Appellate Judges Scrutinize Net Earnings as Partnership Tax Item

A panel of appeals court judges Thursday primarily focused on whether net earnings from self-employment are considered a taxable partnership item, with limited discussion of whether state-law limited partners can qualify for a tax exemption.

While a recent Fifth Circuit ruling interpreting the phrase “limited partner, as such” for the purposes of a self-employment tax exemption under IRC Section 1402(a)(13), the First Circuit panel spent much of its argument time examining a separate issue: whether the IRS’ adjustment to Denham Capital Management LP‘s net earnings to self-employment at the partnership level were in accordance a 1982 law . ...