Question

Debbie is a limited partner in ADK Partnership. Her partnership Schedule K-1 reports $19,000 ordinary business income, $2,000 long-term capital gain, and $830 dividend income. Which of these items are subject to self-employment tax?

Answer 1

None of the items are subject to SE tax because Debbie is a limited partner.

What does the limited partner mean?

Limited partners invest money in exchange for equity in the partnership, but have limited voting rights in the company's affairs and are not involved in day-to-day operations. A limited partner's liability for the company's debts cannot exceed the amount he has invested in the company.

What is limited partner example?

However, limited partners only invest in the company and have little control over business operations. For example, Ben, Bob, and Brandi are partners who own and operate a bookstore. You own The Book Nook. According to the Articles of Incorporation, Ben and Bob are limited partners.

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