# Hedge fund taxes



## Banalanal (Mar 28, 2011)

I have money in a few hedge funds. I did not receive dividends or withdraw any capital gains realized on the year, rather let the money compound. Do the gains need to be declared? Anything regarding their existence need to be declared?


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## andrewf (Mar 1, 2010)

Were there any distributions that you reinvested, or were there just no distributions. It's unlikely a hedge fund would have no distributions. 

If there were distributions, you should be receiving a tax slip. They should also have something on their site about taxation of distributions.


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## Banalanal (Mar 28, 2011)

I just called the CRA and they tell me all gains from the (hedge) funds, need to be declared, even if I don't receive a capital gain or dividend. I highly doubt this is true, right? Aren't these gains deferred until I sell my shares of the fund or receive a dividend? One is based in Canada, two are in BVI and Caymans.

Thanks.


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## Eclectic12 (Oct 20, 2010)

I suspect the CRA agent meant receiving a cash payment and/or possibly more units.

The articles below as part of the broader discussion, talk about similar situations.
http://www.theglobeandmail.com/glob...s-if-my-mutual-fund-lost-money/article535832/
http://www.taxtips.ca/personaltax/investing/taxtreatment/mutualfunds.htm
http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm

Cheers


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## Banalanal (Mar 28, 2011)

Called CRA again, got someone more competent. Problem solved. No taxes unless disposition.


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## Guban (Jul 5, 2011)

Haven't seen a study for CRA, but the IRS often answers questions incorrectly. I've seen error rates cited as 20-40%. Wow!

http://articles.sun-sentinel.com/1989-03-17/news/8901140965_1_irs-employee-taxpayers-tax-code


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## andrewf (Mar 1, 2010)

I'm not sure asking CRA is a good idea. Nothing they say can be used to defend yourself if they challenge anything. They are not responsible for their own incompetence. 

I'd suggest that if you are planning to be 'aggressive' in how you report income, you may want to consult a good tax accountant beforehand. It might save you legal fees and hassle down the road.


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## el oro (Jun 16, 2009)

Tax treatment of your hedge fund depends on the legal structure (partnership, trust, or corporation). ie. A limited partnership hedge fund is not taxed directly and so each partner is responsible for reporting their share of realized gains, losses, dividends and interest income, regardless of actual partnership distributions. In this case, you should expect to receive a T5013 slip that will summarize your share.

I could be as wrong as those CRA guys though. I second the suggestion to consult a tax professional.


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## Canadian (Sep 19, 2013)

Guban said:


> Haven't seen a study for CRA, but the IRS often answers questions incorrectly.


Not many CRA employees at this level (answering inquiries, etc.) have an accounting or tax background. Even those who do, I'm not sure they have continued to build on undergraduate education.


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