From: Richard Kahn

From: Richard Kahn To: Jeffrey Epstein <[email protected]> Subject: Fwd: Tax Alert: Major Tax Case on US Lending Activities of Offshore Funds Date: Wed, 15 Jul 2015 17:49:11 +0000 Richard Kahn HBRK Associates Inc. tel , fax cell Forwarded message From: Sadis & Goldberg Tax Group Date: Wed, Jul 15, 2015 at 1:06 PM Sub'ect: Tax Alert: Major Tax Case on US Lending Activities of Offshore Funds To: ALERT July 15, 2015 Major Tax Case on US Lending Activities of Offshore Funds Heads to the US Tax Court For further information about this Alert, please contact: Steven Etkind Partner 1=1 Alex retinas Please feel free to discuss any aspect of this Alert with your regular Sadis & Goldberg contact or with any of the partners whose names and contact information can be found at the end of the Alert. EFTA00851267 In January of this year, we circulated a Client Alert about an ongoing Internal Revenue Service audit of the US lending and stock distribution (underwriting) activities of an offshore hedge fund in which the IRS had determined that the offshore fund in question was engaged in a US trade or business both with respect to the lending and the underwriting activities, and that neither activity was shielded from US federal income tax by the well known "trading in stocks or securities" safe harbor rules in the Internal Revenue Code. Click on the link to read the alert: http://www.sglawyers.com/admin/PDFs/347.PDF Recent Developments It was recently reported that the IRS issued a deficiency notice to the Cayman Islands hedge fund that was the subject of our prior Client Alert for over $102 million in US income tax. Last month, such hedge fund filed a petition with the US Tax Court, claiming that such deficiency was incorrect because the IRS incorrectly determined that the fund was engaged in a US trade or business by reason of its direct lending and also its underwriting activities. Consequently, if this case is not settled, it is expected that there will be a major Tax Court decision interpreting the scope of the securities trading safe harbor rules, and possibly additional judicial guidance on exactly when lending by offshore funds constitutes a US trade or business. The Takeaway Hedge fund lending and the scope of the securities trading safe harbor rules have been a topic of much discussion among tax practitioners, but such issues have rarely been considered in reported tax cases or published guidance from the IRS. As a result, tax counsel have developed their own standards for how to avoid US trade or business exposure, but such strategies (such as "season and sell") have never been tested in courts. The last major Tax Court decision on the securities trading safe harbor rules (InverWorld Inc. v. Commissioner) was issued in 1996, and the Tax Court's rather strict interpretation of the Code at that time caused many offshore hedge funds to reconsider how to carry on their US activities to avoid US income taxation. The Tax Department of Sadis & Goldberg LLP will continue to monitor developments relating to this matter. If you have any questions about this Alert, please contact Tax partners Steven Etkind at or Alex Gelinas at Sadis & Goldberg LLP Please feel free to discuss any aspect of this Alert with your regular Sadis & Goldberg contact or with any of the partners, whose names and contact information are provided below. Alex Gelinas, Daniel G. Viola Danielle Epstein-Day, Douglas Hirsc Erika Winkler Jamie Kim, Jeffrey Goldber Jennifer Rossanfl, John Araneo, Lance Friedl Mitchell Tara Paul Fascian Ron S. Geffn Sam Lieberm Steven Etkin EFTA00851268 Steven Hutde Yehuda Braunstein, Yelena Maltse If you would like copies of our other Alerts, please visit our website at www.sglawyers.com and choose "Library". Any U.S. federal tax advice included in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal tax penalties. The information contained herein was prepared by Sadis & Goldberg LLP for general informational purposes for clients and friends of Sadis & Goldberg LLP. Its contents should not be construed as legal advice, and readers should not act upon the information in this Tax Alert without consulting counsel. This information is presented without any representation or warranty as to its accuracy, completeness or timeliness. Transmission or receipt of this information does not create an attorney-client relationship with Sadis & Goldberg LLP. Electronic mail or other communications with Sadis & Goldberg LLP cannot be guaranteed to be confidential and will not create an attorney-client relationship with Sadis & Goldberg LLP. Sadi,s & Goldberg LIP 1551 Fifth Avenue, 21st Floor I New York, NY to176 Copyright 2015 Sadis & Goldberg UT Forward this email This email was sent to by Update Profile/Email Address Rapid removal with SafeUnsubscribe'" Privacy Policy. Sadis & Goldberg LLP 551 Fifth Avenue, 21st Floor New York I NY I 10176 EFTA00851269