Proposed Partnership Treasury Regulations – Consider the Guaranteed Payment

October 08, 2015

Recent Proposed Regulations address the rules for disguised payments for services and guaranteed payments by partnerships. The Proposed Regulations technically do not take effect until published in final form, but Treasury and the IRS view the Proposed Regulations as generally reflecting Congressional intent. These Proposed Regulations may impact the treatment of certain preferred equity investments in entities treated as partnerships. Importantly, these investments may result in “guaranteed payments,” which could have an adverse effect on the taxation of the income from such investment for certain investors. Therefore, the Proposed Regulations should be carefully considered when reviewing existing arrangements and structuring such arrangements in the future.

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