Archive - November 2014
Fund Principals – Here is What not to Do in Your Private Foundations
It is common for high profile private equity or hedge fund principals to run private foundations or other charitable organizations. The principals would be “disqualified persons” but the foundations would nonetheless have some room for investing in the underlying investment funds sponsored by the principals without triggering UBTI and excise taxes. The charitable organization sponsored by the principal then will either be subject to 2% private foundation excise tax on its investment income, or no tax, if for example the organization is classified as a supporting organization under IRC...
November 24, 2014 read more
In Brinkley v. Comm’r, T.C. Memo. 2014-227, all Goes Wrong for the Taxpayer
Here is a case that showcases how a routine business transaction could lead to tax grief for the parties involved. In this case we have a founder, CIO exec, who worked for a company called Zavers. The CIO was paid a salary, a bonus, and also received restricted shares, much like many founders and principals in venture capital start ups. Originally, he owned approximately 10% of the company. As it happens, the exec was diluted by later investment rounds and tried to negotiate with Zavers a minimum of 3% interest, or else, he would leave. There was no official documentation to that...
November 03, 2014 read more