I am preparing the K-1 and the Form 1065. In Screen 22 under other deductions I enter Code R for the retirement contribution that the partners withheld from their guaranteed payments they made. The guaranteed payments listed on the K-1 includes the elective deferral. Then in screen 27.1 - Deduction on Schedule K not charged against book income I enter it again. If I do not do that my net income per books on Schedule M-1 line 1 does not agree. My problem is that on Schedule M-2 line 3 the net income per books (as adjusted to tax basis) is understated. And as a result the Partnership's capital account balance line 9 is also understated. In order to fix this I entered the elective deferrals in line 4 as other increase but it is not way I want to prepare this tax return. There is no mechanism for me to add back the elective deferral on Line 3 of Schedule M-2. So I thought perhaps there is a different wat to enter the elective deferral.
