Q.

What is carried interest, and should it be taxed as capital gain?

A.

­­­­­­­­­­­­­­­­­­­­Carried interest, income flowing to the general partner of a private investment fund, is generally treated as capital gains for the purposes of taxation. This tax preference is viewed as an unfair, market-distorting loophole by some but consistent with the tax treatment of other entrepreneurial income by others.