Client has 42% of Schedule C net income allocated to MT due to part year residency.  The Part Year Allocation worksheets have been completed within the Pro Series tax software.  However, the allocation of the SEP IRA contribution, SE tax deduction and SE health insurance deduction to the MT income are not being made within the software program thereby increasing the allocation of taxable income to MT.  Current ratio is MT source income (exclusive of the above-mentioned deductions) divided by MT AGI resulting in a ratio of 55%.  The MT AGI includes the deduction.

In summary, the question is: shouldn't the MT source income be net of the part-year allocation of the deductions for SEP IRA contribution, SE tax deduction and SE health insurance deduction and this resulting number be divided by the MT AGI.  If this was the case, the ratio would be decreased from 55% to 42% thereby reducing the MT income tax liability.