SE Taxation of Limited Partners: Sirius Solutions, L.L.L.P. v. Commissioner

Tax attorney Mary McNulty will present at ACPEN Signature 2026: Partnerships and LLCs Update, a virtual program addressing new legislative, regulatory and judicial developments affecting limited liability companies (LLCs) and partnerships along with their return preparers and tax advisors. Designed to encompass an array of issues, from IRS audit initiatives to self-employment tax questions to allocation and basis calculation errors, the course will equip participants with the knowledge to guide clients on income tax returns, reporting compliance and more. Ms. McNulty's presentation will focus on the U.S. Court of Appeals for the Fifth Circuit's decision in Sirius Solutions, L.L.L.P. v. Commissioner, a landmark ruling that held a "limited partner" is a partner in a state law limited partnership that has limited liability for purposes of the self-employment tax – and notably rejected the IRS and U.S. Tax Court's use of a "passive investor" test. She will open by providing background on Self-Employed Contributions Act (SECA) taxes and history of the limited partner exception, including the Soroban Capital decision that established the passive investor test for which the government argued. She will then explain the Fifth Circuit's analysis in Sirius Solutions, highlight related pending cases and share recommendations for practitioners working on matters before IRS Appeals as the effects of these decisions continue to play out.