Tuesday, August 17, 2010

Does an "investment club" type partnership have to pay for Self employment tax?

A regular partnership is required to pay both an income tax and a self employment tax on profits generated by the partnership at the federal level. What about an investment club type of partnership- where the only profit generated is purely from investments?

Does an "investment club" type partnership have to pay for Self employment tax?
The income from the partnership flows to the partners in the same classification as it was generated. Unearned income is reflected as such on the K-1s and is taxed that way -- no SE taxes are due.





Do make sure that your partnership agreement is iron clad on it's purpose and how income will be generated within it. If any income other than unearned income is generated, it must be reflected as such on the K-1s and may be subject to SE taxes.

buck teeth

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