W-2 Compensation to an Indirect Owner

[taxcrazy]

For those of you dealing with LLC issues electing to be taxed as a partnership, do you have any words of wisdom relating to the following issue:

(1) Can a greater than 2% owner of an S-Corporation which owns a majority interest in a LLC (i.e. partnership) be paid W-2 wages from the partnership or LLC as an employee? Second question, should the fringe benefits be deductible?

[Bees Knees]

If the greater than 2% owner of an S corporation is not a partner in the partnership, then the S corporation shareholder could be paid a W-2 wage for services rendered to the partnership. However, due to the attribution rules, any fringe benefits provided by the partnership would be taxable compensation since the S corporation shareholder would be considered related to the partnership.