Changes to Taxation of Partnership Interests for Services Rendered
This act aims to change how certain income from partnership interests, linked to services performed, is taxed. This means that some profits previously treated as capital gains (often taxed at a lower rate) will now be taxed as ordinary income, potentially increasing tax burdens for individuals operating in specific industries.
Key points
Profits from certain partnership interests, received for services, will be treated as ordinary income instead of capital gains.
A "recharacterization account" mechanism is introduced to track amounts subject to the new tax rules.
The new rules apply to industries such as capital raising, investing, and business development.
The act takes effect for tax years beginning after December 31, 2021.
Status:
Expired
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