Use this button to switch between dark and light mode.

Face the (Tax) Consequences: Preferred Equity Investment in U.S. Operating Companies

December 06, 2022

Private equity investments are a particularly important subject to tax attorneys involved in entity formations, equity issuances, and M&A transactions. This practice note discusses U.S. federal income tax considerations that arise in a preferred equity investment in an operating company organized and operated in the United States. It focuses primarily on the tax considerations that apply to U.S. investors, but also discusses considerations that may apply to non-U.S. investors, foreign sovereign governments, and tax-exempt entities.

Read now »

Related Content

  • Pass-Through Entities Taxation
    Review this practice note discussing the tax characteristics of pass-through entities, including partnerships, multi-member series LLCs, S corporations, real estate investment trusts, and regulated investment companies. 

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

  • Tax Key Legal Developments Tracker (Federal)
    Stay informed on new developments: 
    • Business Entities. IRS obsoletes and replaces existing Revenue Procedure 94-69 and prescribes special procedures for certain eligible LB&I taxpayers who are subject to nearly annual examinations to file a qualified amended return shortly after the opening of an audit.  Proc. 2022-39.
    • International Tax. IRS and Treasury propose regulations offering some narrow exceptions to the 2021 final foreign tax credit regulations, which generally require offshore measures to align with U.S. laws to qualify for a credit back to the United States. The proposed regulations address the following issues: (1) the definition of a reattribution asset for purposes of allocating and apportioning foreign income taxes, (2) the application of the cost recovery requirement, and (3) the application of the source-based attribution requirement to withholding taxes on certain royalty payments. 87 Fed. Reg. 71,271 (Nov. 22, 2022).  
  • Explore local taxes in key jurisdictions (CA, CT, DE, DC, FL, GA, IL, NJ, NC, OH, PA, SC, and WA) with our State Law Comparison Tool, practice area Tax, Topic: Local Taxes.
  • Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts
  • Check out the new Practical Guidance Author Center! Learn about the 1750+ leading attorney authors contributing to our 22 practice areas, and find out how you can Become a Practical Guidance Author.
  • Share fundamental guidance with your firm’s new associates to help them sharpen their research and writing skills, get the inside scoop on associate survival, and hit the ground running in the tax practice area. Review the resources in the First Year Associate Resource Kit: Tax.
  • The Practical Guidance Journal Fall Edition features the impacts of the U.S. Supreme Court’s decision in Dobbs v. Jackson Health Organization on employers, healthcare, insurance, and privacy concerns, and tracks the status of state law changes.
  • Listen up! Access our growing collection of podcasts by navigating to the Practical Guidance Podcasts Resource Kit.


Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+

Tags: