Multi Partner LLC for Flip - Self Employment Tax ?

[Oshi Jain]

We are creating an new multi partner LLC for Flipping business(8 partners total, 2 partners will be active). We are looking at doing 2-3 Flips in first year. Is Flipping considered as active or passive like rental ? and do all the partners need to pay quaterly self employment tax for it ? I checked with several CPAs and getting conflicting answers. Most are saying we will have to pay Self-employment tax which couple of them are saying we don't have to. If you can share your thoughts that would be great.

[Teri Feeney Styers]

Hopefully a CPA will weigh in here (@Linda Weygant?) but here is how I think it will go... Flipping is "active" income but that income will pass through the LLC partnership to you and the others in the form of a K-1. That document will be added to your taxes when you file and that income will be factored in. However, you (not the partnership) are responsible for making tax contributions during the quarters that income is received. You don't have to be exact - but you need to either pay 110% of what is owed OR 100% of what was owed last year... So you will be filling out form 1040 ES and your state equivalent.