Investment Fund Allocations: Defining a Partner’s Interest in the Partnership

Most investment fund operating (or partnership) agreements include income and loss allocation provisions that are driven by distribution rights. These so-called targeted allocation partnership agreements don’t necessarily provide explicit instructions regarding a partner’s share of realized profit or loss. Rather, the focus of these partnership agreements is on the partner’s rights to partnership capital and associated distributions with distributive shares of profit or loss derived from these data. The allocation provisions often reference an intent to achieve ending capital account balances commensurate with future distributions.

Originally published in TAX NOTES FEDERAL, July 8, 2024.