going brain dead - partnership SE income

[D Eckerman]

LLC has 3 members who take out guarenteed payments on which they pay SE tax on...

Line 1 income is just ordinary income then??? Goes to Sch E pg 2.

Two of them also run a deer farm as a LLC - no payments as huge losses which they cover thru capital contributed.

Does their line 1 loss also get treated as line 14 A- as self employment income?

This then gets "added" to the guarenteed payments from the very profitable business on the Sch SE?

Thank you - need asap.

D

[RitaB]

I would say yes it's all subject to SE since they are obviously working for the LLC. However, somebody has probably told them they don't owe SE on the ordinary income, so you may have to convince them. If you have The Tax Book, p. 5-23 has a good explanation. Here is a quote: "The IRS wants SE tax under most conditions if the LLC member works for the LLC..." But then, it goes on to give the author's comment that in court cases, IRS has caved on this and just required SE on the equivalent of a "reasonable wage" (like S- Corps). I personally make it all subject to SE when they are working for the LLC. (Hey, I pay SE on all of my income as a sole proprietor. I hate dealing with LLC's.) You might also consult Publication 541 and instructions to Form 1065 as well as the section on LLC's in The Tax Book. Hope this helps!

[RitaB]

LLC has 3 members who take out guarenteed payments on which they pay SE tax on...

Line 1 income is just ordinary income then??? Goes to Sch E pg 2.

Two of them also run a deer farm as a LLC - no payments as huge losses which they cover thru capital contributed.

Does their line 1 loss also get treated as line 14 A- as self employment income?

This then gets "added" to the guarenteed payments from the very profitable business on the Sch SE?

Thank you - need asap.

D

OK - sorry, I didn't answer the second question. Yes, the loss on the deer farm will offset the SE on the income from the profitable LLC. I am losing it here!

[mcb39]

LLC has 3 members who take out guarenteed payments on which they pay SE tax on...

Line 1 income is just ordinary income then??? Goes to Sch E pg 2.

Two of them also run a deer farm as a LLC - no payments as huge losses which they cover thru capital contributed.

Does their line 1 loss also get treated as line 14 A- as self employment income?

This then gets "added" to the guarenteed payments from the very profitable business on the Sch SE?

Thank you - need asap.

D

De.....Both the guaranteed payments and the portion of the ordinary income on Line 1 are SE income. The only difference is that the GP are only taxed to the Partner who received them. The Line 1 income, which remains, after all GPs are deducted is split between the partners and taken to Sch E; page 2. The losses from the deer farm should also flow to Sch E page 2 and wipe out or decrease the other earnings. The K1 input sheet has space to enter more than one K1. Enter the LLC ID# and they will each magically turn up on different lines of the Sch E and all of the adjusting will be done there...