Fifth Circuit Reverses Course On Limited Partner Self-Employment Tax Exception
Court of Appeals for the Fifth Circuit has issued a surprising reversal that alters the landscape for partnership taxation.
The U.S. Court of Appeals for the Fifth Circuit has issued a surprising reversal that alters the landscape for partnership taxation. By withdrawing a previous opinion from January, the court has introduced a fresh standard for determining which individuals qualify as limited partners for the purpose of avoiding self-employment taxes. This move has caught many tax professionals off guard, as it moves away from a strictly legal definition toward a functional assessment of a partner's activities within a firm.
NEW Test for Limited Partners
On August 12, 2026, the appellate court officially retracted its earlier ruling in the case formerly known as Sirius Solutions, L.L.L.P. v. Commissioner. Now
Source: forbes.com · 2026-08-17