In light of the rapidly changing coronavirus (COVID-19) situation, Troutman Sanders and Pepper Hamilton have postponed the effective date of their previously announced merger until July 1, 2020. The new firm – Troutman Pepper – will feature 1,100+ attorneys across 23 U.S. offices. Read more.
Presented by Lorman Education Services
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.
Key topics include: