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Bradley T. Borden (Brooklyn; Google Scholar), Douglas L. Longhofer (Central Missouri), Martin E. Connor Jr. (Debevoise & Plimpton) &  Nastassia Shcherbatsevich (Cravath, Swaine & Moore), A Monetary Evaluation of Disguised Gross sales of Partnership Pursuits, 172 Tax Notes Fed. 381 (July 19, 2021):

This text examines the problems that come up in figuring out disguised gross sales of partnership pursuits, and it explores whether or not a monetary evaluation can assist in distinguishing disguised gross sales from recapitalizations. The article examines legislation that considers each property and monetary transactions that increase disguised-sale issues. It reveals that when property is a part of a transaction current case legislation and rulings present useful steerage for figuring out whether or not the transaction is perhaps recast as a disguised sale of a partnership curiosity. The article additionally reveals that, in contrast, current authority proves principally unhelpful in figuring out whether or not finance transactions are disguised gross sales of a partnership curiosity. The article presents a monetary evaluation that illustrates the issue of figuring out disguised gross sales but in addition reveals how a sale of an curiosity differs from a recapitalization. The evaluation offers a common framework for contemplating the query of disguised gross sales of partnership pursuits, however it doesn’t seem to offer a definitive mannequin for analyzing all financing transactions that is perhaps recast as disguised gross sales of pursuits in partnerships.

Conclusion
It’s troublesome to tell apart disguised gross sales of partnership pursuits from bizarre contribution and distribution transactions. The IRS, Treasury, commentators, and practitioners have all
struggled with how one can craft workable guidelines to make the disguised sale willpower. Utilizing a monetary evaluation is usually a useful software in making that willpower. In impact, any distribution and contribution transaction that alters the monetary scenario of a seamless companion would seem like a recapitalization as a result of the modified monetary scenario signifies that the partnership needed to pay an quantity for brand new capital that differed from the quantity it was paying for the retired capital. The complexity of the fairness construction in lots of fashionable partnerships might frustrate each the monetary evaluation mentioned on this article and the general willpower of whether or not a transaction needs to be handled as a disguised sale of a partnership curiosity. However, any algorithm for figuring out disguised sale of partnership pursuits might want to embody a number of components to keep away from being too broad in utility — a monetary evaluation could also be one such issue to assist decide whether or not a transaction is a disguised sale.

https://taxprof.typepad.com/taxprof_blog/2022/03/a-financial-analysis-of-disguised-sales-of-partnership-interests.html