The argument is that venture capitalists and private-equity partners who get paid off the ‘carry’ are really being paid for their labor, since it reflects the work done by the VC on behalf of the investors….and that hence, it should be taxed at ordinary income rates.
BUT…when people are taxed on ordinary income, that usually represents the compensation for labor they have performed in the current tax year and were paid for when it was performed, or shortly thereafter. Whereas the work a VC does on a deal is mostly front-end-loaded….he may spend a lot of time reviewing & filtering a range of possible deals, finally selecting a relative few of them, and then spend additional time structuring the deals. And the payback will very often be 5 years or more in the future. So he’s doing work that he won’t be compensated for for many years, if ever.
Rather different in timing from typical hourly or salaried work; looked at in that light, the carried-interest CG treatment seems reasonable.
From a business acquaintance, "Like Trump's tax bill before it, which was rushed through in reconciliation without a single Dem vote, this is a disaster of poor drafting, lack of clear policy and language bordering on the incomprehensible. The Democrats followed the lead of the OECD and put in a tax computes by reference to financial statement income. But unlike Europe where tax is computed by reference to financial statement income the US doesn’t do that and haven’t done it for 100 years. It will make money for the accounting firms but won’t grow the economy."
Manchin was playing McConnell like the failed idiot he is. Just pass gun control and we will like you , just pass Chips and we will like you. Then spit in his face and laugh at him. The rinos always surrender !! ALWAYS.
Imagine the work-around that someone dreams up... With the capital gain allocated to the GP now taxed at the ordinary income rate--in other words a gain is no longer a gain, but income--what adjustments will the partnership make?
Why let a gain be taxed as income--adjust the allocation so that the limited partners get the cap gain, and the GP takes income taxed as income. Why let the govt rape your partnership?
Since the type of assets invested vary between hedge, venture, private equity, and real estate, there will be some variation as between income, expense, gains, and losses, and an opportunity to shift allocations. In some cases, it will be obvious, in other perhaps not worth the extra complexity.
I'd be curious to see the assumptions for the tax revenue estimates produced for this legislation.
The argument is that venture capitalists and private-equity partners who get paid off the ‘carry’ are really being paid for their labor, since it reflects the work done by the VC on behalf of the investors….and that hence, it should be taxed at ordinary income rates.
BUT…when people are taxed on ordinary income, that usually represents the compensation for labor they have performed in the current tax year and were paid for when it was performed, or shortly thereafter. Whereas the work a VC does on a deal is mostly front-end-loaded….he may spend a lot of time reviewing & filtering a range of possible deals, finally selecting a relative few of them, and then spend additional time structuring the deals. And the payback will very often be 5 years or more in the future. So he’s doing work that he won’t be compensated for for many years, if ever.
Rather different in timing from typical hourly or salaried work; looked at in that light, the carried-interest CG treatment seems reasonable.
From a business acquaintance, "Like Trump's tax bill before it, which was rushed through in reconciliation without a single Dem vote, this is a disaster of poor drafting, lack of clear policy and language bordering on the incomprehensible. The Democrats followed the lead of the OECD and put in a tax computes by reference to financial statement income. But unlike Europe where tax is computed by reference to financial statement income the US doesn’t do that and haven’t done it for 100 years. It will make money for the accounting firms but won’t grow the economy."
Manchin was playing McConnell like the failed idiot he is. Just pass gun control and we will like you , just pass Chips and we will like you. Then spit in his face and laugh at him. The rinos always surrender !! ALWAYS.
Yeah carried interest is a tough loophole
So you let PE go out rape and pillage mostly good business Then don’t pay taxes on all short term and long term gains indefinitely
I’ve seen to many good family bussiness es destroyed by PE
Then you get a 176 page closing document
Which comes down to who has the better attorney or judge 😉
Imagine the work-around that someone dreams up... With the capital gain allocated to the GP now taxed at the ordinary income rate--in other words a gain is no longer a gain, but income--what adjustments will the partnership make?
Why let a gain be taxed as income--adjust the allocation so that the limited partners get the cap gain, and the GP takes income taxed as income. Why let the govt rape your partnership?
Since the type of assets invested vary between hedge, venture, private equity, and real estate, there will be some variation as between income, expense, gains, and losses, and an opportunity to shift allocations. In some cases, it will be obvious, in other perhaps not worth the extra complexity.
I'd be curious to see the assumptions for the tax revenue estimates produced for this legislation.