Question

My partnership Schedule K-1 shows a small amount for non-deductible expenses. Can I report these non-deductible expenses on my personal return?

Answer

You can’t deduct the non-deductible expenses paid or incurred by the partnership on your personal return. These non-deductible expenses are reported on IRS Schedule K-1, Box 18 with Code C. Instead, you should decrease the adjusted basis of your interest in the partnership by this amount.

You also don’t have to include in your income amounts of tax-exempt income shown in Box 18 with Code B. Instead, increase the adjusted basis of your interest in the partnership by the amount shown.

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