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ARTICLE · 09 MAY 2022

Hedge Funds 101: An Introduction To Tax Issues

Freeman Law
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Hedge funds provide a vehicle to pool private capital for investment in stocks, securities and financial derivatives.

United StatesFinance and Banking
Jason Freeman
Jason Freeman

Hedge Funds and Taxes

Hedge funds provide a vehicle to pool private capital for investment in stocks, securities and financial derivatives. While hedge funds take on many different structures-including master-feeder, parallel, or fund-of-funds structures-they share many similar tax considerations.

Hedge fund tax issues include entity classification, tax allocations, the taxation of carried interests, swap taxation, withholding, and numerous other issues. In this Insight post, we discuss the typical hedge fund structure and usual players, as well as several common tax issues.

Typical Hedge Fund Structures

Most hedge funds use one of the following organizational structures: 1) a single entity fund, 2) a master-feeder fund, 3) a parallel fund, or 4) a fund of funds.

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