Whether an LLC is treated as a partnership or a disregarded entity for federal income tax purposes can sometimes have a significant effect on the tax consequences of a transaction. A recent order issued by the Tax Court in Joint Star Properties, LLC v. Commissioner (January 22, 2024) illustrates the sorts of issues that can arise.
If an LLC has a single member, then it is generally disregarded as separate from its member for income tax purposes, and if an LLC has more than one member, it is generally treated as a partnership for income tax purposes (assuming in each case that the LLC has not elected to be treated as a corporation).
