Paul L. Caron
Dean




Saturday, September 4, 2021

RenTec Hedge Fund Executives Agree To Pay $7 Billion To Settle IRS Tax Dispute Over Characterization Of Basket Option Income

Following up on my previous posts (links below):  New York Times, Hedge Fund’s Insiders Agree to Pay as Much as $7 Billion to I.R.S.:

RenaissanceA yearslong dispute between a pioneering hedge fund and the Internal Revenue Service ended Thursday with an enormous bill for taxes and penalties: as much as $7 billion.

James Simons, a mathematician whose algorithmic approach has been adopted by many other investment funds, and some of his former colleagues at Renaissance Technologies have settled a decade-long dispute with the government over the tax treatment of some of their investments, the firm said in a letter to investors.

The settlement, which involves 10 years’ worth of trades made by the hedge fund, could be worth as much as $7 billion, according to a person with knowledge of the agreement. It is one of the largest federal tax disputes in history.

The deal ends a standoff that led to a congressional investigation and involved two politically connected financiers: Mr. Simons, a longtime patron of Democratic candidates with an estimated net worth of $25 billion, and Robert Mercer, a former Renaissance executive whose advocacy for conservative causes included helping to found Cambridge Analytica. After Donald J. Trump won the 2016 presidential election, the now-defunct political consulting firm became embroiled in a scandal for harvesting Facebook data without users’ consent to assist his campaign.

Prior TaxProf Blog coverage:

https://taxprof.typepad.com/taxprof_blog/2021/09/rentec-hedge-fund-executives-agree-to-pay-7-billion-to-settle-irs-tax-dispute-over-characterization-.html

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