Interested in training for your team? Click here to learn more

Complex Waterfall Structures: Identifying, Allocating, and Reporting Preferred Returns, Clawbacks, Taxable and Nontaxable Capital Shifts

A live 110-minute CPE/CLE webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Friday, May 16, 2025

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, April 18, 2025

or call 1-800-926-7926
Add to your calendar

This webinar will go beyond reporting basic waterfall allocations. Our panel of veteran partnership professionals will point out complex waterfall language in operating agreements, review preferred returns and clawback provisions, and tackle target issues, including target returns with guaranteed payments and those that include taxable and nontaxable capital shifts.

Description

Waterfall provisions ensure investors recoup their investment along with a specified rate of return referred to as a hurdle rate. Once the return of capital is recovered, profits are allocated as stipulated in the operating agreement. Almost always, there are preferred returns that guarantee the limited partners' specific returns and motivate the general partner to maximize profits on the investment. These distribution tiers are known as waterfalls, and computing and reporting these distributions is complicated.

Private equity investments usually consist of multiple deals. A general partner's share of profits from an investment is referred to as the fund manager's carried interest or carry. A volatile market, for example, could produce early gains followed by subsequent losses. A clawback provision requires the general partner repay the prior excess distributions. These repayments are generally repaid net of the tax paid on the prior profit distribution.

Listen as our panel of experts guides you through challenging waterfall scenarios utilizing illustrative examples of these arduous calculations. Tax practitioners working with private equity partnerships need to understand how to calculate, allocate, and report complex waterfall structures.

READ MORE

Outline

  1. Target capital account basics
  2. Components of complex waterfalls
    1. Preferred returns
    2. Operating distributions
    3. Tax distributions
    4. Performance driven metrics
    5. Clawback provisions
  3. Advanced target issues
    1. PIP (partners' interests in the partnership) allocations
    2. Guaranteed payments
    3. IRC Section 704(c)
    4. Nontaxable capital shifts
    5. Taxable capital shifts
  4. Boilerplate language
    1. Gross vs. net P&L provisions
    2. Provisions apportioning the general partner's proceeds
    3. Liquidating provisions

Benefits

The panel will cover these and other critical issues:

  • Targeted returns using guaranteed payments
  • Calculating preferred returns
  • Identifying boilerplate language in operating agreements for waterfall structures
  • Impact of clawback provisions on general and limited partners

Faculty

Clayman, Jeffrey
Jeffrey Clayman, CPA, JD, LLM
Tax Senior Director
Alvarez & Marsal

Mr. Clayman has over 18 years of public accounting experience with a focus on for-profit businesses in many different...  |  Read More

Keller, Griffin
Griffin Keller, CPA
Director
Alvarez & Marsal

Mr. Keller is a Director with Alvarez & Marsal Tax based out of Washington, D.C, primarily focusing on...  |  Read More

Attend on May 16

Early Discount (through 04/18/25)

CPE credit processing is available for an additional fee of $39.
CPE processing must be ordered prior to the event. See NASBA details.

Cannot Attend May 16?

Early Discount (through 04/18/25)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. CPE credit is not available on recordings. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

CPE On-Demand

See NASBA details.