Last month the Tax Court shot down an IRS argument that limited liability company losses are automatically "passive" under rules drafted for old-fashioned limited partnerships. Yesterday the Court of Claims agreed with the Tax Court. Ruling for the taxpayer on summary judgement, the Claims Court explicitly followed the Tax Court, explaining:
Finally and most importantly, an LLC is not "substantially equivalent" to a limited partnership. As discussed above, unlike a limited partnership, an LLC allows all members to participate in the business while retaining limited liability.
Claims Court: Thompson, NO. 06-211 T (Fed Cl)
Tax Court: Garnett, 132 T.C. No. 19
Finally and most importantly, an LLC is not "substantially equivalent" to a limited partnership. As discussed above, unlike a limited partnership, an LLC allows all members to participate in the business while retaining limited liability.
Claims Court: Thompson, NO. 06-211 T (Fed Cl)
Tax Court: Garnett, 132 T.C. No. 19
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