Quote:
Originally posted by Mmmm, Burger (C.J.)
1) Most private equity fund managers are taking risks. To be sure, primarily with investors' money, but also their own. Indeed, the investors who get the 80% of the gains (that is all gains less the 20% carried interest), are taxed at the k-gains rate.
2) There are reasons for a lower k-gain rate other than providing incentives for risk taking.
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1) That's true, but the manager will get the cap gains rate on any gains on their invested money. The manager is also "risking" that the carried interest will be zero--not that they get nothing, because the manager gets 2% off the top, no matter what else happens. However, isn't "risk" more about the risk of losing your investment, which isn't an issue for carried interest?
2) Such as . . .? I can't think of examples that reasonably apply to carried interests other than the lower rate generates more free cash for campaign contributions.
