Co-invest pre-tax?

Question for people in REPE who are familiar with fund co-invest:

Say you defer part of your bonus (assume $100k for simplicity) and use that to co-invest in your closed-ended fund.

Fast forward 7-10 years. Your fund did a 2x so you are taking $200k out.

Do you pay income taxes on $100k return OF capital + cap gains on the $100k return ON capital?

Or do you pay just cap gains on all $200k?

Trying to think if there's some kind of tax benefit to doing something like this.

Comments (3)

Nov 22, 2019

I presume your $100K bonus that should have been taxed as income tax was deferred and the $100K profits are taxed as capital gains.

Nov 22, 2019

yeah that's what I'm thinking too. would be way too good to be true I guess.

Nov 23, 2019