Applying Fundamental Income and Partnership Tax Principles to the Income Tax and Gift Tax Planning for Transfers of Carried Interests

Rafi Mottahedeh will be a panelist at the ABA Section of Taxation’s 2026 May Tax Meeting on May 8, 2026.  His presentation is titled, “Applying Fundamental Income and Partnership Tax Principles to the Income Tax and Gift Tax Planning for Transfers of Carried Interests.”

The service partners in Investment Funds, Private Equity Investments and Real Estate Developments frequently assign their partnership profits interest to trusts either for assignment of income purposes or for estate planning purposes. The materials will illustrate the application of the fundamental principles to the transfer of a partnership profits interest obtained by providing past services or providing future services. The materials will discuss the treatment of a profits interest for providing future services that is not vested. The materials will examine the treatment of fee waivers. For investors and service providers who transfer their interests for estate planning, the materials address valuation issues and the impact of Code Section 2701 using vertical slice planning. As an alternative to the transfer of a carried interest, we will examine the creation of a derivative so that the actual property interest is not transferred.