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Renkemeyer Case Sheds Light on Law Firm Tax Issues

By Richard Stieglitz and and Martin Arking

A recent tax court case involving a law firm dealt with two issues that are relevant to many law firms. In this particular case, the taxpayer had a bad set of facts and consequently ended up with a bad result. However, the court's decision may have a far-reaching effect on other taxpayers taking less aggressive positions. The first issue is the allocation of partnership income to the partners in the absence of a written partnership agreement. The second issue is whether income generated by a limited liability partnership is subject to self-employment tax. This question is of particular interest to law firms as the limited liability partnership is the entity of choice for many law firms.

Allocation of Income

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