IRS Fights Hedge-Fund Tax Maneuver Once Used by Renaissance

The government Wednesday labeled the “basket options” strategy of converting short-term capital gains and ordinary income into lighter-taxed long-term gains as a “listed transaction.

The Internal Revenue Service (IRS) building stands in Washington, D.C., U.S., on Wednesday, April 6, 2011. The IRS would have to suspend tax audits, the Small Business Administration's processing of loan applications would be halted and National Parks would close if the federal government is forced into a partial shutdown because of the budget impasse in Congress.
Photographer: Andrew Harrer/Bloomberg

Provide news feedback or report an error

Confidential tip?

Send a tip to our reporters

Site feedback:

Take our Survey

By Richard Rubin

July 8, 2015 at 7:30 PM UTC

Updated on

July 8, 2015 at 9:55 PM UTC

This article is for subscribers only.

A tax strategy once used by the hedge fund Renaissance Technologies is attracting a new level of scrutiny from the IRS.

The government Wednesday labeled the “basket options” strategy of converting short-term capital gains and ordinary income into lighter-taxed long-term gains as a “listed transaction.” That requires anyone who uses it to declare the maneuvers on their tax returns and imposes penalties for those who don’t.