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***** Scenario 3: Carried Interest Loophole? Partner in an...

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Accounting

*****
Scenario 3: Carried Interest Loophole?
Partner in an investment management firm receives $2.5 million in carried interest.
The underlying assets were held for more than 3 years.
Wages: None
Qualified Dividend Income: $20,000
Itemized Deductions: $50,000
Allowable deduction for self-employment tax: None (but SE tax applies to partnership income)
Calculate:
AGI, Taxable Income, and Total Tax Liability
Debate whether the tax treatment of carried interest is fair, considering loopholes and proposals to change the rules.

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