Philadelphia partner Steve Hamilton was quoted in the Bloomberg BNA Daily Tax Report in an article titled “IRS Floating Draft of Carried Interest Rules: Official.” The article discussed expectations regarding how the IRS will draft regulations aimed to clarify carried interest issues in the new tax law (Section 1061), such as whether private investment funds must hold assets or partnership interests for three years to receive long-term capital gains treatment. Practitioners debate whether that required holding period applies only to the partnership interest itself or also to capital assets held by the partnership interest.

Steve said that the new section applies to long-term capital gains “with respect to” applicable partnership interests, so that the scope of the provision depends on what is meant by that phrase. He indicated that the language “sounds like it’s supposed to apply to the assets underneath,” noting that reading the provision as applying solely to the partnership interests themselves would mean that “the section covers almost nothing.”

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Source: Bloomberg BNA