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2015 Federal Budget – Closing the Carried Interest Loophole

This is a change for the better that reverses a bit of tax code that never made sense to me. There is a loophole that taxes what you or I would look at as income to partners of an investment firm, and tax it at a capital gain rate. As the budget proposal states “Although profits interests are structured as partnership interests, the income allocable to such interests is received in connection with the performance of services. A service provider’s share of the income of a partnership attributable to a carried interest should be taxed as ordinary income and subject to self-employment tax because such income is derived from the performance of services.”

I was always in favor of closing this loophole. Let’s see if this budget ever passes.

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