Gain a comprehensive understanding of the
Section 1061, enacted as part of the TJCA, requires a three year holding period (rather than a one year holding period) in order for carried interest partners to qualify for long-term capital gains rates on carry proceeds (3 Year Carry Rule). The application of these rules to a typical private equity fund structure is complex and fact-specific. This topic provides a clear summary of these rules in an easy-to-understand format, identifies common misconceptions and traps for the unwary and provides practical structuring solutions to avoid or minimize the impact of the 3 Year Carry Rule. In particular, this panel will focus on the potential implementation of a carry waiver mechanism, whereby carried interest partners may avoid the short-term characterization through a waiver of their participation rights with respect to portfolio investments held for less than three years in exchange for a priority return with respect to certain qualifying investments held for more than three years. These provisions have the potential to drastically reduce or eliminate the application of short-term capital gain rates, but come with a host of technical and drafting issues that may trigger significant unintended consequences unless drafted carefully.
Agenda
Faculty
Morgan Klinzing
Troutman Pepper Hamilton Sanders LLP
- Partner at Troutman Pepper Hamilton Sanders LLP, resident in the Philadelphia office
- Practice focuses on federal and international income tax, with a focus on the private equity arena and pass-throughs
- Represents clients in domestic and cross-border M&A, fund formation and structure, reorganizations, and partnership agreements
- Frequent speaker for the American Bar Association and other professional groups on tax issues impacting flow-through entities and cross-border structuring
- LL.M. degree in taxation, New York University
- Can be contacted at [email protected] or 215-981-3456
David Stauber
Pepper Hamilton LLP
- Partner in the NYC office of Pepper Hamilton LLP
- Practice emphasizes all aspects of U.S. federal income tax aspects of fund formation, mergers and acquisitions and securities offering matters
- Conducts regular seminars and workshops on numerous topics related to partnership taxation, international taxation and tax reform
- Written several publications related to the areas of international tax, partnership tax and tax reform
- Member of the New York and New Jersey bars
- LL.M. degree in taxation, NYU; J.D. degree, cum laude, University of Michigan
- Can be contacted at 212-808-2705 or [email protected]
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