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| Preface | |
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| The Arcane World of Hedge Funds and Investment Partnerships | |
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| What Is a "Hedge Fund"? | |
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| U.S. Venture Partnerships | |
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| Types of U.S. Hedge Fund Entities and the U.S. Tax Code | |
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| Organizing a Typical U.S. Hedge Fund | |
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| Investor Clienteles in Hedge Funds | |
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| Foreign Investors in a U.S. Hedge Fund | |
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| Offshore Funds | |
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| U.S. Investors in Offshore Funds | |
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| U.S. Investors in Swiss Bank Accounts | |
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| U.S. Investors in Madoff-Like Managed U.S. Trading Accounts | |
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| Size of the Global Hedge Fund Industry | |
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| Fund-of-Funds | |
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| Incentives of the Hedge Fund Manager and Investors | |
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| Valuation of a Hedge Fund Management Company | |
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| Economies of Scale in Hedge Funds | |
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| The Structure of Hedge Funds | |
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| Organizing a Typical Offshore Hedge Fund | |
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| Master-Feeder Structuring of Onshore/Offshore Arms: Organizing a Hedge Fund for Clienteles | |
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| U.S. Withholding Agent for U.S. Withholding Taxes on Foreign Investors | |
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| Hedge Fund Fees | |
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| Starting Point: The Partnership Agreement | |
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| Fund Valuation at Discrete Opening Time Points | |
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| Calculation of Fixed Fees | |
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| Calculation of Performance Fees | |
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| Claw-Back Provision: Performance Fee Returned to Limited Partners | |
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| Representation of a Fund's Net Asset Value (NAV) per share | |
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| Black-Scholes Formula Valuation of Performance Fees | |
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| Hedge Fund Accounting and Tax Filing | |
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| Partnership Accounting for U.S. Funds | |
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| IRS Tax Return Filings for U.S. Hedge Funds | |
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| Financial Statements for Hedge Funds and Venture Funds | |
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| Interim Valuation: The Core of a Hedge Fund's Accounting Operation | |
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| Books of Account and Financial Statements for Hedge Funds | |
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| Audit of an Offshore Fund | |
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| Audit of a U.S. Fund | |
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| Capital Account Audit for Both Offshore and U.S. Funds | |
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| Partner Tax Allocations in U.S. Partnerships | |
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| U.S. Tax Allocation Rules Governing U.S. Partnerships | |
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| Tax Components of U.S. Investment Partnership Income | |
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| Fixed Fees: Income to the General Partner and Expense to the Limited Partners | |
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| Generalizing the Allocation Formula to Other Components of Income | |
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| Tax Basis of Partner's Investment in a U.S. Partnership | |
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| Accountants' Terminology | |
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| Tax Allocations of Realized and Unrealized Income to Partners | |
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| The Tax Allocation Method of Layering | |
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| Tax Allocation of Interest | |
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| Tax-Exempt Interest Income, Line 18a | |
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| Similar Calculation for Tax Allocation of Dividends, Investment Expense, Foreign Tax Paid | |
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| Tax Allocation of Fixed Fees Paid by Limited Partners | |
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| Tax Allocation of Guaranteed Payments (of Fixed Fees) to the General Partner | |
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| Reporting Subcomponents of Interest Income and Dividends | |
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| Tax Consequences of Shorting | |
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| Short Positions: Tax Treatment of Equity Dividends or Bond Coupons Claimed as Interest Expense | |
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| Distributions from Partnerships Owned | |
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| Tax Allocations of Realized Gains by Layering | |
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| Tax Allocation of Unrealized and Realized Capital Gains Using the Method of Layering | |
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| Ignoring Ambiguity #1 with Layering | |
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| Work-Around to Fix Ambiguity #2, The Fatal Flaw with Layering | |
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| Partial and Full Netting Methods | |
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| The Methods of Aggregation or Netting | |
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| Partial Netting | |
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| Full Netting | |
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| Measures of Book-Tax Disparity across Partners | |
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| Formulating the Problem for Optimal Partner Tax Allocations under Full Netting | |
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| Formulating the Problem for Optimal Partner Tax Allocations under Partial Netting | |
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| Solving the Convex Optimization Problem of Tax Allocation | |
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| Comparative Tax Consequences of Layering and Netting Methods | |
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| Which Is the Better Method for Allocation of Realized Gains: Layering, Full Netting, or Partial Netting? | |
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| Layering Examples Showing Earlier Tax Payment | |
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| Full Netting Examples Showing Tax Postponement | |
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| Tax Efficiency of Hedge Funds | |
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| Tax Efficiency Considerations for Offshore Hedge Funds | |
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| Tax Preference Ordering for U.S. Investors | |
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| More Attractive Tax Items to U.S. Investors | |
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| Less Attractive Tax Items to U.S. Investors | |
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| An Exception: Special Tax Preference for Gains from U.S. Exchange-Traded Futures Contracts | |
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| Ambiguities in Tax Preference | |
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| Tax Efficiency Steps for U.S. Hedge Funds | |
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| A Structure for Tax-Exempt U.S. Entities to Recover Foreign Taxes | |
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| Hedge Fund Performance and Risk Presentation | |
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| Performance Presentation: CFA Institute GIPS Verification | |
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| Calculation of Hedge Fund Returns for Performance Presentation | |
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| Facilitating Historical Risk and Return Review for Investors Using GIPS Guidelines | |
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| Mutual Funds and Venture Funds Compared to Hedge Funds | |
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| Tax Return Filing of U.S. Partnerships Is an Involved Task | |
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| Comparison with Tax Allocations Made by Mutual Funds | |
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| U.S. Venture Partnerships (Silicon Valley Venture Funds) | |
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| Epilogue | |
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| Economic Accounting Is a Common Denominator for U.S. and Offshore Funds | |
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| Tax Return Filing of U.S. Partnerships Is an Involved Task | |
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| Calculating Partner Allocations Is Most of a U.S. Partnership's Tax Accounting Effort | |
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| Layering and Netting Methodologies for Tax Allocation of Capital Gains | |
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| Example of Tax Allocation of Capital Gains by Full and Partial Netting in a 100-Partner Setting | |
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| Tilting Tax Allocations According to Tax Preferences | |
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| The Crown Jewel: Automated Tax Allocation of All Items of Income | |
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| The End of an Era of Layering | |
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| Excerpts of Key U.S. Statutes Discussed in Chapter 1 That Govern U.S. and Offshore Hedge Funds Venture Funds | |
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| Methodology and Implementation Example of Full Netting | |
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| Methodology and Implementation Example of Partial Netting | |
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| Nonabusive Tilting of Tax Allocations According to Tax Preferences | |
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| Eliminating Layering Entirely, by Allocating Dividends, Interest, Capital Gains, and Expenses in One Step | |
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| Index | |