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Hedge Fund Managers Pay Only A 15% Income Tax

If you're a lawyer, doctor, or small businessperson who had a really good year, you'll pay a 35% income tax on your income.  If you manage a hedge fun, you'll pay 15% on your income.  That's not a typo.  How can this be?Hedge fund managers are paid on the 2-and-20 principle: They get 2% of the value of the hedge fund as compensation, no matter what.  They also get 20% of any profits the hedge fund makes.  For example: Hedge Fund A is valued at $10 billion in Dec. 2009. Hedge Fund Manager receives $200 million just for showing up to work. Hedge Fund A is valued at $12 billion in Dec. 2010. Hedge Fund Manager receives $400 million as a management fee. The hedge fund manager will pay a 15% tax on his fees because a tax loophole holds that hedge fund compensation is treated as long-term capital gains...continue to full post

Full post as published by Crime & Federalism on June 17, 2010 (boomark / email).