Original source: https://nyppexprivate.blogspot.com/2021/05/how-to-choose-right-qualified-matching.html
In the event that you have had your fund transferred frequently by limited partners, then there is a real risk that it might get designated as a publicly traded partnership. This will be really bad for you because your fund can be liable to get taxed as a corporation that can provide income. It can be really surprising to learn about how low the line is when funds can get treated as publicly traded partnerships.
A partnership can get treated as a publicly traded partnership in certain specific situations, like for instance if the interests in the partnership that are being traded are on certain securities markets. It can also happen if interests in the partnership can be readily traded in secondary markets. However, the problem in this regard is that if you have a secondary market then what parameters does it follow. Under the rules of income tax, you will be tested based on certain circumstance tests to learn if your fund is available for buying, selling and trading in a specific manner that can be compared to proper trading practices in the securities market.
This can be really bothersome because income tax officials can be quite petulant in designating your fund is tradable. One of the provisions that you can use here is to show how your fund can be exempted under certain regulations and show it as a trading exception. This will help you to show that your fund is not easily tradable in the secondary market and there are no real tangible gains to be made from the entire process. This process can be long but it can help you save your fund. Of course another option will be to use a good qualified matching service or QMS.
When you are making your transfers through these qualified machine services, then almost about 10% of your interests may get transferred during your taxable year and still not make your company a publicly traded partnership. If you want to learn how to choose the right Qualified Matching Service, then you should look up relevant forums on the internet to get a good idea.
