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Old 02-05-2014, 08:39 PM
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Join Date: Feb 2014
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Business note interest income

I am an active (not material) member of an LLC that holds a mortgage loan on some property that I and the other member sold. The LLC incurs expenses each year such as annual report fees etc. but I have been unable to find from searching the tax laws if my share of these expenses are deductable once they pass thru to my personal tax return.

They do show up on the K-1 that Turbo Tax does for the LLC, in box 1 "ordinary income/loss". The thing is the only income the LLC receives is interest it takes in on the mortgaqe note. (there were no capital gains since it was a zero basis when we sold the property). This interest income is passive.

When doing my personal return I enter the data from the K-1 and Turbo Tax asks me if the loss (expenses) were at-risk (which I would think they were), since they were paid by the LLC . And it asks me if I was an active member in decisions etc, which I was.

And after doing so, when I view Form 8582 page 1 it does show the net income/loss from the LLC on lines 3a thru 3d, and is reflected on line 4. The form 6198 also shows losses which are reflected on box 1 of the K-1.

But then also on Form 8582 on page 2 worksheet 5, it shows what appears to be an "unallowed loss" of said losses. So I guess this particular scenario for an LLC the expenses are not deductable when passed thru to my personal return. I'm still curious as to why since I can't clearly nail it down.

From another LLC of similar member status but with rental income (passive also) the same form shows that expenses were allowed to deducted against my personal returns income.
R_W_B Posts: 3Joined: 6 Jan 2012



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