Partnership Option

Technical topics regarding tax preparation.
#1
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12-Dec-2014 3:58pm
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New York
Has Jeff or anyone dealt with the 1.761-3 regulations on option holders treated as partner?

Corporate partner and individual form partnership with corporate partner contributing cash and individual contributing IP with 55% and 45% profits and capital interests. Partnership has substantial prior losses and small taxable income for 2017. Hedge fund partnership loans $3 million to partnership with warrant to acquire 3% interest in 2017. For book purposes the 3% option has been recorded as $180,000 equity interest in the partnership. CPA firm has recorded the $180,000 interest as a capital interest only for 2017.

Additional facts and circumstances. Corporate partner has NOL carry forward and along with individual partner is in discussion to sell total of 66.66% of partnership interests in 2018 including all of corporate partner interest to another unrelated hedge fund partnership for $33 million.

Would the option holder be treated as a partner and receive a distributive share of the partnership income, gain, loss etc.?

Thanks.
 

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