Section 163(j) and Form 8990 (1065)

Alerts and notices

Overview

This article provides information about how UltraTax/1065 calculates Form 8990, Limitation on Business Interest Expense Under Section 163(j).

Section 163(j)

IRC section 163(j) was amended under the 2017 Tax Cuts and Jobs Act (TCJA) to reflect a new limitation on the deduction for business interest expense for certain taxpayers in tax years beginning after 2017. Visit this IRS resource for answers to common questions surrounding this new limitation: Basic questions and answers about the limitation on the deduction for business interest expense External link. (What's this?)

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Form 8990

The new section 163(j) business interest expense deduction and carryover amounts are reported on Form 8990. The form calculates the section 163(j) limitation on business interest expenses in coordination with other limits. Refer to the Form 8990 instructions External link for more information on the filing requirements and calculations.

Data entry and printing

To calculate and print Form 8990, use the following input screens and fields.

To stop Form 8990 from printing, see the "Excepted trade or business" and the "Small business taxpayer" sections below.

Excepted trade or business

Certain trades or businesses qualify as excepted from the section 163(j) limitation and therefore are not required to file Form 8990. For more information on what types of trades or business are excepted, see the Form 8900 instructions.

To indicate that a trade or business is exempt, use the Meets criteria for an excepted trade or business under Section 163(j) field on each of the activity screens: Screen Inc, Screen F, Screen 4835, and Screen Rent. Excepted trades or businesses may be required to file an election to be excepted. See 1065-US: Excepted trade or business under Section 163(j) for more information.

Small business taxpayer

To indicate that the taxpayer is a small business taxpayer, mark the Small business taxpayer field on Screen 8990 in the Schedule K folder. If there is no excess business interest expense in the return passed-through from another partnership, marking the field will stop Form 8990 from printing. If there is business interest expense passed-through from another partnership, Form 8990 will calculate per the instructions and print. 

Partner's Schedule K-1

A Partner's Schedule K-1 cannot have both a box 13k amount and a box 20AE or 20AF amount. This is because Form 8990 states that if there is an amount on line 32 to skip lines 33-37. Line 32 is where the bpx 13k amount is generated. Line 36 and 37 are for box 20AE and 20AF, respectively. Therefore, if you have a line 32 (13k) amount, lines 36 (20AE) and 37 (20AF) are skipped.

Box 13 code K

Per the IRS Form 1065 instructions, box 13k is the amount from Form 8990, Part II, line 32 for excess business interest expense. If the partner has an amount here, they are required to file Form 8990. The partner will enter the amount on their Form 8990, Schedule A, line 43(c).

Box 20 code AE

Per the IRS Form 1065 instructions, box 20AE is the amount from Form 8990, Part II, line 36 for excess taxable income. If the partner is required to file Form 8990, they will enter the amount on their Form 8990, Schedule A, line 43(f).

Box 20 code AF

Per IRS Form 1065 instructions, box 20AF is the amount from Form 8990, Part II, line 37 for excess business interest income. If the partner is required to file Form 8990, they will enter this amount on their Form 8990, Schedule A, line 43(g).

Box 20 code AH

UltraTax CS does not assume that the partnership knows if a partner is or is not required to file Form 8990. Therefore, the application always reports business interest income, adjusted taxable, and/or business interest income on Schedule K-1, line 20AH.

To suppress this information from printing on the Schedule K-1, mark the Suppress K1 supplemental detail of business interest expense limitation field on Screen 8990.