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Renaissance Explores Settlement as IRS Seeks Billions in Taxes

51 points by jpn 7y ago

chollida1 7y ago
This has been discussed more than a few times here. I've written my thoughts on this. its either very cunning or blatantly thumbing your nose at the tax code depending on where you sit. Long story short, I think when the tell all book for RenTech is written you'll find that they are very smart but tax avoidance accounted for a much larger share of their returns than most people would expect. > https://news.ycombinator.com/item?id=9859620#9859701 https://news.ycombinator.com/item?id=9859620#9859701 > https://news.ycombinator.com/item?id=13445232#13445506 https://news.ycombinator.com/item?id=13445232#13445506
- gimmeThaBeet 7y ago
  It's not great since the IRS is mad and feels cheated, but I think I'm in the 'very cunning' camp. I'm always interested in ways peoples use derivatives. If people think RenTech is just that much smarter than them, and they're half right, because a main part was they were doing kind of straightforward and shady tax strategies, I dunno, that sounds terrific.
- deleted 7y ago
  [deleted]
- djakjxnanjak 7y ago
  Isn’t RenTech’s total return something like 35% annually over decades? Seems like tax savings could account for at most one year of that.
  - chollida1 7y ago
    No, assuming all their trades are short term, probably not correct, and assuming this basket option allows them to make short term trades look like long term. then they are saving the long term minus the short term rate each year, so 40% - 25% = 15% So this saves them, or makes then an additional, 15% each year on taxes. So a 35% gain each year becomes a 20% return each year. That's pretty darn significant and if true makes their returns fall in line with many other of their peers, which also means they no longer look like the superstar fund that some people make them out to be.
    - djakjxnanjak 7y ago
      I don’t think the math works that way. Suppose your return is 35% after paying the long term tax rate. This implies your pre-tax return was .35/(1-.25) = 46.66. Now instead pay the short-term rate and get 46.66 * (1-.4) = 28%. So the return drops from 35% to 28%, which is still mind-boggling (even 20% over decades would be extremely impressive).
      - chollida1 7y ago
        Yes your right, you'll even notice I made up the tax amounts as I was on my phone. The point I was trying to make is that the tax rate does significantly affect the returns and once accounted for puts them back in line with some of their peers if account for this.
jonathankoren 7y ago
> A bipartisan Senate panel estimated in 2014 that Medallion investors underpaid their taxes by some $6.8 billion over more than a decade by masking short-term gains as long-term returns. Holy shit. That 10 year number is the equivalent of the NSF’s entire budget. [0] This is t an accident. It’s criminal. And it’s not a surprise given that IRS enforcement has been declining over a decade and focusing on small taxpayers rather than wealthy individuals and corporate tax payers.[1] [0] https://www.nsf.gov/about/budget/fy2018/ https://www.nsf.gov/about/budget/fy2018/ [1] https://www.propublica.org/article/earned-income-tax-credit-irs-audit-working-poor https://www.propublica.org/article/earned-income-tax-credit-...
jpn 7y ago
Why hasn't anyone started a Betterment for basket options?
- omeze 7y ago
  Could you elaborate on this? What would it offer?
  - jpn 7y ago
    They would offer basket options so that anyone could make short term capital gains looks like long term capital gains.
walshemj 7y ago
This from a UK perspective weird why is basically a collective investment scheme liable to pay any CGT at all - isn't that the individual investors liability. And in this case why are not all other funds being targeted.
- deleted 7y ago
  [deleted]

51 points by jpn 7y ago

This has been discussed more than a few times here. I've written my thoughts on this. its either very cunning or blatantly thumbing your nose at the tax code depending on where you sit. Long story short, I think when the tell all book for RenTech is written you'll find that they are very smart but tax avoidance accounted for a much larger share of their returns than most people would expect. > https://news.ycombinator.com/item?id=9859620#9859701 https://news.ycombinator.com/item?id=9859620#9859701 > https://news.ycombinator.com/item?id=13445232#13445506 https://news.ycombinator.com/item?id=13445232#13445506

gimmeThaBeet 7y ago
It's not great since the IRS is mad and feels cheated, but I think I'm in the 'very cunning' camp. I'm always interested in ways peoples use derivatives. If people think RenTech is just that much smarter than them, and they're half right, because a main part was they were doing kind of straightforward and shady tax strategies, I dunno, that sounds terrific.
deleted 7y ago
[deleted]
djakjxnanjak 7y ago
Isn’t RenTech’s total return something like 35% annually over decades? Seems like tax savings could account for at most one year of that.
- chollida1 7y ago
  No, assuming all their trades are short term, probably not correct, and assuming this basket option allows them to make short term trades look like long term. then they are saving the long term minus the short term rate each year, so 40% - 25% = 15% So this saves them, or makes then an additional, 15% each year on taxes. So a 35% gain each year becomes a 20% return each year. That's pretty darn significant and if true makes their returns fall in line with many other of their peers, which also means they no longer look like the superstar fund that some people make them out to be.
  - djakjxnanjak 7y ago
    I don’t think the math works that way. Suppose your return is 35% after paying the long term tax rate. This implies your pre-tax return was .35/(1-.25) = 46.66. Now instead pay the short-term rate and get 46.66 * (1-.4) = 28%. So the return drops from 35% to 28%, which is still mind-boggling (even 20% over decades would be extremely impressive).
    - chollida1 7y ago
      Yes your right, you'll even notice I made up the tax amounts as I was on my phone. The point I was trying to make is that the tax rate does significantly affect the returns and once accounted for puts them back in line with some of their peers if account for this.

jonathankoren 7y ago

> A bipartisan Senate panel estimated in 2014 that Medallion investors underpaid their taxes by some $6.8 billion over more than a decade by masking short-term gains as long-term returns. Holy shit. That 10 year number is the equivalent of the NSF’s entire budget. [0] This is t an accident. It’s criminal. And it’s not a surprise given that IRS enforcement has been declining over a decade and focusing on small taxpayers rather than wealthy individuals and corporate tax payers.[1] [0] https://www.nsf.gov/about/budget/fy2018/ https://www.nsf.gov/about/budget/fy2018/ [1] https://www.propublica.org/article/earned-income-tax-credit-irs-audit-working-poor https://www.propublica.org/article/earned-income-tax-credit-...

jpn 7y ago

Why hasn't anyone started a Betterment for basket options?

omeze 7y ago
Could you elaborate on this? What would it offer?
- jpn 7y ago
  They would offer basket options so that anyone could make short term capital gains looks like long term capital gains.

walshemj 7y ago

This from a UK perspective weird why is basically a collective investment scheme liable to pay any CGT at all - isn't that the individual investors liability. And in this case why are not all other funds being targeted.

deleted 7y ago
[deleted]