Joseph W. Bartlett
The attractions of Section 1202 of the Internal Revenue Code for investors in small to medium sized private companies (under $50 million in “aggregate gross assets”) have been around for a long while … exclusion of the federal tax on capital gains on the sale of stock held for at least five years. The benefits started out as an exclusion of 50% of the gain from tax but that morphed into 100%; that said, the benefit was subject to periodic renewal and disappearance in the absence of Congressional action … dampening tax planning opportunities, for example. One holds the shares for four years and then finds the benefit has expired.
Guest post by Jonathan Talansky of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
The First Circuit’s much-discussed decision in Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund et al., No. 12-2312 (1st Cir. 2013) has forced many practitioners and commentators (and, perhaps, tax policymakers) to take another step back and assess the appropriate tax treatment of pooled investment vehicles (in particular, private equity funds). The ultimate holding of the case, however, is far less foreboding for tax purposes than some have made it out to be. In fact, the most relevant aspect of the case from a federal tax perspective may just be a footnote buried near the end of the court’s opinion.