PRACTICE AREA - Tax


Tax

Kleinberg Kaplan has a sophisticated and broad Tax Practice. We advise individuals, entities, trusts, estates and tax-exempt organizations on federal, state, local and international tax issues. We provide guidance not only on the “rules” but also on how to apply those rules in practical ways to achieve our clients’ goals and objectives.

Kleinberg Kaplan is particularly well known for its experience in tax issues related to hedge funds, private equity fund, and real estate investment funds, as well as tax planning for the managers of those funds.

Our Tax Practice also advises on:

  • Corporate transactions: mergers, acquisitions and dispositions
  • Real estate transactions
  • Securities investments and derivatives
  • Executive compensation and non-qualified deferred compensation
  • Inbound and outbound investments and transactions
  • Tax controversies, including federal, state and city tax audits
  • Private placement life insurance and annuities

Hedge Funds

We have provided comprehensive tax advice to hedge funds since the 1970s and continue to provide tax advice to emerging managers as well as established managers. We counsel funds ranging in size from very small to some of the largest in the world.

Some of the tax issues we address for our fund clients are:

  • Structuring and restructuring funds
  • Structuring and restructuring management companies
  • Taxation of investments
  • Management compensation
  • Employee compensation
  • ERISA
  • Foreign Account Tax Compliance Act (FATCA)
  • Seeding fund managers and mergers and acquisitions of fund managers
  • Domiciliation in Puerto Rico and other jurisdictions
  • Insurance dedicated funds
  • Investor versus trader questions

Private Equity Funds

Private equity funds raise many tax issues similar to hedge funds but also have their own unique tax issues. The partnership agreement tends to be more complex and the incentive allocation (referred to in the PE context as a “carry”) is different. Also, the types of contemplated investments are extremely important in determining the optimal structure and addressing other tax issues.

Real Estate Partnerships and Investments

Our Tax Practice works closely with our Real Estate Practice on real estate partnerships and real estate investments. Key factors for structuring include: the location of the real estate; the type of real estate; the expected exit strategy, and the location of the investors.

We also advise our clients on Foreign Investment in Real Property Tax Act (FIRPTA) issues and help them establish private REITs.

Corporate Transactions: Mergers, Acquisitions and Dispositions

We regularly provide tax advice regarding buying and selling assets and on taxable and tax-free mergers and acquisitions.

Securities Investments and Derivatives

We advise funds regarding the tax treatment of their investments and potential investments. We address issues arising under many of the complex provisions in the Internal Revenue Code that potentially affect the taxation of investments, including, Section 1221 (capital asset or not), Section 1259 (constructive disposition rules), Section 1260 (constructive ownership rules), Section 1091 (wash sales).

Executive Compensation and Non-qualified Deferred Compensation

How an employer compensates its employees can be critical to any business. We provide advice regarding the tax implications of employment agreements, including under Section 409A of the Internal Revenue Code. We advise our clients how to make employees owners of some of the business and on alternatives such as phantom equity as well as on the tax implications of vesting, clawbacks, etc., and related planning issues such as Section 83(b) elections.

In the hedge fund context, we advise our clients about various ways to share the incentive allocation with their employees and how to have employees invest in the fund. We explain the implications and strategies so that compensation can be used to align the interests of employees and employers.

Inbound and Outbound Investments and Transactions

There are tax planning considerations for foreign investment in the U.S. (inbound investing) and U.S. investment abroad (outbound investing). We address issues concerning doing business considerations, tax treaties, the Foreign Investment in Real Property Act (FIRPTA), withholding taxes, estate tax, passive foreign investment companies (PFIC) and controlled foreign corporations (CFC), among others.

Tax Controversies, Including Federal, State and City Tax Audits

We handle tax audits for hedge funds, hedge fund managers, operating companies, individuals (including state residency audits) and other taxpayers. We advise our clients on what to do when they receive a notice of audit from a tax authority and how to respond.

Private Placement Life Insurance and Annuities

We have over 25 years of experience in private placement life insurance (PPLI) and private placement variable annuities (PPVA) as well as insurance dedicated private investment funds established for investments exclusively by PPLI and PPVA. We advise our clients on the benefits of PPLI and PPVA as well as issues surrounding investor control and diversification requirements.

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