Ending the Carried Interest Loophole Act

Redefinition of Partnership Interest Value: The bill changes the treatment of partnership interests transferred in connection with services so that the fair market value is treated as the amount the partner would receive if the partnership sold all assets for cash and liquidated. This is found in Section 2(a)(A)(i).

Treatment of Capital Accounts: For those receiving interests, the amount included in gross income is treated as an addition to the person's capital account for purposes of subchapter K. This is found in Section 2(a)(B)(i).

Treatment of Invested Capital: If an interest is an applicable partnership interest, the amount included in gross income is treated as invested capital. This is found in Section 2(a)(B)(ii).

Ordinary Income Classification: Taxpayers holding "applicable partnership interests" must include a "deemed compensation amount" in their gross income as ordinary income. This is found in Section 3(a)(1).

New Tax Burdens on Specific Trades: The bill targets taxpayers involved in "applicable trade or business," which includes activities like raising or returning capital and investing in or developing specified assets such as securities or commodities. This is found in Section 3(b)(3).

Impact of Partnership Loans: The definition of an "applicable loan" includes loans issued directly or indirectly from the partnership or other partners, which could affect how interests are treated. This is found in Section 3(b)(4).

Accelerated Income Recognition: If a taxpayer sells or disposes of an applicable partnership interest, they may face an accelerated inclusion of the deemed compensation amount. This is found in Section 3(c)(5).