Private equity tax question. I’m on an account where they calculate carry on a fund level. I’ve never seen that before, I’ve only seen it on entity by entity level. Why would they do a carry calculation on the whole fund?

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Calculating at fund level is considered the “American” style of waterfall and calculating on deal by deal is considered “European” style of waterfall. Honestly surprised you’ve never seen it calculated on the fund level as that’s probably more common in the us than on a deal by deal basis. But it obviously depends on the funds you work on

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That’s hard to say. The BNA portfolio is a great place to start. I also personally love “The Tax Adviser” articles because it explains things in a simple to follow way, but does get into complex issues and cites it’s support very well, so if you can find one on PE allocations, great. But other than that, it really is a thing that you have to work through to understand. I know that’s not a great answer, but you gotta go through the pain to learn it. I’ve only had one PE client that allocates deal by deal, and I just had to run the waterfall multiple times and then a ton of special allocations.

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That’s how they drafted it in the partnership agreement. Every fund operates differently to meet the specific needs and wants of its investors

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Uh bc you shouldn’t get a carry if only one investment goes well and the other 10 go bust

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Could be that the partnership agreements require income allocation to be that way.

Do you mean it’s not deal by deal rather on entire fund?

I’ve only ever seen it done at the fund level.

Come to PwC and we will tell you why.

😂

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