Carried Interest Rules for Investment Funds: Planning Opportunities and Pitfalls

Tax attorney Christopher Marotta will co-lead a BARBRI webinar presentation on carried interest rules and how they apply to investment funds. Carried interest, structured as a partnership interest in a fund, allows investment fund managers to participate in a portion of the fund's profits. Federal income tax treatment of partnership interests is based on the character of the income the fund earns, and Internal Revenue Code (IRC) Section 1061 may increase the holding period required for long-term capital gains treatment from one year to three years. In addition, IRS and U.S. Department of the Treasury regulations may limit planning opportunities and impose partnership-level reporting requirements. During this program, Mr. Marotta will cover ways for private equity and hedge fund managers to preserve long-term capital gains treatment based on a one-year holding period instead of the three years under Section 1061. He will also outline planning techniques such as structural adjustments to a business deal that can help fund managers maintain compliance while preserving profit.