TaxConnections

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please Type Topic Into Search Bar

Delaware LLC: One foreign partner and one domestic partner, pass -thru tax, question on the tax on foreign partner.

The scenario:
ABC LLC company (a publisher). John: One domestic partner 90% share and one foreign partner 10%: Mary (non-resident, ZERO days appearance in usa).
ABC LLC income: $1,000 from royalty from book publishing.
ABC LLC operation cost: $2,000.
ABC LLC business income is a loss: -1,000.
ABC LLC pass-through the loss to its partners: so John's business income is a loss: -$900.00 and Mary (foreign partner) is -$100.

Some people say:

Mary doesn't need to pay tax because as a business partner. Her business income tax basis is -$100 as it's passed through from ABC LLC.

Some people say:

Mary needs to pay tax because royalty is ordinary income. So mary needs to pay tax ->$1000 * tax rate

Which one is correct?

In my opinion, Mary does not need to pay tax because ABC LLC passes a loss to her. So there is no income basis for tax.

Why would some people say Mary needs to pay tax even though the outcome for Mary's investment is a loss? There is no profit at all. It's a common sense that No profit->no income-> no tax

Please Help.

Thanks
LLC LLC Foreign partner


Meet Leading Tax Advisors

User Photo John Stancil

Professor

Lakeland

User Photo Peter J. Scalise

Federal Tax Credits & Incentives Practice Leader

New York, NY

User Photo John Dundon, II EA

Tax Director

Denver, CO

User Photo William Rogers, CFP, MBA, EA

CEO/Certified Financial Advisor

Rancho Santa Fe, CA

User Photo Monika Miles

President

San Jose, CA

User Photo Blake Christian

Tax Partner

Long Beach/ Park City, CA

User Photo John Richardson

Lawyer

Toronto, Canada

 

View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page

INCREASE KNOWLEDGE WITH EVERY ISSUE OF TAXCONNECTIONS

 

Learn from tax advisors, straight to your inbox

Update My Email Address
Contact Us Today