Proposed Carried Interest Regulations Leave Unanswered Questions

Latham & Watkins LLP

While the proposed carried interest regulations clarify key aspects, the proposed rules leave some ambiguity for investment fund managers.

Section 1061 is intended to limit long-term capital gain treatment attributable to “carried interest” arrangements issued to owners and employees of investment fund managers by imposing a three-year holding period requirement in lieu of a one-year holding period requirement to obtain favorable long-term capital gain rates. On July 31, 2020, the Treasury Department and Internal Revenue Service (together, Treasury) issued proposed regulations under Section 1061 (the Proposed Regulations).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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