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Alternative Market Briefing

Other Voices: Hedge Funds - tax issues and planning to consider before year-end

Tuesday, December 19, 2017

By: Philip Gross, Kleinberg Kaplan, Wolff & Cohen

Year-end has always been a time for tax planning and we send our clients our year-end tax planning newsletter on an annual basis. Tax planning for this year-end, however, is even more important (and more complex and more uncertain) because of the proposed tax changes. The proposed tax legislation is extremely complex and introduces new classes of income with different rates and changes many tax provisions. The proposed tax legislation is also being enacted very close to year-end which makes year-end tax planning difficult to determine and implement.

This newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. Some planning may need to wait until 2018 and some planning may be able to be done retroactively. Lastly, there will be a number of glitches and mistakes in the new law which may provide tax opportunities as well as the potential for tax pitfalls.

HEDGE FUND PRINCIPALS AND EMPLOYEES

1. State and local income and property taxes. The tax changes propose to disallow deductions for non-business state and local taxes for taxes paid after 2017. Individuals should generally pay 2017 state and local income and property taxes prior to year-end. They need to remember to take into account the alternative minimum tax (AMT) in making this determination. One is issue which is being considered is the ability to prepay 2018 tax......................

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