In this episode of Willis Weighs In, Benjamin M. Willis, Tax Notes Federal contributing editor, discusses carried interests with partnership tax expert Monte A. Jackel. Monte and Ben speculate on what the new regulations are expected to look like and provide their opinions on potential IRS overreaches likely to be overturned if potentially tenuous arguments are brought to court.
Section 1061 was enacted as part of the Tax Cuts and Jobs Act to scale back the tax benefits obtained on carried interests provided for services to fund managers of large private equity funds: long-term capital gain rates as low as 15 to 20 percent. Under section 1061, future partnership profits afforded through applicable partnership interests are subject to a three-year holding period if the taxpayer provides substantial services for an applicable trade or business. Corporations holding applicable partnership interests are excluded from the new rules. This conversation is accessible to those new to the area yet extracts nuanced insights for experienced tax practitioners well-versed in carried interests.
*This episode was recorded before the proposed regulations were released.