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

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

#111

Post by socialist_coder » Fri, Jul 10, 2015, 1:25 AM UTC

kbenson wrote: post #96

dtparr wrote: post #84

Earlier quoted context omitted.

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.

Do any people doing them by hand actually make these investments directly, or do they use intermediaries? Is it that hard to require the intermediaries provide end of year reports? I don't think this level of extra computational burden is a good counter-argument against more sane tax policies in this day and age.

Your stock broker or investment manager should be doing all this for you. Normally you receive end of year tax documents and all you do is copy some numbers from them onto your tax return. It's pretty easy but it could definitely be even more automated.

Maybe some stock brokers or weird investments don't do this?

I would hate having to do all that stuff by hand.

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

#112

Post by Frondo » Fri, Jul 10, 2015, 3:00 AM UTC

JoshTriplett wrote: post #90

toomuchtodo wrote: post #88

Earlier quoted context omitted.

> It would force all people currently saving for retirement to save 10-15% more to pay this new pile of tax. This will happen regardless, as tax rates have nowhere to go but up in the USA (considering trillions in unfunded liabilities). > And what, precisely, do they get in return for that added tax burden? Civilization. That's exactly what taxes pay for.

> This will happen regardless, as tax rates have nowhere to go but up in the USA (considering trillions in unfunded liabilities). Because when you've run up a giant pile of debt, the response should be "get and spend more money" rather than "spend less"? > Civilization. That's exactly what taxes pay for. As long as we're being snarky: product not as advertised, cost inflated well over initial agreement, return policy…

So get involved with the political process and work to make it better. It's so easy to get into local and state politics, and that's the stuff that has the biggest influence over your life.

I don't get why more people don't do this!

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

#113

Post by MagicWishMonkey » Fri, Jul 10, 2015, 3:01 AM UTC

Tycho wrote: post #40

throwaway6497 wrote: post #19

This made my jaw drop: "Its Medallion fund, which now manages money for its employees only, was the most prolific user of basket options. The fund has earned an average annual return of more than 35 percent for two decades." $25 billion is all employees money; Even if we exclude Simon's money ($14 billion) it is a ton. 35% avg annualized returns for 20 years. Simply stunning.

Actually the Medallion fund is only about $6 billion I believe. The rest of the money is managed in funds which are open to non-employees (and those ones don't make anything close to 35% annualised returns).

Do you know which funds are available to non-employees?

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

#114

Post by Frondo » Fri, Jul 10, 2015, 3:04 AM UTC

tanderson92 wrote: post #75

dragonwriter wrote: post #66

Earlier quoted context omitted.

> The point is that the two situations are very similar in spirit. You keep asserting that, but you have failed to even begin to argue that. > rather, I think that any retroactive decision in guidance/policy/interpretation is prohibited by the constitution. You are welcome to think that, however, that's not consistent with the history of the use "ex post facto law", which was a legal term of art already in existence…

I believe a reasonable person wills see the situations' similarity. I am not attempting to convince you since you are not interested. There seems to be no good word for nonpayment of tax; tax evasion you take issue with elsewhere, tax avoidance is not the correct word I agree, but I don't know what word you really would like. One thing is very clear: the IRS will take what it feels is due ('legally', or retroactively…

I am a freedom-loving American and I do not consider this a gross violation of the constitution.

I consider the IRS as a necessary and permitted part of governance, as a way to pay for the many benefits I enjoy for living in a (mostly) civilized nation.

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

#115

Post by bd_at_rivenhill » Fri, Jul 10, 2015, 3:12 AM UTC

MaulingMonkey wrote: post #100

kbenson wrote: post #96

Earlier quoted context omitted.

Do any people doing them by hand actually make these investments directly, or do they use intermediaries? Is it that hard to require the intermediaries provide end of year reports? I don't think this level of extra computational burden is a good counter-argument against more sane tax policies in this day and age.

> Do any people doing them by hand actually make these investments directly, or do they use intermediaries? Is it that hard to require the intermediaries provide end of year reports? I use an intermediary, but have to report individual stocks nonetheless (fraud avoidance?) And you can only require what they can provide. During tax season, I have to dive through filing cabinets to fish out the cost basis information t…

You have to assume that the brokerage must retain and report the information, otherwise you can lie all you want about your cost basis without any way for the IRS to cross check at scale. If caught in an audit, you can just claim a bookkeeping error; probably not what they want given the lengths they've gone to in order to fill common holes (c.f. the whole "provide a 1099 to pretty much everyone you have a financial relationship with" pile of bullshit).

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

#116

Post by dtparr » Fri, Jul 10, 2015, 3:22 AM UTC

gohrt wrote: post #103

dtparr wrote: post #84

Earlier quoted context omitted.

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.

You're incorrect. I personally know two retirees who sell off stock regularly as part of their retirement income who do it by hand.

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

#117

Post by bd_at_rivenhill » Fri, Jul 10, 2015, 3:23 AM UTC

ISL wrote: post #56

DannyBee wrote: post #28

Earlier quoted context omitted.

1. In the US, the supreme court has repeatedly held that the ex-post-facto clause only applies to criminal laws (See Calder v. Bull, which was decided in 1798). This is actually consistent with the history of the clause (It was understood to apply to criminal laws. Motions were made to change the wording to say it also applied to civil cases, they were turned down) 2. This is not a law, and may not even be administra…

If the IRS doesn't think I've paid my taxes, I can go to prison. Doesn't that make this particular case a criminal one?

Fortunately, tax law has been made so complex that the Supreme Court eventually decided that ignorance is a defense: https://en.wikipedia.org/wiki/Cheek_v._United_States

So you may end up with penalties and interest, but you have a high probability of avoiding prison absent doing something stupid like trading emails with your broker on how you plan to evade taxes.

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

#118

Post by steve-howard » Fri, Jul 10, 2015, 3:48 AM UTC

leereeves wrote: post #46

jsprogrammer wrote: post #34

Earlier quoted context omitted.

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

Not a 'fictional' entity; a legal construct (perhaps multilayered) that groups ownership of real assets and/or obligations of real people.

The company is in that sense a "legal fiction," which seems to confuse people.

https://en.wikipedia.org/wiki/Legal_fiction

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

#119

Post by tanderson92 » Fri, Jul 10, 2015, 3:55 AM UTC

Frondo wrote: post #114

tanderson92 wrote: post #75

Earlier quoted context omitted.

I believe a reasonable person wills see the situations' similarity. I am not attempting to convince you since you are not interested. There seems to be no good word for nonpayment of tax; tax evasion you take issue with elsewhere, tax avoidance is not the correct word I agree, but I don't know what word you really would like. One thing is very clear: the IRS will take what it feels is due ('legally', or retroactively…

I am a freedom-loving American and I do not consider this a gross violation of the constitution. I consider the IRS as a necessary and permitted part of governance, as a way to pay for the many benefits I enjoy for living in a (mostly) civilized nation.

Very few people consider the IRS itself to be unconstitutional.

I at least of course do not see the IRS proper as a gross violation of the constitution. Rather, the retroactive judgement of tax owed is a gross violation. That is the context we are having this conversation in, whether the government can retroactively decide that you owe tax to it, in apparent violation of (the spirit, anyway) the constitution.

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

#120

Post by jsprogrammer » Fri, Jul 10, 2015, 5:31 AM UTC

jsprogrammer wrote: post #53

marvin wrote: post #48

Earlier quoted context omitted.

There is nothing fictional about the ownership of a fraction of a profitable enterprise. This shouldn't be more difficult than the concept of negative numbers, or any other useful non-physical concept. Ditto for options or any other construct that has a mathematical or market-based value.

>There is nothing fictional about the ownership of a fraction of a profitable enterprise. Please read more carefully. I never claimed any such thing. 'fictional' modifies 'entity', not 'ownership'.

Wow, down modded for a factual post.

Will need to rethink my involvement here.