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How to enter Acquisition Interest on a 1040 for S Corp?

Micibug
Level 1

I have two new individual tax clients who are also S Corp shareholders. They have acquisition interest on prior year returns which has been reported on Schedule E as an allowed nonpassive loss. I'm having trouble getting this interest to flow through properly onto Schedule E when entering the prior year returns in ProConnect. 

 

I tried entering this interest in the S Corp K-1 input screen --> Less Common Scenarios --> Other Nonpassive Loss. This is either incorrect or I'm missing a step, because the result isn't agreeing to the prior year returns. It seems this acquisition interest should not impact basis, but when I enter it as an Other Nonpassive Loss, it reduces basis. This results in basis being incorrect, and in one case the loss is being disallowed due to basis limits.

 

Can someone please point me in the right direction on how to enter this acquisition interest properly??

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1 Comment 1
PhoebeRoberts
Level 11
Level 11

I enter an other current year increase to basis memo'd something like "acquisition interest paid with outside funds." You have to do a similar manual adjustment for a partner with UPE.