Ever since word leaked that the Senate Finance Committee was studying the federal income tax treatment of “carried” partnership interests, there has been much speculation but little information about what legislation addressing this controversial area might do. Our understanding is that this

study is in the early stages, as has been reported in the media, and there is no “proposal”, despite rumors to the contrary. Instead, the study has been going on at the staff level - Congressional tax staffs are currently gathering information to determine whether, and if so how to act. We suspect that this process will take months and may even see Congressional hearings on the topic.

Anticipating a continued interest in this issue, we thought it might be helpful to inform clients about the parameters of the current debate and what we think are realistic possibilities for legislative action. What follows are guesses and only guesses. Congress, as usual, will have the last legislative word.