{"id":7396,"date":"2021-09-03T09:00:36","date_gmt":"2021-09-03T13:00:36","guid":{"rendered":"https:\/\/navesinkinternational.com\/?p=7396"},"modified":"2023-12-20T02:53:21","modified_gmt":"2023-12-20T07:53:21","slug":"7bn-tax-due-renaissance-technology","status":"publish","type":"post","link":"https:\/\/navesinkinternational.com\/2021\/09\/03\/7bn-tax-due-renaissance-technology\/","title":{"rendered":"$7bn tax due &#8211; Renaissance Technology"},"content":{"rendered":"<p><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-7401 alignright size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/10\/James-Simons-Congressional-Hearing-2008.jpg\" alt=\"James-Simons-Congressional-Hearing-2008\" width=\"300\" height=\"199\" \/>Renaissance Technologies has agreed to pay <span style=\"text-decoration: underline;\">$7bn in tax to the IRS<\/span>.<\/p>\n<p>That&#8217;s a nice chunk of change, even for them.<\/p>\n<p>&nbsp;<\/p>\n<h3>Here is the issue at stake<\/h3>\n<ul>\n<li>Trading profits can be taxed at the <span style=\"text-decoration: underline;\">short-term capital gains<\/span> rate (&lt;1Y, ordinary income) or at the long-term capital gains rate (&gt;1Y, likely 20%).<\/li>\n<li>At stake here is Rentech&#8217;s <span style=\"text-decoration: underline;\">entire option trading activity<\/span>. Each trade is definitely held for less than a year, but <span style=\"text-decoration: underline;\">all these trades are aggregated into one single derivative<\/span> (of dynamic composition), which lasts many years.<\/li>\n<li>The IRS has been <span style=\"text-decoration: underline;\">characterized the activity as short-term<\/span>, while Rentech argued that it was long-term.<\/li>\n<li><span style=\"text-decoration: underline;\">In 2015, Congress changed the law<\/span> to make the issue more clear &#8211; and <span style=\"text-decoration: underline;\">short-term<\/span>.<\/li>\n<li>The IRS made the rule <span style=\"text-decoration: underline;\">retroactive to January 2011<\/span>.<\/li>\n<\/ul>\n<p>RenTech has finally settled on $7 bn, to <span style=\"text-decoration: underline;\">avoid a larger payout<\/span> if he lost the tax court proceedings.<\/p>\n<p>The liability will fall on the fund&#8217;s investors, aka the companies employees but mostly Mr. Simmons himself.<\/p>\n<p>&nbsp;<\/p>\n<h4>Related Navesink article<\/h4>\n<ul>\n<li>June 2021: <a href=\"https:\/\/navesinkinternational.com\/2021\/06\/22\/renaissance-underperformance-and-redemptions-not-for-everyone\/\" target=\"_blank\" rel=\"noopener\">Renaissance underperformance and redemptions \u2013 not for everyone<\/a><\/li>\n<\/ul>\n<h4>Reference<\/h4>\n<ul>\n<li>New York Times, September 2, 2021: <a href=\"https:\/\/www-nytimes-com.cdn.ampproject.org\/c\/s\/www.nytimes.com\/2021\/09\/02\/business\/renaissance-irs-robert-mercer-james-simons.amp.html\" target=\"_blank\" rel=\"noopener\">Hedge Fund\u2019s Insiders Agree to Pay as Much as $7 Billion to I.R.S.<\/a><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><iframe style=\"background: white;\" src=\"https:\/\/www-nytimes-com.cdn.ampproject.org\/c\/s\/www.nytimes.com\/2021\/09\/02\/business\/renaissance-irs-robert-mercer-james-simons.amp.html\" width=\"100%\" height=\"650\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Renaissance Technologies has agreed to pay $7bn in tax to the IRS. That&#8217;s a nice chunk of change, even for them.<br \/>\nHere is the issue at stake.<\/p>\n","protected":false},"author":1,"featured_media":7401,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14,11,13],"tags":[17,234,304,247,305],"acf":[],"_links":{"self":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7396"}],"collection":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/comments?post=7396"}],"version-history":[{"count":2,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7396\/revisions"}],"predecessor-version":[{"id":13148,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7396\/revisions\/13148"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media\/7401"}],"wp:attachment":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media?parent=7396"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/categories?post=7396"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/tags?post=7396"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}