Final noncompensatory partnership option rules could affect wide range of arrangements

February 2013


The IRS on February 4 finalized the noncompensatory partnership option (NCPO) regulations (T.D. 9612) regarding the issuance, lapse, exercise, and accounting of an NCPO. The IRS also issued proposed regulations that address "closing transactions" and would expand the recharacterization measurement events to include certain transfers of interests in the issuing partnership and other look-through entities (REG-106918-08). The regulations provide guidance on the key issues that arise when options or convertible partnership interests are issued to investors.

The final regulations are effective for NCPOs issued on or after February 5, 2013.  The proposed regulations are proposed to be effective for the same date.

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