Complexity Cubed : Partnerships, Interest Expenses, and the Proposed Regulations

Section 163(j) strictly limits business interest expense (BIE) deductions to large (and possibly not so large) taxpayers. Generally, BIEs may only be deducted to the extent they do not exceed 30% of “adjusted taxable income” (“ATI”) plus business interest income. Section 163(j)(4) requires partnerships to calculate this limitation at the partnership level. In this article, I focus on how section 163(j) applies to partnerships under the Proposed Regulations, including the "11 Steps from Hell."