Level 3

Is there any way to deduct home equity interest for a business the taxpayer purchased with the proceeds

Forum|Forum|3 years ago
June 20, 2023
2 replies
18 views

A taxpayer started a partnership and purchased a business using the home equity proceeds she took out to purchase the business and wants to deduct the equity interest as a business expense. She was told by the bank that she could do this?? Other than a home office, is there a way to deduct this interest from the business?

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abctax55

Level 15

The interest can be taken a UPE ( unreimbursed partnership expenses), if the proper tracing & election steps are taken.

As you didn't divulge the software you are using, I can't help with the specific date entry points.

HumanKind... Be Both

M

mj46Author

Level 3

I'm using Lacerte software. Since it is mortgage interest and can be use as UPE. do I deduct it as UPE on Form Schedule E, page 2 as a deduction against the partner's share of partnership income or must I deduct it on Schedule A?

qbteachmt

Level 15

"Since it is mortgage interest and can be use as UPE"

It's not a mortgage. It's a loan, secured by the equity, as you noted. It's short-term revolving credit. The interest can't be both "mortgage" and investment interest expense. It was used for one thing, and that was not applied to the property.

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BobKamman

Level 15

Was the loan used to buy the business, for example from an existing partner who was leaving? Or was it used by the business to buy business assets and pay business operating expenses?

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mj46Author

Level 3

It was used to buy the business.

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