Carry taxation debate

The debate over how carried interest should be taxed. Actual treatment depends on jurisdiction, tax year, income character, holding periods and the taxpayer’s circumstances.

Carry taxation debate in round numbers

A limited U.S. example: section 1061 generally requires a holding period of more than three years for certain gains associated with applicable partnership interests to retain long-term capital-gain treatment, subject to exceptions. That rule does not mean all carry receives one tax rate or that taxpayers simply choose between two rates.

Source: IRS: section 1061 reporting guidance.

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