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Carried interest

Carried interest

For tax years beginning after December 31, 2017, the new law requires a 3-year holding period in order for certain partnership interests received as compensation for services rendered to qualify as long-term capital gain. Otherwise all capital gains are treated as short-term gain taxed at ordinary income rates.

Background: Under old law, carried interests were treated in the hands of the taxpayer at as capital gain rather than ordinary income.

Observation: This will negatively affect some hedge fund manager’s taxes.


Zaher Fallahi, Tax Attorney, CPA, is a Tax Controversy Attorney, and defends taxpayers in resolving their Income Tax and Offshore Accounts (FBAR and FATCA) problems. Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), Toll Free 877-687-7558,  e-mail taxattorney@zfcpa.com