Hedge funds and private equity managers will have to rethink strategies to shield some of their pay from higher taxes following IRS rules for carried interest.
The 2017 tax law changed the way carried interest, the portion of an investment fund’s returns that are paid to managers, is taxed. The law requires the funds to hold assets for more than three years—up from one—for managers to get a preferential tax rate of 20% versus 37%, generally accompanied by an additional 3.8% net investment income tax.
Some funds altered their partnership agreements to structure carried interests in a way ...
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