Temporary Regs Shut Down Partner-Employee Planning
In the investment fund and private M&A world it is very common to issue profits interest to key-men. In the investment fund context these could be top traders for example who share in the GP’s carry. In the private M&A context these would be non-founding member executive talent. Often these individuals would be perceived by the founders and other parties as employees but would be remunerated like partners. In fact, many times, individuals who were previously purely treated as employees are converted to profit interest members. That usually presents a predicament from a tax...
May 04, 2016 read more
CCA 201442053 – Partnership Freeze Gone Awry
The IRS released a few days ago the above-mentioned CCA, which illustrates the gory pitfalls of Sec. 2701. In this ruling, the IRS had to opine whether the recapitalization of a family partnership would be subject to Sec. 2701. The parties here attempted a partnership freeze. This is an estate planning technique whereby the older generation retains a fixed interest in the partnership and transfers future profits to the younger generation. Thereafter, the older generation could gift portions of the retained interest annually within the limits of the annual gift exclusion. Alternatively, the...
October 23, 2014 read more