• Higher quarterly cash distributions due to lower federal and state taxes for AllianceBernstein Holding.
• Deferral of portion of taxable income on each Unitholder's pro rata share of partnership income as a result of amortization deductions.
• Time value of tax deferral.

AllianceBernstein Holding (NYSE: AB) is a publicly traded limited partnership and does not pay the typical 35% federal corporate income tax rate on its profits. Instead, AllianceBernstein Holding pays a 3.5% federal tax on certain gross business revenues.

Because AllianceBernstein Holding is a partnership, it pays lower federal and state taxes compared to corporations. AllianceBernstein Holding’s tax savings permit greater quarterly cash distributions to Unitholders.

Investors who purchase Units receive additional tax deductions that defer a portion of the federal income taxes they would normally pay on their pro rata share of the partnership’s taxable income. These deductions result from a portion of the purchase price being allocated to tax deductible goodwill. The deductions, however, reduce the Unitholder’s tax basis and thus can result in higher taxes when the Units are sold.

Unitholders are not taxed on their quarterly cash distributions, but rather on their pro rata share of the partnership’s taxable income. Unitholders are required to report their pro rata share of the partnership’s taxable income on their tax return. AllianceBernstein provides this information to each Unitholder annually on a Schedule K1. Schedule K1’s are mailed no later than March 1 following the close of the Partnership’s year-end. Schedule K1’s are also available on the tax department website at: www.taxpackagesupport.com/ab.

Individual investors - Tax implications for individual investors depend on the vehicle in which AllianceBernstein Holding Units are held (see Tax-exempt/tax-advantaged vehicles below).

Institutional investors - The tax implications for institutions will be governed by each institution’s tax status.

Mutual funds, or Regulated Investment Companies under the American Jobs Creation Act of 2004, may derive qualifying income for purposes of the 90% gross income test from AllianceBernstein Holding. A Mutual Fund can generally have no more than 25% of its assets in publicly traded partnerships, and can own no more than 10% of any one publicly traded partnership.

Tax-exempt/tax-advantaged vehicles such as IRAs, pension and profit sharing plans, foundations, endowments and certain trusts may not find an investment in AllianceBernstein Holding Units appropriate. Partnership Operating income is generally treated as unrelated business taxable income (UBTI) subject to taxation. Nevertheless, some pension funds, foundations and endowments have invested in publicly traded partnerships such as AllianceBernstein Holding.

Non-U.S. investors generally must file a U.S. tax return reporting income from AllianceBernstein Holding, and will be taxed at regular U.S. graduated rates. Tax laws require that an estimate of this tax be withheld at the highest individual tax rate (for individuals presently 35%) as prepayment of the taxes. Tax laws in the investor’s home country may allow a foreign tax credit for the U.S. taxes paid on this income.

AllianceBernstein Holding has made an Internal Revenue Code Section 754 election, which allows the Partnership to pass through to Unitholders the tax benefit of amortization deductions that reduce taxable income. The amortization amount is calculated by the AllianceBernstein Tax Department and is generally attributable to goodwill. It is based on the investor’s purchase price of the Units, partnership tax basis and other factors. This amortization deduction is included in the amount reported on the Schedule K-1 Part III line 1 - ordinary business income (and disclosed separately on line 20 as the Section 743(b) adjustment). Certain items, including this goodwill, are amortized over 15 years and applicable to Unitholders who purchased Units after 1997 or obtained their Units through inheritance.

For each year the Units are owned, the Unitholder’s tax basis is reduced by the amount of that year’s amortization. In the year the Units are sold, the Unitholder must recapture the amortization (i.e., the deduction and reduction of basis in each year owned) as ordinary income. Capital gains tax may apply to any remaining gain. A Unitholder may have to recognize an amount of ordinary income even if the Unitholder has an overall capital loss on the sale of the Units.

Below is a hypothetical example of an investor buying 1,000 AllianceBernstein Holding (NYSE:AB) Units and selling after one year. The purpose of the example is to further assist investors in understanding the various tax implications of investing in AllianceBernstein Holding Units. This example is illustrative only and is generally applicable to an individual taxpayer. Certain passive activity rules and state income tax considerations are ignored.

Sample Tax Calculation

Explanation:
In the example, the unitholder would receive $3,500 ($3.50 [A] x 1,000 Units) in cash distributions and report taxable income of $700 ($0.70 [D] x 1,000 Units) for the year. Cash distributions [A] should not be reported as dividend or taxable income; the distributions are considered return of capital that reduces a unitholder's tax basis. This reduction is partially offset by the unitholder's share of taxable income [D], which increases the tax basis. The unitholder's tax basis is adjusted to reflect these two amounts [E]. The new tax basis per Unit at the end of the year would be $57.20 [F] ($60-$2.80 [E]). Assuming sale at the beginning of year 2, the unitholder would be subject to tax at the unitholder's ordinary tax rates on the recapture of previous amortization deductions taken of $3,000 ($3.00 [C] x 1,000 Units times the number of years the Units were held). Capital gains taxes may apply to any remaining gain.

A unitholder's taxable income [D] is shown on a Schedule K-1. The taxable income pre-amortization [B] is not shown on the Schedule K-1 but can be calculated using information disclosed.

*Assumptions include no increase or decrease in cash distributions each year.

Most states require that income or losses derived from an investment in a partnership, such as AllianceBernstein Holding be included in the resident taxpayer's state income tax return. Additionally, some states require that a non-resident partner file a non-resident income tax return with the state in which the partnership conducts business. The states in which AllianceBernstein and AllianceBernstein Holding conduct business are: California, Colorado, Florida, Georgia, Illinois, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Texas, Washington, and District of Columbia. The partnership's business is predominantly conducted in New York which requires non-resident partners to file a tax return and pay New York state taxes.