THE CARRIED INTEREST THREAT

A bill currently being floated by Rep. Charles Rangel (D-NY) and Sandy Levin (D-MI) is likely to crank up the tax burden on the real estate industry. According to Commentator Charles Temkin, director at Deloitte Tax LLP, so-called carried interest, as the legislation is dubbed, is a misnomer for a tax hike that will affect far more than private-equity circles. And yet 25% of respondents to last week's Feedback Poll said the legislation won't apply to real estate at all; 7% think it will impact only large deals; and 20% think only private equity will feel the pinch. Those who believe it will sweep through all real estate partnerships weighed in at 44%. Here's Temkin's take:

"Some people have heard there's legislation but haven't focused on it as much as they might because it's always referred to as 'carried interest,' and that's a phrase not typically used in real estate. I think the term comes from the oil or gas industry, but I've heard it only in connection with private-equity deals. But the concept has been in every real estate deal I've ever worked on.

"Essentially, the bill would change the tax treatment of everyone who receives a partnership interest as a result of providing management-type services relating to securities, real estate or commodities. Even if the partnership recognizes capital gain, the service provider partner's distributive share, except to the extent it is attributable to any capital he or she contributed, would be taxed as ordinary compensation income.