Paul L. Caron

Wednesday, October 14, 2009

Burke: Revisiting the ALI's Carried Interest Proposals

Karen C. Burke (San Diego) has published Back to the Future: Revisiting the ALI's Carried Interest Proposals, 125 Tax Notes 242 (Oct. 12, 2009).  Here is the abstract:

Congress is currently considering carried-interest legislation (§ 710) that would limit the ability of service partners to convert ordinary compensation income into tax-favored capital gain. While the problem of conversion undoubtedly merits attention, the premise of the proposed legislation deserves closer scrutiny. This article argues that Treasury may already have the requisite authority under existing law to address capital gain conversion and avoidance of other limitations, and that instead of enacting complex new statutory provisions of uncertain scope Congress should consider directing Treasury to promulgate anti-abuse regulations under § 707(a)(2)(A). The article draws on the the American Law Institute's reform proposals concerning the treatment of service partners.

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