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January 09, 2003 at 07:00 PM
WASHINGTON (HedgeWorld.com)–New Internal Revenue Service regulations took effect New Year’s Day, broadening the scope of information reporting obligations and investor list maintenance requirements with respect to tax shelter transactions.
The new regulations, promulgated on Oct. 21, were written quite broadly, applying to hedge funds, private equity funds and certain funds registered under the Investment Company Act of 1940, according to the New York law firm Tannenbaum Helpern Syracuse & Hirschtritt LLP.
Michelle Kron, an associate at Tannenbaum Helpern, said Tuesday that the administration will likely consider a variety of carve-outs to the new regulations–”they’re talking about partnerships that mark their assets to market” as the beneficiaries of one such carve-out, for example.
Under the new requirements, fund managers and their investors will be required to disclose to the IRS their participation in any reportable transaction by completing and attaching Form 8886 to their respective federal income tax returns for each year in which their income tax liability is affected, or is reasonably expected to be affected, by such reportable transaction. Fund managers and other material advisers to the finds will also have to maintain lists of their investors and their investors’ tax identification numbers and keep copies of private placement memoranda available for potential audits.
