1. Short title This Act may be cited as the Ending the Carried Interest Loophole Act . 2. Partnership interests transferred in connection with performance of services (a) Modification of election To include partnership interest in gross income in year of transfer Subsection (c) of section 83 is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: (4) Partnership interests Except as provided by the Secretary— (A) In general In the case of any transfer of an interest in a partnership in connection with the performance of services— (i) the fair market value of such interest shall be treated for purposes of this section as being equal to the amount which the partner would receive if the partnership sold (at the time of the transfer) all of its assets for cash at their fair market value in a fully taxable transaction and distributed the proceeds of such sale (reduced by the liabilities of the partnership) to its partners in complete liquidation, and (ii) the person receiving such interest shall be treated as having made the election under subsection (b)(1) unless such person makes an election under this paragraph to have such subsection not apply. (B) Coordination with other partnership rules Except as otherwise provided by the Secretary, if, by reason of subparagraph (A), subsection (b)(1) applies to a partnership interest transferred to a person, then the amount included in the gross income of such person by reason of such subsection shall (at the time of the transfer)— (i) be treated as an addition to the capital account of such person with respect to such partnership for purposes of subchapter K, and (ii) if such interest is an applicable partnership interest under section 1299 at any time, be treated as invested capital of such person with respect to such interest for purposes of such section. (C) Election The election under subparagraph (A)(ii) shall be made under rules similar to the rules of subsection (b)(2). (D) Partnership interest (i) In