In a four-part guest series, Arthur H. Kohn, partner at Cleary Gottlieb, along with Andrew L. Oringer and Steven W. Rabitz, partners at Dechert, summarize the principal U.S. federal income tax and related design considerations associated with carried interest arrangements for individuals who are employed by or otherwise provide services to sponsors of private investment funds. This second article discusses practical and design considerations related to profits interests in a tax partnership, including 83(b) elections; fee-waiver provisions; and the tax treatment on the repurchase or disposition of profits interests or the payment in liquidation of profits interests. The first article provided background on carried interest arrangements and examined relevant analytical considerations. The third and fourth articles will explore additional practical and design considerations. For additional insights from Oringer, see our five-part series “Happily Ever After? – Investment Funds That Live With ERISA, For Better and For Worse”: Part One (Sep. 4, 2014); Part Two (Sep. 11, 2014); Part Three (Sep. 18, 2014); Part Four (Sep. 25, 2014); and Part Five (Oct. 2, 2014).