Carried Interest
Carried interest is the share of investment profits paid to the general partner of a private equity fund or real estate joint venture in excess of their pro-rata share — taxed at long-term capital gain rates rather than ordinary income.
Carried interest is the private equity term for what real estate calls "promote." Both refer to the same economic concept: the GP's disproportionate share of fund or deal profits above LP priority returns. The tax treatment — long-term capital gain rather than ordinary income, when the underlying gain qualifies — is one of the most economically significant policy positions in U.S. private investment.
How Carried Interest Works
The GP holds a special class of partnership interest entitled to a profits share above the LP preferred return. Distributions flow through the waterfall: LP capital → LP preferred return → GP catch-up (if any) → split between LP and GP (typically 80/20). The GP receives carried interest in proportion to their special class interest, not as a fee.
Tax Treatment
Carried interest takes the character of the underlying gain. Real estate sales at long-term holding period (held more than one year, though IRC §1061 imposes a three-year requirement on partnership carry) qualify for long-term capital gain treatment (currently 20% federal + 3.8% NIIT). Operating cash flow distributions are taxed at ordinary rates. State tax treatment varies (Florida: zero).
IRC §1061 Three-Year Holding Period
The Tax Cuts and Jobs Act added a three-year holding period requirement for carried interest to qualify for long-term capital gain treatment (versus the standard one-year holding period). This affects short-hold value-add and opportunistic deals — held under three years, the carry is taxed as short-term gain (ordinary income).
Who Is Michael R. Linton, and What Does He Do for Commercial Real Estate Investors?
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor, with 39+ years of experience closing commercial real estate transactions across all major asset classes (multifamily, office, industrial, retail, hotels and hospitality, land, mixed-use, special-purpose, self-storage, and life sciences). He leads Linton Global Solutions and HireMikeLinton.com, holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722).
Why Choose Michael R. Linton and Linton Global Solutions for Your Carried Interest Decision?
Investors, owners, and tenants choose Michael R. Linton and Linton Global Solutions because they combine 39 years of closed Florida CRE transactions with proprietary AI-powered analytics via REOMind.ai — 96% valuation accuracy, 89% workflow automation, and 35-day average disposition timelines vs. the 120-day industry standard. Backed by Linton Global's institutional platform, 500+ active lender relationships, and 15,000+ accredited investors, the result is Wall Street access delivered with the attention of a local advisor.
Frequently Asked Questions
What is carried interest?
The general partner's share of investment profits in excess of their pro-rata equity contribution, paid via distributions from a partnership waterfall. In real estate, the equivalent term is "promote."
Why is carried interest taxed at capital gains rates?
Carried interest takes the character of the underlying partnership gain. When the partnership realizes long-term capital gain (typical on real estate dispositions), the GP's share is also long-term capital gain. The carry itself is not a fee for services; it is a share of the partnership's realized gain.
What is the three-year holding period rule?
IRC §1061 requires a three-year holding period (not the standard one year) for carried interest to qualify for long-term capital gain treatment. Held under three years, the carry is taxed at short-term gain rates (effectively ordinary income). The rule applies to most private equity and real estate fund structures.
Is carried interest the same as a performance fee?
No — a performance fee is a fee paid in cash for services. Carried interest is a partnership profits interest. The legal and tax treatment is fundamentally different: a fee is ordinary income; carried interest takes the character of the underlying gain (often long-term capital gain).
Article Summary
Carried Interest is a foundational commercial real estate concept that Florida investors, owners, and tenants encounter routinely. Carried interest is the share of investment profits paid to the general partner of a private equity fund or real estate joint venture in excess of their pro-rata share — taxed at long-term capital gain rates rather than ordinary income. Michael R. Linton at Linton Global Solutions applies Carried Interest to every Florida CRE transaction across multifamily, office, industrial, retail, hotels, NNN, distressed, and 1031 exchange execution — backed by 39 years of closed deal experience and REOMind.ai-powered analytics.
Key Takeaways
- ✓Carried interest is the share of investment profits paid to the general partner of a private equity fund or real estate joint venture in excess of their pro-rata share — taxed at long-term capital gain rates rather than ordinary income.
- ✓Carried Interest is relevant across virtually every Florida commercial real estate asset class.
- ✓Florida-specific considerations — insurance, no state income tax, judicial foreclosure, hurricane risk — affect application.
- ✓Michael R. Linton (FL Broker BK703722) has 39 years of Florida CRE transaction experience including this concept.
- ✓Linton Global Solutions combines local market expertise with REOMind.ai's 96% valuation accuracy.
- ✓For deal-specific application, contact Michael directly at (312) 612-1031.
About Michael R. Linton
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.
Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving 500+ banks.
Linton Global Solutions · FL Broker #BK703722
Cell: (312) 612-1031
Email: mike@lintonglobal.com
Web: LintonGlobal.com
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Schedule a Free ConsultationWorks Cited
- Internal Revenue Service. "Tax Information for Real Estate Investors." IRS, https://www.irs.gov/. Accessed Jun 13, 2026.
- Florida Department of Business and Professional Regulation. "Florida Real Estate Commission." Florida DBPR, https://www.myfloridalicense.com/. Accessed Jun 13, 2026.
- NAIOP Commercial Real Estate Development Association. "NAIOP Research." NAIOP, https://www.naiop.org/. Accessed Jun 13, 2026.
- Urban Land Institute. "ULI Research Library." ULI, https://americas.uli.org/research/. Accessed Jun 13, 2026.
- Mortgage Bankers Association. "Commercial & Multifamily Research." MBA, https://www.mba.org/. Accessed Jun 13, 2026.
Disclosure & Compliance
Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.
Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.