Cash, Property, Sweat Equity: Structuring Partner Returns

Cash, Property, Sweat Equity: Structuring Partner Returns

Jeremy breaks down how partnerships can divide profits among partners who contribute very different things — cash, property, or just time and effort — without running afoul of federal tax law. Using a hypothetical partnership as a running example, he covers what makes an allocation legitimate versus a tax dodge, and why the IRS cares so much about the difference. * (00:00) - Meet Lighthouse LLC (01:17) - Investor Payback Goals (04:32) - Course Roadmap (05:40) - Pass Through Basics (08:47) - Baisey Case Lesson (14:18) - Separately Stated Items (20:39) - Partner vs Partnership Tests (23:22) - Unreimbursed Expenses (27:27) - Property Contributions 721 (32:01) - 704c Built In Gain (36:37) - Capital Accounts Explained (42:04) - Substantial Economic Effect (52:05) - Drafting The Waterfall (55:55) - Key Takeaways Next Steps Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

Limited Partner or Not? Why Courts Are Split on Your Tax Bill

Jeremy digs into what actually makes someone a partner for federal tax purposes, tracing the definition back to the Supreme Court's Tower and Culbertson decisions and the "hypothetical liquidation" test for capital interests. From there, he unpacks the messier question of self-employment tax on partnership income: the undefined "limited partner as such" exception under IRC Section 1402(a)(13), and the current circuit split between the Tax Court's functional analysis (Renkemeyer, Soroban) and the Fifth Circuit's state-law approach in Sirius Solutions, with Denham Capital Management still pending at the First Circuit. * (00:00) - Partnerships Recap Goals (01:27) - LLC Members Case Study (03:17) - Are Partners Equal (05:11) - Who Counts As Partner (10:14) - Tower Case Principles (14:48) - Culbertson Intent Test (17:30) - Congress Defines Capital Interest (26:26) - Capital Interest Explained (28:47) - General Versus Limited Partners (30:18) - Self Employment Tax Basics (33:19) - Limited Partner Definition Fight (36:06) - Key Court Cases Split (48:47) - New Cases Jurisdiction Issues (52:12) - Back To LLC Example (55:02) - Takeaways Next Episode Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

When Does Co-Ownership Become a Partnership

Two friends sharing a short-term rental, a married couple flipping houses, siblings splitting the income from a property they own together: any of these could be a partnership for federal tax purposes, often without the owners realizing it. This episode works through how federal tax law defines a partnership, when one actually forms, and why mere co-ownership does not automatically create one, drawing on Subchapter K, the regulations, and foundational cases like Tower and Culbertson. It also separates two regimes that frequently get conflated, the qualified joint venture under Section 761 and the community property LLC exception under Revenue Procedure 2002-69, and closes with a framework for making the call. * (00:00) - Rental Friends Scenario (01:36) - Why Partnership Status Matters (02:28) - Aggregate Versus Entity (04:22) - Goals For This Episode (05:51) - IRS Partnership Definition (09:12) - Mere Co Ownership Tests (14:10) - LLCs And Entity Rules (17:20) - When A Partnership Forms (23:22) - Supreme Court Guidance (27:45) - Court Factors Checklist (33:50) - Electing Out Of Subchapter K (39:41) - Spouse Exceptions Explained (49:08) - Two Step Decision Framework (54:31) - Case Study Short Term Rental (57:01) - Key Takeaways And Wrap Up Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

Cracking Open the Shell: How S Corp Asset Sales Actually Work

A buyer who wants a business but not its liabilities will often buy the assets instead of the stock, and that one decision reshapes how the entire deal gets reported. This episode breaks down the S corporation asset sale from the ground up: allocating the purchase price across seven asset classes using the residual method under Section 1060, reporting it on Form 8594, and handling goodwill and other Section 197 intangibles. It also covers why each asset's character drives the gain that passes through to shareholders, and what documentation has to be locked down before you prepare a single return. * (00:00) - Stock vs Asset Sales (03:32) - Course Goals Overview (06:04) - Lighthouse Example Setup (13:16) - Why Buyers Prefer Assets (16:29) - Section 1060 Basics (25:36) - Residual Method Classes (32:17) - Goodwill and Going Concern (40:45) - Personal Goodwill Cases (42:57) - Form 8594 Reporting (47:53) - Elections 338 and 336 (50:08) - Due Diligence Checklist (53:18) - Workflow and Wrap Up Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

S Corp Ownership Changes: What Every Tax Advisor Needs to Know

When ownership in an S corporation changes hands, the tax consequences routinely catch both clients and their advisors off guard. Jeremy walks through the two critical questions that drive correct reporting — who or what acquired the stock, and when did the transfer actually occur for tax purposes — and explains how the answers determine whether a transaction is treated as a capital sale, a stock redemption, or a distribution. He also covers the two close-the-books elections available under IRC Section 1377(a)(2) and Reg. 1.1368-1(g), and why locking in those elections before filing — ideally before the transaction closes — can make a significant difference in how income gets allocated between outgoing and incoming shareholders. Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]