Recently, press stories have suggested some in Congress are raising questions about the appropriate tax treatment and character of the income that investment managers and others receive from certain interests in partnerships. The change that is apparently being considered may make the award of a profits interest or the receipt of proceeds from a profits interest (sometimes termed a 'carried interest') in a partnership a taxable event that is taxed as ordinary income to the partner. Such a change would have an impact far beyond investment funds because many other sectors of business use profits interests to align the longer term interests of the management with the partnership, including real estate, oil and gas and other partnerships (or LLC's).

 

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