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Posted by MCfla on September 22, 2003 at 11:21:22:

Ok I read the archives, went to IRS.org and have spoken to an Accountant and to a CPA.

Q: If I am a member of an LLC that purchases and holds Rental property (only activity) do I have to pay Self employment/ SS taxes on the money flowing to me from the LLC? Does it make a difference if we elect to be treated as a Partnership or Corp?

CPA says No; all rental income is considered a passive activity.

IRS PUblication 3402 says Yes, "generally, members pay self-employment tax on their share of the partnership earnings".

Accountant says Yes, LLC earnings are subject to self-employment tax.

Thanks in advance.
MCfla

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Posted by JHyre in Ohio on September 22, 2003 at 14:21:55:

Whether you pay SS tax on partnership earnings depends on the nature of partnership/LLC's earnings. Rental income is not considered "earned income" (like, say, wages) and is therefore not subject to SS tax.

John Hyre

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Posted by Sandra on September 24, 2003 at 07:21:54:

On the flip side, what if someone was to sell all their properties on a land contract? That was the only income coming in, say selling 10-15 a year on land contract. Would there be one particular entity that would be best as far as self employment tax,etc.?