News & Analysis as of

Internal Revenue Service Investment Funds Tax Court

The United States Internal Revenue Service is a bureau of the United States Department of the Treasury. The IRS is charged with collecting revenue and enforcing the Internal Revenue Code.  
Cadwalader, Wickersham & Taft LLP

Tax Court Denies SECA Exception to Soroban

The Tax Court recently ruled for the IRS in another case involving the “limited partner exception” under the Self Employment Contributions Act (SECA). Code Section 1402(a)(13) generally exempts the distributive share of...more

Morrison & Foerster LLP

Tax Court’s Decision in Soroban—Potential SECA Tax Implications for Management Fee Income

On May 28, 2025, the U.S. Tax Court issued its decision in Soroban Capital Partners LP v. Commissioner (T.C. Memo 2025-52) (“Soroban”), holding that “limited partners” of a management company organized as a Delaware limited...more

Hogan Lovells

The limited partner exception from self-employment taxes: Soroban II

Hogan Lovells on

The latest chapter in the IRS attack on the use of a self-employment tax exception by fund managers came in the form of another Tax Court opinion last month in Soroban Capital Partners LP v. Commissioner (“Soroban II”) The...more

Rivkin Radler LLP

The Limited Partner Exclusion From Self-Employment Tax – But Who Is A Limited Partner?

Rivkin Radler LLP on

An Agency Under Siege - The mission statement of the IRS reminds taxpayers that it is their responsibility to understand and meet their tax obligations, while it is the role of the IRS to “enforce the [tax] law with...more

Husch Blackwell LLP

U.S. Tax Court Rules That Limited Partners of an Investment Manager Are Subject to Self-Employment Tax

Husch Blackwell LLP on

On May 28, 2025, the United States Tax Court held that the limited partners of a limited partnership providing investment management services to various investment funds were not limited partners within the meaning of...more

White & Case LLP

The IRS Continues Winning Self-Employment Contributions Act (SECA) Tax Against Limited Partners in Private Equity and Hedge Funds

White & Case LLP on

Recently, the Internal Revenue Service ("IRS") has successfully asserted that limited partners in private equity and hedge funds that are organized as limited partnerships were subject to tax under the Self-Employment...more

WilmerHale

Court Decision on Limited Partner Exception to Self-Employment Tax

WilmerHale on

On May 28th, the U.S. Tax Court issued a decision in Soroban Capital Partners LP v. Commissioner (T.C. Memo 2025-52) holding that all of the income allocable to the partnership’s limited partners (not just the amount...more

Cadwalader, Wickersham & Taft LLP

Tax Court Calls Bluff on Hedge Fund’s Basket Option Contracts

The Tax Court recently held that a hedge fund’s basket option contracts were in substance tax ownership of the underlying basket securities. The hedge fund, through its affiliated entities, entered into 10 basket option...more

Hogan Lovells

Another U.S. IRS Victory in the Self-Employment Tax Arena: Denham Capital Management

Hogan Lovells on

For those keeping score at home, it’s currently two wins for the IRS in as many years, and nada/zilch/zero for the fund managers, at least when it comes to the limited partner exception for self-employment taxes (the “Limited...more

Morgan Lewis

Private Funds Year in Review: Key Tax Developments That Shaped the Industry in 2024

Morgan Lewis on

In 2024, several significant tax developments emerged that are set to impact the private fund industry in 2025. These changes include pivotal US Tax Court (Tax Court) opinions, updates to Internal Revenue Service (IRS) forms,...more

Foley & Lardner LLP

Tax Court Reaffirms Soroban Holding that “Active” Limited Partners are Subject to Self-Employment Tax

Foley & Lardner LLP on

On December 23, 2024, the Tax Court ruled in Denham Capital Management LP v. Commissioner (T.C. Memo. 2024-114), that limited partners that actively participated in the activities of a fund manager formed as a state law...more

Tannenbaum Helpern Syracuse & Hirschtritt LLP

Investment Fund Manager Update on Self-Employment Limited Partner Exception: Tax Court Holds that Limited Partners May Be Subject...

On November 28, 2023, the Tax Court held that limited partners in state law limited partnerships cannot automatically rely on Section 1402(a)(13) of the Self-Employment Contributions Act (“SECA”) to exclude their distributive...more

Seward & Kissel LLP

For Fund Managers, Tax Court Ruling Sets Limited Partners Back “As Such”

Seward & Kissel LLP on

Memorandum to our Investment Management Clients and Friends - The United States Tax Court recently issued a ruling (the “Ruling”) pertaining to the possible exclusion of a limited partner’s distributive share of income...more

Morgan Lewis

Taxpayer Victory in US Tax Court Highlights Need for Properly Structuring Partnership Profits Interests

Morgan Lewis on

A recent US Tax Court case upholds profits interest treatment for a taxpayer’s receipt of a partnership interest granted in exchange for services. The case highlights how properly structuring and documenting the grant of a...more

Morgan Lewis

Grecian Magnesite Mining: Impact on Investments by Non-US Investors in US Funds

Morgan Lewis on

US Tax Court decision may facilitate tax-efficient investment structures for non-US investors investing in US operating partnerships, directly or through investment funds....more

Wilson Sonsini Goodrich & Rosati

The Unwind: ‘I Don’t Want It’

In the inaugural column of ‘‘Power and Taxes,’’ we discussed the tensions surrounding the requirement that an investor be an owner when a project is placed in service in order to qualify for the investment tax credit under...more

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