What’s in a Name: Who Qualifies as a Limited Partner for Self-Employment Tax Purposes?
Author: Walter D. Schwidetzky.
Source: Volume 41, Number 02, Winter 2024 , pp.3-12(10)
next article > |return to table of contents
Abstract:
There have been several cases that have looked at what it means to be a limited partner for Section 1402(a)(13) purposes. The definition is an important one as generally under the Code a limited partner’s share of income is excluded from net earnings from self-employment, which in turn means it is not subject to relevant Social Security and Medicare taxes. Recently, the Tax Court, in Soroban, concluded that it is not sufficient for Section 1402(a)(13) purposes to meet the definition of limited partner for state-law purposes. The taxpayer must be a limited partner in substance, essentially meaning the limited partner must be a passive investor.Keywords: Soroban Capital Partners LP v. Comm’r, limited partner, IRC Sec. 1402(a(13), net earnings from self employment, passive investor
Affiliations:
1: University of Baltimore School of Law.