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For the management fee you will have a hard time calling that a profit
allocation because it gets paid regardless of whether there are profits or
not.
But the performance fee can easily be called a profit allocation. It is
just a case of profits being allocated in a proportion different from
partner ownership percentages. There are examples of this in the IRS
publication for Form 1065 as I recall.
Aaron Schindler
Schindler Trading
----- Original Message -----
From: "Scott Hoffman" <trader2020@xxxxxxx>
To: "omega-list" <omega-list@xxxxxxxxxx>
Sent: Sunday, June 08, 2003 11:25 AM
Subject: Tax question
> I am setting up an exempt commodity pool structured as an LP with my
> management company as the sole GP as well as the trading advisor. I lieu
of
> cash out of the pool to the management company for incentive / management
> fees, which would be ordinary income to the management company and a
> deductable expense to the pool participants, I would like to have the GP
> compensated via an allocation of pool profits which in the case of 1256
> contracts would receive the favorable 60/40 tax treatement.
>
> The accountant I am using to help set this all up says this would not be
> allowed under IRS rules. Can any accountant out there be of assistance to
> me?
>
> Scott Hoffman
> President
> Red Rock Capital Management, Inc.
>
>
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