1065 LLC, SE Tax

[Gretel]

Need a smart head here.

LLC's income is only subject to SE for GP and can distribute profits same a S-Corp., right? (Please no discussion about the SE here, it's not my problem)

Technically, I am preparing 2 K-1's for each partner, one just shows GP, the other one all income and deductions. So far so good. What about Sec.179 expenses? I have concluded that I can put them only on the K-1, which is not for GP. Is that correct?

My problem is EIC for one partner and if Sec.179 could be taken on K-1 for GP it will drop the other K-1 just under the limit for investment income. By I don't see how this would be possible.

Hope I made myself clear.
Thank you.

[KJ Judd]

The LLC income may or may not be subject to SE tax. If the partner is doing services for the LLC (i.e. lawyer in a partnership) then the partnership income is subject to SE.

Sec. 179 is allocated among the general partners (or LLC members treated as general partners). So if GP is all Partner 2 is entitled to, he doesn't receive a share of Sec. 179, any passthru income (interest, div) or contributions).

Hope that helps.

[BOB W]

Se

My general understanding is like S-corps handling. All Scorp distributions are NOT subject to SE. In order to be pay SS & Med the shareholder must issue a W2. LLCs should be just the same but instead of a W2- Guaranteed Payments should be used as they are subject to SE.

And I don't agree that lawyers are always subject to SE on all profits. Lawyers, like other professionals, do not operate without assistants or other personel that contribute to the profits. A reasonable effort needs to be made to take into consideration all factors that contribute to profits. Like equipment, personel, capital, and such.