March 15 (Bloomberg) -- John Paulson, the New York hedge-fund manager who was considering a move to Puerto Rico, said he won’t set up a permanent residence on the island.
“In light of the media attention surrounding a relocation to Puerto Rico, he has no plans to move to Puerto Rico,” Paulson & Co., John Paulson’s hedge fund, said today in a statement. “While Mr. Paulson has considered real estate investments and has vacationed on the island, he has no plans to establish a permanent residence there.”
Bloomberg News reported March 11 that Paulson, a lifelong New Yorker, had been exploring a move to Puerto Rico, where a new law would eliminate taxes on gains from the $9.5 billion he has invested in his own hedge funds, according to four people who have spoken to him about a possible relocation. The 57-year-old recently looked at real estate in the exclusive Condado neighborhood of San Juan, an area that’s home to St. John’s School, an English-language private academy, the people said.
Paulson rose to fame in 2007 with a successful bet that subprime mortgages would tumble. The wager produced $15 billion in profits for his hedge fund and turned him into one of the 100 richest people in the world, with an estimated wealth of $11.2 billion, according to the Bloomberg Billionaires Index.
The manager lost his touch in the past two years, posting losses in several strategies in 2011 and 2012, as bets on an economic recovery in the U.S. and a breakup of the euro proved wrong or poorly timed. Since the end of 2010, he has lost 64 percent in his Advantage Plus fund, once the firm’s largest. This year, his $900 million Gold Fund has dropped 26 percent amid a slump in the metal, after more than a decade of gains. Assets overseen by the firm have declined to $18 billion from a peak of $38 billion in 2011.
The Puerto Rican tax law was designed to attract people like Paulson, who earn most of their money from investments. The federal rate for top earners in the U.S. is 23.8 percent on long-term capital gains and dividends and 39.6 percent on ordinary income, which includes short-term gains and interest. State and local taxes can push the marginal rate for rich New Yorkers higher.
Under the new law, any capital gains accrued after a person moves to the island would be tax free. Dividend and interest income paid by U.S. companies would still be subject to U.S. federal taxes, though would not be taxed locally.
Ten wealthy individuals have already relocated to Puerto Rico to take advantage of the new laws, and 40 more are currently talking to the government about moving and have brought their families to look at housing and schools, said Alberto Baco Bague, Secretary of Economic Development and Commerce of Puerto Rico. About 35 percent are hedge-fund managers, he added.
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