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This course is the second in a 2-part series that covers tax issues that can affect investment partnerships and their partners. Investment partnerships have become increasingly prevalent. They are now widely used for real estate development and management, private equity, hedge, venture capital and credit fund vehicles, and wealth management arrangements. The partnership structure (including LLCs treated as partnerships for tax purposes) offers the advantages of flow-through taxation and economic flexibility, but with those benefits come complexity and sometimes unanticipated tax results.

The 2-part series broadly explores a myriad of issues that affect investment partnerships and their partners. This course (the second part of the series) starts out with a brief recap of some of the high points for the first course, and then builds on those concepts. It explores approaches for compensating sponsors and managers, focusing on the tax implications of using profit interests (including case law, the IRS Revenue Procedure 93-27 “safe harbor”, and the 2017 Tax Act increased holding period for long-term capital gains associated with “carried interests”). It identifies issues that can arise in connection with transfers of partnership interests, and considerations concerning winding up and liquidating. Finally, it explains the 2015 Balanced Budget Act’s overhaul of the partnership tax audit rules.

While accountants and other tax professionals will find the technical aspects of this course helpful in understanding investment partnerships, practical aspects of the course will also be valuable to investment and real estate professionals, finance and accounting executives, wealth managers, and investors (and those considering becoming investors) in investment partnerships.

Part I of this course can be found here.

Course Key Concept: Partnership, Limited Liability Company, Partnership Agreement, Carried Interest, Fee Waiver, Section 751 Asset, Section 754 Election, Capital Account Book-Up, Bipartisan Budget Act (BBA) Audit Regime, Partnership Representative, “Push-out” Election.

Learning Objectives

  • Explore arrangements for compensating partnership sponsors and managers.
  • Recognize issues presented by compensation with profits interests.
  • Identify tax implications of partnership interest transfers.
  • Recognize tax implications of partnership liquidations.
  • Discover important features of the new partnership tax audit regime, introduced by the Balanced Budget Act of 2015.
Last updated/reviewed: April 27, 2020

Prerequisites

Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course, although completion of the first course in this series, Investment Partnerships: The Basics, Part I, is recommended.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  1:01Introduction to Investment Partnerships: The Basics - Part 2
  7:07Part 1 Review
  9:32Compensating The Manager/Sponsor
  7:08Compensating The Manager/Sponsor Cont'd
  9:41Partnership Interest Transfers
  8:16Partnership Interest Transfers Cont'd
  3:43Partnership Liquidations
  11:24Partnership Audits and Conlusion
CONTINUOUS PLAY
  57:52 Investment Partnerships: The Basics - Part II
SUPPORTING MATERIAL
  PDFSlides: Investment Partnerships: The Basics, Part II
  PDFInvestment Partnerships: The Basics, Part II Glossary/ Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM