Don’t Suffer the (Tax) Consequences! See These Strategies for Private Fund Investments

This practice note discusses the principal U.S. federal income tax consequences to a private fund and its investors of owning common stock or American Depository Shares (ADSs) of a foreign corporate issuer. This practice note assumes that the private fund is taxable as a partnership for U.S. federal income tax purposes and that investors are not pass-through entities; they are either U.S. individuals or U.S. organized corporations for U.S. federal income tax purposes. While non-U.S. investors can invest in U.S. partnerships and funds, this practice note does not delve into the tax consequences of non-U.S. investors who hold stock of foreign issuers indirectly through a U.S. fund.
 
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Related Content

• Tax Considerations in Structuring a Private Equity Fund
  Review this discussion of strategies and structures developed by the private equity industry to avoid adverse tax consequences at the general partner/manager, investor, and portfolio level.

• PFICs and Private Equity
  Read this practice note that looks at how private equity funds deal with passive foreign investment companies (PFICs), specifically focusing on how funds may invest in PFICs.

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