In Defense of the Current Treatment of Carried Interest
Jeffrey H. Kahn
Florida State University - College of Law
Douglas A. Kahn
University of Michigan Law School
June 3, 2013
Tax Notes, Vol. 138, 2013
The Obama administration and several commentators have asserted that the current taxation of so-called ‘‘carried interest’’ at capital gains rates is wrong and unjustified. Their case for this change is based on their characterization of the distributions to the partners in question as payments for their services. If that characterization were correct, there would be a very strong case for ordinary income treatment. This letter to the editor explains that, to the contrary, that characterization is erroneous. When the nature of the transaction is examined, it is clear that capital gain treatment is entirely consistent with tax policy and is appropriate.
Number of Pages in PDF File: 2
Keywords: Carried Interest, Venture Capital, Capital Gains, Ordinary, Partnership, Investment Manager, Capital, Labor
JEL Classification: H20, H24, H25, H26Accepted Paper Series
Date posted: June 12, 2013
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