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The Spiegel & Utrera, P.A. Dual Class LLC is designed to take advantage of proposed IRS regulations issued in 1997, wherein the IRS extended the statutory scheme for the Self Employment Tax (SE Tax) income rules for partners (including the exception for limited partners) to individual LLC members. These proposed regulations are not effective until issued as final regulations, which has not yet occurred. Unofficially, IRS representatives have stated that they are awaiting congressional guidance on this issue. The absence of definitive guidance from the IRS concerning the application of the SE income rules to LLC members has created uncertainty for taxpayers but also a degree of flexibility. At Spiegel & Utrera, P.A., our Dual Class LLC applies the proposed regulations’ definition of a limited partner to LLC members even though the proposed regulations are not currently binding. This is the most definitive guidance currently available, and it should be very difficult for the IRS to attack a taxpayer’s use if these proposed regulations as being unreasonable. An IRS representative was quoted in June 2003 as stating that as long as taxpayers conform to the latest proposed rules, the IRS generally will not challenge what the taxpayers do with regard to SE taxes. | |