Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Renaissance executives agree to pay around $7 billion to settle tax dispute with IRS -source

EconomySep 02, 2021 09:43PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The Internal Revenue Service (IRS) building is seen in Washington, U.S. September 28, 2020. REUTERS/Erin Scott

(Reuters) -Executives of hedge fund Renaissance Technologies LLC could pay as much as $7 billion to U.S. tax authorities after agreeing to settle a dispute over whether they improperly reduced their tax liability from trading profits, according to a letter reviewed by Reuters and a source familiar with the matter.

James Simons, the founder of one of the world’s most successful quantitative hedge funds and a major Democrat donor, will make an additional settlement payment of $670 million to the Internal Revenue Service, according to the letter from Renaissance's Chief Executive Peter Brown sent on Thursday to investors.

In describing the settlement, one of the largest in IRS history, Brown wrote that the fund worked through the IRS appeals process for several years before concluding that it was better to agree to the resolution "rather than risking a worse outcome, including harsher terms and penalties, that could result from litigation."

The settlement comes after former U.S. Senator Carl Levin in 2014 detailed a practice in which Deutsche Bank AG (NYSE:DB) and Barclays (LON:BARC) Plc helped several hedge funds, including Renaissance, treat some capital gains as longer-term profits, attracting a lower tax rate, than gains made from trades on assets held for less than a year. The banks sold the funds options to help them achieve that outcome, the report said.

In the letter, Brown said the trades in question were done by its flagship Medallion fund between 2005 and 2015. Medallion is solely managed internally for friends and family.

The IRS did not immediately respond to Reuters' request for comment. Barclays and Deutsche Bank (DE:DBKGn) declined to comment. The Wall Street Journal earlier reported news of the settlement.

Levin died in July, aged 87.

"I wish Senator Levin were here, seven years after he first exposed its outrageous tax scam, to see RenTec finally held accountable," said Elise Bean, a former longtime aide.

"It's good to see that, despite a years-long knock-down bare-knuckles battle, the IRS prevailed in compelling at least one set of billionaires to pay the taxes they owe," Bean said.

Levin in 2014 had presented the findings of a year-long probe into basket options, calling for tougher action from the authorities. The report said the largest user of the options, Renaissance Technologies Corp, saved an estimated $6.8 billion in taxes.

In 2015, the IRS issued guidance https://www.reuters.com/article/usa-irs-hedgefunds-idUKL3N0ZP3D320150709 that hedge funds using "basket options" had to report them on their tax returns and correct past returns, which came after a U.S. Senate subcommittee reported some funds were using this to avoid federal taxes.

According to Renaissance's investor letter, the seven individuals who were members of Renaissance's board during those years, and their spouses, will be required to pay the tax and interest and penalties. Investors in the fund will be required to pay additional tax and interest but not penalties.

The payment would dwarf that of a transfer pricing dispute with GlaxoSmithKline (NYSE:GSK) in 2006 which saw the drug firm pay $3.4 billion. The IRS's press statement https://www.irs.gov/pub/irs-news/ir-06-142.pdf said at the time it was the largest single payment to the IRS to resolve a tax dispute.

Renaissance executives agree to pay around $7 billion to settle tax dispute with IRS -source
 

Related Articles

Shares of China Evergrande fall in early trade
Shares of China Evergrande fall in early trade By Reuters - Oct 26, 2021

HONG KONG (Reuters) - Shares of cash-strapped China Evergrande Group and its electric vehicle unit fell early on Wednesday after the country's state planner said it had advised...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Daniel Hodel
Daniel Hodel Sep 02, 2021 9:46PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If you or myself would try to pull that kind of $h!+, we would be in a federal prison. So much for law & order.
Jon Bal
Jon Bal Sep 02, 2021 7:38PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
and why would the irs respond to you asking about someone else's taxes?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email