Tax
Jun. 15, 2023
Definition of a profits interest examined by tax court
The result of this case should be further proof that the grant of a profits interest to a lower-tier partnership, including those issued on a back-to-back basis, falls within Rev. Proc. 93-27. Again, the applicable profits interest would be based on the profits of the lower-tier partnership only.
Phil Jelsma
Partner and Chair of the Tax Practice Team
Crosbie Gliner Schiffman Southard & Swanson LLC (CGS3)
Email: pjelsma@cgs3.com
Phil is chair of the tax practice team at CGS3. He is recognized as a leading joint venture and tax attorney, with a 30-year background in real estate exchange transactions, syndications, nonprofit corporations and international tax planning.
In a finding that benefits partnerships, the U.S. Tax Court recently examined the definition of a “profits interest” in ES NPA Holdings, LLC v. Commissioner (TC Memo 2023-55), a memorandum opinion. Involving partnership profits interest in tiered structures, the decision provides support to issuers of profits interest – an equity-like form of compensation granted by a partnership or limited liability company (LLC) – including those in the ...
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