Originally Posted by CreditCrunch
#1;This is the first year I've gotten a K-1. I invested in a limited partnership and earned about $6k in interest income (Box 5). However, I also paid about $1600 in "Professional Fees" as stated in Box 13. Turbo tax isn't deducting these fees as I might have expected. Surely these fees (coded with a "W") are deductible?
#2;I saw that some fees are subject to the 2% floor rule (which I don't meet). If I can't deduct these fees somehow, my returns on the fund are taxed at an effective rate of 60%!
Any advice? Any further detail I can provide?
#1;You may deduct fees paid to attorneys / other professionals who are independent contractors, for "ordinary and necessary" expenses of your business. The income reported on your sch K-1 should already be the net income after deductions for normal business expenses. These would be on the income and expense portion of the partnership tax return. Only if you have any other expenses that you paid out of your pocket that were not included in the partnership expenses would you be able to deduct them.
#2;As long as you are not entitled to reimbursement under the partnership agreement, you can deduct such expenses on Sch. E. These expenses will also decrease SE income from that partnership. I guess you need to cotnact the software vendor for sure