PrefBlog

The legislation to close the loophole on taxation of “carried interest” (discussed on May 20) has a rather peculiar feature:

Private-equity firms, trying to derail legislation that would boost taxes on their leaders’ pay, are attacking a provision that would make it more costly for executives to sell their own management firms.

The provision, which also would affect operators of hedge funds, would make executives pay ordinary income tax rates on profits from selling a stake in their own management companies. Founders of other types of businesses would remain eligible to pay lower capital-gains rates when they sell. The House is scheduled to vote on the legislation today.
…
The sales provision is intended to stop executives at buyout, venture-capital and real-estate partnerships from circumventing the higher taxes on their pay imposed by the bill, said Matthew Beck, a spokesman for the House Ways and Means Committee. Otherwise, he said, fund managers would sell their stake — and pay the lower tax rate — just before receiving income subject to higher taxes.

Well – I haven’t read the legislation and I’m not a tax lawyer anyway. But this sounds like a ridiculous punitive provision that will pass anyway because it bashes those evil Wall Street Types. I find it very difficult to believe that the income vs. Capital Gain question used as justification is applicable only to private equity firms.

Another day of elevated volume and fine returns, as PerpetualDiscounts gained 60bp to take the total return subindex for this class to its highest level since April 21. FixedResets gained 5bp and continue their record of outperforming PerpetualDiscounts from both that date and month-to-date.

This entry was posted on Thursday, May 27th, 2010 at 9:55 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.