After losing for the fourth time in court, the IRS has decided to accept the fact that under present regulations a member’s interest in an LLC taxed as a partnership is not equivalent to a limited partnership interest for purposes of the passive activity loss rules. See Newell v. Commissioner, Dec. 58,127(M), T.C. Memo 2010-23.
The question now becomes what will happen to those LLC members who want to be treated as limited partners for purposes of SECA, the self-employment tax. Can they have it both ways?-Marc Ward