Except that the auto dealer gets taxed at regular rates for business income.
Reader comment on: Diana Furchtgott-Roth on Taxing Investment Managers
Submitted by Lyle (United States), Jun 10, 2010 10:45
They don't get carried interest treatment. Look at a schedule K-1 Most of their income will be called ordinary business income (loss) and go on line 1 of the form which goes on Schedule E which ends up on line 17 of the 1040 as ordinary income. Also subject to self employment tax if appropriate. The carried interest is not the enterprise value of the partnership, as that is only recognized if you sell the share of the partnership.
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The Future of Capitalism replies:
Agreed but if they have founder's stock it gets capital gains treatment when they sell. The latest legislation affects not only the annual income but a sale.
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