ExpertMedium1 markMultiple Choice
CPA · Question 47 · Area III: Entity Tax Planning
A taxpayer is a general partner in a partnership that operates a trade or business. The partnership income is $100,000. The taxpayer performs services for the partnership. Is the income subject to Self-Employment (SE) Tax?
A taxpayer is a general partner in a partnership that operates a trade or business. The partnership income is $100,000. The taxpayer performs services for the partnership. Is the income subject to Self-Employment (SE) Tax?
Answer options:
A.
No, it is passive income.
B.
Yes, the full distributive share is subject to SE Tax.
C.
Only guaranteed payments are subject to SE Tax.
D.
No, because it flows through.
How to approach this question
General Partners: Distributive share of ordinary business income + Guaranteed Payments = Net Earnings from Self-Employment.
Full Answer
B.Yes, the full distributive share is subject to SE Tax.✓ Correct
B
IRC §1402(a). A general partner's distributive share of partnership trade or business income is net earnings from self-employment.
Common mistakes
Thinking only guaranteed payments are SE income; confusing with Limited Partners (who are generally exempt).
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