1. How much room do you feel there really is for a member of an LLC to be involved, in any way beyond being a mere investor, and yet avoid application of the self-employment tax on his or her distributions from the LLC? Use the handbook reading, including the article and the revenue ruling, to suggest exactly what level of involvement is and is not allowed. Does this sound to you like an LLC member could truly be involved in the matters of the LLC and yet be able to avoid self-employment tax? How about this, how about if the members put up his or her interest between himself and his spouse, or the spouse is not involved in the business in any way. Could this then allow the LLC member to avoid the self-employment tax under the Renkemeyer on the lease half of his or her income?
2. Discuss some of the key issues that occur with liabilities when a partnership is converted to an LLC. Discuss issues that include both recourse and nonrecourse liabilities. What is the basic rule on the ability of LLC members to share in the liabilities of the LLC in order to increase the basis of their interest in the LLC under code Section 752? For an LLC member, will there be a different treatment of recourse debt versus nonrecourse debt?
3. There is a C corporation with assets worth $5 million, with the basis to the Corporation of only $1 million, and the Corporation is a closely held corporation with only five shareholders. It is considering a few possibilities for this year 1. One is the possibility of liquidating and operating as an LLC. Another is making an S corporation. It does anticipate that its assets will be sold over the next 5 to 10 years. What do you think it should do? Do you think it should convert to an LLC, and why or why not? Do you think it should elect S corporation status, and why or why not?