Monday, November 26, 2012

PEU Moves to Avoid the Taxman

The PEU tax avoidance shell game is on, according to Bloomberg:

Private-equity managers are bracing for higher taxes in 2013 and in the final weeks of this year are refinancing investments, accelerating gains and shifting what they transfer to trusts.

Some are considering whether to accelerate gains on accrued carried interest at current tax rates. One way to do that is by transferring general partner interests to an affiliate in a taxable transaction, Brown said. 

The affiliate is usually set up as an S Corporation or a non-U.S. firm based in a place like the Cayman Islands so it isn’t subject to corporate-level U.S. tax, he said. 

There's more than one strategy to keep PEU's preferred taxation, have it in any new law.  Members of Congress know who provides their re-election funding.

Proposals in Congress have allowed so- called qualified capital, or investments that managers make alongside investors in a deal, to still be taxed at preferential rates.
Red and Blue love PEU.

Update 12-6-12:  PEU's are ready to remake the world in their image.