What is “Carried Interest” and how is it taxed so cheaply?
Carried interests is a for profits interest in a venture where one person/party receives this in liew of money for some type of work in the venture. Often you see it in Oil and Gas deals. Income interests are ordinary income and taxed at regular income tax rates, but not carried interest when redeemed over one year from origination. At that point they become taxed at capital gains rates and this is quite favorable to people involved.
