Co-Investments and Joint Ventures (JVs)

Definition

A co-investment is a direct investment made alongside a fund or lead sponsor in a single deal; a joint venture is two or more parties combining capital or assets in a shared business. For federal income tax, an unincorporated joint venture is generally treated as a partnership,^[1] whose income passes through to the partners rather than being taxed to the venture.^[2]

Federal law

A market and contract term. No Act of Congress defines it; the federal laws below apply as described.

1. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 761, 68A Stat. 3, 252. Internal Revenue Code § 761(a): defines 'partnership' for tax purposes to include a joint venture or other unincorporated organization carrying on a business. Official text: govinfo.gov, U.S. Government Publishing Office.
2. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 701, 68A Stat. 3, 239. Internal Revenue Code § 701: a partnership is not itself subject to income tax; partners are taxed on their shares. Official text: govinfo.gov, U.S. Government Publishing Office.
3. Securities Act of 1933, Act of May 27, 1933, ch. 38, title I, § 4(1), 48 Stat. 74, 77. Securities Act of 1933: exempted from registration transactions by an issuer not involving any public offering (the private offering exemption, now § 4(a)(2), 15 U.S.C. § 77d(a)(2)). Official text: govinfo.gov, U.S. Government Publishing Office.

Federal regulations

Rules issued by federal agencies under the laws above.

4. Classification of certain business entities, 26 CFR 301.7701-3 (Internal Revenue Service (Department of the Treasury)). Treasury default rule classifying a domestic unincorporated entity with two or more members as a partnership unless it elects corporate treatment. Official text: govinfo.gov, U.S. Government Publishing Office.