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Posted by removeps-groups@yahoo.com on April 24, 2008, 10:26 am
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> I was requested by a taxpayer to look at a 1065 prepared by his accountant.
> The taxpayer purchased a business in 2007 using funds provided by a mortgage
> on his personal residence. Because the property is half owned by his wife,
> she insisted on having a ½ interest in the new business. The attorney formed
> an LLC naming both the husband and wife as equal partners and that both
> assets and income were to be divided 50/50. The wife is not involved with
> the running of the business.
>
> The accountant divided the 2007 $60,000 profit evenly on the 1065 but
> reported only the husband's half as self-employment income and the wife's
> as passive income and not self-employment income. Is there any justification
> for how the accountant handled this situation?
Here's my guess: What is the FMV salary for the husband? If it is
60k or more, then I think all of the 60k should go to him as salary,
and he's have SS and Medicare on all of it. If the FMV salary is 50k,
then he should get 50k as salary, and the remaining 10k should be
distributions. If the LLC is taxed as an S Corp, then both husband
and wife should get 5k as they each have 50% of the shares. But
anyway, hope someone else knows better than me.
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