Many investment fund managers are structured as limited partnerships because the structure offers both tax and non-tax benefits to fund managers and their owners. That may be about to change, however, based on a Tax Court ruling published in December 2023 (Ruling) that pertains to the possible exclusion of an LP’s distributive share of income from the federal self-employment tax. The Ruling raises several important questions for any U.S.-based fund manager structured as a limited partnership, particularly in light of heightened audit activity by the Internal Revenue Service in this space and previous attempts to limit or revoke the LP self-employment tax exception. In a guest article, Seward & Kissel partner Brett R. Cotler summarizes the Ruling; forecasts its impact on LPs and fund managers; and offers guidance on how they can proceed in light of the Ruling. See our two-part series “Hot Topics in Tax and Negotiating Tips for Private Fund LPs”: Part One (Aug. 10, 2023); and Part Two (Aug. 24, 2023).