Does a limited partner's distributive share always avoid self-employment tax?
Not automatically. The safest answer is that a limited-partner fact pattern may support excluding the distributive share from self-employment tax, but that does not mean every dollar received from the partnership gets the same treatment.
Ask two questions first:
- Is the amount actually a distributive share?
- Or is part of it a guaranteed payment for services?
If the question mixes those two items, split them before you conclude anything.
For EA exam purposes, the biggest mistake is using the phrase "limited partner" as if it answers the treatment of every cash flow coming out of the entity.
Master Part 1 with our EA Course
195 lessons · 180+ hours· Expert instruction
Related Questions
Does paying income tax to one state automatically stop another state from taxing the same year?
Do I need an IP PIN to e-file a prior-year individual return?
Does paying my balance due automatically give me an extension to file?
Why can an underpayment penalty apply even after a large January estimated payment?
What should I do if a paper-filed return may have been mailed with errors?
Join the Discussion
Ask questions and get expert answers.