We recognize the need for CFOs, CPAs, attorneys, and private equity organizers to have access to expert counsel in order to navigate the intricate financial and regulatory landscape. Our team of experienced tax consultants serves as your reliable ally, drawing from an extensive background of handling tax matters for more than thousands of funds and SPVs. Within this context, we delve into the commonly asked questions about taxes, offering valuable insights to guide you through this complex terrain.
1. When will I receive my K-1?
Your K-1 will be dispatched as soon as the tax return is finalized. At Venture360, we aim to have all K-1s distributed by March 15th.
If the return is pending or requires information from the portfolio company or organizer, there may be a delay in issuance.
2. How will I receive my K-1?
All K-1s are securely uploaded to the investor’s venture360 profile.
3. I'm foreign – do I need to file a return?
The necessity to file a US tax return as a foreign investor depends on several factors. While we provide K-1s and report to the IRS, personalized guidance should be sought from a CPA or tax attorney, as Venture360 does not offer tax advice.
4. Why does my K-1 show income I never received?
OID INTEREST: Convertible notes held by the fund, categorized as OID instruments, require interest income recognition annually, irrespective of actual payouts. This holds true whether the fund uses the cash or accrual accounting method.
CONVERSION: When a convertible note held by the fund converts into preferred shares, the increase in value is considered taxable income, passed through to the fund's investors.
LLC PASSTHROUGH: Investments in partnerships/LLCs, like Company B, entail income or loss passed through to investors, regardless of cash distributions.
5. I invested, but there's no K-1 – why?
Venture360 files a tax return every year, so if you don’t see a K-1 for an investment, please reach out to our support team at support@venture360.co
6. How do I fill out form W8/9?
Venture360 cannot offer tax advice or assist in form completion. Refer to the instructions for Form W8 and seek guidance from a CPA or tax attorney familiar with your situation.
7. The company had a down round – why no loss on my K-1?
Assets are accounted for at their cost basis, and mark-to-market accounting is not applied. Only active securities dealers and traders can opt for mark-to-market.
8. Late K-1 – aren't they due in January?
K-1s must be furnished to investors by the same deadline as the fund's tax return. The initial due date for the previous tax year is March 15, with the possibility of extensions to September 15 if needed.
9. Distribution amount on K-1, but no cash – what happened?
Distributions are credited to your account. The SPV Manager decides when distributions are disbursed to investors.
10. Foreign startup note – CFC/PFIC required?
No, this becomes an issue when the fund holds an equity interest.
11. Exit proceeds in escrow – all gain recognized this year?
No, gain is recognized when the funds held in escrow are released.
12. Asset allocation to investors possible?
While Venture360’s standard service doesn't include asset classes, it can be accommodated with discussion and customization.
13. Sales charge deducted before fund entry – impact on basis?
Investor outside basis is not tracked, as it is influenced by various factors. Seek advice from your tax advisor for clarification.
14. Effectively Connected Income (ECTI) – is it relevant for funds?
ECTI stems from active trade or business operations and rarely applies to SPVs, which are passive investment vehicles.
15. Exempt entity investors and Unrelated Business Taxable Income (UBTI)
Investments by exempt entities usually do not generate UBTI, except in cases of income from certain funds. Consult your tax advisor for specific guidance.
16. Withholding for US investors (backup withholding)
Partnerships may not be required to withhold tax for US investors subject to backup withholding unless mandated by the IRS. Letters from the IRS confirming withholding obligations are essential.
In the intricate domain of fund taxes, professional guidance is crucial. Venture360 stands ready to assist, offering unparalleled expertise in navigating the complexities of fund tax compliance and regulation.