compensation

[Guest mk2308]

what is the compensation for members of an LLC taxed as a partnership? the members were given "W-2" compensation (incorrect, but that is what happened)and had losses on their K-1s for their share of the company's loss. does it make a difference if they are investor only or managing members?

[Guest mk2308]

would we take the amount from line 14 (self-employment earnings(loss)) of the

K-1?

[mbozek]

The instructions to form 1065/K-1 for line 14 contains a worksheet for computing the net earnings from SE for a partner who has gains/losses attributable to his partnership interest.

[Archimage]

There is more to it than that. If there are section 179 deductions and/or unreimbursed partner expense then you would reduce for those amounts. You would also add in any guaranteed payments for services.

In your case I would add back the W-2 wages to NESE.

[Guest mk2308]

thank you....one more question, a loss carried over from a previous year does not factor into the calculations, correct?

[Archimage]

Correct. You have to remember that comp is based on services performed in a given plan year. A loss from a prior year has nothing to do with the services performed in the current plan year so they would never be recognized.

[Guest mk2308]

that's what I thought, thanks!