Taxation of Individual Investors in Private Investment Funds When a Fund Leaves an International Project

In this report, the authors work through the detailed federal income tax rules applicable to an individual investor in a fund with indirect business operations outside the United States. Making simplifying assumptions, they analyze whether and to what extent the individual's return on investment will qualify for preferential tax rates for long-term capital gains and qualified dividends. They consider the effects of certain available tax elections, and thus consider three separate cases that differ from each other based on the treatment of the fund's investment entities as corporations or passthroughs. A table at the end summarizes the results of their analysis