Tax Issues for Secondary Sales of Private Funds: Transfer Restrictions, Fund Structures, Tax Elections, Allocations

This CLE/CPE course will provide guidance to tax counsel and advisers on critical tax considerations for secondary sales of interests in private funds. The panel will discuss tax and fund structuring challenges impacting the buyers, sellers and the fund, transfer restrictions, tax elections, allocation of tax and expenses, and tax withholdings. The panel will also offer fund structuring techniques to minimize potential implications in the event of a sale.

In response to the coronavirus pandemic, decreased values of certain assets, and other items impacting investments, fund investors may seek options to liquidate their interests. Tax counsel and advisers must identify essential tax rules applicable to secondary sales of interests in private funds and implement methods to avoid or minimize any adverse tax consequences for sellers and buyers.

The secondary private equity market involves the buying and selling of preexisting interests in private market funds. Investors purchase these interests from limited partners seeking to exit primary private equity funds before they are fully liquidated. However, this process isn't without potential legal and tax ramifications. Secondary sales require counsel and advisers to have a complete understanding of tax and structuring considerations, such as the impact of transfer restrictions, tax elections, and allocation of taxes and expenses, all of which significantly impact the transaction.

Listen as our panel discusses tax and fund structuring challenges impacting a buyer, seller, and private equity funds stemming from secondary sales and offers techniques for structuring transactions to minimize potential tax implications.