II 

114TH CONGRESS 

1ST SESSION S. 1686 

To amend the Internal Revenue Code of 1986 to provide for the proper 

tax treatment of personal service income earned in pass-thru entities. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2015 

Ms. BALDWIN (for herself, Mr. WHITEHOUSE, Ms. WARREN, Mr. FRANKEN, 

Mr. SANDERS, Mr. REED, Ms. HIRONO, Mr. MANCHIN, and Mr. 

BLUMENTHAL) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the proper tax treatment of personal service income 

earned in pass-thru entities. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Carried Interest Fairness Act of 2015’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

Sec. 1. Short title; etc. 

Sec. 2. Partnership interests transferred in connection with performance of 

services. 

Sec. 3. Special rules for partners providing investment management services to 

partnerships. 

5 SEC. 2. PARTNERSHIP INTERESTS TRANSFERRED IN CON6 NECTION WITH PERFORMANCE OF SERVICES. 

7 (a) MODIFICATION TO ELECTION TO INCLUDE PART8 NERSHIP INTEREST IN GROSS INCOME IN YEAR OF

9 TRANSFER.—Subsection (c) of section 83 is amended by 

10 redesignating paragraph (4) as paragraph (5) and by in11 serting after paragraph (3) the following new paragraph: 

12 ‘‘(4) PARTNERSHIP INTERESTS.—Except as 

13 provided by the Secretary— 

14 ‘‘(A) IN GENERAL.—In the case of any 

15 transfer of an interest in a partnership in con16 nection with the provision of services to (or for 

17 the benefit of) such partnership— 

18 ‘‘(i) the fair market value of such in19 terest shall be treated for purposes of this 

20 section as being equal to the amount of the 

21 distribution which the partner would re22 ceive if the partnership sold (at the time of 

23 the transfer) all of its assets at fair market 


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1 value and distributed the proceeds of such 

2 sale (reduced by the liabilities of the part3 nership) to its partners in liquidation of 

4 the partnership, and 

5 ‘‘(ii) the person receiving such interest 

6 shall be treated as having made the elec7 tion under subsection (b)(1) unless such 

8 person makes an election under this para9 graph to have such subsection not apply. 

10 ‘‘(B) ELECTION.—The election under sub11 paragraph (A)(ii) shall be made under rules 

12 similar to the rules of subsection (b)(2).’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to interests in partnerships trans15 ferred after the date of the enactment of this Act. 

16 SEC. 3. SPECIAL RULES FOR PARTNERS PROVIDING IN17 VESTMENT MANAGEMENT SERVICES TO 

18 PARTNERSHIPS. 

19 (a) IN GENERAL.—Part I of subchapter K of chapter 

20 1 is amended by adding at the end the following new sec21 tion: 


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1 ‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN2 VESTMENT MANAGEMENT SERVICES TO 

3 PARTNERSHIPS. 

4 ‘‘(a) TREATMENT OF DISTRIBUTIVE SHARE OF

5 PARTNERSHIP ITEMS.—For purposes of this title, in the 

6 case of an investment services partnership interest— 

7 ‘‘(1) IN GENERAL.—Notwithstanding section 

8 702(b)— 

9 ‘‘(A) an amount equal to the net capital 

10 gain with respect to such interest for any part11 nership taxable year shall be treated as ordi12 nary income, and 

13 ‘‘(B) subject to the limitation of paragraph 

14 (2), an amount equal to the net capital loss 

15 with respect to such interest for any partner16 ship taxable year shall be treated as an ordi17 nary loss. 

18 ‘‘(2) RECHARACTERIZATION OF LOSSES LIM19 ITED TO RECHARACTERIZED GAINS.—The amount 

20 treated as ordinary loss under paragraph (1)(B) for 

21 any taxable year shall not exceed the excess (if any) 

22 of— 

23 ‘‘(A) the aggregate amount treated as ordi24 nary income under paragraph (1)(A) with re25 spect to the investment services partnership inVerDate Sep 11 2014 02:12 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1686.IS S1686

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1 terest for all preceding partnership taxable 

2 years to which this section applies, over 

3 ‘‘(B) the aggregate amount treated as or4 dinary loss under paragraph (1)(B) with re5 spect to such interest for all preceding partner6 ship taxable years to which this section applies. 

7 ‘‘(3) ALLOCATION TO ITEMS OF GAIN AND

8 LOSS.— 

9 ‘‘(A) NET CAPITAL GAIN.—The amount 

10 treated as ordinary income under paragraph 

11 (1)(A) shall be allocated ratably among the 

12 items of long-term capital gain taken into ac13 count in determining such net capital gain. 

14 ‘‘(B) NET CAPITAL LOSS.—The amount 

15 treated as ordinary loss under paragraph (1)(B) 

16 shall be allocated ratably among the items of 

17 long-term capital loss and short-term capital 

18 loss taken into account in determining such net 

19 capital loss. 

20 ‘‘(4) TERMS RELATING TO CAPITAL GAINS AND

21 LOSSES.—For purposes of this section— 

22 ‘‘(A) IN GENERAL.—Net capital gain, long23 term capital gain, and long-term capital loss, 

24 with respect to any investment services partner25 ship interest for any taxable year, shall be deVerDate Sep 11 2014 02:12 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1686.IS S1686

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1 termined under section 1222, except that such 

2 section shall be applied— 

3 ‘‘(i) without regard to the recharacter4 ization of any item as ordinary income or 

5 ordinary loss under this section, 

6 ‘‘(ii) by only taking into account items 

7 of gain and loss taken into account by the 

8 holder of such interest under section 702 

9 (other than subsection (a)(9) thereof) with 

10 respect to such interest for such taxable 

11 year, and 

12 ‘‘(iii) by treating property which is 

13 taken into account in determining gains 

14 and losses to which section 1231 applies as 

15 capital assets held for more than 1 year. 

16 ‘‘(B) NET CAPITAL LOSS.—The term ‘net 

17 capital loss’ means the excess of the losses from 

18 sales or exchanges of capital assets over the 

19 gains from such sales or exchanges. Rules simi20 lar to the rules of clauses (i) through (iii) of 

21 subparagraph (A) shall apply for purposes of 

22 the preceding sentence. 

23 ‘‘(5) SPECIAL RULE FOR DIVIDENDS.—Any div24 idend allocated with respect to any investment serv25 ices partnership interest shall not be treated as 


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1 qualified dividend income for purposes of section 

2 1(h). 

3 ‘‘(6) SPECIAL RULE FOR QUALIFIED SMALL

4 BUSINESS STOCK.—Section 1202 shall not apply to 

5 any gain from the sale or exchange of qualified small 

6 business stock (as defined in section 1202(c)) allo7 cated with respect to any investment services part8 nership interest. 

9 ‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 

10 ‘‘(1) GAIN.— 

11 ‘‘(A) IN GENERAL.—Any gain on the dis12 position of an investment services partnership 

13 interest shall be— 

14 ‘‘(i) treated as ordinary income, and 

15 ‘‘(ii) recognized notwithstanding any 

16 other provision of this subtitle. 

17 ‘‘(B) GIFT AND TRANSFERS AT DEATH.— 

18 In the case of a disposition of an investment 

19 services partnership interest by gift or by rea20 son of death of the taxpayer— 

21 ‘‘(i) subparagraph (A) shall not apply, 

22 ‘‘(ii) such interest shall be treated as 

23 an investment services partnership interest 

24 in the hands of the person acquiring such 

25 interest, and 


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1 ‘‘(iii) any amount that would have 

2 been treated as ordinary income under this 

3 subsection had the decedent sold such in4 terest immediately before death shall be 

5 treated as an item of income in respect of 

6 a decedent under section 691. 

7 ‘‘(2) LOSS.—Any loss on the disposition of an 

8 investment services partnership interest shall be 

9 treated as an ordinary loss to the extent of the ex10 cess (if any) of— 

11 ‘‘(A) the aggregate amount treated as ordi12 nary income under subsection (a) with respect 

13 to such interest for all partnership taxable 

14 years to which this section applies, over 

15 ‘‘(B) the aggregate amount treated as or16 dinary loss under subsection (a) with respect to 

17 such interest for all partnership taxable years 

18 to which this section applies. 

19 ‘‘(3) ELECTION WITH RESPECT TO CERTAIN EX20 CHANGES.—Paragraph (1)(A)(ii) shall not apply to 

21 the contribution of an investment services partner22 ship interest to a partnership in exchange for an in23 terest in such partnership if— 

24 ‘‘(A) the taxpayer makes an irrevocable 

25 election to treat the partnership interest reVerDate Sep 11 2014 02:12 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1686.IS S1686

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1 ceived in the exchange as an investment serv2 ices partnership interest, and 

3 ‘‘(B) the taxpayer agrees to comply with 

4 such reporting and recordkeeping requirements 

5 as the Secretary may prescribe. 

6 ‘‘(4) DISTRIBUTIONS OF PARTNERSHIP PROP7 ERTY.— 

8 ‘‘(A) IN GENERAL.—In the case of any dis9 tribution of property by a partnership with re10 spect to any investment services partnership in11 terest held by a partner, the partner receiving 

12 such property shall recognize gain equal to the 

13 excess (if any) of— 

14 ‘‘(i) the fair market value of such 

15 property at the time of such distribution, 

16 over 

17 ‘‘(ii) the adjusted basis of such prop18 erty in the hands of such partner (deter19 mined without regard to subparagraph 

20 (C)). 

21 ‘‘(B) TREATMENT OF GAIN AS ORDINARY

22 INCOME.—Any gain recognized by such partner 

23 under subparagraph (A) shall be treated as or24 dinary income to the same extent and in the 

25 same manner as the increase in such partner’s 


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1 distributive share of the taxable income of the 

2 partnership would be treated under subsection 

3 (a) if, immediately prior to the distribution, the 

4 partnership had sold the distributed property at 

5 fair market value and all of the gain from such 

6 disposition were allocated to such partner. For 

7 purposes of applying subsection (a)(2), any gain 

8 treated as ordinary income under this subpara9 graph shall be treated as an amount treated as 

10 ordinary income under subsection (a)(1)(A). 

11 ‘‘(C) ADJUSTMENT OF BASIS.—In the case 

12 of a distribution to which subparagraph (A) ap13 plies, the basis of the distributed property in 

14 the hands of the distributee partner shall be the 

15 fair market value of such property. 

16 ‘‘(D) SPECIAL RULES WITH RESPECT TO

17 MERGERS, DIVISIONS, AND TECHNICAL TERMI18 NATIONS.—In the case of a taxpayer which sat19 isfies requirements similar to the requirements 

20 of subparagraphs (A) and (B) of paragraph (3), 

21 this paragraph and paragraph (1)(A)(ii) shall 

22 not apply to the distribution of a partnership 

23 interest if such distribution is in connection 

24 with a contribution (or deemed contribution) of 

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1 tion 721 applies pursuant to a transaction de2 scribed in paragraph (1)(B) or (2) of section 

3 708(b). 

4 ‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER5 EST.—For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘investment serv7 ices partnership interest’ means any interest in an 

8 investment partnership acquired or held by any per9 son in connection with the conduct of a trade or 

10 business described in paragraph (2) by such person 

11 (or any person related to such person). An interest 

12 in an investment partnership held by any person— 

13 ‘‘(A) shall not be treated as an investment 

14 services partnership interest for any period be15 fore the first date on which it is so held in con16 nection with such a trade or business, 

17 ‘‘(B) shall not cease to be an investment 

18 services partnership interest merely because 

19 such person holds such interest other than in 

20 connection with such a trade or business, and 

21 ‘‘(C) shall be treated as an investment 

22 services partnership interest if acquired from a 

23 related person in whose hands such interest was 

24 an investment services partnership interest. 


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1 ‘‘(2) BUSINESSES TO WHICH THIS SECTION AP2 PLIES.—A trade or business is described in this 

3 paragraph if such trade or business primarily in4 volves the performance of any of the following serv5 ices with respect to assets held (directly or indi6 rectly) by one or more investment partnerships re7 ferred to in paragraph (1): 

8 ‘‘(A) Advising as to the advisability of in9 vesting in, purchasing, or selling any specified 

10 asset. 

11 ‘‘(B) Managing, acquiring, or disposing of 

12 any specified asset. 

13 ‘‘(C) Arranging financing with respect to 

14 acquiring specified assets. 

15 ‘‘(D) Any activity in support of any service 

16 described in subparagraphs (A) through (C). 

17 ‘‘(3) INVESTMENT PARTNERSHIP.— 

18 ‘‘(A) IN GENERAL.—The term ‘investment 

19 partnership’ means any partnership if, at the 

20 end of any two consecutive calendar quarters 

21 ending after the date of enactment of this sec22 tion— 

23 ‘‘(i) substantially all of the assets of 

24 the partnership are specified assets (deter25 mined without regard to any section 197 


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1 intangible within the meaning of section 

2 197(d)), and 

3 ‘‘(ii) less than 75 percent of the cap4 ital of the partnership is attributable to 

5 qualified capital interests which constitute 

6 property held in connection with a trade or 

7 business of the owner of such interest. 

8 ‘‘(B) LOOK-THROUGH OF CERTAIN WHOL9 LY OWNED ENTITIES FOR PURPOSES OF DETER10 MINING ASSETS OF THE PARTNERSHIP.— 

11 ‘‘(i) IN GENERAL.—For purposes of 

12 determining the assets of a partnership 

13 under subparagraph (A)(i)— 

14 ‘‘(I) any interest in a specified 

15 entity shall not be treated as an asset 

16 of such partnership, and 

17 ‘‘(II) such partnership shall be 

18 treated as holding its proportionate 

19 share of each of the assets of such 

20 specified entity. 

21 ‘‘(ii) SPECIFIED ENTITY.—For pur22 poses of clause (i), the term ‘specified enti23 ty’ means, with respect to any partnership 

24 (hereafter referred to as the upper-tier 

25 partnership), any person which engages in 


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1 the same trade or business as the upper2 tier partnership and is— 

3 ‘‘(I) a partnership all of the cap4 ital and profits interests of which are 

5 held directly or indirectly by the 

6 upper-tier partnership, or 

7 ‘‘(II) a foreign corporation which 

8 does not engage in a trade or business 

9 in the United States and all of the 

10 stock of which is held directly or indi11 rectly by the upper-tier partnership. 

12 ‘‘(C) SPECIAL RULES FOR DETERMINING

13 IF PROPERTY HELD IN CONNECTION WITH

14 TRADE OR BUSINESS.— 

15 ‘‘(i) IN GENERAL.—Except as other16 wise provided by the Secretary, solely for 

17 purposes of determining whether any inter18 est in a partnership constitutes property 

19 held in connection with a trade or business 

20 under subparagraph (A)(ii)— 

21 ‘‘(I) a trade or business of any 

22 person closely related to the owner of 

23 such interest shall be treated as a 

24 trade or business of such owner, 


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1 ‘‘(II) such interest shall be treat2 ed as held by a person in connection 

3 with a trade or business during any 

4 taxable year if such interest was so 

5 held by such person during any 3 tax6 able years preceding such taxable 

7 year, and 

8 ‘‘(III) paragraph (5)(B) shall not 

9 apply. 

10 ‘‘(ii) CLOSELY RELATED PERSONS.— 

11 For purposes of clause (i)(I), a person 

12 shall be treated as closely related to an13 other person if, taking into account the 

14 rules of section 267(c), the relationship be15 tween such persons is described in— 

16 ‘‘(I) paragraph (1) or (9) of sec17 tion 267(b), or 

18 ‘‘(II) section 267(b)(4), but solely 

19 in the case of a trust with respect to 

20 which each current beneficiary is the 

21 grantor or a person whose relationship 

22 to the grantor is described in para23 graph (1) or (9) of section 267(b). 

24 ‘‘(D) ANTIABUSE RULES.—The Secretary 

25 may issue regulations or other guidance which 


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1 prevent the avoidance of the purposes of sub2 paragraph (A), including regulations or other 

3 guidance which treat convertible and contingent 

4 debt (and other debt having the attributes of 

5 equity) as a capital interest in the partnership. 

6 ‘‘(E) CONTROLLED GROUPS OF ENTI7 TIES.— 

8 ‘‘(i) IN GENERAL.—In the case of a 

9 controlled group of entities, if an interest 

10 in the partnership received in exchange for 

11 a contribution to the capital of the part12 nership by any member of such controlled 

13 group would (in the hands of such mem14 ber) constitute property held in connection 

15 with a trade or business, then any interest 

16 in such partnership held by any member of 

17 such group shall be treated for purposes of 

18 subparagraph (A) as constituting (in the 

19 hands of such member) property held in 

20 connection with a trade or business. 

21 ‘‘(ii) CONTROLLED GROUP OF ENTI22 TIES.—For purposes of clause (i), the term 

23 ‘controlled group of entities’ means a con24 trolled group of corporations as defined in 

25 section 1563(a)(1), applied without regard 


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1 to subsections (a)(4) and (b)(2) of section 

2 1563. A partnership or any other entity 

3 (other than a corporation) shall be treated 

4 as a member of a controlled group of enti5 ties if such entity is controlled (within the 

6 meaning of section 954(d)(3)) by members 

7 of such group (including any entity treated 

8 as a member of such group by reason of 

9 this sentence). 

10 ‘‘(F) SPECIAL RULE FOR CORPORA11 TIONS.—For purposes of this paragraph, in the 

12 case of a corporation, the determination of 

13 whether property is held in connection with a 

14 trade or business shall be determined as if the 

15 taxpayer were an individual. 

16 ‘‘(4) SPECIFIED ASSET.—The term ‘specified 

17 asset’ means securities (as defined in section 

18 475(c)(2) without regard to the last sentence there19 of), real estate held for rental or investment, inter20 ests in partnerships, commodities (as defined in sec21 tion 475(e)(2)), cash or cash equivalents, or options 

22 or derivative contracts with respect to any of the 

23 foregoing. 

24 ‘‘(5) RELATED PERSONS.— 


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1 ‘‘(A) IN GENERAL.—A person shall be 

2 treated as related to another person if the rela3 tionship between such persons is described in 

4 section 267(b) or 707(b). 

5 ‘‘(B) ATTRIBUTION OF PARTNER SERV6 ICES.—Any service described in paragraph (2) 

7 which is provided by a partner of a partnership 

8 shall be treated as also provided by such part9 nership. 

10 ‘‘(d) EXCEPTION FOR CERTAIN CAPITAL INTER11 ESTS.— 

12 ‘‘(1) IN GENERAL.—In the case of any portion 

13 of an investment services partnership interest which 

14 is a qualified capital interest, all items of gain and 

15 loss (and any dividends) which are allocated to such 

16 qualified capital interest shall not be taken into ac17 count under subsection (a) if— 

18 ‘‘(A) allocations of items are made by the 

19 partnership to such qualified capital interest in 

20 the same manner as such allocations are made 

21 to other qualified capital interests held by part22 ners who do not provide any services described 

23 in subsection (c)(2) and who are not related to 

24 the partner holding the qualified capital inter25 est, and 


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1 ‘‘(B) the allocations made to such other in2 terests are significant compared to the alloca3 tions made to such qualified capital interest. 

4 ‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO

5 ALLOCATION REQUIREMENTS.—To the extent pro6 vided by the Secretary in regulations or other guid7 ance— 

8 ‘‘(A) ALLOCATIONS TO PORTION OF QUALI9 FIED CAPITAL INTEREST.—Paragraph (1) may 

10 be applied separately with respect to a portion 

11 of a qualified capital interest. 

12 ‘‘(B) NO OR INSIGNIFICANT ALLOCATIONS

13 TO NONSERVICE PROVIDERS.—In any case in 

14 which the requirements of paragraph (1)(B) are 

15 not satisfied, items of gain and loss (and any 

16 dividends) shall not be taken into account under 

17 subsection (a) to the extent that such items are 

18 properly allocable under such regulations or 

19 other guidance to qualified capital interests. 

20 ‘‘(C) ALLOCATIONS TO SERVICE PRO21 VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH

22 ARE LESS THAN OTHER ALLOCATIONS.—Alloca23 tions shall not be treated as failing to meet the 

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1 terest represent a lower return than the alloca2 tions made to the other qualified capital inter3 ests referred to in such paragraph. 

4 ‘‘(3) SPECIAL RULE FOR CHANGES IN SERVICES

5 AND CAPITAL CONTRIBUTIONS.—In the case of an 

6 interest in a partnership which was not an invest7 ment services partnership interest and which, by 

8 reason of a change in the services with respect to as9 sets held (directly or indirectly) by the partnership 

10 or by reason of a change in the capital contributions 

11 to such partnership, becomes an investment services 

12 partnership interest, the qualified capital interest of 

13 the holder of such partnership interest immediately 

14 after such change shall not, for purposes of this sub15 section, be less than the fair market value of such 

16 interest (determined immediately before such 

17 change). 

18 ‘‘(4) SPECIAL RULE FOR TIERED PARTNER19 SHIPS.—Except as otherwise provided by the Sec20 retary, in the case of tiered partnerships, all items 

21 which are allocated in a manner which meets the re22 quirements of paragraph (1) to qualified capital in23 terests in a lower-tier partnership shall retain such 

24 character to the extent allocated on the basis of 


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1 qualified capital interests in any upper-tier partner2 ship. 

3 ‘‘(5) EXCEPTION FOR NO-SELF-CHARGED

4 CARRY AND MANAGEMENT FEE PROVISIONS.—Ex5 cept as otherwise provided by the Secretary, an in6 terest shall not fail to be treated as satisfying the 

7 requirement of paragraph (1)(A) merely because the 

8 allocations made by the partnership to such interest 

9 do not reflect the cost of services described in sub10 section (c)(2) which are provided (directly or indi11 rectly) to the partnership by the holder of such in12 terest (or a related person). 

13 ‘‘(6) SPECIAL RULE FOR DISPOSITIONS.—In the 

14 case of any investment services partnership interest 

15 any portion of which is a qualified capital interest, 

16 subsection (b) shall not apply to so much of any 

17 gain or loss as bears the same proportion to the en18 tire amount of such gain or loss as— 

19 ‘‘(A) the distributive share of gain or loss 

20 that would have been allocated to the qualified 

21 capital interest (consistent with the require22 ments of paragraph (1)) if the partnership had 

23 sold all of its assets at fair market value imme24 diately before the disposition, bears to 


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1 ‘‘(B) the distributive share of gain or loss 

2 that would have been so allocated to the invest3 ment services partnership interest of which such 

4 qualified capital interest is a part. 

5 ‘‘(7) QUALIFIED CAPITAL INTEREST.—For pur6 poses of this section— 

7 ‘‘(A) IN GENERAL.—The term ‘qualified 

8 capital interest’ means so much of a partner’s 

9 interest in the capital of the partnership as is 

10 attributable to— 

11 ‘‘(i) the fair market value of any 

12 money or other property contributed to the 

13 partnership in exchange for such interest 

14 (determined without regard to section 

15 752(a)), 

16 ‘‘(ii) any amounts which have been in17 cluded in gross income under section 83 

18 with respect to the transfer of such inter19 est, and 

20 ‘‘(iii) the excess (if any) of— 

21 ‘‘(I) any items of income and 

22 gain taken into account under section 

23 702 with respect to such interest, over 

24 ‘‘(II) any items of deduction and 

25 loss so taken into account. 


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1 ‘‘(B) ADJUSTMENT TO QUALIFIED CAPITAL

2 INTEREST.— 

3 ‘‘(i) DISTRIBUTIONS AND LOSSES.— 

4 The qualified capital interest shall be re5 duced by distributions from the partner6 ship with respect to such interest and by 

7 the excess (if any) of the amount described 

8 in subparagraph (A)(iii)(II) over the 

9 amount described in subparagraph 

10 (A)(iii)(I). 

11 ‘‘(ii) SPECIAL RULE FOR CONTRIBU12 TIONS OF PROPERTY.—In the case of any 

13 contribution of property described in sub14 paragraph (A)(i) with respect to which the 

15 fair market value of such property is not 

16 equal to the adjusted basis of such prop17 erty immediately before such contribution, 

18 proper adjustments shall be made to the 

19 qualified capital interest to take into ac20 count such difference consistent with such 

21 regulations or other guidance as the Sec22 retary may provide. 

23 ‘‘(C) TECHNICAL TERMINATIONS, ETC., 

24 DISREGARDED.—No increase or decrease in the 

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1 sult from a termination, merger, consolidation, 

2 or division described in section 708, or any 

3 similar transaction. 

4 ‘‘(8) TREATMENT OF CERTAIN LOANS.— 

5 ‘‘(A) PROCEEDS OF PARTNERSHIP LOANS

6 NOT TREATED AS QUALIFIED CAPITAL INTER7 EST OF SERVICE PROVIDING PARTNERS.—For 

8 purposes of this subsection, an investment serv9 ices partnership interest shall not be treated as 

10 a qualified capital interest to the extent that 

11 such interest is acquired in connection with the 

12 proceeds of any loan or other advance made or 

13 guaranteed, directly or indirectly, by any other 

14 partner or the partnership (or any person re15 lated to any such other partner or the partner16 ship). The preceding sentence shall not apply to 

17 the extent the loan or other advance is repaid 

18 before the date of the enactment of this section 

19 unless such repayment is made with the pro20 ceeds of a loan or other advance described in 

21 the preceding sentence. 

22 ‘‘(B) REDUCTION IN ALLOCATIONS TO

23 QUALIFIED CAPITAL INTERESTS FOR LOANS

24 FROM NONSERVICE-PROVIDING PARTNERS TO

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1 section, any loan or other advance to the part2 nership made or guaranteed, directly or indi3 rectly, by a partner not providing services de4 scribed in subsection (c)(2) to the partnership 

5 (or any person related to such partner) shall be 

6 taken into account in determining the qualified 

7 capital interests of the partners in the partner8 ship. 

9 ‘‘(9) SPECIAL RULE FOR QUALIFIED FAMILY

10 PARTNERSHIPS.— 

11 ‘‘(A) IN GENERAL.—In the case of any 

12 specified family partnership interest, paragraph 

13 (1)(A) shall be applied without regard to the 

14 phrase ‘and who are not related to the partner 

15 holding the qualified capital interest’. 

16 ‘‘(B) SPECIFIED FAMILY PARTNERSHIP IN17 TEREST.—For purposes of this paragraph, the 

18 term ‘specified family partnership interest’ 

19 means any investment services partnership in20 terest if— 

21 ‘‘(i) such interest is an interest in a 

22 qualified family partnership, 

23 ‘‘(ii) such interest is held by a natural 

24 person or by a trust with respect to which 

25 each beneficiary is a grantor or a person 


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1 whose relationship to the grantor is de2 scribed in section 267(b)(1), and 

3 ‘‘(iii) all other interests in such quali4 fied family partnership with respect to 

5 which significant allocations are made 

6 (within the meaning of paragraph (1)(B) 

7 and in comparison to the allocations made 

8 to the interest described in clause (ii)) are 

9 held by persons who— 

10 ‘‘(I) are related to the natural 

11 person or trust referred to in clause 

12 (ii), or 

13 ‘‘(II) provide services described 

14 in subsection (c)(2). 

15 ‘‘(C) QUALIFIED FAMILY PARTNERSHIP.— 

16 For purposes of this paragraph, the term 

17 ‘qualified family partnership’ means any part18 nership if— 

19 ‘‘(i) all of the capital and profits in20 terests of such partnership are held by— 

21 ‘‘(I) specified family members, 

22 ‘‘(II) any person closely related 

23 (within the meaning of subsection 

24 (c)(3)(C)(ii)) to a specified family 

25 member, or 


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•S 1686 IS

1 ‘‘(III) any other person (not de2 scribed in subclause (I) or (II)) if 

3 such interest is an investment services 

4 partnership interest with respect to 

5 such person, and 

6 ‘‘(ii) such partnership does not hold 

7 itself out to the public as an investment 

8 advisor. 

9 ‘‘(D) SPECIFIED FAMILY MEMBERS.—For 

10 purposes of subparagraph (C), individuals shall 

11 be treated as specified family members if such 

12 individuals would be treated as one person 

13 under the rules of section 1361(c)(1) if the ap14 plicable date (within the meaning of subpara15 graph (B)(iii) thereof) were the latest of— 

16 ‘‘(i) the date of the establishment of 

17 the partnership, 

18 ‘‘(ii) the earliest date that the com19 mon ancestor holds a capital or profits in20 terest in the partnership, or 

21 ‘‘(iii) the date of the enactment of this 

22 section. 

23 ‘‘(e) OTHER INCOME AND GAIN IN CONNECTION

24 WITH INVESTMENT MANAGEMENT SERVICES.— 

25 ‘‘(1) IN GENERAL.—If— 


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•S 1686 IS

1 ‘‘(A) a person performs (directly or indi2 rectly) investment management services for any 

3 investment entity, 

4 ‘‘(B) such person holds (directly or indi5 rectly) a disqualified interest with respect to 

6 such entity, and 

7 ‘‘(C) the value of such interest (or pay8 ments thereunder) is substantially related to 

9 the amount of income or gain (whether or not 

10 realized) from the assets with respect to which 

11 the investment management services are per12 formed, 

13 any income or gain with respect to such interest 

14 shall be treated as ordinary income. Rules similar to 

15 the rules of subsections (a)(5) and (d) shall apply 

16 for purposes of this subsection. 

17 ‘‘(2) DEFINITIONS.—For purposes of this sub18 section— 

19 ‘‘(A) DISQUALIFIED INTEREST.— 

20 ‘‘(i) IN GENERAL.—The term ‘dis21 qualified interest’ means, with respect to 

22 any investment entity— 

23 ‘‘(I) any interest in such entity 

24 other than indebtedness, 


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•S 1686 IS

1 ‘‘(II) convertible or contingent 

2 debt of such entity, 

3 ‘‘(III) any option or other right 

4 to acquire property described in sub5 clause (I) or (II), and 

6 ‘‘(IV) any derivative instrument 

7 entered into (directly or indirectly) 

8 with such entity or any investor in 

9 such entity. 

10 ‘‘(ii) EXCEPTIONS.—Such term shall 

11 not include— 

12 ‘‘(I) a partnership interest, 

13 ‘‘(II) except as provided by the 

14 Secretary, any interest in a taxable 

15 corporation, and 

16 ‘‘(III) except as provided by the 

17 Secretary, stock in an S corporation. 

18 ‘‘(B) TAXABLE CORPORATION.—The term 

19 ‘taxable corporation’ means— 

20 ‘‘(i) a domestic C corporation, or 

21 ‘‘(ii) a foreign corporation substan22 tially all of the income of which is— 

23 ‘‘(I) effectively connected with 

24 the conduct of a trade or business in 

25 the United States, or 


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•S 1686 IS

1 ‘‘(II) subject to a comprehensive 

2 foreign income tax (as defined in sec3 tion 457A(d)(2)). 

4 ‘‘(C) INVESTMENT MANAGEMENT SERV5 ICES.—The term ‘investment management serv6 ices’ means a substantial quantity of any of the 

7 services described in subsection (c)(2). 

8 ‘‘(D) INVESTMENT ENTITY.—The term ‘in9 vestment entity’ means any entity which, if it 

10 were a partnership, would be an investment 

11 partnership. 

12 ‘‘(f) EXCEPTION FOR DOMESTIC C CORPORATIONS.— 

13 Except as otherwise provided by the Secretary, in the case 

14 of a domestic C corporation— 

15 ‘‘(1) subsections (a) and (b) shall not apply to 

16 any item allocated to such corporation with respect 

17 to any investment services partnership interest (or 

18 to any gain or loss with respect to the disposition of 

19 such an interest), and 

20 ‘‘(2) subsection (e) shall not apply. 

21 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

22 such regulations or other guidance as is necessary or ap23 propriate to carry out the purposes of this section, includ24 ing regulations or other guidance to— 


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•S 1686 IS

1 ‘‘(1) require such reporting and recordkeeping 

2 by any person in such manner and at such time as 

3 the Secretary may prescribe for purposes of enabling 

4 the partnership to meet the requirements of section 

5 6031 with respect to any item described in section 

6 702(a)(9), 

7 ‘‘(2) provide modifications to the application of 

8 this section (including treating related persons as 

9 not related to one another) to the extent such modi10 fication is consistent with the purposes of this sec11 tion, 

12 ‘‘(3) prevent the avoidance of the purposes of 

13 this section (including through the use of qualified 

14 family partnerships), and 

15 ‘‘(4) coordinate this section with the other pro16 visions of this title. 

17 ‘‘(h) CROSS REFERENCE.—For 40-percent penalty 

18 on certain underpayments due to the avoidance of this sec19 tion, see section 6662.’’. 

20 (b) APPLICATION OF SECTION 751 TO INDIRECT DIS21 POSITIONS OF INVESTMENT SERVICES PARTNERSHIP IN22 TERESTS.— 

23 (1) IN GENERAL.—Subsection (a) of section 

24 751 is amended by striking ‘‘or’’ at the end of para25 graph (1), by inserting ‘‘or’’ at the end of paragraph 


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•S 1686 IS

1 (2), and by inserting after paragraph (2) the fol2 lowing new paragraph: 

3 ‘‘(3) investment services partnership interests 

4 held by the partnership,’’. 

5 (2) CERTAIN DISTRIBUTIONS TREATED AS

6 SALES OR EXCHANGES.—Subparagraph (A) of sec7 tion 751(b)(1) is amended by striking ‘‘or’’ at the 

8 end of clause (i), by inserting ‘‘or’’ at the end of 

9 clause (ii), and by inserting after clause (ii) the fol10 lowing new clause: 

11 ‘‘(iii) investment services partnership 

12 interests held by the partnership,’’. 

13 (3) APPLICATION OF SPECIAL RULES IN THE

14 CASE OF TIERED PARTNERSHIPS.—Subsection (f) of 

15 section 751 is amended— 

16 (A) by striking ‘‘or’’ at the end of para17 graph (1), by inserting ‘‘or’’ at the end of para18 graph (2), and by inserting after paragraph (2) 

19 the following new paragraph: 

20 ‘‘(3) an investment services partnership interest 

21 held by the partnership,’’, and 

22 (B) by striking ‘‘partner.’’ and inserting 

23 ‘‘partner (other than a partnership in which it 

24 holds an investment services partnership inter25 est).’’. 


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•S 1686 IS

1 (4) INVESTMENT SERVICES PARTNERSHIP IN2 TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 

3 751 is amended by adding at the end the following 

4 new subsection: 

5 ‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER6 ESTS.—For purposes of this section— 

7 ‘‘(1) IN GENERAL.—The term ‘investment serv8 ices partnership interest’ has the meaning given 

9 such term by section 710(c). 

10 ‘‘(2) ADJUSTMENTS FOR QUALIFIED CAPITAL

11 INTERESTS.—The amount to which subsection (a) 

12 applies by reason of paragraph (3) thereof shall not 

13 include so much of such amount as is attributable 

14 to any portion of the investment services partnership 

15 interest which is a qualified capital interest (deter16 mined under rules similar to the rules of section 

17 710(d)). 

18 ‘‘(3) EXCEPTION FOR PUBLICLY TRADED PART19 NERSHIPS.—Except as otherwise provided by the 

20 Secretary, in the case of an exchange of an interest 

21 in a publicly traded partnership (as defined in sec22 tion 7704) to which subsection (a) applies— 

23 ‘‘(A) this section shall be applied without 

24 regard to subsections (a)(3), (b)(1)(A)(iii), and 

25 (f)(3), and 


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•S 1686 IS

1 ‘‘(B) such partnership shall be treated as 

2 owning its proportionate share of the property 

3 of any other partnership in which it is a part4 ner. 

5 ‘‘(4) RECOGNITION OF GAINS.—Any gain with 

6 respect to which subsection (a) applies by reason of 

7 paragraph (3) thereof shall be recognized notwith8 standing any other provision of this title. 

9 ‘‘(5) COORDINATION WITH INVENTORY

10 ITEMS.—An investment services partnership interest 

11 held by the partnership shall not be treated as an 

12 inventory item of the partnership. 

13 ‘‘(6) PREVENTION OF DOUBLE COUNTING.— 

14 Under regulations or other guidance prescribed by 

15 the Secretary, subsection (a)(3) shall not apply with 

16 respect to any amount to which section 710 applies. 

17 ‘‘(7) VALUATION METHODS.—The Secretary 

18 shall prescribe regulations or other guidance which 

19 provide the acceptable methods for valuing invest20 ment services partnership interests for purposes of 

21 this section.’’. 

22 (c) TREATMENT FOR PURPOSES OF SECTION

23 7704.—Subsection (d) of section 7704 is amended by add24 ing at the end the following new paragraph: 


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•S 1686 IS

1 ‘‘(6) INCOME FROM CERTAIN CARRIED INTER2 ESTS NOT QUALIFIED.— 

3 ‘‘(A) IN GENERAL.—Specified carried in4 terest income shall not be treated as qualifying 

5 income. 

6 ‘‘(B) SPECIFIED CARRIED INTEREST IN7 COME.—For purposes of this paragraph— 

8 ‘‘(i) IN GENERAL.—The term ‘speci9 fied carried interest income’ means— 

10 ‘‘(I) any item of income or gain 

11 allocated to an investment services 

12 partnership interest (as defined in 

13 section 710(c)) held by the partner14 ship, 

15 ‘‘(II) any gain on the disposition 

16 of an investment services partnership 

17 interest (as so defined) or a partner18 ship interest to which (in the hands of 

19 the partnership) section 751 applies, 

20 and 

21 ‘‘(III) any income or gain taken 

22 into account by the partnership under 

23 subsection (b)(4) or (e) of section 

24 710. 


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•S 1686 IS

1 ‘‘(ii) EXCEPTION FOR QUALIFIED CAP2 ITAL INTERESTS.—A rule similar to the 

3 rule of section 710(d) shall apply for pur4 poses of clause (i). 

5 ‘‘(C) COORDINATION WITH OTHER PROVI6 SIONS.—Subparagraph (A) shall not apply to 

7 any item described in paragraph (1)(E) (or so 

8 much of paragraph (1)(F) as relates to para9 graph (1)(E)). 

10 ‘‘(D) SPECIAL RULES FOR CERTAIN PART11 NERSHIPS.— 

12 ‘‘(i) CERTAIN PARTNERSHIPS OWNED

13 BY REAL ESTATE INVESTMENT TRUSTS.— 

14 Subparagraph (A) shall not apply in the 

15 case of a partnership which meets each of 

16 the following requirements: 

17 ‘‘(I) Such partnership is treated 

18 as publicly traded under this section 

19 solely by reason of interests in such 

20 partnership being convertible into in21 terests in a real estate investment 

22 trust which is publicly traded. 

23 ‘‘(II) Fifty percent or more of 

24 the capital and profits interests of 

25 such partnership are owned, directly 


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•S 1686 IS

1 or indirectly, at all times during the 

2 taxable year by such real estate in3 vestment trust (determined with the 

4 application of section 267(c)). 

5 ‘‘(III) Such partnership meets 

6 the requirements of paragraphs (2), 

7 (3), and (4) of section 856(c). 

8 ‘‘(ii) CERTAIN PARTNERSHIPS OWN9 ING OTHER PUBLICLY TRADED PARTNER10 SHIPS.—Subparagraph (A) shall not apply 

11 in the case of a partnership which meets 

12 each of the following requirements: 

13 ‘‘(I) Substantially all of the as14 sets of such partnership consist of in15 terests in one or more publicly traded 

16 partnerships (determined without re17 gard to subsection (b)(2)). 

18 ‘‘(II) Substantially all of the in19 come of such partnership is ordinary 

20 income or section 1231 gain (as de21 fined in section 1231(a)(3)). 

22 ‘‘(E) TRANSITIONAL RULE.—Subpara23 graph (A) shall not apply to any taxable year 

24 of the partnership beginning before the date 


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•S 1686 IS

1 which is 10 years after the date of the enact2 ment of this paragraph.’’. 

3 (d) IMPOSITION OF PENALTY ON UNDERPAY4 MENTS.— 

5 (1) IN GENERAL.—Subsection (b) of section 

6 6662 is amended by inserting after paragraph (7) 

7 the following new paragraph: 

8 ‘‘(8) The application of section 710(e) or the 

9 regulations or other guidance prescribed under sec10 tion 710(g) to prevent the avoidance of the purposes 

11 of section 710.’’. 

12 (2) AMOUNT OF PENALTY.— 

13 (A) IN GENERAL.—Section 6662 is amend14 ed by adding at the end the following new sub15 section: 

16 ‘‘(k) INCREASE IN PENALTY IN CASE OF PROPERTY

17 TRANSFERRED FOR INVESTMENT MANAGEMENT SERV18 ICES.—In the case of any portion of an underpayment to 

19 which this section applies by reason of subsection (b)(8), 

20 subsection (a) shall be applied with respect to such portion 

21 by substituting ‘40 percent’ for ‘20 percent’.’’. 

22 (B) CONFORMING AMENDMENT.—Subpara23 graph (B) of section 6662A(e)(2) is amended 

24 by striking ‘‘or (i)’’ and inserting ‘‘, (i), or (k)’’. 


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•S 1686 IS

1 (3) SPECIAL RULES FOR APPLICATION OF REA2 SONABLE CAUSE EXCEPTION.—Subsection (c) of sec3 tion 6664 is amended— 

4 (A) by redesignating paragraphs (3) and 

5 (4) as paragraphs (4) and (5), respectively; 

6 (B) by striking ‘‘paragraph (3)’’ in para7 graph (5)(A), as so redesignated, and inserting 

8 ‘‘paragraph (4)’’; and 

9 (C) by inserting after paragraph (2) the 

10 following new paragraph: 

11 ‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT12 TRIBUTABLE TO INVESTMENT MANAGEMENT SERV13 ICES.— 

14 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

15 not apply to any portion of an underpayment to 

16 which section 6662 applies by reason of sub17 section (b)(8) unless— 

18 ‘‘(i) the relevant facts affecting the 

19 tax treatment of the item are adequately 

20 disclosed, 

21 ‘‘(ii) there is or was substantial au22 thority for such treatment, and 

23 ‘‘(iii) the taxpayer reasonably believed 

24 that such treatment was more likely than 

25 not the proper treatment. 


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•S 1686 IS

1 ‘‘(B) RULES RELATING TO REASONABLE

2 BELIEF.—Rules similar to the rules of sub3 section (d)(3) shall apply for purposes of sub4 paragraph (A)(iii).’’. 

5 (e) INCOME AND LOSS FROM INVESTMENT SERVICES

6 PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE7 TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 

8 (1) INTERNAL REVENUE CODE.— 

9 (A) IN GENERAL.—Section 1402(a) is 

10 amended by striking ‘‘and’’ at the end of para11 graph (16), by striking the period at the end of 

12 paragraph (17) and inserting ‘‘; and’’, and by 

13 inserting after paragraph (17) the following 

14 new paragraph: 

15 ‘‘(18) notwithstanding the preceding provisions 

16 of this subsection, in the case of any individual en17 gaged in the trade or business of providing services 

18 described in section 710(c)(2) with respect to any 

19 entity, investment services partnership income or 

20 loss (as defined in subsection (m)) of such individual 

21 with respect to such entity shall be taken into ac22 count in determining the net earnings from self-em23 ployment of such individual.’’. 


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•S 1686 IS

1 (B) INVESTMENT SERVICES PARTNERSHIP

2 INCOME OR LOSS.—Section 1402 is amended by 

3 adding at the end the following new subsection: 

4 ‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME

5 OR LOSS.—For purposes of subsection (a)— 

6 ‘‘(1) IN GENERAL.—The term ‘investment serv7 ices partnership income or loss’ means, with respect 

8 to any investment services partnership interest (as 

9 defined in section 710(c)) or disqualified interest (as 

10 defined in section 710(e)), the net of— 

11 ‘‘(A) the amounts treated as ordinary in12 come or ordinary loss under subsections (b) and 

13 (e) of section 710 with respect to such interest, 

14 ‘‘(B) all items of income, gain, loss, and 

15 deduction allocated to such interest, and 

16 ‘‘(C) the amounts treated as realized from 

17 the sale or exchange of property other than a 

18 capital asset under section 751 with respect to 

19 such interest. 

20 ‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN21 TERESTS.—A rule similar to the rule of section 

22 710(d) shall apply for purposes of applying para23 graph (1)(B).’’. 

24 (2) SOCIAL SECURITY ACT.—Section 211(a) of 

25 the Social Security Act is amended by striking 


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•S 1686 IS

1 ‘‘and’’ at the end of paragraph (15), by striking the 

2 period at the end of paragraph (16) and inserting ‘‘; 

3 and’’, and by inserting after paragraph (16) the fol4 lowing new paragraph: 

5 ‘‘(17) Notwithstanding the preceding provisions 

6 of this subsection, in the case of any individual en7 gaged in the trade or business of providing services 

8 described in section 710(c)(2) of the Internal Rev9 enue Code of 1986 with respect to any entity, invest10 ment services partnership income or loss (as defined 

11 in section 1402(m) of such Code) shall be taken into 

12 account in determining the net earnings from self13 employment of such individual.’’. 

14 (f) SEPARATE ACCOUNTING BY PARTNER.—Section 

15 702(a) is amended by striking ‘‘and’’ at the end of para16 graph (7), by striking the period at the end of paragraph 

17 (8) and inserting ‘‘, and’’, and by inserting after para18 graph (8) the following: 

19 ‘‘(9) any amount treated as ordinary income or 

20 loss under subsection (a), (b), or (e) of section 

21 710.’’. 

22 (g) CONFORMING AMENDMENTS.— 

23 (1) Subsection (d) of section 731 is amended by 

24 inserting ‘‘section 710(b)(4) (relating to distribuVerDate Sep 11 2014 02:12 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 E:\BILLS\S1686.IS S1686

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•S 1686 IS

1 tions of partnership property),’’ after ‘‘to the extent 

2 otherwise provided by’’. 

3 (2) Section 741 is amended by inserting ‘‘or 

4 section 710 (relating to special rules for partners 

5 providing investment management services to part6 nerships)’’ before the period at the end. 

7 (3) The table of sections for part I of sub8 chapter K of chapter 1 is amended by adding at the 

9 end the following new item: 

‘‘Sec. 710. Special rules for partners providing investment management services 

to partnerships.’’. 

10 (h) EFFECTIVE DATE.— 

11 (1) IN GENERAL.—Except as otherwise pro12 vided in this subsection, the amendments made by 

13 this section shall apply to taxable years ending after 

14 the date of the enactment of this Act. 

15 (2) PARTNERSHIP TAXABLE YEARS WHICH IN16 CLUDE EFFECTIVE DATE.—In applying section 

17 710(a) of the Internal Revenue Code of 1986 (as 

18 added by this section) in the case of any partnership 

19 taxable year which includes the date of the enact20 ment of this Act, the amount of the net capital gain 

21 referred to in such section shall be treated as being 

22 the lesser of the net capital gain for the entire part23 nership taxable year or the net capital gain deter24 mined by only taking into account items attributable 


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•S 1686 IS

1 to the portion of the partnership taxable year which 

2 is after such date. 

3 (3) DISPOSITIONS OF PARTNERSHIP INTER4 ESTS.— 

5 (A) IN GENERAL.—Section 710(b) of such 

6 Code (as added by this section) shall apply to 

7 dispositions and distributions after the date of 

8 the enactment of this Act. 

9 (B) INDIRECT DISPOSITIONS.—The amend10 ments made by subsection (b) shall apply to 

11 transactions after the date of the enactment of 

12 this Act. 

13 (4) OTHER INCOME AND GAIN IN CONNECTION

14 WITH INVESTMENT MANAGEMENT SERVICES.—Sec15 tion 710(e) of such Code (as added by this section) 

16 shall take effect on the date of the enactment of this 

17 Act. 

Æ 


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