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Hedge Funds Advised To Squeeze As Much Out Of Old Hedge-Fund-Friendly Tax Plan Before New Hedge-Fund-Friendly Tax Plan Passes

Get ready to spend your real Christmas bonus on your new house in Boca.
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You might think that the people who run hedge funds are pretty satisfied with how the G.O.P. tax plan is shaping up. After all, it includes sharply lower taxes for the rich, even more sharply lower corporate taxes and brings hopes of yet another dose of stimulus into the already rather stimulated economy. And in spite of all of the unkind words on the part of the president about those paper-pushing hedge-fund guys getting lucky and paying nothing and getting away with murder vis-à-vis taxes, and all the solemn promises on the part of the hedge-fund guys he then staffed his administration with, it seems the carried-interest tax loophole isn’t going away after all.

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But, you know, in the making of that this particularly rich-person friendly omelette, a few eggs may get broken, including a particularly nice one for those hedge-fund guys living in New York, New Jersey, Connecticut, Massachusetts and California. For while they do not like the high taxes imposed on them in those states, they do like deducting them from their federal income tax levy.

Luckily, they have some options. Miami, for instance, as Miami continues to hopefully and rather pathetically remind them, and with some success. Of course, if you don’t want to move to America’s worst state like David Tepper, there is another thing you can do, at least for this year, and that’s cut some checks before the ball drops.

Tsafos, whose firm advises 1,400 hedge fund firms, is encouraging clients to consider doling out bonuses early, instead of the typical February payout, to ensure that workers benefit from existing deductions for state and local levies….

Employees at funds that gained at least 25 percent in 2016 are expected to receive a bonus of about $179,000, according to the report which polled staff at more than 200 hedge fund firms globally.

Which sounds like a great and simple idea, but is actually Sophie’s Choice. Being a hedge-fund manager sure is hard.

Moving up bonuses to this year presents a snag, though. It means employees would be getting two bonuses in one year, which could push them into an even higher tax bracket, Tsafos said. Adjusting the payout is something a hedge fund firm would need to analyze and discuss with its employees, he said.

Why Hedge Funds Should Weigh Bonus Payouts Before Tax Shift [Bloomberg]
Tax-Hike Fears Trigger Talk of Exodus From Manhattan and Greenwich [Bloomberg]


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