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7 Jan 2011

Hedge Fund Tax Alert: Reporting of ‘Specified Foreign Financial Assets

New York ( – U.S. taxpayers with ownership in foreign hedge funds, investments and assets may be affected by the Foreign Account Tax Compliance Act (“FATCA”), which was included as part of the 2010 Hiring Incentives to Restore Employment (“HIRE”) Act, according to hedge fund adviser Decosimo.

Hedge fund managers may need information on related costs and penalties associated with noncompliance.

A short summary of the key points are:

* WHO is subject: individuals (but may be expanded to entities by regulations).

* WHAT is subject: any “specified foreign financial asset” which includes foreign bank or securities, accounts, any stock or security issued by a non-US person, any financial instrument or contract held for investment where the issuer or counterparty is a non-US person and any interest in a foreign entity with total value of all accounts of $50,000 or more.

* WHEN is effective date: Tax filing year 2011 for most individuals.

* WHERE is this reported: Form 1040 package (specific form not yet drafted).

* WHY should taxpayers comply: potential penalties are substantial and statute of limitations may be involuntarily extended.

Full Alert Here: Reporting of ‘Specified Foreign Financial Assets’ (22KB)