How do I move non-deductible expenses from Current Year Income to Other Increase (Decrease) in a 1065 return using interview forms?

  • Article Type:
  • How To
  • Last Modified:
  • 02/14/2020

Objectives

To move the non-deductible expenses from the Current Year Income to the Other Increase (Decrease) in a 1065 return using interview forms?
Schedule K-1 Other Increase (Decrease) - Non-deductible expenses

Environment

  • CCH Axcess Tax
  • CCH ProSystem fx Tax
  • 1065
  • Schedule K-1
  • Interview

Procedure

On Schedule K-1, Item L, Analysis of partner's capital accounts, taxable/deductible items are included with current year net income and non-taxable/non-deductible items included with other increases and decreases.  An option to include the non-taxable/non-deductible items with current year increases/decreases income has been discussed.  The accounting theory is that the other increases and decreases would perfectly match the Schedule M-2 items. 

To move the non-deductible expenses from Current Year Net income to Other Increase (Decrease), do the following:
  1. Go to Federal Interview Form K-3 - Other Schedule K Items and Schedules M-1 and M-2 Adjustments.
    • Enter the Nondeductible Expenses:
      • In Box 30 - Class Code, use the look up feature (double click or press F4) to select NDE - Nondeductible expenses.
      • In Box 31 - Option, use the look up feature (double click or press F4) to select 2 - Return and not books (Schs. K/K-1/M-1).
      • In Box 32 - Description, enter a description.
      • In Box 33 - Amount, enter the amount. 
    • Enter the M-2 Adjustment:
      • In Box 30 - Class Code, use the look up feature (double click or press F4) to select DCR - Other Decreases.
      • In Box 32 - Description, enter a description.
      • In Box 33 - Amount, enter the amount. 
  2. Calculate the return.

Additional Information

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