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Level 4
December 4, 2020

Interest expense purchase buyout partner

  • December 4, 2020
  • 2 replies
  • 1 view

Hello,

I was asked to do a return for an individual who bought out his partner in their S-Corp.  He is making payments to that partner.  Does the buyout loan amount with payments/interest expense get recorded on his S-Corp books?  If not, where on the 1040 do I list his interest expense for the loan to buy out his partner.  Thank you.

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    2 replies

    sjrcpa
    Level 15
    December 4, 2020

    Does the buyout loan amount with payments/interest expense get recorded on his S-Corp books?  No

    where on the 1040 do I list his interest expense for the loan to buy out his partner? Schedule E page 2 separate line called interest expense

    The more I know the more I don’t know.
    Level 4
    December 4, 2020

    Thank you, but I'm not seeing the line interest expense.  Please help with my indoor blindness and tell me the line number.

    abctax55
    Level 15
    December 4, 2020

    1)  S-corps don't have partners.   Let's make sure we are discussing the same thing

    2)  There ISN'T a specific line for it.

    3) Disclose the actual software you are using, and perhaps more guidance will be forthcoming as to where to enter it in the software to get it to populate on the correct 'line'. 

    HumanKind... Be Both
    Intuit Community Champion
    December 4, 2020

    Did the S Corp buy out the shareholder or did one shareholder sell to another shareholder. S Corps don't have partners. If the buy out is shareholder to shareholder you have an instalment sale, and in order to use the instalment method there has to be a gain. Suggest you research pub 537

    Level 4
    December 4, 2020

    Shareholder bought out other shareholder.  Yes installment sale.  I am on the buyer's side. 

    Intuit Community Champion
    December 4, 2020

    Your client has investment interest expense, and that would go on Schedule A, and possibly 4952. He will have to itemize to take advantage of the interest expense.