It’s not uncommon for an incoming partner in a 专业的公司 to take out a personal loan to finance all or part of the cost of acquiring an ownership interest. If some of your firm’s partners have done this, they need to know the proper federal income tax treatment of the resulting interest expense. Such partner-level interest expense is sometimes called “outside interest” because it comes from a personal loan that is outside of the partnership.
国税局 guidelines say outside interest expense that is traceable to a personal loan is generally fully deductible in the same way as other ordinary business expenses when the proceeds are used to finance the acquisition of an ownership interest in a pass-through business entity such as a partnership, 有限责任公司或S公司. This assumes the borrower — the firm partner in this case — is not limited by the passive activity rules. In most cases, he or she is probably not. This also assumes that essentially all of the firm’s assets are used to conduct the law practice business, which is most likely the case. (Source: 国税局 Notice 89-35)
到目前为止，一切顺利. But exactly how does the partner claim his or her rightful deduction for the outside business interest expense?
- First, the 国税局 says the write-off should be reported as a negative amount on 附表E第II部. This is the same form that is used to report the partner’s share of taxable income from the firm each year. (This is the amount reported to the partner on his or her Schedule K-1 from the partnership.)更具体地说, the outside interest expense amount should be entered on a separate line below the partnership income amount 和 described as “business interest” followed by the name of the partnership 和 the partnership’s taxpayer ID number. (Source: 国税局 Notice 88-37)
- 第二个, the interest expense should also be claimed as a deduction in figuring the partner’s self-employment (SE) income for SE tax purposes. That way, the partner will receive both an income tax 和 SE tax benefit from the expenditure.
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