The prototypical “private equity” fund pools the capital of sophisticated investors, purchases ailing companies, restructures the companies, and then resells them—at a profit, if all goes well. In fact, all has gone extraordinarily well for some funds. Accordingly, the earnings of those who market and manage such funds are not only among the largest in the nation, but are so historically outsized as to inspire talk of a new Gilded Age. Yet, as the fortunes of private equity fund managers have grown, so too has the intensity of the scrutiny they have attracted from the press, Congress, and the academy. Calls for reform ring out from several sources concerning various aspects of the way in which these funds do business. One of the chief pressure points—and the one that seems to be of greatest concern to private equity firms themselves—is the income tax treatment of fund manager compensation.