Matthew P. Larvick, a Shareholder focusing on federal income taxation and an adjunct professor in the IIT Chicago-Kent College of Law Graduate Tax Program, recently authored an article that appeared in the June 3, 2013 issue of Tax Notes magazine.

The article, titled “Noncompensatory Partnership Options: The Final Regulations,” examines the new Treasury regulations addressing noncompensatory options to acquire partnership interests (NCOs). The regulations also address convertible debt and convertible equity issued by partnerships. 

The article explains the general rules for the issuance, exercise and lapse of NCOs and explores the characterization rule, which “would treat, in some circumstances, an NCO as a partnership interest, thus bestowing partner status on its holder.”

Mr. Larvick notes, “On the one hand, the final regulations offer many improvements to the proposed regulations. It is clear that the IRS and Treasury gave careful consideration to the comments submitted. On the other hand, the final regulations have grown in complexity, and the advisability of some provisions could be debated. Overall, however, the final regulations provide a sensible framework for the tax treatment of NCOs.”

For more information on this topic, please contact Matthew Larvick at +1 (312) 609 7970 or mlarvick@vedderprice.com.