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Why Every Estate Plan Needs a Qualified Appraisal
Chief Counsel Advice (“CCA”) 202152018 was released on December 30, 2021 and includes analysis by the Office of the Chief Counsel surrounding a taxpayer gift to a grantor retained annuity trust (“GRAT”) and subsequently in the same year, a gift to a charitable remainder trust (“CRT”). It is important to note that CCAs cannot be…
Valuation of General Partnership Interests in Private Equity Funds
INTRODUCTION Partnership Interests in a private equity structure are typically represented by an obligation to contribute a certain capital amount and a right to receive proceeds from the realization of portfolio investments. Because of the specifics of private equity compensation structure, general partnership (GP) interests’ value extends beyond the contributed capital, even in the beginning…
Fairness Opinions to be Required for Advisor-Led Secondary Transactions
In early 2022, the U.S. Securities and Exchange Commission (SEC) voted 3-1 to propose new rules and amendments under the Investment Advisors Act of 1940 (Advisors Act), which the dissenting Commissioner categorized as a “sea change”, that would have a significant impact on private fund advisers.[1] The proposed reforms signal that the regulatory pendulum at…
Valuation Consideration: Early Termination of a QTIP or CRT
In the context of estate tax and income tax planning, taxpayers commonly choose to protect their assets by leveraging various types of annuity trusts, unitrusts, or both. These trusts provide income to an income beneficiary for a designated period of time, then leave the assets to one or more remainder beneficiaries. The income stream is…
STRUCTURING DEALS – EARNOUTS & ROLLOVER
In today’s hot Mergers and Acquisitions (M&A) market, deal negotiations have become increasingly more competitive. Earnouts and contingent rollover equity can be effective tools for bridging the valuation gap, sharing risk between the buyer and the seller, and addressing key person exposure. This article discusses key considerations when structuring earnouts and contingent rollover equity as…
Valuing Private Equity Interests
Valuing Private Equity Interests Steps in valuation of GP and LP interests in Private Equity Funds, and why the capital account balance is not always a reliable indication of the value of the interest. When valuing general partner (GP) and limited partner (LP) interests in private equity funds, specifically those in the early stages, a…