Healthcare Tax Takes Bite Out Of Carried Interest

Apr 2 2013 | 10:29am ET

As the alternative investment industry girds for another fight over taxation of carried interest, a little-known new tax has already begun to eat into those profits.

President Barack Obama's 2010 healthcare overhaul included a new levy, the net investment income tax, which will take 3.8% of "unearned investment income" from the highest-earning taxpayers. And, according to a new white paper from law firm Hirschler Fleischer, the new tax is targeted specifically at hedge fund managers and gives them little opportunity to avoid it.

The NII, which took effect at the beginning of the year, taxes income from "trading in financial instruments."

Private equity fund managers, according to Hirschler Fleischer, may be able to avoid the levy, but only if they can demonstrate that their investments aren't passive. That could be hard: Federal tax law requires some 500 hours of work annually personally performing services for a business to shed the passive tag.


In Depth

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Griffin Selling Chicago Apartment

Nov 26 2014 | 11:40am ET

Citadel Investment Group’s Kenneth Griffin is making clear to his estranged wife...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.