Renaissance executives agree to pay around $7 billion to settle tax dispute with IRS -source

September 2, 2021

(Reuters) -Executives of hedge fund Renaissance Technologies LLC could pay as much as $7 billion under an agreement with the Internal Revenue Service, a source familiar with the situation said, following a long-running dispute over the tax treatment of certain derivative transactions.

The firm’s founder, James Simons, who stepped down as the firm’s chairman in January, will also make an additional settlement payment of $670 million, according to a letter obtained by Reuters which was sent to investors from Renaissance’s Chief Executive Peter Brown on Thursday. The news was earlier reported by the Wall Street Journal.

Medallion, Renaissance’s flagship fund, is solely managed internally for friends and family.

The letter, earlier published by the WSJ, said the fund had resolved its longstanding dispute with the IRS regarding the tax treatment of certain Medallion option transactions during 2005-15.

The dispute was over whether investors should be taxed on portfolio gains at the higher short-term capital gain rates, rather than at the lower longer-term capital gain rates of the options themselves.

“We engaged for several years in the IRS Appeals process,” the letter said, but concluded that it was better to agree to the resolution with the IRS “rather than risking a worse outcome, including harsher terms and penalties, that could result from litigation.”

The IRS did not immediately respond to Reuters’ request for comment.

(Reporting by Manojna Maddipatla in Bengaluru, Maiya Keidan in Toronto, Paritosh Bansal and Megan Davies in New York; Editing by Amy Caren Daniel and Chris Reese)

Source Link Renaissance executives agree to pay around $7 billion to settle tax dispute with IRS -source