Lacerte Form 8990 Negative Taxable Income

Technical topics regarding tax preparation.
#1
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What is the definition of "taxable income" under 163(j)? Can "taxable income" be negative? According to Lacerte and the instructions all amounts should be entered as positive https://www.irs.gov/pub/irs-pdf/i8990.pdf (page 5 section 2).

This could have a difference. For example, say taxable income is -150,000 for a partnership but depreciation expense is 200,000 and interest expense is say $50,000. This would mean ATI would be -150+200+50 = 100k x 30% = 30k; interest limited by 20k.

If taxable income is limited to 0, then ATI would be 0 + 200 + 50 = 250k x 30% = 75k thus no interest limit.

All comes down to the definition of "taxable income."

The instructions specifically state that Line 6 should be entered as a positive amount unless otherwise indicated. This seems incorrect but Lacerte maintains it should be either 0 or above and not negative.

Any thoughts on this?
 

#2
Coddington  
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I think that is an error in the instructions and they should say to input lines 7-21 as positive numbers. If read literally and without regard to the specific instructions for Line 6, that -150,000 would be input as +150,000, leading to an even more absurd result.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 

#3
Nilodop  
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I don't know. The proposed regs go into the rules in great great great detail beginning with this heading:
§1.163(j)-6 Application of the business interest deduction limitation to partnerships and subchapter S corporations.
. The rules start here https://www.irs.gov/pub/irs-drop/REG-106089-18-NPRM.pdf at about page 250 and counting examples they run thru page 312. Somewhere in there it refers to section 703 as a starting point.
 


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