Rev. Pro. 2001-43 clarifies treatment of a grant of substantially nonvested partnership profits interest

PARTNERS & PARTNERSHIPS

In Rev. Proc. 2001-43, the IRS provides guidance on the treatment of the grant of a substantially nonvested partnership profits interest to a service provider. The new procedure clarifies Rev. Proc. 93-27, by addressing the impact of vesting on the receipt of a partnership interest. According to Rev. Proc. 2001-43, the Service would not treat the grant of such an interest (or an event that causes such an interest to become substantially vested) as a taxable event for the partner or the partnership if the requirements of the new revenue procedure and Rev. Proc. 93-27 were met.

When Is an Interest Taxable?

According to Rev. Proc. 93-27, unless otherwise provided, if a person receives a profits interest for the provision of services to (or for) the benefit of a...