There's a looming possibility of legal challenges to Treasury's position on a tax break for hedge fund and private equity managers, now that the government has issued proposed rules.
The proposed rules would prevent S corporations from taking advantage of a 2017 tax law provision that lets corporations get the favorable carried interest tax treatment faster—by holding assets for one year rather than three.
If Treasury pushes forward with final regulations, and they are struck down by a court, private equity and hedge fund managers may try to employ S corporations to get the better tax treatment after just one year, although some may find certain restrictions on S corporations too burdensome.
In case you are keeping track:
INSIGHT: Final FDII Regulations Reduce Some Documentation Burdens and Delay Applicability Date
Treasury and the IRS released last month the final regulations for the foreign-derived intangible income deduction. Amanda Varma and Lauren Azebu of Steptoe & Johnson provide an overview of some of the most significant changes made by the final regulations and certain practical implications for taxpayers.
On July 9, 2020, Treasury and the IRS released final regulations under tax code Section 250, providing guidance on the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).
Weekly IRS Roundup July 27 – July 31, 2020 | McDermott Will & Emery - JDSupra
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 27, 2020 – July 31, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here .
July 28, 2020: The IRS issued final regulations providing guidance about the limitation on the deduction for business interest expense after amendment of the Internal Revenue Code (Code) by the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief and Economic Security Act (CARES Act).
Carried Interest Rules Prompt Investment Funds to Rethink Plans
Hedge funds and private equity managers will have to rethink strategies to shield some of their pay from higher taxes following IRS rules for carried interest.
The 2017 tax law changed the way carried interest, the portion of an investment fund's returns that are paid to managers, is taxed.
Some funds altered their partnership agreements to structure carried interests in a way that would potentially circumvent the new holding period under tax code Section 1061 , said Robert Richardt, a tax partner at CohnReznick LLP.
In case you are keeping track:
Wisconsin DOR Proposes Individual Income, Property Tax Regulations Related to Homestead Credit
The Wisconsin Department of Revenue (DOR) Aug. 3 proposed individual income and property tax regulations related to the homestead credit.
INSIGHT: Foreign Trust Jurisdictional Considerations
Foreign trusts have both benefits and risks, which vary from jurisdiction to jurisdiction. Jack Millhouse and Charles F. Schultz IV of FGMK look at examples from civil law jurisdictions in Europe, so-called "tax havens" in the Caribbean, no-longer popular New Zealand, and the unique situation in Malta.
In the process of forming a trust, the choice of jurisdiction and its associated tax or legal regime may play a significant role impacting the decision. The purpose of this piece is to provide a high-level snapshot of several noteworthy regimes and jurisdictions. Each of these regimes requires a different approach to planning and to structuring the resulting trusts. Practitioners should always keep in mind that there is no "one size fits all" method when it comes to establishing foreign
Happening on Twitter
The IRS released regulations to restrict the valuable carried interest tax break that hedge fund managers were able… https://t.co/c0x1cRWfhS business (from New York and the World) Fri Jul 31 17:28:05 +0000 2020
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