A & B, unrelated to each other, each have SMLLC's that are 50/50 partners in a partnership, P.
The ordinary income passing through to A & B on the K-1's from P has been reported on their 1040's, schedule C's. They make significant pension contributions each year to a plan established by P.
Should pension deduction be taken on 1065 reducing their ordinary income to be reported on their Schedule C's or should pension contribution be reported on Line 13, code R on the K-1's issued by P?
In first case, pension deduction would reduce income on A & B's Schedule C's. In later case, Schedule C income will be higher (and accordingly SE tax will be higher)) and pension contribution would be taken as an adjustment on their 1040's.
Thanks for your thoughts.
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Paul Herman
HERMAN & COMPANY CPAs, PC
White Plains NY
914-400-0300
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