Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 79-53

1979-1 C.B. 286

Section 1402

IRS Headnote

Limited partner; distributive share of income. A calendar year limited partner's distributive share of partnership income for a partnership's fiscal year ended June 30, 1978 is excluded from net earnings from self-employment.

Full Text

Rev. Rul. 79-53

ISSUE

Does the effective date of section 1402(a)(12) of the Internal Revenue Code of 1954, concerning the exclusion of the distributive share of a limited partner from net earnings from self-employment, apply to the taxable year of the partner or partnership?

FACTS

During 1978, a limited partner filing income tax returns on a calendar year basis became entitled to a distributive share from a partnership that operated a retail store. The partnership filed an income tax return for a fiscal year ended June 30, 1978.

LAW ANALYSIS

Section 1402(a)(12) of the Code excludes from net earnings from self-employment the distributive share of any item of income or loss of a limited partner. Section 1402(a)(12) was added by section 313(b)(3) of the Social Security Amendments of 1977, Pub. L. 95-216, 1978-1 C.B. 462, 466, effective with respect to taxable years beginning after December 31, 1977 (section 313(c) of the Social Security Amendments of 1977).

The self-employment tax in section 1401 of the Code is imposed on a partner rather than partnership.

HOLDING

The effective date of the exclusion of a limited partner's distributive share from net earnings from self-employment applies to the 1978 calendar taxable year of the partner. Therefore, in the instant case, the limited partner's distributive share of the partnership income for the partnership fiscal year ended June 30, 1978 is excluded from net earnings from self-employment, even though the partnership's taxable year began before January 1, 1978.