Treasury and IRS release long-awaited guidance on carried interest taxation
On July 31, 2020, Treasury and IRS released proposed regulations regarding Sec. 1061’s carried interest rule, which was enacted as part of the Tax Cuts and Jobs Act (TCJA). Targeting incentive allocations made to fund managers, Sec. 1061 recharacterizes certain long-term capital gains as short-term if the holding period is not more than three years. Section 1061 was a limited change to carried interest taxation and it did not impact other aspects regarding the tax treatment of carried interests (including the safe harbor regarding the issuance of a profit interest, e.g., carried interest). Key highlights of the proposed regulations include:
Please follow this link for detailed commentary from Andersen United States on these proposed regulations.