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1065 LLC, SE Tax

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    1065 LLC, SE Tax

    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.

    #2
    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.

    Comment


      #3
      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.
      Last edited by BOB W; 02-15-2006, 11:06 PM.
      This post is for discussion purposes only and should be verified with other sources before actual use.

      Many times I post additional info on the post, Click on "message board" for updated content.

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