Although I still agree with the view that it’s not a big enough line item to justify all the attention it gets, and therefore don’t recommend that you waste a lot of time on it, I understand "carried interest" better after reading this blog post and the linked items.
Basically, it’s about whether what amounts to commissions, paid to hedge fund managers if the funds they manage increase in value, should be treated as ordinary income or as capital gains.
Here’s the best comparison I could think of: are those commissions the same as if the fund managers had invested their own money in the fund, or are they like contingent fees that a lawyer earns if there’s a recovery on a contingent fee claim?
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