The vast majority of private equity funds are structured as partnerships rather than companies to allow for ‘tax transparency’. This means that the partnership, in this case the Fund entity, will not itself be liable for any tax. Instead, tax authorities will tend to ‘look through’ the partnership and instead levy taxes on the partners directly. It is this feature which allows some private equity funds to qualify for capital gains treatment on their returns, as capital gains tax is levied at the investor, rather than the entity, level.

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