Hedge Funds

Long-Term back taxes


An unwelcome spotlight returned to back tax demands on hedge funds this month as the Internal Revenue Service (IRS) is seeking $75 million from the former partners of Long-Term Capital Management. The IRS alleges that John Meriwether, Robert Merton and Myron Scholes deliberately violated U.S. tax codes by using a series of complex transactions for the sole purpose of creating tax deductions on more than $100 million in income. A victory for the prosecution could reopen the debate on the imposition of back taxes on the U.S. hedge fund industry. Hedge fund managers often defer taxes on fee