Reading between the lines

Tue Nov 1, 2005

New IRS deferred compensation guidelines provide hedge funds with some relief

The verdict is in. The new Internal Revenue Service deferred compensation guidelines won't be as onerous for hedge funds as feared.

"The major causes for concern that clouded deferred compensation arrangements for hedge funds seem to have been resolved in the industry's favor," says Ruth Wimer, a partner in Ernst & Young's Washington, D.C. compensation, benefits and taxation practice.

When hedge fund partners leave a firm, they will still be able to collect fee compensation that their employer had chosen to hold offshore on a deferred basis. Until the release of the latest guidelines, issued on September 29, such a practice was uncertain. One possibility was that employees would have had to wait for distributions that could only be made on a predetermined, fixed schedule or upon the occurrence of a "permissible"...

ISSN: 2151-1845 / CDC10004H

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