Sunday, May 27, 2018
Bloomberg, Hedge Fund Managers Shift Billions Over Carried Interest Concern:
Late last year, some hedge fund managers raced to protect their personal fortunes from being carved up by the Republican tax law.
Their concern? That the vague language of the new rule makes it possible that profits that had already been paid to them, taxed and reinvested back into the fund would be lumped in with other untaxed carried interest — and all subject to the new three-year holding period. So they rushed to separate out those distributed gains.
“The whole statute is an epic screw up and so poorly done,” said Michael Spiro, who chairs the tax group at Finn Dixon & Herling. “Nobody thought through these various policy decisions.”
Spiro said he thinks the lack of clarity in the law spurred dozens of hedge fund managers to split their taxed and untaxed profits up to avoid having it all potentially taxed at a higher rate.
Rafael Kariyev, a tax partner at Debevoise & Plimpton, warns that “any structure designed to avoid the carried interest provision is likely to be attacked by the IRS in regulations or other guidance.”