Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

Is money given to a partnership as a "fee option payment" subject

Customer Question
to self employment tax on the...
Is money given to a partnership as a "fee option payment" subject to self employment tax
on the partner level?
Submitted: 7 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 10 minutes by:
4/1/2010
Tax Professional: socrateaser, Lawyer replied 7 years ago
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,479
Experience: Retired (mostly)
Verified

Please define "fee option payment." I like to know exactly what I'm dealing with.

 

 

Terms and Conditions: By your continuing in this conversation with me, or by your clicking “Accept”, you are expressly agreeing to all of the following: (1) our communication is for entertainment purposes only; (2) you are not consulting me in my professional capacity as an attorney; (3) you do not seek to establish an attorney-client relationship with me, nor do I with you; (4) you will not rely on anything I say and you will obtain appropriate legal counsel via a traditional/office consultation with an attorney licensed to practice in the jurisdiction where your legal issue arises (and you may not use our communication to avoid taxpayer penalties imposed by the U.S. Dept. of Treasury); (5) by communicating with me in this public forum you are irrevocably waiving any right to privacy, confidentiality and attorney-client privilege concerning the matters discussed. You further separately declare that any payment made by you is not consideration for this contract, nor offered for any services rendered by me on your behalf, but rather is made in genuine admiration and respect for my desire to help others. If you do not agree with these terms and conditions, then you must advise me immediately.

Ask Your Own Tax Question
Customer reply replied 6 years ago
<p>I don't exactly know much detail. There is a fee option money received by a partnership (four partners, 2 individuals, one revocable trust and one S corp) that are for the rights to cut or not cut timber.</p><p> </p><p>I need to know how to code the K-1 for the self-employment income line 14A.There is no other income this year. This partnership in in the principle business of forestry and their product is timber. </p><p> </p>
Tax Professional: socrateaser, Lawyer replied 6 years ago
Oh.

I would treat the payment as a royalty (K-1, box 7), because the payment is in exchange for the opportunity to exploit the timber, rather than for the timber itself. See Treas. Reg. 1.61-8(a).

Hope this helps.

Ask Your Own Tax Question
Customer reply replied 6 years ago
So there would be no self employment income on it for any of the entities?
Tax Professional: socrateaser, Lawyer replied 6 years ago
A royalty payment is reportable as income from self-employment, unless the partner is a passive investor.
Ask Your Own Tax Question
Customer reply replied 6 years ago
So for the general partners the income would be subject to self employment and for the limited it would not? I have two individuals that are general and domestic and two limited and domestic that are an S corp and a revocable trust
Tax Professional: socrateaser, Lawyer replied 6 years ago
Timber is a weird corner case. Whether or not the options are passive income or not depends on just how actively youare operating your business. If this is just a stand of trees that has been sitting around for 25 years and it's not ready to cut, then it's probably passive royalty income to everyone.

If you are actively managing the land, in some manner (replanting, excavating, managing log piles, etc., then it could be self employment income (assuming you spend 500+ hours per year managing the timber).

However, it's definitely passive income to a limited partner, under all circumstances.

Hope this helps.
Ask Your Own Tax Question
Customer reply replied 6 years ago
Relist: Incomplete answer. Nedd to be absolutely clear on rhis one especially for $ 45. I don't feel I know what should be done yet.
Tax Professional: socrateaser, Lawyer replied 6 years ago
You may want to read the following publication from the Dept. of Agriculture.

As I said, this is a difficult issue, and there are numerous ways of classifying the income. I cannot/will not advocate a particular course of action in an area that is arguable, because it carries with it liability if you decide that you later do not agree with my viewpoint, and you believe that I have damaged your interests.

I would treat the income as royalties from a passive activity. You may choose whichever path you think is best.

Best wishes.

Ask Your Own Tax Question
Customer reply replied 6 years ago
Relist: Answer quality.
Tax Professional: socrateaser, Lawyer replied 6 years ago
I see that you received and paid for an answer from another expert, who copied my answer, verbatim (http://www.justanswer.com/tax/4lnfl-hi-steve-i-looking-you-didn-t-know.html).

I feel like Rodney Dangerfield. Cry

Ask Your Own Tax Question
Ask socrateaser Your Own Question
socrateaser
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,479
39,479 Satisfied Customers
Experience: Retired (mostly)

socrateaser is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,336 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,906 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
From a tax liability perspective, what are the differences
From a tax liability perspective, what are the differences between filing taxes from a trust versus a personal income tax filing ?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
882 satisfied customers
EFLA question - net income from EFLA partnership was
EFLA question - net income from EFLA partnership was reported on Line K-1, Line 11 as $50,000 and is made up of interest, cap gains, section 988, expenses, etc. Of that amount, $30,000 is recharacteri… read more
Carter McBride
Carter McBride
LLM
98 satisfied customers
What is the effect of the latest tax changes on individual
what is the effect of the latest tax changes on individual income taxes for individuals in the $60-70,000 range with no special deductins? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Filed W1040 for self-employment. Should I file amended return for HSH?
I was self-employed last year and I filed a W1040 tax form. Everything went through well. I did it through an H&R computer program. Currently I am in need of financial aid as I am going to college. I … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,906 satisfied customers
I am calculating my employer tax provision (Deferred Income
Hi,I am calculating my employer tax provision (Deferred Income tax , reconciliation between Book-Tax) and I noticed that our prior accountant has always add the "accrued bonus" back to the book income… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,252 satisfied customers
I have an LLP (limited liability partnership) with an
I have an LLP (limited liability partnership) with an operating agreement that indicates it's organized as a general partnership. I am the designated 'tax matters partner'. The *other* partner is resp… read more
abci168
abci168
Principal
27 satisfied customers
I had some self employment income where I was paid in
I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expen… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
882 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
My employer wants to pay 90% of an individual's EMBA program
My employer wants to pay 90% of an individual's EMBA program via Accts Payable. How should i report on his W2 or should i?… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Does Subpart F only apply for passive income? I owe a
Hi,Does Subpart F only apply for passive income?I owe a foreign corporation and my accountant told me that it is CFC. I Googled this definition and I agree with it. The part that doesn't seem logic to… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a client who has overseas self-employment income. It
I have a client who has overseas self-employment income. It is my understanding that this income cannot be excluded from his taxes because his main home was in the US? Is that correct? Also would he q… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
882 satisfied customers
Income tax question. Are there any ways that interest on an
income tax question. Are there any ways that interest on an insurance policy can be tax deductible? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,906 satisfied customers
Is any or all partnership income or s-corp from a k-1 ever
Is any or all partnership income or s-corp from a k-1 ever figured for self employment tax on a 1040?… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Which of the following income is there also a self
Which of the following income is there also a self employment tax, fica and medicare K1 income 1099 income (not for employment, but royalties, economic/profit splits etc) COD income… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,252 satisfied customers
A limited liability partnership was owned by a trust cfeated
A limited liability partnership was owned by a trust cfeated by the former owner. At the former owners death, the trust required termination of the trust distribution of the partnership interest equal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I have earned a little over $3000 on passive income through
Hi there! I have earned a little over $3000 on passive income through a website called Hubpages. I'm not sure whether to file that on my return as "other income" under the artist/writer category as I … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Two partners in a partnership. One has other self employment
Two partners in a partnership. One has other self employment income and has a solo 401(k). If the other partner would like to have a SEP but i believe that has to be set up at partnership level. If it… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Is income from sublease subject to self-employment tax?
Taxpayer owns 13 properties in a partnership. The partnership leases a residential house and subleases that house to a tenant. Would the income generated from the sublease be treated as active income … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x