General Partner Interests and Entities (GPs)

Definition

A general partner (GP) manages a partnership or fund, usually for the sponsor, and a GP interest is its stake: typically a small capital commitment plus a share of profits (carried interest). For federal tax, gain on a partnership interest held in connection with the performance of substantial services in an investment business is long-term only if held more than three years.^[1]

Federal law

Formed under state law. No Act of Congress creates it; the federal laws below apply to it as described.

1. Tax Cuts and Jobs Act (popular name), Pub. L. 115-97, § 13309, 131 Stat. 2130. Added 26 U.S.C. § 1061: three-year holding period for long-term capital gain on 'applicable partnership interests' held in connection with substantial services in an applicable trade or business. Official text: govinfo.gov, U.S. Government Publishing Office.
2. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 704(a), 68A Stat. 3, 240. Internal Revenue Code § 704(a): a partner's distributive share is determined by the partnership agreement. Official text: govinfo.gov, U.S. Government Publishing Office.
3. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 701, 68A Stat. 3, 239. Internal Revenue Code § 701: partners, not the partnership, are subject to income tax. Official text: govinfo.gov, U.S. Government Publishing Office.