In today’s episode of Adam Talks, Adam Bergman, Esq. discusses the IRS attack on Steven Cohen to pay millions in self-employment tax from hedge fund investments, and how this may impact you.
The IRS Attacks New York Mets’ Owner and the Impact on All Investment Funds
The episode discusses the case of Stephen Cohen, the owner of the New York Mets, who is potentially facing an additional $10 million in taxes on his earnings from 2015 and 2016. This case has significant implications for investment funds, such as hedge funds and family offices, as the IRS has become more aggressive in going after limited partnerships and arguing that their income is subject to self-employment tax.
The IRS has traditionally exempted limited partners from paying self-employment tax on their distributed share of partnership income, only requiring tax on guaranteed payments for services rendered. However, the IRS is now attempting to stretch the definition of guaranteed payments to include other types of income generated from services rendered.
Stephen Cohen’s case could set a new precedent if the IRS is successful in changing its position and claiming that even passive income from a limited partnership is subject to self-employment tax. Cohen is fighting this claim, as he believes he has not done anything contrary to the rules and that the IRS is going against its own guidelines. The outcome of this case is closely watched by investment fund associations and family offices, as it could have significant implications for their tax liabilities.
Despite the IRS’s aggressive stance on self-employment tax, Adam Bergman suggests that Cohen is likely to win the case. He argues that Cohen has a strong defense based on the facts and the IRS’s own guidelines. However, Bergman acknowledges that the IRS has significant financial resources and is under pressure to generate more revenue, which may influence the outcome.
Bergman believes that Cohen has the power to fight the IRS and suggests that the law is on his side. He expresses confidence in Cohen’s ability to fight back due to his financial resources and discusses how the IRS’s increasing aggressiveness and funding may not be favorable for ordinary individuals.
In conclusion, this case highlights the ongoing tension between taxpayers and the IRS regarding the interpretation and enforcement of tax laws. It has implications for investment funds and could potentially change the way self-employment tax is applied to limited partners’ income. The outcome of Cohen’s case will be closely watched by the industry, and it will be interesting to see if he can successfully challenge the IRS’s position. To learn more about this story, listen to the podcast!