013. Is Carried Interest Taxable Now or Later?

In this episode, Brandon and Dylan discuss carried interest in real estate investments. They provide updates on tax filing deadlines and the progress of a tax bill in Congress. They explain the concept and history of carried interest, as well as its key features such as crystallization, clawback provision, vesting periods, and catch-up provision. They highlight the benefits of carried interest for both investors and managers. The conversation also covers the tax implications of carried interest, including the provisions in Section 1061 and how to structure carried interest to avoid tax traps. They emphasize the importance of involving both attorneys and CPAs in the process. Takeaways

• Carried interest is a mechanism used in real estate investments to align the interests of investors and managers.
• Key features of carried interest include crystallization, clawback provision, vesting periods, and catch-up provision.
• Carried interest is beneficial for both investors and managers as it incentivizes managers to achieve a certain return for investors.
• Understanding the tax implications of carried interest is crucial, and structuring it properly can help avoid tax problems.