Secondary transactions remain appealing to institutional investors seeking liquidity solutions or wishing to rebalance their investment allocations in the current climate. Parties need to conduct thorough and thoughtful diligence of restrictions in fund agreements, however, to avoid potential negative tax ramifications. If precautions are not taken, a secondary transaction can, for example, cause a fund to be treated as a publicly traded partnership (PTP) or result in a real estate investment trust (REIT) violating stringent requirements. Strafford CLE Webinars recently hosted a program to consider those and other key U.S. tax considerations for secondary transactions in a presentation featuring Ashurst partner M. Sharon Kim and Mayer Brown partner Matthew A. McDonald. This first article in a two-part series details the importance of performing diligence on fund agreements to ensure compliance with transfer restrictions meant to avoid PTP, REIT or technical termination issues. The second article will describe an array of other tax issues to address at the outset of a secondary transaction, including verifying tax elections; allocating taxes and expenses between the parties; and obtaining a withholding tax certificate. For further insights from Mayer Brown partners, see “How Private Fund Managers Can Access Investor Capital in Hong Kong and China: An Interview With Mayer Brown’s Robert Woll” (Feb. 23, 2017); and “Operational Challenges for Private Fund Managers Considering Subscription Credit and Other Financing Facilities (Part Three of Three)” (Jun. 16, 2016).