Tax Policy Center
Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits: Testimony Before the U.S. Senate Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs (Testimony)
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In this testimony before the Senate Permanent Subcommittee on Investigations, Steve Rosenthal describes how two hedge funds, with the help of two investment banks, purported to convert short-term trading profits into long-term capital gains with derivatives—which lowered the tax rate on their gains from 35% to 15% (the difference in rates for short-term and long-term gains for most of the years in question). He explains why he believes the funds stretched the tax law to achieve their goal. He also recommends legislation to address the misuse of derivatives more comprehensively.
Private Equity Is a Business: Sun Capital and Beyond (Commentary)
|Posted to Web: July 22, 2014||Publication Date: July 22, 2014|
Private equity has grown exponentially: it now controls and operates a large number of the companies in our economy. But private equity is just that: private. Its operations are confidential and difficult to parse. This article attempts to demystify the business of private equity. It also describes the unanimous decision by the 1st Circuit that a private equity fund is a trade or business for purposes of ERISA. Finally, the article discusses the tax implications of "trade or business" status for private equity funds and recommends further guidance from Treasury.
Taxing Private Equity Funds and Their Partners: A Debate on Current Law (Commentary)
|Posted to Web: September 24, 2013||Publication Date: September 24, 2013|
The following is the text of a debate that occurred between Rosenthal and Needham at the May meeting of the American Bar Association Section of Taxation in Washington regarding the proper tax treatment of private equity funds and their partners under current law. The introduction should be attributed solely to Rosenthal. The views expressed by Rosenthal are his own and do not necessarily reflect the views of the Tax Policy Center, the Urban Institute, or the Brookings Institution. The text of the debate has been edited for purposes of clarity and print.
Financial Products Tax Reform Discussion Draft (Testimony)
|Posted to Web: June 25, 2013||Publication Date: June 25, 2013|
Steven Rosenthal's testimony before the House Subcommittee on Select Revenue Measures of the Committee on Ways and Means on the Discussion Draft’s proposals to reform the tax rules for derivatives and securities investments.
Taxing Private Equity Funds as Corporate 'Developers' (Commentary)
|Posted to Web: March 20, 2013||Publication Date: March 20, 2013|
Private equity funds manage vast amounts of money: $2.5 trillion in 2010, much more than the $100 billion in 1994. They earn immense profits, largely from selling the stock of acquired and improved companies. This article focuses on the character of the funds' profits. It recommends that the IRS write new regulations to treat the funds' profits as ordinary income in light of the law, Congress's original intent, and tax policy.
Basis Reporting: Lessons Learned and Direction Forward (Commentary)
|Posted to Web: January 28, 2013||Publication Date: January 21, 2013|
Stockbrokers began reporting sales proceeds and cost basis to the IRS and taxpayers this year. This article describes how those information reports came about and discusses the issues they raise. It also argues that compliance gains and simplification benefits justify the reporting burdens that come with advances in information technology, but asserts that Congress and the IRS should take steps to alleviate the burden.
|Posted to Web: April 25, 2012||Publication Date: April 16, 2012|
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