She Has Leverage

Tax and legal terms

Pass-through Taxation

Pass-through taxation means a partnership generally reports its income, gain, loss, deduction, and credit to its partners rather than paying federal income tax on those items itself. Amounts are allocated under the partnership agreement and applicable tax rules, and as an LP you can owe tax without receiving a matching cash distribution.

Example: A fund may report a gain on your K-1 in a year when its cash distributions to you are small.

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Knowing the language helps you follow the conversation. Knowing what to ask is how you participate in it.

Understanding the terms is a first step. The Aligned Capital Program uses them to teach you how to evaluate a fund and prepare the questions to ask its manager.

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