Proposed Carried Interest Regulations: Impact on Fund Managers and Tax Planning

Anti-Abuse Rules, Exceptions, Three-Year Holding Period, and Early Adoption

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

Conducted on Tuesday, November 17, 2020

Recorded event now available

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Program Materials

This webinar will provide fund managers and their advisers with a practical guide to the challenges and planning opportunities found in the proposed carried interest regulations.


The practice of preferential tax treatment of an applicable partnership interest or "carried interest" granted to managers of hedge funds, private equity, and real estate funds present tax reporting and planning challenges to partnerships and their tax advisers.

Carried interest refers to the practice when partnerships grant profits interest to general partners for their fund management services, sometimes only if the fund's profit margin exceeds a specified rate of return applicable to limited partners. Current law allows the general partner recipient to treat this payment as long-term capital gain if the underlying assets meet the required holding period and provide tax benefits. The grant itself is not subject to tax upon either grant or vesting.

The recent regulations did not eliminate the carried interest preference but made several fundamental changes. These regulations confirm the exclusion of specific type of gains, including Section 1231 and Section 1256 mark-to-market gains. Particularly concerning is the taxation of certain transfers via gift or death of a partner which were previously tax-free. Although not effective until finalized, taxpayers can rely on these regulations as long as they are consistently applied.

Listen as our experienced panel provides practical guidance on the recent regulations and the tax reporting and planning challenges contained in the new carried interest rules.



  1. Background
  2. Carried interest treatment in the proposed regulations
    1. Exceptions
    2. The three year holding period
    3. Waivers and deferrals
    4. Look-through rules
    5. Anti-avoidance rules
    6. Other provisions
  3. Tax reporting challenges involving carried interests
  4. Early adoption
  5. Differences between federal and state treatment of carried interests


The panel will discuss these and other relevant topics:

  • General treatment of carried interest holders under the proposed regulations
  • Exceptions to this general treatment, such as where a carried interest holder also invests capital in their fund
  • Transfers of carried interest, in particular, gain recognition on transfers to related parties
  • Treatment of seed investors and other persons who may indirectly participate in the carried interest (by virtue of invested capital rather than performing services)
  • Effective dates and potential early reliance on the proposed regulations
  • Potential differences between state and federal tax treatment of carried interest


Gross, Philip
Philip S. Gross

Kleinberg Kaplan Wolff & Cohen

Mr. Gross is a partner and the chair of the Tax Department at Kleinberg, Kaplan, Wolff & Cohen, P.C. His practice...  |  Read More

McCann, James
James D. McCann

Kleinberg Kaplan Wolff & Cohen

Mr. McCann has extensive experience in the areas of domestic and international taxation. He counsels clients regarding...  |  Read More

Taeid, Deborah
Deborah Taeid

Kleinberg Kaplan Wolff & Cohen

Ms. Taeid advises clients on a wide variety of international, federal, state and local tax matters. She focuses her...  |  Read More

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