Legal Question in Investment Law in Connecticut

Private Investment Partnerships & Tax-deferred accounts

Hi,

I've recently read that one can establish a private investment partnership and use this partnership to pool the investments of various individuals (as long as there are fewer than 100 people within the partnership).

I think this is typically done by forming a LLC or LP, and the tax obligations ''pass through'' to each member of the partnership.

MY QUESTION IS: Can these types of private investment partnerships *also* receive tax-deferred and/or tax-exmpt money (i.e. rolled-over 401k money, IRA investments, etc.)?

Thank you for any information!


Asked on 3/12/04, 9:56 am

1 Answer from Attorneys
Michael Paradise Law Offices of Michael S. Paradise

Re: Private Investment Partnerships & Tax-deferred accounts

If they are structured properly, they can accept ERISA and IRA investors. Unless the fund is structured solely for tax-exempt or tax deferred investors, there is a limitation of the percentage of assets that these investors can own in the fund.

There are other permutations too complicated to discuss in this forum. The bottom line is that you should consult a specialist in this area if you are thinking about setting up a fund with these types of investors.

Regardless, there are tax consequences to these types of investors if the trading fund generates income from margin trading, also known as "unrelated business taxable income".

Good luck.

Read more
Answered on 3/12/04, 10:05 am


Related Questions & Answers

More Investment Law questions and answers in Connecticut