Discussion:Health insurance premiums in LLC

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Discussion Forum Index --> Basic Tax Questions --> Health insurance premiums in LLC
Discussion Forum Index --> Tax Questions --> Health insurance premiums in LLC

MSTguy (talk|edits) said:

12 December 2007

I have an S-corp with 3 owners that contributed all of its assets to a new LLC in exchange for a 49% interest in the LLC. The 3 shareholders are now employees of the LLC, but have no direct ownership (the other 51% ownership is from outside investors).

How are health insurance premiums paid for the employees (S-corp shareholders) treated? Are they nontaxable fringe benefits like they would be for any other normal employee, or are they treated as partners because of their indirect (constructive) ownership of the LLC, thereby making them subject to the fringe benefit limitation.

On top of that, does it matter that 2 of them are officers in the LLC while the 3rd is not?

At first I thought the premiums should be 100% taxable to them on their W-2s, but since learning that they don't have a controlling interest in the LLC, I'm starting to change my opinion.

Any thoughts?

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