Investment partnerships receive guidance from final regs on distribution of marketable securities

Article Abstract:

The tax consequences of an investment partnership's distribution of marketable securities are governed by the IRC section 731 final regulations. These regulations provide managers of hedge funds and similar investment vehicles with more certainty regarding such distributions, which are typically used to defer gains when partners make redemptions. Qualifying hedge funds and master/feeder funds can make tax-free distributions under the regulation's investment exception. The potentially adverse tax consequences are also discussed.

Partnerships, Laws, regulations and rules, Securities, Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation), Hedge funds, Securities taxes, Partnership distributions

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More guidance is needed on master/feeder fund earnings and profits

Article Abstract:

Many regulated investment companies have adopted a master/feeder fund structure which complicates earnings and profits accounting when the year-ends are not the same. The funds could have increased tax liability because of their inability to support dividends with earnings and profits due to the linked fund not having reached its year-end. The aggregate and entity accounting methods provide some relief from the problem but IRS guidelines are necessary to indicate which method is allowed or if both are.

Profit, Accounting and auditing, Profits, Mutual funds

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Issuance of final regulations under Section 351 will not resurrect exchange funds

Article Abstract:

The final regulations issued under Section 351 on Aug 8, 1995, do not apply to exchange or swap funds. Investors can diversify their portfolios without having to recognize capital gains through transfers to such funds, and Congress wanted to prohibit such activity with Section 351(e). In the 1960s, tax-free transfers to such funds were permissible, but the final regulations issued in 1995 do not include such transfers in their scope.

Stock transfer, Swaps (Finance)

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