With 2009 tax season mostly over and done with, we can all move forward with our "cleanup" situations we put on the back burner. Mine is not too difficult, but I do need some advice.
I have a client who has vacation rental cabins that he always rents out for short periods of time....1 week or even 2 weeks at a time. This activity has always been reported on his Sch C. At the beginning of 2008, his neighbor convinced him to have another CPA create a partnership and to put this activity inside the partnership. So, he did. The CPA then prepared a firts and last 1065 for 2008 for this newly created entity (form 1065).
I am supposed to prepare this clients 1040, using the PS K-1. Here is my concern. The CPA made my client a 1% general partner, his daughter a 1% limited partner, and my clients living trust a 98% limited partner. Isn't the income still subject to SE tax? Do I have reason to feel uncomfortable with this new setup?
I have a client who has vacation rental cabins that he always rents out for short periods of time....1 week or even 2 weeks at a time. This activity has always been reported on his Sch C. At the beginning of 2008, his neighbor convinced him to have another CPA create a partnership and to put this activity inside the partnership. So, he did. The CPA then prepared a firts and last 1065 for 2008 for this newly created entity (form 1065).
I am supposed to prepare this clients 1040, using the PS K-1. Here is my concern. The CPA made my client a 1% general partner, his daughter a 1% limited partner, and my clients living trust a 98% limited partner. Isn't the income still subject to SE tax? Do I have reason to feel uncomfortable with this new setup?
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