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The result of this bill would be to change the tax treatment of private equity and hedge funds from a single level of taxation at a 15% rate (or 35% in the case of most hedge funds) to a corporate-level tax of 35%, plus a 15% tax on dividends when distributed.
A blocker corporation is a type of C Corporation in the United States that has been used by tax exempt individuals to protect their investments from taxation when they participate in private equity or with hedge funds. In addition to tax exempt individuals, foreign investors have also used blocker corporations. [1]
Thus it is useful to compare the treatment of a similar non-partnership transaction under general income tax principles." [1] Entity Concept An entity concept on the other hand looks at a partnership as a separate entity for tax purposes with partners owning equity interest in the partnership as a whole. This treatment is similar to ...
Structure of a private equity or hedge fund, which shows the carried interest and management fee received by the fund's investment managers. The general partner is the financial entity used to control and manage the fund, while the limited partners are the individual investors.
This tax treatment is often called the "hedge-fund loophole", [31] even though it is private equity funds that benefit from the treatment; hedge funds usually do not have long-term gains. [32] It has been criticized as "indefensible" and a "gross unfairness", [ 33 ] because it taxes management services at a preferential rate intended for long ...
Republican presidential front-runner Donald Trump blasted hedge fund managers on Sunday as mere "paper pushers" who he said were "getting away with murder" by not paying their fair share of taxes.
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[156] [157] This tax treatment promotes cross-border investments by limiting the potential for multiple jurisdictions to layer taxes on investors. [158] US tax-exempt investors (such as pension plans and endowments) invest primarily in offshore hedge funds to preserve their tax exempt status and avoid unrelated business taxable income. [157]