Court Decision Reaffirms Importance of Adequately Documenting Deductible Management Fees

The IRS is increasing its audit of large partnerships and is increasingly scrutinizing the validity and deductibility of management fee arrangements. In the case, Aspro, Inc. v. Commissioner, it offers a warning to taxpayers, including private equity and venture capital funds seeking to establish similar arrangements with their portfolio companies. But perhaps more importantly, this case provides a roadmap for taxpayers to follow when structuring and documenting these arrangements.