The Tax Cut and Jobs Act included section 163(j) to limit interest expense deductions and section 1061 to limit the availability of favorable long-term capital gains rates for sales of property held less than three years with respect to “Carried Interests.” Each of these provisions resulted in many unanswered questions for taxpayers. In the last two months, Treasury has released lengthy final and new proposed regulations under section 163(j) and proposed regulations under section 1061. These provisions have a significant impact on private equity—how acquisitions are financed, dispositions are structured, organizations are capitalized, and partners are compensated.
Join KPMG for our Hot Topics in Tax: Section 163(j) and Section 1061 for Private Equity Funds webcast. This webcast features leading KPMG tax professionals who address the new final and proposed regulations under Section163(j) and the new proposed regulations under section 1061 and their implications for private equity funds. Specific topics include:
- Presidential Election Considerations
- Section 163(j): The Interest Expense Limitation Provision
- Setting the stage
- How do the regulations impact the funding of acquisitions?
- Do the proposed regulations address how debt-financed distributions will be treated for purposes of section 163(j)?
- Are there any planning ideas to manage the potential impact of section 163(j) interest limitations?
- Section 1061: The “Carried Interest” Provision
- Setting the stage
- Which taxpayers need to worry about these rules?
- How much long-term gain could be subject to recharacterization as short-term under section 1061?
- How do the proposed regulations impact co-invest structures?
- How should taxpayers structure “follow-on” investments?
- On a disposition, should taxpayers sell assets or equity interests?
- As a purchaser of equity in a portfolio company (perhaps from former service partners), do the purchaser need to worry about section 1061?
- Section 1061(d) seems to provide harsh rules for related-party transfers. How could this provision impact partners, particularly individual partners?
- Are there planning suggestions to manage section 1061?