The following video explains how to enter ​59e(2) expenditures from passthrough activities into a 1040 return using CCH Axcess™ Tax and CCH® ProSystem fx® Tax.

To enter 59(e)(2) expenditures, do the following:

1. Go to the Income > Partnership Passthrough (K-1 1065) or S Corporation Passthrough (K-1 1120S) worksheet.
   • Go to Section 3 - Activity (Continued).
     • In line 1 - J Section 59(e)(2) expenditures, enter the appropriate data.
2. Calculate the return.

These expenses flow to their own line on the Schedule E, Page 2 below the passthrough entity that it is associated with.

90% of these expenses will also increase the Alternative Minimum Taxable income on the Form 6251, Line 19 or 23. If the passthrough activity is passive, this adjustment will flow to Line 19. If the activity is nonpassive, it will flow to Line 23.

Section 59(e)(2) expenditures can be taken in full in the current year for regular tax purposes. However, they have to be amortized over a certain amount of time for AMT.  If no type code is selected, the default is mining costs. For AMT purposes, mining costs are required to be amortized over 10 years. Therefore, we add to AMTI 9/10s of the amount entered.