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Report: Hedge funds escaped billions in taxes
Source: USA Today
Report: Hedge funds escaped billions in taxes
Paul Davidson, USA TODAY 6:32 p.m. EDT July 21, 2014
Two large banks used a complex financial scheme to help 13 hedge funds avoid paying billions of dollars in taxes and evade federal borrowing limits on brokerage accounts over a 15-year period, according to the findings of a Senate subcommittee investigation.
Deutsche Bank and Barclays Bank sold "basket options" to the hedge funds that allowed the funds to report trading profits as long-term capital gains for tax purposes, even though 97% of the assets were held for less than six months, the Senate Permanent Subcommittee on Investigations said.
Also, the trades were made in the banks' accounts so that the hedge funds would not be subject to leverage limits that prevent banks from lending more than $2 for every dollar put up by the hedge funds, according to its report. The funds, however, controlled all assets, executed all the trades and reaped the profits, the subcommittee said.
From 1998 to 2013, its report said, the banks sold 199 basket options to hedge funds to conduct more than $100 billion in trades. One fund, Renaissance Technologies, earned about $34 billion in profits and avoided paying $6.8 billion in taxes through the financial legerdemain, the report said.
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Paul Davidson, USA TODAY 6:32 p.m. EDT July 21, 2014
Two large banks used a complex financial scheme to help 13 hedge funds avoid paying billions of dollars in taxes and evade federal borrowing limits on brokerage accounts over a 15-year period, according to the findings of a Senate subcommittee investigation.
Deutsche Bank and Barclays Bank sold "basket options" to the hedge funds that allowed the funds to report trading profits as long-term capital gains for tax purposes, even though 97% of the assets were held for less than six months, the Senate Permanent Subcommittee on Investigations said.
Also, the trades were made in the banks' accounts so that the hedge funds would not be subject to leverage limits that prevent banks from lending more than $2 for every dollar put up by the hedge funds, according to its report. The funds, however, controlled all assets, executed all the trades and reaped the profits, the subcommittee said.
From 1998 to 2013, its report said, the banks sold 199 basket options to hedge funds to conduct more than $100 billion in trades. One fund, Renaissance Technologies, earned about $34 billion in profits and avoided paying $6.8 billion in taxes through the financial legerdemain, the report said.
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Read more: http://www.usatoday.com/story/money/business/2014/07/21/hedge-funds-options-trades-tax-avoidance/12947225/
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