What White V. Commissioner Says About Partnerships

Law360 (August 24, 2018, 1:34 PM EDT) -- It’s not always apparent when a person cast as a partner should be treated as a disguised service provider or employee. This issue is squarely presented in the private fund area when drafting partnership carried interest provisions and implementing management fee waivers.[1] In each of these cases, if the ostensible partnership interest is disguised compensation, the “partner” will have ordinary income instead of an allocable share of the partnership’s capital gains and other items. In addition, if an allocation or distribution is disguised compensation, the partnership could be liable for failure to withhold federal income taxes.[2]

About 70 years ago, the...

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