Tax Reporting and Reconciliation of Hedge Fund and Other Alternative Investment Fund K-1s

Navigating Footnotes and Tying Information to the Tax Return

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, May 16, 2017
Recorded event now available


This webinar will provide tax advisers and professionals with the tools needed to accurately reconcile complex Form K-1 for hedge funds and other alternative investments.

Description

For many K-1s received by taxpayers, reporting the pass-through items of income and loss is a fairly straightforward process. However, for hedge funds and other multi-fund pass-through entities, the K-1 often requires the tax preparer to refer to information from numerous footnotes. A Schedule K-1 from an alternative investment fund can easily exceed 50 pages or more, including details for individual transactions among the various funds or investments held.

These K-1s generally have important tax reporting information in the extensive footnotes following the standard page 1 boxes listing income, deductions, credits and distributions. To allocate and report items on the client’s tax return, tax professionals must be able to identify the type of fund the K-1 is generated from and use information found in the footnotes to prepare an accurate and complete return for clients.

Listen as our experienced panel provides detailed and practical guidance to help tax professionals correctly reconcile tax information from these complex K-1 schedules.

Outline

  1. Brief background and history of hedge funds
  2. Overview of Investor, Trader and Fund of Funds
  3. Treatment of income and expenses from hedge fund K-1s
  4. Differences between book and tax income, Item L of Schedule K-1
  5. Net Investment Income Tax - 3.8%
  6. Reconciliation schedule to tie Fund of Fund K-1s to tax return
  7. Footnotes and how to decipher
  8. Go through sample K-1s for each type of fund

Benefits

The panel will review these and other relevant topics:

  • Setting up a schedule to reconcile current-year hedge fund K-1 reporting information
  • Understanding K-1 footnotes to determine items such as passive vs. non-passive income
  • Knowing when a K-1 requires the tax preparer to enter info in return areas other than Sch. E page 2
  • Calculating basis on capital assets sold within a fund to correctly report gain or loss on Form 8949
  • Preparing and maintaining a basis schedule for the hedge fund investment

Learning Objectives

Upon completing this webinar, you will be able to:

  • Understand the type of K-1 you are receiving (i.e. investor fund, trader fund, fund of funds) and how to properly reflect the income, losses, and deductions being reported.
  • How to decipher K-1 footnotes to ensure proper treatment of key pieces of information.
  • Prepare a schedule to reconcile current-year hedge fund K-1 reporting information to what is reflected on the tax return.

Faculty

Laura L. Ross, CPA, Partner
EisnerAmper, San Francisco

Ms. Ross is a Partner in the firm’s Financial Services Group. She has extensive expertise in accounting and tax issues of hedge funds, market makers, and pass-through entities and their owners. She provides tax services to partnerships, LLCs, securities partnerships, market makers, and high net-worth individuals. She frequently speaks at seminars and webinars on hedge fund taxation issues.

Eliot Goldberg, CPA, MBA (Tax), Principal
WithumSmith+Brown, New York

Mr. Goldberg is a tax specialist in the Firm’s Financial Services and Investment Group. With more than 20 years of experience dealing with alternative investment vehicles, investment management entities and broker-dealers, he specializes in addressing a range of issues involving structuring, transactions and compliance. He is a member of industry groups and committees. Prior to joining Withum, Mr. Goldberg was the Director of Taxation for an international quantitative trading and alternative investment organization.

Suzy Lee, CPA, MST, Senior Tax Manager
Untracht Early, Florham Park, N.J.

Ms. Lee is experienced in tax advisory services for a varied array of financial services companies and executives including private equity funds, commodities and futures traders, brokerage firms, investment advisors, hedge funds, and multinational financial services organizations. She has specialized knowledge in conducting reviews of both partnerships and corporations with particular focus on engagements that have federal and multi-state compliance, tax estimation, tax planning, and consulting as components. Previously, she spent nearly 15 years with a Big Four as an Asset Management Alternative Investments Director where she served as a tax advisor to financial services companies in the private equity, hedge fund, broker-dealer, investment, and commodities areas.

Stacy L. Palmer, CPA, MBA, MST, Senior Tax Manager
Untracht Early, Florham Park, N.J.

Ms. Palmer's areas of focus include both corporate and individual taxation. She offers guidance on effective tax planning and tax structuring opportunities and assists her corporate clients with related individual tax matters. Previously, she worked at a Big Four accounting firm as a member of the Internal Audit group and Tax department. 


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