The remainder of M's $15,000 gain would be short-term capital gain
. The lookthrough provisions do not apply to the sale or exchange of short-term partnership interests, thus preventing the conversion of M's short-term capital gain
into long-term capital gain.
Because the basis of a partnership interest cannot be segregated to a portion of an interest, basis in the portion of a partnership interest with a long-term holding period could reduce gain attributable to the portion of a partnership interest with a short-term holding period in situations where such interest was recently received in exchange for contributed short-term capital gain
T's taxable income consisted of $18,350 of ordinary income, $1,500 of short-term capital gain
, a $2,500 short-term capital loss, a $3,000 collectibles gain, a $4,000 unrecaptured Sec.
Rather than treating amounts failing the three-year test as ordinary income (as has been the typical recharacterization under prior versions of proposed carried interest legislation), section 1061 treats such gain as short-term capital gain
Net short-term capital gain
(loss) -121,385 -24,542,756
"The average mutual fund's asset turnover is well over 100%, meaning that capital gains are realized at least once a year and subject to the higher short-term capital gain
Also, on their 2001 and 2003 tax returns, they deducted interest of approximately $7.8 million and $33 million, respectively The IRS determined the arrangement did not satisfy section 1058, and instead determined the Samuelis had purchased and immediately resold securities in 2001 with no gain or loss, purchased and immediately resold securities in 2003 with a short-term capital gain
of about $13.5 million and that no debt existed, therefore disallowing their interest deductions.
A portion of each distribution may be treated as paid from sources other than undistributed net investment income, including but not limited to short-term capital gain
, long-term capital gain or return of capital.
The notice conveys the IRS's concern that taxpayers are using basket option contracts to "inappropriately defer income recognition or convert ordinary income or short-term capital gain
into long-term capital gain." The notice further states that taxpayers are treating these transactions as outside of the scope of Sec.
The total short-term capital gain
or loss amount, as well as the total long-term capital gain or loss amount, is taken from Form 1041 Schedule D, Capital Gains and Losses, for the corresponding tax year.
Exhibit 2 contains one column for each possible type of capital gain (short-term capital gain
and three categories of long-term capital gain: 28%, 25%, and 20%).
A portion of each distribution may be treated as paid from sources other than net income, including but not limited to short-term capital gain
, long-term capital gain and return of capital.