Private Equity Management Fee Conversions

Gregg D. Polsky

University of North Carolina (UNC) at Chapel Hill - School of Law

February 16, 2009

Tax Notes, Vol. 122, No. 7, 2009

Private equity managers regularly convert a portion of their 2 percent annual management fees into additional carried interest. They do this primarily to convert the tax character of the resulting income. This special report explains the economics behind management fee conversions, describes their mechanics, and analyzes the arguments that could be made by the IRS to disallow their intended tax results. The report ultimately concludes that the IRS can make quite strong arguments under current law to deny managers the tax benefits they seek in converting fees.

Keywords: fee waivers, fee waiver, fee conversion, fee conversions, private equity, private equity management fees, private equity management fee waiver

JEL Classification: K34

Not Available For Download

Date posted: February 13, 2009 ; Last revised: January 14, 2012

Suggested Citation

Polsky, Gregg D., Private Equity Management Fee Conversions (February 16, 2009). Tax Notes, Vol. 122, No. 7, 2009. Available at SSRN: http://ssrn.com/abstract=1342030

Contact Information

Gregg D. Polsky (Contact Author)
University of North Carolina (UNC) at Chapel Hill - School of Law ( email )
Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
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