Publications
Proposed Regulations Seek to Change Tax Treatment of Compensatory Grants of Partnership Interests
Proposed regulations and a proposed revenue procedure recently issued by the Internal Revenue Service would, if finalized in their current form, apply Internal Revenue Code section 83 to the receipt of a partnership interest as compensation for services rendered to the partnership. While section 83 had previously been applied to situations in which corporate equity or partnership capital interests were received for services rendered, the tax treatment of the receipt of partnership profits interests was the subject of some uncertainty. The new rules would also provide a safe harbor under which a partnership and all its partners can ensure that the fair market value of a compensatory partnership interest is considered to be equal to its liquidation value.