Quote:
Originally posted by taxwonk
I can see an argument for that. There's also a some law on both sides of the issue. It's something the Service has issued Revenue Procedures for guidance on, but it's still working itself out.
Of course, if I can anticipate your next point...no, the value of the carry isn't zero on day one. It's the NPV of the estimated payout. Based upon the manager's past record and the market conditions, someone much more mathematically adept than I could produce a value. But then, your guys would be paying tax on dry income, years before they see the cash.
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Not my next question at all.
My next question was what you valued the partnership interest at the day you started a new law firm?
Remember, these guys started the Company (or Fund, as the case may be), and they have a separate stream of income in the management fee to pay salary to all the service providers. The Company buys all the assets after the day they get their interest.
If your new law firm happened to buy a little office condo, would you expect to pay ordinary income when you sold it? Would it have affected the amount you took into income when you started the firm?
