Taxation of Carry Dollars at Work

What do you mean by "carry dollars at work"? In my estimation you are referring to one of two things. First, you may have been granted value in the GP as if you had invested. This obviously has no immediate relationship with carry (you are essentially an LP without the fees and the benefit of GP's ownership of carry; you receive returns net of the investment and receive your portion of carry once the hurdle is met ). This would be taxed at capital gains but would likely also have been taxed when the interest was deemed if it holds value at that time. Secondly, I am guessing you may be referring to an award of carried interest. If you are awarded carried interest (or simply rights to a portion of the carried interest value created) then you are also taxed at capital gains rate as returns are achieved and value created. Beware, if your carried interest has a vesting schedule then you are taxed on the total amount of carried interest value, regardless of whether you are vested or unvested. It is important to negotiate tax payments and tax responsibilities at the time of the award. All this being said, I may be misunderstanding your question... haha.