Disappointing Diogenes: The LLC Debate that Never Was
40 Pages Posted: 19 Oct 2007
Abstract
With Rev. Rul. 88-76, the Internal Revenue Service acknowledged that, when properly structured, a limited liability company may be classified for federal tax purposes as a partnership. Constraints on organizational requirements were significantly relaxed with the Check-the-Box classification rules. Each of these changes in federal tax law, typically incorporated by the states into their own income tax systems, served to initially make available and thereafter to liberalize the availability of the LLC form. It did so even as organizations that might have otherwise been organized as corporations subject to state income taxation were now treated as pass-through structures. Herein we, for the first time, examine, or rather identify the absence of, an informed debate on the state tax implications of making the LLC broadly available.
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