On July 31, 2020, the Department of Treasury and IRS issued proposed regulations that provide guidance to the “carried interest” rules under Section 1061 of the Internal Revenue Code. Long-term capital gains derived by individuals are subject to a preferential 20% US federal income tax rate (plus 3.8% “net investment income” tax after certain income thresholds are met). On the other hand, individuals are subject to US federal income tax on short-term capital gains at the graduated ordinary income tax rates with a maximum tax rate of 37% (plus 3.8% “net investment income” tax after certain income thresholds are met).
Continue reading the full GT Alert, 3-Year Holding Period Rule for ‘Carried Interests’ Addressed in IRS Proposed Regulations.