Extract to table

Anti-Abuse and Substantial Economic Effect The limited partnership agreement ("LPA") for each of the Main Fund and the Parallel Fund must include allocation provisions that satisfy the substantial economic effect safe harbor under IRC § 704(b) and Treasury Regulation § 1

The allocation of carried interest to the Fund V GP (and, through it, to the principals of the Sponsor) constitutes a special allocation that must either have economic effect under the substantial economic effect safe harbor or be in accordance with the partners' interests in the partnership

This deferral means that the timing of income allocations to the GP may differ from the timing of actual distributions, and the LPA must carefully coordinate the allocation provisions with the waterfall mechanics to ensure compliance with § 704(b)

manufacturing facilities, distribution centers, healthcare facilities), and the USRPHC analysis must be performed for each portfolio company on an ongoing basis

As discussed above, the risk that a Fund V portfolio company will be classified as a USRPHC is relatively low given the Fund's sector focus, but must be monitored on a deal-by-deal basis