Tax Court Asserts Its Ability to Analyze a ‘Limited’ Partner

A tax exception that would allow a partnership to exclude income distributed to its limited partners from its net earnings doesn’t apply when they are “limited in name only,” the Tax Court said.

The US Tax Court held Tuesday that Soroban Capital Partners LP, an investment firm organized as a Delaware limited partnership, couldn’t claim an exception as a matter of law under tax code Section 1402(a)(13) to exclude ordinary business income distributed to its limited partners from its net earnings from self-employment for 2016 and 2017.

While the tax code contains an exception for limited partners, the Tax Court ...