Carried interest: and form 461

Forum|Forum|15 days ago
July 23, 2026
3 replies
39 views

Taxpayer receives both income and carried interest on form K1. For purposes of Schedule 1, the carry is treated as capital gains. But for purposes of form 461, Limitation on Business losses, the carried interest should be treated as income on line 5. This seems impossible t do in Lacerte, where the input for 461 comes directly from Schedule 1. Anyone know a way around this? Customer service has no answers and no one seems to care, which pretty much eliminates Lacerte as a software for dealing with finance. Any other programs that might do this?

Best answer by PhoebeRoberts

I think you want the carried interest piece to be reported on Line 8 of the Form 461 - the Line 5 amount is, per the instructions, directly from Schedule 1.

Input for Line 8 is in Screen 15, NOL Deduction, in the Excess Business Loss sub-section. I have to override every now and then, because the business income per the K-1 disagrees with the automatic calculation. The nice thing is that if there’s no EBL limitation, the Form 461 doesn’t even generate, so I do the calculation in my workpapers and if it’s not even close, it’s one less fiddly thing to laboriously reconcile.

PhoebeRoberts

Answer

Intuit Community Champion

I think you want the carried interest piece to be reported on Line 8 of the Form 461 - the Line 5 amount is, per the instructions, directly from Schedule 1.

Input for Line 8 is in Screen 15, NOL Deduction, in the Excess Business Loss sub-section. I have to override every now and then, because the business income per the K-1 disagrees with the automatic calculation. The nice thing is that if there’s no EBL limitation, the Form 461 doesn’t even generate, so I do the calculation in my workpapers and if it’s not even close, it’s one less fiddly thing to laboriously reconcile.

U

username115870Author

Level 2

Thank you Phebe Roberts. I owe you lunch. At least. I spent hours with tech support. And you solved the problem minutes after I posted it. Thank you

PhoebeRoberts

Intuit Community Champion

Tech support is really limited by the reality that they spend most of their time answering questions, rather than most of their time preparing tax returns. The long-time posters here spend most of our time preparing tax returns, and that’s how you know where things are hidden, what reliably breaks, and the best ways to fix it.

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