Tax Pros Dissect Court’s Ruling on Limited Partner Exception, Tax Notes

Partner Jennifer Breen was quoted in a Tax Notes article analyzing the Fifth Circuit’s decision in Sirius Solutions LLLP v. Commissioner, which rejected the US Tax Court’s passive investor test and held that the limited partner exception to self-employment tax turns on limited liability under state law.

Jennifer noted that while the ruling represents a significant step toward clarity, appeals pending in the First and Second circuits could still lead to divergent interpretations. She added that the decision refocuses the analysis on statutory text and longstanding administrative practice, offering a more workable framework for compliance.

“The decision underscores the importance of how the statute has operated in practice,” Jennifer said, adding that the court’s approach “provided clear direction for compliance.”

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