Taxpayer acquired S Corporation stock with debt financing. Instructions for Sch. E, Line 28, under the paragraph "Debt-financed acquisition", states that the portion of the interest expense allocated to trade or business assets, is reported on a separate line of the Schedule E, Part II. It should be entered as "business interest" with the name of the S corporation in column (a) and the amount in column (i).
IRS Notice 88-37 in Cumulative Bulletin 1988-1 states in Section IV, A, 2: This interest expense is deductible without limitation and should not be entered on Form 8582, relating to passive activity loss limitations, or Form 4952, relating to investment interest.
Lacerte has no means of accomplishing this to my knowledge.
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