Have a Tax Question? Ask a Tax Expert
Since the gram-Leach Bliley act and other privacy initiatives, the fund could actually get in a lot of trouble publishing who their investors are
Now, if the INVESTOR has to make their investments public, like with a public company or some charities...
hmm. okay. so can you walk through a hypothetical with me
you might get to it that way
if an individual investor invests in a fund and benefits from it, i.e., makes a profit, where and when is that reported on tax documents?
OK, yes, the interest from interest bearing investments would be put on a 1099 int
for example, if dividends accrue for the investor in the fund, are those dividends necessarily reported on the investor's return, or do they accrue to the fund, and then they are reported when withdrawn
any proceeds of sale of the shares of the fund itself would be sent to them (and IRS) on a 1099B
actually the dividends would be placed on a 1099div regardless
it's not really PUBLIC information though
fuds have to report regardles of whether the dollars are withdrawn or not ... it's kind of like profits in an S-Corp
even if you don't physically distribute, you have to pay the tax
Now, if the irs put a lien or levied funds THAT information is filed with the court and become public
If you have access to the persons tax documents though (as in the case of a divorcing spouse) you would certainly see everything there
If you give me a little (not identifying information, but) more information about the reason you need it or a scenario where there's a certain relationship, I might be able to help you work through it
there are verious relationships (fiduciary to client,etc) where there's a requirement of full disclosure, for example
still with me?
it would go on a 1099 to the individual EVEN if the individual didn't receive cash?
the fund has to pay the tax? or the individual does? what if the fund is authorized to pay the tax from the proceeds of the fund, even if undistributed. that is the case here.
i'm trying to figure out how this individual has invested significantly in a fund but may not have received a 1099 from them
hi, still with you.
OK hang on and let me get the regs
i didn't know you were chatting on there!
yes, it's for a divorce, but the response is: it would be on my tax return.
however, i know he has invested in the fund. I have the Investor's rights agreement and the stockholders agreement
I guess I should look on those again re tax reporting
They MUST provide that information see this:
New Cost Basis Reporting Challenge for Hedge Funds, Partnerships and Corporations: IRS Form 8949 & New Form 1065 Schedule D:
IRS Form 8949 requires taxpayers to detail and segregate capital gains and losses on a transaction-by-transaction basis (rather than by summarizing and referencing an attachment) and into separate categories for those short-term gains and losses for which Form 1099-Bs are received that report both gross proceeds and cost basis, those for which Form 1099-Bs are received that report gross proceeds but not cost basis and those for which no Form 1099-Bs were received. Similar segregation is required for long-term gains and losses.
There are mor rewuirements for funds, regardless of how they're organized than ever before
if NO interest was paid by any of the investment inside the fund
so the individual will have to receive and report to the its an irs form 8949 regardless of whether he withdrew money from the fund?
if nothing was sold so that there;s no 1099B
You COULD have a situatin where there was no reporting to be done (very unlikely) but possible
because to me that says "taxpayer," which could mean the fund itself in this case
lets say they help the same investments for the full tax year, and none of thos inestments paid a dividen
no, funds pass everything through to the investor
I know the investments paid a dividend for sure
then there would be a 1099-DIV
and you could (by knowing the dividenper share and share price_ "Back into" the amount invested
but the investor's rights doc says that the fund can hold the investor's investment. You mean that they send an IRS form to the individual investor, even if the fund pays taxes for the investor out of his/her proceeds?
basically, this person is extremely crafty and sophisticated about hiding money and is suppressing income. as soon as the eye is off of him, I'm sure he'll withdraw the money
holding the funds (as a custodian) and paying the taxes are different
the only way the find would pay it's own taxes, would be if it were a -Corp
and even then any dividends paid to the shareholder would be taxable and reported on 1099-DIV
it's actually an LLP.
Thats a limited Liability Partnershi[p
pays NO taxes at the organization level ... everything is passed through to the investor on a K-1 form which is used then to file their own taxes
but if the dividends are not paid out, and just held in the fund instead for release at later date, and fund is authorized to pay on investor's behalf, investor would STILL receive 1099?
it's an s-corp inside an llp
if the LLP used up it's revenues on it;s own expensew and had no profit ....?
sorry this is annoying. i will pay for it!
Both are pure pass throughs
Only C-Corps and IRRevocable trusts pay their own taxes at corporate and trust tax rates and brackest respectively
sole proprietorships, S-Corps, LLCs and all partnerships are pass throughs
all taxes are paid at eh investor level even if NOT distributed
there will be either 1099s or k-1s
You are going to be annoyed, but I am fairly positive that the fund keeps the money in a Trust and that is how it pays its own taxes.
to look for
does that change anything
if the trust is IRRevocable, that's possible, but in that case neither he nor you can accese dollars ... If he can pull the dollars he either pays taxes ont it as its distributed or when the profits are made
IRREvocable trusts are just that .. left for future generations etc.... no ownership invested in the grantor of the trust
But again there are LOTS of times where
if nothing is sold
and no dividends are paid
there's nothing to report
(and if no interest is borne)
okay. they were paid, but not distributed to investors
that's a general rule of almost all pooled investments, mutual funds, hedge finds, etc... the dividends can be reinvested in the fund BUT there's a 1099 where the investor has to pay the tax on the dividend (makes the taxes much less when it's liquidated because they are paying the tax al alng the way)
Just had a thought
if the investment is inside a qualified plan (401(k), IRA, etc) then there are NEVER any tax reporting documents unless the funds are distributed from the plan ... no matter what the investment INSIDE the plan is
when they finally DO distribute the there's a 1099-R
THAt could explain it
Then, there should still be (as with the others) a statement
but no 1099s etc.
Okay- i just saw it. the fund is the stockholder of record until the shares are sold AND dividends are disbursed (happens at same time). the share value and dividends are held in a "trust corporation." once sold, proceeds are distributed to underlying shareholders
aahhhh theres the corporation piece
mus be a distribution
Yes, this is possible.
The only paper (could even be a web site) is the statement
do you mean that the proceeds of this fund benefit an entity like a pension?
Hmm, I have to think what else could be a qualified plan
But yes, you've pinned it down, they've use dthe corporate entity to hold everything in retain earnings... the corporation is paying its own tax thereby lessenting what will come to him, but no reporting to him until a distributon
qualified plan is a little different
IRA, ROTH IRA, pension, oney purchase plan, profit sharing
SEPP (Simplified Employee Pension)
SIMPLE IRA, SIMPLE 401(k)
annuities also won't have any tax reporting until distribution
okay, awesome. thank you so much. Fantastic.