Royalties

[Elkevano]

Are royalties (acting/play) after the death of the actor subject to self employment tax to the beneficiaries and do they get reported as ordinary income? The beneficiaries have set up an LLC for this.

[itonewbie]

Sounds like residuals during the actor's lifetime, which was subject to SE tax.  That's now income in respect of decedent, which is not subject to SE tax.

[Elkevano]

Thank you! Where does it go on Form 1065? When I enter it on 8825, it is asking me for an address. When I enter it as ordinary income it makes it subject te SE tax for managing member. 

[itonewbie]

But if the right to receive residuals was bequeathed to the beneficiaries, shouldn't it be the beneficiaries' income rather than as a passthrough from the LLC?  Whether the beneficiaries assign or contribute that income to the LLC shouldn't change that fact, by fruit of the tree doctrine.  If the arrangement was structured by an attorney or financial planner, it'd be best to consult that person as to the technicality, operations, and the appropriate tax reporting position.

[rbynaker]

I don't do partnerships, but wouldn't this just go on Sch K box 7?

[Elkevano]

There are so many different royalty sources and a lot of beneficiaries so to make it easy, they set up an LLC and make distributions from there. Thank you for you help!