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New York - George Soros is giving his foundation a big inflow of money in part to minimise a tax bill hedge fund managers are facing this year.
Money managers have until the end of the year to pay taxes on fees they earned from investors in offshore funds and had deferred payment on. Many are now turning to charitable donations - including to their own foundations - to help offset the levies coming due.
Soros, founder of $26bn Soros Fund Management, has transferred almost $18bn to his Open Society Foundations over the past several years, according to a foundation official.
Tax experts have estimated that collectively managers have at least $100bn offshore, based on tax-advisers’ conversations with clients, brokers and fund-service providers. A New York-based money manager such as Soros could be subject to a top federal income tax rate of 39.6%, plus state and city levies.
When Congress eliminated the tax break in 2008, it gave hedge fund managers until December 31, 2017 to bring the cash home and pay the accumulated taxes.
At the end of 2013, Soros, 87, had amassed $13.3bn in his Soros Fund Management through the use of deferrals, according to Irish regulatory filings. It’s unclear how much more that pool of money has grown since then. The sum of the total transfer to date was reported earlier on Tuesday by the The Wall Street Journal.
A Hungarian émigré, Soros started his career in New York City in the 1950s and gained a reputation for his investing prowess in 1992 by netting $1bn with a bet that the UK would be forced to devalue the pound.
His Quantum fund returned an average of 20% annually until 2011, when he returned outside investors’ money and converted his firm into a family office investing solely on behalf of Soros and his family members and his Open Society Foundations, a worldwide network of philanthropies that promotes democracy, the rule of law and economic advancement.
Open Society typically gives away about $1bn a year, above the 5% generally required annually of private foundations by the Internal Revenue Service. Soros Fund Management will continue to manage the money it’s transferring to the foundations. The firm has returned 11% annualised in the last decade.
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