1061 Carried Interest Regulations

Publication of Final Rule

The IRS on January 7, 2021, submitted for official publication final regulations regarding Section 1061 of the Internal Revenue Code (26 U.S.C. 1061) on the tax treatment of certain partnership interests (i.e., “carried interest”) held in connection with the performance of services. This Code section extends the holding period requirements from one-year to three-years for taxpayers to receive long-term capital gains treatment for gains on carried interest in an applicable partnership interest (“API”). SBIA filed a comment letter last October with the IRS regarding its regulatory proposal, and the SBIA letter had a direct impact because the final rule incorporates several of SBIA’s key recommendations.