June 09, 2008
Horse Fund 2&20
Posted by Victor Fleischer

The WSJ reports that some high profile horse trainers are sponsoring an investment fund that will buy promising thoroughbreds, complete with a 2&20 carried interest management structure. 

The carried interest portion of the structure will presumably qualify for long-term capital gains treatment for the trainers under current law.  But I have trouble imagining the argument that they, or the racing industry, deserves a subsidy.  I like horse racing as much as the next guy, probably more.  But why would want to use the tax code to subsidize investment in horses?  I'm having trouble seeing the positive externalities generated by the sport. 

This will provide a nice talking point the next time Congress holds hearings on carried interest. 

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