Fried Frank Discusses U.S. Treasury’s Carried Interest Regulations

Section 1061 of the Internal Revenue Code was enacted as part of the 2017 Tax Cuts and Jobs Act to create greater parity between the tax treatment of ordinary income and capital gains attributable to carried interest. The basic statutory framework applies by recharacterizing certain long-term capital gain (“LTCG”) as short-term capital gain (“STCG”), unless either an extended holding period is satisfied (three years, as compared to one year) or an exception applies. In August, 2020, the Treasury Department and the IRS issued proposed regulations (the “Proposed Regulations”) interpreting Section 1061, which were complex and restrictive in many respects, and … Read more