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- How to treat "other business expense " from hedge fund?
How to treat "other business expense " from hedge fund?
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laval650
Level 3
09-25-2025
10:51 PM
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A client received a k1 from a hedge fund. He is a limited partner. The K1’s footnotes indicate that “interest income is considerate an investment interest income and is subject to the net investment income limitation. Any amount that is deductible after application of the net investment income limitation may be deducted, in addition to the trade or business expenses as non-passive loss on Sch E”
I agree that interest expense from a trade fund is going to sch E, p. 2, as non-passive loss. However, it looks to me that the “trade and business expenses” should be considered 2% miscellaneous deductions on Sch A. Not deductible.
Should I just follow the footnotes? Your advice would be greatly appreciated.
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2 Comments 2
sjrcpa
Level 15
09-26-2025
10:36 AM
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I would follow the footnotes. I do not think trade or business expenses are the now nondeductible 2% of AGI misc deductions.
The more I know the more I don’t know.
laval650
Level 3
09-26-2025
02:04 PM
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Thank you, I will.
It is the amount of losses that makes me stop and check and re-check.
