For backstory, see my blogpost “As Such,” 11/28/23. For the outcome of the trial foretold therein, Judge Buch tells the story in Soroban Capital Partners LP, Soroban Capital Partners GP LLC, Tax Matters Partner, T. C. Memo. 2025-52, filed 5/28/25.

Judge Buch dissects the private placement memo and investor due diligence questionnaire for this hedge fund, and finds that the three (count ’em, three) Principals of Soroban were, during years at issue “essential to the operation of the business. Soroban explained to its investors that, if all three Principals were unavailable, the funds would liquidate. Materials provided to investors explain that in the event Mr. M were incapacitated, Messrs. K and F would manage the funds. However, in the event all three Principals were ‘temporarily or permanently absent from overseeing the investment of the assets of the Funds, the Analysts and COO/CFO would manage the liquidation of the Funds.’ But for the three Principals, Soroban would not exist.” T. C. Memo. 2025-52, at p. 13. (Names omitted).

Federal tax law controls, not our broad-spectrum NY  Revised Limited Partnership Act, which, standing the usual law school definition of limited partner on its head, would let the Principals slide under the Section 1402(a)(13) tag. For the Feds, their distributions are SE, not investor returns on capital.