Profits Interest vs Capital Interest – What’s the Difference?

When an ownership interest in a partnership (or LLC taxed as a partnership) is transferred to a member in exchange for services, the tax consequences of such transfer are governed by partnership tax law.  Ownership interests in partnerships can be profits interest, capital interests or both.  Partnership tax law is quite complex, and there is…

Allocating Income Using the Closing of the Books Method

When a shareholder joins or leaves an S corporation during the year, it can cause many problems. Among these problems is the question of how to allocate income for tax purposes. The IRS has issued Treasury Regulations to clarify how to deal with some of these situations. The S corporation’s structure is simple.  There is…