Monte Jackel Quoted in Tax Notes Today on Tax Court’s “Limited Partner” Ruling

Tax Notes Today has quoted Akin Gump senior counsel Monte Jackel in the article “‘Limited Partner’ and Self-Employment Tax Debate Resurfaces,” regarding a recent Tax Court memorandum opinion pertaining to the definition of “limited partners” as used by a Mississippi law practice.

The article reports that the court, in Castigliola v. Commissioner, said that three member-managers in the practice were not limited partners because they were involved in the control of practice and could not, under the law, exclude a portion of their distributive shares from self-employment income. Jackel described the decision as “unremarkable” because the court still left some questions unanswered, including “splitting the return between capital and services,” or under what circumstances, “other than obvious cases,” a member of a limited liability entity would be considered a limited partner.

According to Jackel, “the case reflects a consistent pattern of the courts recognizing that one who is not a ‘general partner’ under local (non-tax) law can be a general partner (or not a limited partner) for federal tax purposes.”

Jackel also noted, “If it was not for the government becoming gun-shy after the regulatory moratorium almost two decades ago, the issue would have been resolved by now in regulations.” He added that the IRS “appears content to slug it out case by case because of their prior experience almost 20 years ago.”