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how to enter interest expense for acquiring an S corporation ownership interest

Level 1

My client incurred interest expense related to borrowing funds to purchase his S corporation interest. How do I enter it into Lacerte so that the interest is not limited by either the investment interest rules or basis in the s corporation?

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2 Comments 2
Level 15

What kind of interest are you thinking it might be if it isn't investment interest?

Slava Ukraini!
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Level 11
Level 11

I enter it under Separately Stated Income and Deductions, as an Other nonpassive item. Use Ctrl+E, enter Interest Expense.

I also enter an other current-year increase in basis to offset the reduction that Lacerte will automatically calculate. You'd probably need a squirrelier workaround if your guy has no basis and distributions in excess of basis, to avoid the situation where less of the distribution was taxable and some of the interest was suspended.