Under partnership law, the agreements can allocate the income distribution to the partners in a fashion different from the asset share ownership.
But there is also a general principle of tax law that any payment for services is ordinary income. So I personally would characterize this as a loophole.
I think you are incorrect that closing this loophole would not increase taxes - if we assume the managers still get their same return (as is likely) and pay ordinary income rates on it, then the overall tax rate for investors plus managers will now be higher.
Not also that the way things are structured now there is a lot of room for tax planning - take losses and delay profits, something not usually available for ordinary income. Prior to the reforms of 2008 there was also a lot of abuse using offshore management companies that elected a cash basis of accounting while the onshore fund used accrual for the 2% management fee. (I think some of these may be grandfathered in, and so it is quite possible that Romney is still taking advantage of this old loophole).
>> I think you are incorrect that closing this loophole would not increase taxes - if we assume the managers still get their same return (as is likely) and pay ordinary income rates on it, then the overall tax rate for investors plus managers will now be higher.
But it is not the closing of the loophole that creates more tax revenue - it would be the increase in fees. And while I agree that is certainly possible, may even be likely, it is not a certainty. I think I read that hedge fund fee structures were coming under pressure.
BTW - I am fine with closing this "loophole".
However, implementation of tax policy is more complex than is generally recognized, and characterization in labels like "loophole" color the debate without aiding the understanding.
labels like "loophole" color the debate without aiding the understanding
In this case I concede. But the more egregious strategy (now blocked) that allowed the fixed 2% income to be indefinitely deferred I would indeed characterize as a loophole.
I do agree that sometimes you see inflammatory and uninformed commentary on tax policy - for example the criticisms of allowing companies to deduct the spread on option exercises that didn't point out there was corresponding income (at a higher rate) to the employee.
Czerniecki and colleagues enrolled 27 women with HER2-positive DCIS. They isolated specialized white cells from the patients’ blood using standard apheresis techniques similar to the blood donation process. Once isolated, the researchers activated the dendritic cells, which are key regulators of the immune system, and primed them with small pieces of the HER2/neu protein in Penn’s Clinical Cell and Vaccine Production Facility. Each patient then received four shots, one week apart, of their personalized anti-HER2 vaccine. And two weeks later patients had surgery to remove any remaining disease, which is standard care for DCIS patients.
An all-day climber, news under appreciated at open. exel too, through presentation...... should be an effort to sell the meeting, but recent attempts to sell big-science biotechs have burned the sellers.
Anyway.... given a benign market or better and news, might be good to place bets.
Where does one go to invest in today's world? U.S. stocks! And where should you invest, among U.S. stocks?