New Tax Legislation Will Affect Transfers of Interests in Private Equity Funds.

Mondaq Business Briefing, November, 2004

Attached is a memorandum sent by the National Venture Capital Association to its members that describes a provision in recently-enacted tax legislation - commonly referred to as the "mandatory Section 754" provision - that could affect private equity funds with respect to transfers of fund interests after October 22, 2004 (the effective date of the provision). Testa, Hurwitz & Thibeault, LLP assisted the National Venture Capital Association in their lobbying efforts with respect to this legislation. This memorandum discusses in more detail how the mandatory Section 754 provision is likely to affect private equity funds, funds-of-funds (including secondary funds), general partner entities and secondary purchasers of private equity fund interests.

Background. As the...