#fraconferences

We’ve all seen the headlines and read the stories. Hedge fund AuM is now touted at a whopping $2.9 trillion. This April alone, investors poured no less than $17.9 billion into hedge funds. This trend holds several possible implications for funds…more money to invest in more portfolios…more trading…more gains…more losses and yes…more chances for non-compliance with the IRC. Increased trading activity can lead to an increase in the number of taxable events (wash sales, constructive sales and straddles, etc.) that a fund needs to identify and treat in order to remain compliant with the tax code. The last thing a fund needs is to run afoul of the IRS, face hefty fines as well as risk damaging its reputation and losing clients.

No Easy Feat

When does a series of buy-sell-buy transactions result in a wash sale? When does a non-wash sale become a wash sale because of the effects of a straddle? Answering these questions and others like them is no easy feat; it requires in-depth knowledge of BOTH the U.S. tax code (wash sales, straddles, constructive sales, qualified dividends, dividends received deductions and short sales) and securities trading. Given this complexity and a potential increase in the number of trades that funds need to analyze, it would stand to reason that tax practitioners and compliance officers could only benefit from as many opportunities as possible to learn/review best practices guidelines on IRC compliance. To this end, we maintain a Tax Analysis of Securities Transactions (TAST) Resource page that includes information and guidelines on how to perform tax accounting on investment portfolios. We also share our knowledge and experience on this topic by speaking at various training venues/tax seminars.

This week we will co-sponsor and speak at Financial Research Associates’ (FRA) 5th Annual Private Investment Funds Tax Master Class to be held at the Princeton Club, NYC on May 21 and 22nd.  This year we’re excited to speak on not one but two panels at this tax event for both private equity funds and hedge funds. As part of the Hedge Fund track, at 11:00 a.m. on day two (5/22), George Michaels will join colleagues from BDO and Twenty-First Securities Corp. and talk about constructive sales (see our latest white paper, Advanced Topics in Constructive Sales: The Exceptions) as part of the Wash Sales, Short Sales, Constructive Sales and Constructive Ownership Transactions panel. After lunch at 1:00 p.m., Daniel Tilkin, partner and senior tax analyst at G2, will share the floor with colleagues from Mayer Brown and Kaufman Rossin and talk about basic and identified straddles (see our white paper, Tax Implications of Straddles) on the 1256 Contracts, Section 988 and Straddles panel.

G2 enjoyed another great event last week, co-sponsoring the Hedge Fund Tax 101 and K-1 Boot Camp, which was hosted by Financial Research Associates. The event is a really good starter course for delving into hedge fund tax on one day (day one), and learning how to correctly prepare a Schedule K-1 on another day (day two).

 The G2 team spent a couple of days networking and further appreciating the breadth of tax compliance challenges that our clients face. George Michaels was panelist for our specialty: tax analysis of securities transactions. Along with co-panelist Jay Freedman, Principal, KPMG, George discussed the implications of wash sales and constructive sales for tax adjustments. Jay in effect gave a great plug for TaxGopher®, discussing the importance of being tax aware on a daily basis, rather than waiting until post- year-end when it's too late to make changes to your tax book.

G2 TaxGopher received another strong recommendation, this time from George Teixeira, Tax Partner at Anchin, Block and Chair of this FRA event. George said, "I've used it, my team's tested it..." 

 A couple of other topics of note included "Trader vs. Investor" and "Dissecting the K-1."   During the latter session, Jay discussed the (un)importance of statistics, quoting former Baruch College business professor, Aaron Levenstein, who said, "Statistics are like a bikini. What they reveal is suggestive, but what they conceal is vital." 

Check out our pix of the event on the G2 FaceBook page.