I.R.S. Cracks Down on Hedge Fund Tax Strategy • Hacker News Board

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

#101

Post by gohrt » Thu, Jul 09, 2015, 11:42 PM UTC

madez wrote: post #94

gohrt wrote: post #10

Earlier quoted context omitted.

The rules are deeply arbitrary, and goes to the nature of financials as being rather abstract concepts with arbitrary definitions. I buy stock in a firm, that firm makes a lot of profit, but I don't liquidate my position. How is that different (short-term vs long-term gains) from me selling their stock and buying another stock? It's even the same word: A retail business sells its stock (product), and sells it's stock…

“A retail business (...) sells it's stock” How is this to parse? The contraction “it’s” means either “it has” or “it is”. So, the quoted expression expands either way to a syntactically malformed expression with two verbs. Could it be intended to mean the following? A retail business’ (...) sells — it has stock

Its a typo.

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

#102

Post by gohrt » Thu, Jul 09, 2015, 11:43 PM UTC

tosseraccount wrote: post #21

gohrt wrote: post #10

Earlier quoted context omitted.

The rules are deeply arbitrary, and goes to the nature of financials as being rather abstract concepts with arbitrary definitions. I buy stock in a firm, that firm makes a lot of profit, but I don't liquidate my position. How is that different (short-term vs long-term gains) from me selling their stock and buying another stock? It's even the same word: A retail business sells its stock (product), and sells it's stock…

I buy a stock for $10. 2 years later, I sell it for $20. I get taxed on a $10 capital gains income tax. How is this not "logical" ? Can you explain better?

You can nest a financial asset arbitrary layers deep in funds and holding companies.

See other comments in this subthread that illustrate the various ways to structure assets.

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

#103

Post by gohrt » Thu, Jul 09, 2015, 11:44 PM UTC

dtparr wrote: post #84

ovi256 wrote: post #73

Earlier quoted context omitted.

They could have done that much better with linear interpolation instead of a step function. Today's step function, with made-up tax percentages: 20% if held for less than a year, 10% if a year or more. You end up with a bunch of trades held for a year and a minute. My proposal, with interpolation: 20% if held for less than 6 months 10% if held for 18 months or more Between 6 and 18 months, we interpolate between 20 a…

That sounds like a nightmare to do without software computing it. I realize you and likely everyone reading this use tax software, but many people still do them by hand, and this would involve an individual tax-rate lookup for each transaction rather than just grouping them into short/long-term capital gains.

We have software now, and I don't think anyone with capital gains is doing taxes by hand.

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

#104

Post by gohrt » Thu, Jul 09, 2015, 11:47 PM UTC

tanderson92 wrote: post #64

dragonwriter wrote: post #58

Earlier quoted context omitted.

> And yet this is what we seem to be experiencing in this case No, Congress passing a law saying that "IRS can set taxes at any level they want" is not what we are seeing. If you want to argue that the actual laws Congress has passed are unconstitutional delegations, please, point to the specific laws, and make that argument. > but since tax evasion is itself a crime it seems to indirectly violate the ex post facto l…

> Evasion is a different thing than non-payment. No act that occurred in the past that was not evasion when it occurred becomes evasion as a result of this change in application. Incorrect, but I can see how you might think so. It is the same because if I disagree with the IRS and refuse payment then according to https://www.law.cornell.edu/wex/tax_evasion , I have committed tax evasion. So yes, since the IRS can adj…

> I can now be convicted of tax evasion for refusing to pay

Yes, for refusing to pay. If you concede to the IRS interpretation, you just pay the amount you owe plus interest and fees.

> this arbitrary retroactive tax.

that's not what it is

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

#105

Post by madez » Fri, Jul 10, 2015, 12:00 AM UTC

gohrt wrote: post #101

madez wrote: post #94

Earlier quoted context omitted.

“A retail business (...) sells it's stock” How is this to parse? The contraction “it’s” means either “it has” or “it is”. So, the quoted expression expands either way to a syntactically malformed expression with two verbs. Could it be intended to mean the following? A retail business’ (...) sells — it has stock

Its a typo.

Ah, okay! Thanks for the clarification. I wondered if there was maybe some kind of arcane colloquial rule I didn't know of.

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

#106

Post by refurb » Fri, Jul 10, 2015, 12:04 AM UTC

Tycho wrote: post #42

I think the most interesting part is not the tax, but this: The options also were attractive because they limited the risk of loss to the amount paid for each option, Renaissance said. “No other investment structure of which we are aware provides both high leverage and loss protection,” Renaissance said.

Anyone else find this kind of "scammy" sounding?

How can they have a 35% average annual return over the past 25 years and guarantee that you won't take a loss at all?

Reminds me of Madoff.

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

#107

Post by sitihn » Fri, Jul 10, 2015, 12:24 AM UTC

Long-term investments stabilize the economy and should be encouraged through the tax-code.

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

#108

Post by sitihn » Fri, Jul 10, 2015, 12:27 AM UTC

Long-term investments provide stability to the economy and should be encouraged through the tax-code.

Renaissance pursued a strategy of tax avoidance and should be punished.

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

#109

Post by s73v3r » Fri, Jul 10, 2015, 12:32 AM UTC

jsprogrammer wrote: post #34

dragonwriter wrote: post #26

Earlier quoted context omitted.

> Ultimately, taxing "realized" gains can never be logical, since "realization" is a fictional concept not grounded in reality. Trading an asset vs. holding it is a non-fictional concept very much grounded in reality. Attributing significance to it is, in a sense, arbitrary in the same sense that any assignment of significance is, but its definitely not a fictional concept divorced from reality.

"Trading an asset" What exactly are you trading? Bits in a database that mark ownership of a fraction of a fictional entity?

"What exactly are you trading?"

Part ownership of a company.

To say anything else is to show yourself to be completely naive.

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

#110

Post by socialist_coder » Fri, Jul 10, 2015, 1:23 AM UTC

dtparr wrote: post #84

ovi256 wrote: post #73

Earlier quoted context omitted.

They could have done that much better with linear interpolation instead of a step function. Today's step function, with made-up tax percentages: 20% if held for less than a year, 10% if a year or more. You end up with a bunch of trades held for a year and a minute. My proposal, with interpolation: 20% if held for less than 6 months 10% if held for 18 months or more Between 6 and 18 months, we interpolate between 20 a…

That sounds like a nightmare to do without software computing it. I realize you and likely everyone reading this use tax software, but many people still do them by hand, and this would involve an individual tax-rate lookup for each transaction rather than just grouping them into short/long-term capital gains.

There are probably thousands of laws on the books that would be written differently now that we have software running everything. No sense in writing laws for the world of 20 years ago.