Tax Court clarifies investor control rules |

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Tax Court clarifies investor control rules

On June 30, 2015, the US Tax Court issued a 92-page opinion on the application of the “investor control” doctrine to a private placement life insurance policy where the policy premiums were used “to purchase investments in startup companies with which (the taxpayer) was intimately familiar and in which he otherwise invested personally and through privateequity funds which he managed” (Webber v. Commissioner, T.C., No. 14336-11, 144 T.C. No. 17, 6/30/15). The taxpayer exercised his control over the policy separate account through a not too elaborate “protocol” in which the taxpayer’s “investment advisor,” accountant and lawyer acted as his intermediaries in the selection, purchase and sale of the investments held in the policy account. This was not a difficult case in that the IRS offered 70,000 emails to or from the taxpayer’s investment manager, lawyer, accountant and insurance carrier containing his investment “recommendations”, all of which were followed. Additional evidence also indicated numerous unrecorded telephone calls designed to eliminate any “paper trails”.

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About The Hedge Fund Journal

INFORMING THE HEDGE FUND COMMUNITY With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry. Highlights of Issue 106: Championing Customization: Amundi Alternative Investments Tackling UK Farming’s Funding Shortfall: Helping reform UK’s agriculture and alternative energy industries Shareholder Activism as Private Equity Allocation: The resurgence of the strategy a decade after first rising CME Group Crude Oil Spread Options Suite: Volumes advance with screen-based trading growing fastest Adding Dynamic Beta to Double Alpha: UBS Equity Opportunity Long Short UCITS