TaxProf Blog

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Pepperdine University School of Law

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Wednesday, February 6, 2013

Defending the Current Tax Treatment of Carried Interest

Carried interest is taxed at the capital gains rate because it is a profits interest on a long-term capital asset. This tax policy encourages the risk taking that is required to start and grow companies. Changing the taxation of carried interest would upend a long-standing, successful policy that has helped America prosper for more than 100 years. This white board video explains how partnerships, including private equity, venture capital and real estate, earn carried interest by making successful investments.

http://taxprof.typepad.com/taxprof_blog/2013/02/defending.html

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Comments

This is a joke, right? Sweat equity has never been treated the same as a contribution of property. It's not a tax-free contribution under either corporate tax or partnership tax.

Posted by: HTA | Feb 7, 2013 12:42:47 PM

Thanks to low taxes on carried interest, slick PR is very affordable.

Posted by: Anon | Feb 8, 2013 11:32:41 AM

Let's just eliminate the capital gains / labor distinction all together. We can all get the low capital gains rate.

Which will have to be increased to close the tax rate on labor.

Posted by: Anon | Feb 8, 2013 11:33:32 AM

"It's not a tax-free contribution under either corporate tax or partnership tax."

1. Revenue Procedure 2001-43; Revenue Procedure 93-27.
2. Stock options for services w/ a negligible value at issuance w/ an 83(b) election.

"Let's just eliminate the capital gains / labor distinction all together."

I disagree.
- http://www.slate.com/blogs/moneybox/2012/09/21/mitt_romney_s_effective_tax_rate_is_very_low_most_economists_think_it_should_be_.html
- http://www.aei-ideas.org/2012/11/why-capital-gains-tax-rates-should-be-lower-than-those-on-labor-income/

Posted by: Carry Me Home | Feb 8, 2013 11:37:02 PM