Bradley T. Borden (Brooklyn; Google Scholar), Douglas L. Longhofer (Central Missouri), Martin E. Connor Jr. (Debevoise & Plimpton) &  Nastassia Shcherbatsevich (Cravath, Swaine & Moore), A Financial Analysis of Disguised Sales of Partnership Interests, 172 Tax Notes Fed. 381 (July 19, 2021):

This article examines the issues that arise in identifying disguised sales of partnership interests, and it explores whether a financial analysis can help in distinguishing disguised sales from recapitalizations. The article examines law that considers both property and financial transactions that raise disguised-sale considerations. It shows that when property is part of a transaction existing case law and rulings provide helpful guidance for determining whether the transaction might be recast as a disguised sale of a partnership interest. The article also shows that, by contrast, existing authority proves mostly unhelpful in determining whether finance transactions are disguised sales of a partnership interest. The article presents a financial analysis that illustrates the difficulty of identifying disguised sales but also shows how a sale of an interest differs from a recapitalization. The analysis provides a general framework for considering the question of disguised sales of partnership interests, but it does not appear to provide a definitive model for analyzing all financing transactions that might be recast as disguised sales of interests in partnerships.

Conclusion
It is difficult to distinguish disguised sales of partnership interests from ordinary contribution and distribution transactions. The IRS, Treasury, commentators, and practitioners have all
struggled with how to craft workable rules to make the disguised sale determination. Using a financial analysis can be a helpful tool in making that determination. In effect, any distribution and contribution transaction that alters the financial situation of a continuing partner would appear to be a recapitalization because the changed financial situation indicates that the partnership had to pay an amount for new capital that differed from the amount it was paying for the retired capital. The complexity of the equity structure in many modern partnerships may frustrate both the financial analysis discussed in this article and the overall determination of whether a transaction should be treated as a disguised sale of a partnership interest. Nevertheless, any set of rules for determining disguised sale of partnership interests will need to include several factors to avoid being too broad in application — a financial analysis may be one such factor to help determine whether a transaction is a disguised sale.