Action Coming on Carried Interest, 1099 Rules

RMag_At_MidYear1By Robert Freedman, senior editor, REALTOR® Magazine

Look for a Call for Action on two issues of particular concern to practitioners working with investors. House lawmakers are expected to take up an increase in the capital gains tax rate on the carried interest of general partners in an investment partnership. The capital gains tax rate could go up as high as 39 percent from 15 percent under amendments expected to come up in the House very soon as part of tax extender legislation.

The amendment is largely intended to generate more tax revenue from hedge funds, industry analysts say. But the lion’s share of investment partnerships are real estate partnerships, so real estate investors stand to be hit hard if the measure passes. Of roughly 1.2 million investment partnerships in the U.S., about 1 million of them are real estate partnerships; only about 200,000 are hedge funds.

Property managers earlier this year met with lawmakers to educate them about the impact an increase in the tax rate could have on real estate investment partnerships. According to analysts, many lawmakers expressed concern about the potential impact of the increase and appeared open to looking into the issue more.

The other issue expected to be part of the extender bill concerns IRS Form 1099 filings. Under a provision that Congress will be looking at, rental property owners would have to file a 1099 Form for any vendor they work with that earns $600 a year or more. Should that pass, that could place a significant paperwork burden even on owners who own just a few rental properties.

The extender bill could come up in just a few days and is expected to be put on a fast track. If it is, it could be considered on the full House without a thorough look by the tax-writing Ways and Means Committee, putting a premium on fast action by NAR to try to curb the measures.

The situation is fluid but you could see the Call for Action Sunday.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at

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  1. Where is NAR on this?

    Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

    The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year