Hedge Fund Tax Compliance (Investment Manager) – Partial Payment & Minimum Price

Hedge fund tax preparation depends on investor-level accounting to properly allocate gain, loss and expense to investors on annual tax Schedule K-1s. Trader tax status is important as are key tax treatment elections like Section 475 MTM on securities, Section 988 on forex and Section 1256 contracts.

Price: $1,995.00


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This payment is a partial payment and minimum price for our tax compliance (planning/preparation) service for your hedge fund entity's federal and state tax returns. (Delaware hedge funds don't file a state tax return if they don't have operations there, so often only a federal tax return is required. It's the management company that has operations in states, and the hedge fund is a virtual business without state tax nexus.) Expect a balance due when we complete the engagement. Please read Price & Billing Policies for more information.

Choose this service if you had a multi-member LLC (limited liability company) or LP (limited partnership) filing a partnership tax return. U.S.-based (domestic) hedge funds chose the partnership structure so they can have special allocations including carried interest to managers. (We use the term hedge fund also to apply to commodity pools and forex funds.)

We suggest also signing up for individual and management company tax-compliance services as significant matters — including pass-through of Schedule K-1 income, loss and expense and reporting tax liability or use of net losses — are applied to your management company and individual tax returns.

Other items to consider with hedge funds taxed as partnerships:

  • A partnership passes through unearned income for Obamacare 3.8% Net Investment Tax.
  • A partnership can have special allocations including profit-allocation — otherwise referred to as carried interest — to the management company LP general partners or individual LLC managing members.
  • Qualification for trader tax status which unlocks business expense treatment including on advisory fees.
  • Trader tax status also opens the door to consideration of a Section 475 MTM ordinary gain or loss election on business trading positions, but not segregated investment positions. (Some hedge funds don't want Section 475 MTM as it can lead to redemption requests before positions are sold.)
  • Investor-level accounting is required to allocate income, loss and expense to existing partners vs. new partners and when existing partners change their capital amounts and related profit and loss percentages.
  • Cost-basis reporting with wash-sale adjustments when Section 475 MTM doesn't apply to securities.
  • Careful analysis of tax treatment between securities, Section 1256 contracts, Section 988 forex and other instruments like precious metals, and swaps.

Visit our Investment Management section to learn more.

If you are interested in tax compliance services for an offshore hedge fund and management company, we can refer you to another firm.

If you have any questions, please contact us soon.