Back to the Future: Revisiting the ALI's Carried Interest Proposals

6 Pages Posted: 20 Aug 2009 Last revised: 11 Sep 2015

See all articles by Karen C. Burke

Karen C. Burke

University of Florida Levin College of Law

Date Written: October 7, 2009

Abstract

Congress is currently considering carried-interest legislation (section 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 section 707(a)(2)(A). The article draws on the the American Law Institute's reform proposals concerning the treatment of service partners.

Keywords: carried interests, 710, H.R. 1935, deferred compensation, management fee conversions, profits interests, section 707(a)(2)(A), section 83, guaranteed payments

JEL Classification: K34

Suggested Citation

Burke, Karen C., Back to the Future: Revisiting the ALI's Carried Interest Proposals (October 7, 2009). Tax Notes, October 12, 2009, San Diego Legal Studies Research Paper No. 09-026, Available at SSRN: https://ssrn.com/abstract=1458512

Karen C. Burke (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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