Tax Cuts and Jobs Act – New law increases holding period for carried interests

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Abstract: On the campaign trail, President Trump pledged that tax reform under his leadership would target carried interests — more widely known in the real estate industry as the “promote” in partnership agreements or operating agreements for limited liability companies that are treated as partnerships for tax purposes. In the end, the Tax Cuts and Jobs Act (TCJA) only modifies the rules for carried interests, largely preserving their favorable tax treatment, rather than eliminating that treatment. This article reviews what’s new and what’s left unanswered under the TCJA. A sidebar explains why deciding whether to convert to a C corporation is a complex matter.