Daily Tax Update - February 4, 2013: Final and Proposed Regulations Issued on Noncompensatory Partnership Options

Final and Proposed Regulations Issued on Noncompensatory Partnership Options:  Today, the IRS and Treasury issued final and proposed regulations relating to the tax treatment of noncompensatory options and convertible instruments issued by a partnership.  The final regulations are similar to proposed regulations issued in January 2003 and provide that the issuance and exercise of a noncompensatory option generally does not cause recognition of gain or loss to either the issuing partnership or the option holder.  In addition, the regulations include a characterization rule regarding when the holder of such options or instruments will be treated as a partner. 

For additional information, contact - Aaron P. Nocjaranocjar@steptoe.com

The regulations can be accessed here and here.

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