• Private Equity Associates ("Associates") is a limited partnership that buys, restructures, and then sells companies that are not publicly traded. Manager, the sole general partner of Associates, is entitled to an annual management fee equal to 2% of committed partnership capital. When Associates was formed on January 1, 2018, Manager also received a 20% profits interest, which is an "applicable partnership interest" within the meaning of Private Equity Associates ("Associates") is a limited partnership that buys, restructures, and then sells companies that are not publicly traded. Manager, the sole general partner of Associates, is entitled to an annual management fee equal to 2% of committed partnership capital. When Associates was formed on January 1, 2018, Manager also received a 20% profits interest, which is an "applicable partnership interest" within the meaning of §1061(c)(1). Manager made a §83(b) election and did not report any gross income in connection with his receipt of the profits interest. On June 30, 2018, Associates purchased 100% of the stock of Private Corp. for $1 million. On October 1, 2020, Associates sold its Private Corp. stock for $11 million, realizing a $10 million long-term capital gain. Manager's 20% distributive share of that gain was $2 million.

• (a) What is the tax character of Manager's $2 million distributive share?

• (b) Same as (a), above, except Associates sold its stock in Private Corp. on March 31, 2021. 

• (c) Same as (a), above, except Associates sold its stock in Private Corp. on January 1, 2022.

Answer rating: 100% (QA)

The tax character of the Managers 2 million distributive share can be determined based on ... View the full answer