Archive - May 2015
Fargo and Girard Development v. Comm’r, T.C. Memo. 2015-96 – Yet Another Dealer v. Investor Travail
The Tax Court just released a consolidated case (T.C. Memo. 2015-96) whereby Victor Fargo and its related entity Girard Development took an issue with the IRS’ “dealer” characterization of a sale of certain property held by Girard. This case is a classic example of the unpredictability of the quint-essential real estate tax issue: is the taxpayer a dealer or investor in real estate? Every real estate fund would be familiar with the problem and hopefully is addressing it in its PPMs, but to summarize, if the property held by the fund is found to be held for resale to...
May 27, 2015 read more
Sands Capital NOPA creates self-employment tax confusion
A few months ago, in March, Frank Sands (the principal and owner behind Sands Capital) filed a complaint in the Tax Court (Docket No. 5650-15) arguing that the IRS erroneously assessed close to half a million of self-employment tax with respect to certain income derived from Sands Capital Management, LP. The NOPA did not actually specify that the assessment was with respect to self-employment taxes but the taxpayer assumed so by crunching its own numbers. Under this presumption, the taxpayer proceeded to make an argument that under Sec. 1402(a)(13), there should be no self-employment tax...
May 19, 2015 read more
Regs. 1.446-3T and 1.956-2T change the treatment of “embedded loan” swaps and the related Sec. 956 definition of US property
Treasury just pre-released RIN 1545-BM62 (1.446-3T and 1.956-2T introducing some changes to the application of the “embedded loan” rules and the definition of U.S. property for Sec. 956 purposes. This is not a topic that a typical private equity or hedge fund would face on a regular basis or would be familiar with, but for some participants that are more heavily involved in financial instrument derivative markets the new regulations may prove significant. The regulations do several things, but most importantly, they change the embedded loan rule and provide an exception to...
May 07, 2015 read more
Prop. Reg. 1.1297-4 Addresses Hedge Fund Reinsurance
Treasury is scheduled to release tomorrow the eagerly anticipated hedge fund reinsurance regulations. A pre-release version of the regulations has already been published by the Service and here we explore its most notable elements. Hedge fund reinsurance has been one of those topics, like carried interest and fee waivers, which has reached the status of “evil” in the mass media. It is one of the topics that journalists or politicians alike grasp for when they want to point out how the rich take advantage of the Tax Code at the expense of the poor. As it may be,...
May 04, 2015 read more
Updated SIFMA Tax Positions Paper and National Taxpayer Advocate Comment on FATCA Duplicate Reporting
In the past, the financial industry has had its share of headliner scandals which has spurred various regulatory proposals to rein an alleged behavior often portrayed in the press as “everything that is wrong with America.” It also seems that these days the financial industry is a favorite target for every politician that is ready and able to tackle Federal tax reform. Whether it is closing tax loopholes, simplifying rules, or chasing criminals, you bet, your fund manager, accredited investor, or broker-dealer, will likely be the intended (and sometimes unintended)...
May 01, 2015 read more