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Sep 06, 2018

IRS Issues Guidance Affecting Tax-Exempt Investments in Private Equity Funds

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Under the Tax Cuts and Jobs Act (TCJA, December 22, 2017), tax-exempt investors must now calculate unrelated business taxable income (UBTI) separately with respect to each trade or business. As a result, a deduction from one unrelated trade or business for a taxable year may no longer be used to offset income from a different unrelated trade or business for the same taxable year. The TCJA does not define “trade or business” for this purpose, and thus has created anxiety for many tax-exempt investors that receive significant income from a large number of businesses conducted by private equity funds. As discussed below, the IRS issued Notice 2018-67 on August 21, 2018, providing interim guidance for aggregating income reported by tax-exempt investors with respect to separate trades or businesses under Section 512(a)(6) of the Internal Revenue Code, including welcome news pertaining to investments in private equity funds.

View full memo, IRS Issues Guidance Affecting Tax-Exempt Investments in Private Equity Funds

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Todd Lowther

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