Category:Bifurcation

From TaxAlmanac

This category will hold two different kinds of discussions/articles:

1 - Rentals

When a single rental property should be treated as consisting of two activities — a rental activity and an investment activity, as exemplified by this discussion: Discussion:Florida rental property/investment.

2 - LLCs

Bifurcating income for members of an LLC between SE-taxable and non (multiple classes), as described in this NYSSCPA article: Minimizing Self-Employment Tax of LLC Managing Members (June 2006).

The primary TaxAlmanac discussion on the second of the two topics is Discussion:LLC, SE Tax, and Bifurcation of Income, with the real meat starting about 1/4 of the way down, after the Etocaj scenario is dealt with and the underlying theory is discussed, i.e., Section 2 - start with the post from Glmpllc that begins "JR1, I like your approach on the SE tax issue...not sure I agree with it..." (toward the end of the Feb 1 posts) and read from there.

Also see Discussion:Can an LLC avoid SE taxes?, and the other links listed in the "Pages in category "Bifurcation"" section of this page may also be helpful.

Relevant court cases:

• Renkemeyer: Taken from a 2/9/11 post by DaveFogel: "Renkemeyer v. Commissioner, 136 T.C. No. 7 (2011). The Tax Court ruled that a law partner's distributive share of income from a Limited Liability Partnership law firm was subject to self-employment tax because the distributive share of income arose from legal services that the law partner performed for the firm. Discussion of this issue starts on page 15. This is a "regular" Tax Court opinion, so it has quite a bit of precedential value." Search suggestion: Search Renkemeyer for more comment on this case.

• Garnett: "http://www.ustaxcourt.gov/InOpHistoric/Garnett.TC.WPD.pdf Garnett v. Commissioner], 132 T.C. No 19 (2009). See discussion of the case here: Discussion:LLC passive loss Garnett case.

• Gregg: Gregg v. United States, 186 F. Supp. 2d 1123 (Dist.Ore. 2000), see discussion linked just above for comment on this and other related cases.

A note about categorizing discussions

The discussions listed in the next section have been categorized as dealing with one or the other of the bifurcation issues; categorization is a manual process and many other helpful discussions may not have been labelled yet, so please be sure to search too.

Search on bifurcate, bifurcating, and bifurcated in addition to bifurcation; the search results may be different since TaxAlmanac's search engine only matches the actual search term, and not closely similar words. Also, use the Advanced Search to search on just the term "bifurcation," since if you use the yellow search box for that you'll simply be redirected back to this category page.