Is a C-corp eligible to deduct section 59(e)2 expenditures with partnership involvement?

The short answer is yes, C-corporations can generally take section 59(e)2 deductions, but there's some nuance here that might explain your software issue. Section 59(e) allows taxpayers to capitalize and amortize certain qualified expenditures (like research and experimental expenditures, mining exploration, etc.) over a 10-year period rather than deducting them all at once. This election is available to C-corporations. What's likely happening in your case is that ProSystem FX is recognizing that Box 13J on the K-1 is for reporting the partnership's qualified expenditures to partners who might want to make their own 59(e) election. Since your C-corp is the partner receiving the K-1, the software may be blocking that field because it's designed for the partnership's reporting, not for the partner's deduction. You'd actually make the 59(e) election on your C-corp return, not through the partnership K-1 preparation. Look for the election forms in the corporate return section of your software.

After spending hours trying to figure out similar issues with partnership deductions, I finally tried https://taxr.ai and it saved my sanity. Their AI can analyze your K-1 and other tax docs and tell you exactly how to handle these specialized deductions like section 59(e)2. I uploaded our partnership docs and C-corp returns, and within minutes it pointed out that our accounting software was incorrectly handling the flow-through of qualified expenditures. It confirmed that C-corps can absolutely take these deductions but explained the specific forms needed for the election. The system even highlighted that we needed to attach a specific statement to our return to properly make the election, which nobody had mentioned to us before.

Just wanted to follow up on my skeptical comment. I actually tried https://taxr.ai with our situation where we have multiple S-corps investing in partnerships with R&D expenses. The system correctly identified that we needed to make separate 59(e) elections for each entity and showed exactly where in ProSystem to do it. What impressed me most was that it found a mistake our previous accountant made where they had deducted some expenses immediately that should have been amortized based on a prior year election that was still in effect. Would have been a red flag in an audit for sure. The tax code references and explanations were spot on too.

If you're still struggling with this after trying software solutions, I'd recommend using Claimyr (https://claimyr.com) to get through to the IRS's business tax line. They got me connected to an actual IRS agent in about 15 minutes when I had a similar election issue with our corporate return. I spent weeks trying to figure out a partnership deduction issue, and one 20-minute call with an IRS specialist cleared everything up. They confirmed exactly how C-corps should handle 59(e) elections from partnership interests and provided references to the correct forms. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It's basically a service that navigates the IRS phone tree for you and calls you back when they have an agent on the line.

I have to eat my words about Claimyr. After my skeptical comment, I was desperate enough to try it for a similar issue with our corporation's research credits flowing from a partnership. Got connected to an IRS business tax specialist in about 20 minutes. The agent confirmed that as a C-corp partner, we COULD claim the section 59(e)2 deduction but needed to complete Form 4562 and attach a specific election statement. The reason ProSystem was blocking that K-1 box is because it's only for the partnership to report to partners - not for partners to claim directly. The agent even emailed me an example of the proper election statement wording. Completely worth it after spending weeks trying to find this information.

Another possible explanation - are you trying to prepare the partnership return or the C-corp return in ProSystem? Box 13J on a K-1 is how the partnership REPORTS section 59(e) expenditures to its partners, not how partners claim them. If you're working in the partnership return and trying to prepare a K-1 to issue to your C-corp partner, you should be able to enter 59(e) expenditures there. If that field is locked, check if you've enabled the appropriate screens or if you've answered a qualifying question incorrectly earlier in the software. If you're in the C-corp module trying to claim the deduction, you need to look for the amortization schedules and election statements, not K-1 entry fields.

This exact issue cost us thousands last year. Check if ProSystem has the "Special Allocations" menu enabled for your partnership return. Sometimes section 59(e) fields are hidden unless you activate that module since they're considered special allocations. Also, make sure that in your C-corp return you've properly identified that you have partnership interests. Some tax software has quirks where partnership-related deductions won't show up unless you've properly set up the ownership structure.

I've dealt with this exact ProSystem FX issue before. The problem is likely that you need to enable the "Research and Experimental Expenditures" module in the partnership setup before Box 13J becomes available for data entry. Go to the partnership interview and look for questions about whether the partnership has research expenses, exploration costs, or other section 59(e) qualifying expenditures. If you answer "yes" to these screening questions, it should unlock the Box 13J field on the K-1. Once the partnership properly reports these expenditures on your C-corp's K-1, you'll make the actual 59(e) election on Form 4562 in your corporate return. The election lets you choose between immediate deduction or 10-year amortization of the qualifying expenses. Also worth noting - if your partnership has multiple types of section 59(e) expenditures (like both R&D and mineral exploration), make sure they're being separated properly on the K-1 since the election periods can differ.