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New Proposal to Tax Carried Interest as Ordinary Income
16 September 2011
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On September 12th, President Obama released the text of the proposed American Jobs Act of 2011, which includes provisions that would tax carried interest as ordinary income.
The carried interest provisions of the bill generally would tax at ordinary income tax rates 100% of carried interest and gain from the sale of carried interest (enterprise value), whereas prior Congressional proposals generally would have treated only 75% of carried interest as ordinary income.
The bill would limit the application of the carried interest rules to "investment partnerships," which may protect certain partnerships from inadvertently becoming subject to the carried interest regime.
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