Treasury to issue guidance to prevent hedge fund managers from exploiting tax law

Treasury to issue guidance to prevent hedge fund managers from exploiting tax law
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Treasury Secretary Steven MnuchinSteven Terner MnuchinWorld Bank approves billion-plus annual China lending plan despite US objections On The Money: Congress races to beat deadline on shutdown | Trump asks Supreme Court to shield financial records from House Democrats | House passes bill to explicitly ban insider trading Hillicon Valley: Pelosi works to remove legal protections for tech companies from USMCA | Treasury sanctions Russian group over 0 million hack | Facebook sues Chinese individuals for ad fraud | Huawei takes legal action against FCC MORE said that his department will issue guidance to prevent hedge fund managers from exploiting the tax law's new limits on the carried interest tax break.

"We will have that resolved," he said Wednesday at a Senate Finance Committee hearing.

Carried interest is the profit investment managers get for performing the service of managing funds. Under federal tax law, it can be taxed at lower capital gains rates rather than ordinary income rates.

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President TrumpDonald John TrumpTrump says he will 'temporarily hold off' on declaring Mexican drug cartels as terror organization House Judiciary Committee formally receives impeachment report Artist behind gold toilet offered to Trump sells banana duct-taped to a wall for 0,000 MORE said during his campaign that he wanted to eliminate the carried interest tax break, but the tax law he signed in December didn't do that.

The new law requires investments to be held for at least three years to get the capital gains rate, however, instead of at least one year under the old law. That longer holding period doesn't apply if carried interest is held by a corporation rather than an individual.

Bloomberg reported on Wednesday that hedge fund managers are looking at exploiting the new provision by trying to put their carried interest into S-corporations so that they don't have to hold the investments for three years to get the tax break.

Senate Finance Committee ranking member Ron WydenRonald (Ron) Lee WydenOvernight Health Care — Presented by Johnson & Johnson – House progressives may try to block vote on Pelosi drug bill | McConnell, Grassley at odds over Trump-backed drug pricing bill | Lawmakers close to deal on surprise medical bills Congressional leaders unite to fight for better future for America's children and families McConnell, Grassley at odds over Trump-backed drug bill MORE (D-Ore.) asked Mnuchin about the Bloomberg report.

"We already have hedge fund managers, according to Bloomberg, showing up with ideas for an even bigger loophole for the fortunate few," he said.

Mnuchin replied that he's already met with the IRS and Treasury's tax-policy office about the Bloomberg article.

"The IRS and tax policy intends to send out within the next two weeks guidance that we do believe that taxpayers will not be able to get that loophole," he said.