Capital Interest Law and Legal Definition

“A capital interest is defined as any interest which would entitle the holder to receive a share of partnership assets upon a hypothetical winding up and liquidation of the partnership immediately following acquisition of the interest. A capital interest is an interest that includes the right to share in the capital of a partnership upon liquidation.” A capital interest holder can share in the profits and losses of a partnership, but if a party is not entitled to a share in a partnership's capital, he cannot be considered a capital interest holder. TIFD III-E Inc. v. United States, 2009 U.S. Dist. LEXIS 98884 (D. Conn. Oct. 23, 2009)