Transactions between private equity fund-owned portfolio corporations: an update.
The Tax Adviser › Vol. 39 Nbr. 9, September 2008
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Transactions between private equity fund-owned portfolio corporations: an update.
In today's private equity environment, two common transactions between fund-owned portfolio corporations present challenging tax considerations: (1) asset sales between fund-owned portfolio corporations and (2) the acquisition by a fund-owned portfolio corporation of another portfolio corporation's debt. (These were reviewed in Keller, "Transactions Between Private-Equity-Fund-Owned Portfolio Corporations," Tax Clinic, 37 The Tax Adviser 518 (September 2006); the current item contains excerpts from that 2006 item.)
In September 2007, there was an interesting Pension Benefit Guaranty Corporation (PBGC) Appeals Board decision that, aside from its obvious potential ERISA implications, might alter the federal income tax consequences of the second item and, for that matter, any other private equity transactions where concluding whether the fund itself conducts a "trade or business" is critical to some income tax result. The following example was discussed in the September 2006 Tax Clinic: X Corp. and Y Corp. are both C corporation portfolio investments wholly owned by F, a private equity fund. F is a large, diversely held limited partnership (i.e., five or fewer persons own more tha...See the full content of this document
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