Tracking Changes

There are many things happening so quickly and I am finding it hard to keep on top of all the changes. My job is to be proactive, get an understanding of the regulatory rule changes and meet with my clients to plan a proper course of action.  Here are a couple of things we are tracking:



The new Health Care and Education Reconciliation Act of 2010 will go into effect in 2013.  This will subject some individuals to a 3.8% Medicare contribution tax on unearned income.  What is unearned income?  Unearned income is income such as dividends, interest and capital gains.  And what do investors in hedge funds receive? You guessed it – interest, dividends and capital gains.


There has been some discussion/disagreement as to whether a hedge fund constitutes a trade or business and if it does, then the income is not considered unearned. There are code sections that require material participation in the trade or business for these types of income to not be considered passive or unearned income.


This will be an interesting year as our tax planning strategy with our clients may include trying to accelerate income into 2012 rather than pushing off to 2013. This should be a fun consultation in December, “Mr. X we want you to pay more taxes now because you will really be saving taxes later.”  Ok, get my bullet proof vest ready.



The Financial Accounting Standards Board (FASB) has been actively exploring the definition of an investment company.  This is important because there are proposals regarding when and what companies should be consolidating their financial statements.  This could have a huge impact on the hedge fund industry, not just to the funds but to the management and advisors to these funds, as they may need to consolidate the funds they work with or BE consolidated by the funds.


The FASB is working in conjunction with the International Accountings Standards Board (IASB) to collaborate on a set of rules the entire planet can abide by.   This is necessary if the US ever switches from GAAP (Generally Accepted Accounting Principles) to IFRS (International Financial Reporting Standards). 


On a side note, I feel bad for all of the CPA candidates sitting for the CPA exam. The new exams include questions on IFRS, yet not many companies here in the US have made the switch.


Anyway, here at WS+B, we are monitoring these legislative issues and will be notifying you and all of our clients as to what is the best course of action in the months ahead.  So, keep reading…


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1 reply

  1. It is clear as day….Obama has to go. these rising taxes in the United States of Facism is nuts. every time you turn around in Obamaland those that decide to work and make something of themselves continue to pay for the lazy. we are becoming a country of people who are entitled to anything they want at someone else’s expense. ADOLF BENITO OBAMA NEEDS TO BE VOTED OUT! End of story.

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