Tax Relief Blog

Articles Posted in Limited Partnership Tax

Limited partner’s investment interest from trader partnership deductible above-the-line

Rev Rul 2008-38, 2008-31 IRB; Ann. 2008-65, 2008-31 IRB

Mike Habib, EA

Earlier this year, IRS issued Rev Rul 2008-12, 2008-10 IRB 520 concluding that where a non-corporate limited partner doesn’t materially participate in the partnership’s activity, his distributive share of the interest expense on debt allocable to the entity’s trade or business of trading securities is investment interest, subject to the Code Sec. 163(d)(1) deduction limitation. Because it received a number of queries as to where to report such interest, IRS has issued a new revenue ruling amplifying the earlier one and a new announcement clarifying where to report such interest.