J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

45.2 Partners Pay Self-Employment Tax

A general partner includes his or her share of partnership income or loss in net earnings from self-employment, including guaranteed payments. If your personal tax year is different from the partnership’s tax year, you include your share of partnership income or loss for the partnership tax year ending within 2012.

A limited partner is not subject to self-employment tax on his or her share of partnership income except for guaranteed payments for services performed, which are subject to the tax.

If a general partner dies within the partnership’s tax year, self-employment income includes his or her distributive share of the income earned by the partnership through the end of the month in which the death occurs. This is true even though his or her heirs or estate succeeds to the partnership rights. For this purpose, partnership income for the year is considered to be earned ratably each month.

Retirement payments from partnership.

Retirement payments you receive from your partnership are not subject to self-employment tax if the following conditions are met:

1. The payments are made under a qualified written plan providing for periodic payments on retirement of partners with payments to continue until death.

2. You rendered no services in any business conducted by the partnership during the tax year of the partnership ending within or with your tax year.

3. By the end of the partnership’s tax year, your share in the partnership’s capital has ...