(1888PressRelease)
November 16, 2007 - The US Inland Revenue Service (IRS) is investigating tax returns of private equity firms and hedge funds, in a move that could lead to further regulation of the alternative investment sector.
The IRS probe will focus on whether funds structured stock swaps improperly to avoid withholding taxes, as well as if loan terms were dictated to banks prior to agreeing to purchase loan portfolios, according to a report from the Bloomberg news agency.
Also to be investigated is whether the firms breached rules to classify income as capital gains to take advantage of the lower rate.
An e-mailed statement seen by the news agency said: "The Service seeks to identify any areas of possible non-compliance in the income tax reporting of hedge fund and private equity fund investors and managers, as well as possible non-compliance in the reporting of withholding obligations."
News of the probe comes amid increasing pressure from Capitol Hill for a change to taxation legislation for the two industries.
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