Question Llc (scorp)

[soldtoday]

Are taxes deductible from the disposable income if they are flowed through to the owner-employee in a Sub 5 case?

[justbroke]

I'm not a tax expert and this is a question that requires such an opinion.

I don't know how an individual's taxes would be an expense for an LLC/S-corp after the earnings have been passed-through to the members/shareholders. A Chapter 11 Subchapter V is to rehabilitate (or liquidate) the entity itself and taxes on earnings are not an expense of an LLC/S-corp. That's my overly simplistic reading. I don't know how that applies specifically in a Sub V but it would seem to me that the Sub V debtor could not take an expense for the taxes of a member.

I could be 100% wrong, but as a member in several LLCs, I have never taken a deduction/expense for tax on the LLCs returns since they are technically "informational" only due to the pass-through nature of the LLC. In other words, the LLC never pays any taxes on earnings.

I hope you can find someone to answer this question with more authority than my layman's understanding. I don't think the Sub V, or a straight Chapter 11, make any determination as to the who pays the taxes on earnings.

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