Preferred Stock and Partnership Interests in Private Equity Transactions: Significant Tax Issues


Summary

This practice note discusses certain U.S. federal income tax considerations that arise in a preferred equity investment in an operating entity organized and operated in the United States. It will focus primarily on the tax considerations applicable to U.S. investors, but will, to the limited extent below, also discuss certain considerations applicable to non-U.S. investors, foreign sovereign governments, and tax-exempt entities. Specifically, this practice note will address preferred stock in a corporation, preferred interests in an LLC or partnership, the conversion of preferred into common interests, deductions, and classification considerations.