I.R.S. Cracks Down on Hedge Fund Tax Strategy


Hedge funds that used a strategy to claim billions of dollars in tax savings will face new scrutiny from the government, according to guidance issued by the Internal Revenue Service on Wednesday.

So-called basket options — complex financial structures that allowed hedge funds like Renaissance Technologies to bypass taxes on short-term trades — will now be labeled listed transactions, the I.R.S. said. This means that anyone using the options must declare them on their tax returns. They will be penalized if they fail to do so.

The new I.R.S. guidance will be retroactive, applying to all transactions as far back as Jan. 1, 2011…

I.R.S. Cracks Down on Hedge Fund Tax Strategy

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