2017 Essential Tax and Wealth Planning Guide

Ω 今 Tax implications of fund investing Investment fund attributes Introduction What is an investment fund? Types of investment funds and income tax characteristics • Marketable securities Hedge funds • Private equity/venture capital Publicly traded partnerships Real estate funds . Fund of funds Investment fund attributes Entity characteristics, income/(expense) characteristics, and other considerations Income tax characteristics Passive income/(losses) Preferential rate qualified dividends Long-term capital gains IRC Section 475 mark to market income IRC Section 1256 foreign currency contracts Income subject to 3.8% NIIT tax Marketable security partnership Hedge fund partnership Fund of funds Private equity/ Venture Capital partnership Publicly traded partnerships Real estate partnerships No Sometimes Sometimes No Sometimes Sometimes Sometimes Sometimes Sometimes Sometimes Sometimes Yes Sometimes Sometimes Yes Sometimes Sometimes No No No No Sometimes No No No Yes Yes Yes Yes Yes Fund expenses subject to 2% limitation Sometimes Sometimes Sometimes Fund expenses non-subject to 2% limitation Sometimes Sometimes Sometimes Sometimes Sometimes Sometimes Carried interest Sometimes Sometimes Sometimes Sometimes Sometimes Sometimes Other considerations Monthly/quarterly Investment fund attributes • Trader versus investor . . entities Passive versus non-passive income Separately stated activity (including PTPs) Qualified small business stock (QSBS) Unrelated business taxable income • State tax reporting Conclusion Frequency of liquidity Typical fund life Foreign versus domestic Typical entity type Frequency of asset valuation Indefinite Generally domestic Partnership Monthly/quarterly Monthly/quarterly No liquidity Indefinite Domestic & foreign Partnership Monthly/quarterly 7-13 years Domestic & foreign Partnership No liquidity Daily Indefinite Domestic Partnership Daily No liquidity 7-13 years Domestic & foreign Partnership No liquidity Resources <弓 ☑ |||| A 2017 Essential Tax and Wealth Planning Guide | Tax implications of fund investing 56

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