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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2858
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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I am a 4% limited partner of a CA LLC with line 1 income (not

Customer Question

I am a 4% limited partner of a CA LLC with line 1 income (not real estate income). I do have "Material Participation" in this venture due to over 500 hours of acitivity.
Do I have to pay Self-Employment taxes on the K-1 line 1 distribution due to my Material Participation hours even though SE income per line 14 of K-1 was 0 ?
Do I have to pay the new Net Investment Tax on the line 1 distribution?
I am not a "Real Estate Professional" as defined.
Eric Mueller
Seal Beach, CA
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  Barbara replied 1 year ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
The amount reported in box 1 of your K-1 is your share of the ordinary income (loss) from trade or business activities of the partnership. The amount (if any) reported in Box 14 of your K-1 is your self-employment income.
As a limited partner, your self-employment income includes guaranteed payments, such as salary and professional fees received for services performed during the year. It does not include a distributive share of partnership income or loss (box 1 of K-1).
http://www.irs.gov/Individuals/Tax-Trails---Self-Employment-Income-8
http://www.irs.gov/instructions/i1065sk1/ch02.html#d0e777
The following link contains excellent, detailed information regarding the criteria for Net Investment Income Tax:
http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
Expert:  Barbara replied 1 year ago.
Just following up with you to see if you have any other questions or concerns. If so, please come back to me here at your convenience, and I will be happy to assist you.
If not, please take a moment to rate my answer since that is the only way I receive credit for answering you and alerts Just Answer to compensate me.
Best regards,
Barb