Limited Partners May Be Subject to Self-Employment Tax

The IRS recently took a shot across the bow of limited partners of investment management companies with respect to the application of self-employment tax (or, SE tax, for short). In fact, the ruling could potentially affect limited partners (including LLC / LLP partners) in every industry. While this tax issue has been fought on several levels over the past 20 or more years, it had gone dormant since 1997. Now, an IRS Chief Counsel Advice (ILM 201436049 (05/20/2014)), released on September 5, 2014, (the “ILM”) demonstrates that the IRS may be ready to renew the fight.

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