Forbes – Hedge fund managers are generally taxed on much of their income at an income rate of 55 percent. So when they can – using bright line strategies – lower their tax bill, they often consider these transactions. There are a various ways hedge fund managers can mitigate taxes.
“There are a number of different methods for hedge fund managers to, in strict accordance with the law, pay less taxes. What’s important for hedge fund managers is to carefully consider the specialized strategies and determine which ones make sense for them,” explains Alan Kufeld, a hedge fund tax authority and partner at Flynn Family Office (FFO). “For example, we’re increasingly working with hedge funds to structure captive insurance companies in order to manage certain industry specific risks as well as liability. The ability of the captive insurance to issue lower taxed qualified dividends and convert ordinary income into capital gains in certain circumstances just enhances their appeal.”
