For a taxable entity that owns an interest in a passive entity, is the taxable entitys share of net income of the passive entity excluded from total revenue?
Under Tax Code 171.1011(e) a taxable entity can only exclude from total revenue the taxable entity’s share of net income of the passive entity if the net income of the passive entity was generated by the margin of a taxable entity. Therefore, a taxable entity that owns an interest in a passive entity may only exclude from total revenue, to the extent included, the taxable entity’s share of net income of the passive entity from dividends, distributive shares of partnership income if the partnership is a taxable entity and income from a limited liability company (LLC), if the LLC is a taxable entity.
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