KMK Law Corporate & Securities Blog

Hedge funds and private equity groups have long used the “limited partner exception” to minimize self-employment taxes, but on March 13, 2018, the IRS announced that it was going to increase its scrutiny on taxpayers utilizing that exception.[1] As part of that campaign, a number of cases are currently being litigated regarding the limited partner exception.[2] On November 28, 2023, the Tax Court issued its first ruling on one of the cases dealing with this exception, Soroban Capital Partners LP et al. v. Commissioner; 161 T.C. No. 12 (2023).