On May 28, 2025, the US Tax Court ruled that investment manager limited partners in Soroban Capital Partners were active limited partners and, as such, were ineligible for the limited partner exception to self-employment taxes described in Internal Revenue Code Section 1402(a)(13).
As discussed in this December 2023 client alert, in November 2023, the US Tax Court held that state law limited partners are not per se entitled to the limited partner exception because the limited partner exception does not apply to a partner who is limited in name only. Instead, a functional analysis must be applied to determine whether the limited partner exception applies (the Soroban holding). The case subsequently went to trial to be determined on the facts.
The authors
Stephanie Gentile
Eileen Marshall
Aalok Virmani
