The Impact of IRC Section 1061 on Carried Interest: Key Tax Planning Considerations

Christopher Fiore Marotta | Holland & Knight

Christopher Marotta is a tax attorney in Holland & Knight’s Boston office. Mr. Marotta assists clients with a range of domestic and international tax issues, including in relation to negotiating and structuring the purchase and sale of businesses, negotiating loan agreements for lenders and borrowers, drafting joint venture agreements (including with respect to real estate matters), advising insurers on representation and warranty policy coverage, structuring inbound and outbound investments, forming investment funds, drafting United States tax disclosures for private placement memoranda and public offerings, and other issues relating to mergers, acquisitions and reorganizations.

Prior to joining Holland & Knight, Mr. Marotta advised private equity and corporate clients on the aspects of bankruptcies and domestic and multinational mergers and acquisitions in the New York office of an international law firm. He also has experience of providing advice on the structuring of investments overseas and domestic target companies and other domestic and international tax matters from working in the New York office of an international accounting firm.

In 2017, Mr. Marotta received the editor’s prize from the American Bankruptcy Law Journal for an article analyzing the use of bankruptcy examiners. He also has been published in the Banking Law Journal, Bloomberg Tax Management Memorandum and the Journal of Intellectual Property Law & Practice.

I. Fundamental changes in carried interest tax treatment | 1:00pm – 1:10pm

• Key provisions of IRC Section 1061 under the Tax Cuts and Jobs Act (TCJA)
• The three-year holding period requirement and its practical implications
• Specific impacts on hedge funds, private equity, and real estate fund managers

II. Exceptions | 1:10pm – 1:20pm

• Income categories excluded from Section 1061
• Corporate exception and application
• Capital interest classification

III. Calculation aspects and look-through rules | 1:20pm – 1:30pm

IV. Structuring considerations and anti-abuse rules | 1:30pm – 1:45pm

• Summary of relevant anti-avoidance provisions
• Structuring considerations

V. Tax reporting and planning challenges | 1:45pm – 2:00pm

• IRS reporting requirements
• Practical planning considerations