• Risk of Possible Classification of Funds as Publicly Traded Partnerships
  • December 1, 2003
  • Law Firm: Paul, Weiss, Rifkind, Wharton & Garrison LLP - New York Office
  • Due to the increasing incidence of fund investors who want to transfer their investment fund interests ("fund interests"), for liquidity concerns or other reasons, and the emergence of parties willing to acquire these interests, investment funds ("funds") now face a greater risk of being classified as publicly traded partnerships ("PTP") that are taxable as corporations. General partners and managers of most funds have generally assured fund investors, either explicitly or implicitly, that the fund will be treated as a partnership and will not incur any entity-level tax. Therefore, we think it is important for general partners and fund managers to be aware of the rules under which a fund may be treated as a PTP (and therefore potentially taxable as a corporation), and the techniques available to avoid such classification