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IRS: Partners’ Share Of LLC Income Is Subject to Self-Employment Tax

Every Friday afternoon, while you’re seeking solace in the bottom of a pint glass from another week of hellish reality, the IRS publishes its written determinations for the week. Last week’s release was noteworthy in its volume: the Service released a whopping 57 Private Letter Rulings, Determination Letters, and Chief Counsel Memorandums.

Buried within the typical scores of late S corporation election relief rulings and Section 501(c)(3) determinations was a very important Chief Counsel Advice that could potentially impact the tax treatment of many limited partners, as well as partners in other limited liability partnership vehicles, such as LLCs and LLPs.   And just in time for next weeks extended partnership return due date!

In CCA 201436049, the IRS concluded that the distributive share of partnership income allocated to members of an LLC was subject to self-employment tax. This is a rather big deal, because the treatment of an LLC member’s distributive share of income for purposes of self-employment income has long been clouded–largely due to the Service’s inability or unwillingness to finalize regulations governing the issue over the past three decades. With the release of last week’s Memorandum (“the ILM”), it should serve as notice that the IRS may be ready to approach the issue more aggressively.

This article appeared originally on Forbes.com. Click on the link to read the complete version 

Fulton Abraham Sanchez, CPA, founder of FAS CPA & Consultants of Miami, FL, is a Certified Public Accountant specializing in Tax Planning . You can email him to fa@fascpaconsultants.com or contact us on Facebook: FAS CPA & Consultants

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized in Tax Planning for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution and Offshore Strategies. You can email him to fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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