Investment Company Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting investment companies.

Posts about Mutual Funds (4)

To Defer or Not to Defer

Posted by admin Oct 15, 2012 6:07:20 PM

The Regulated Investment Company (“RIC”) Modernization Act of 2010 (the “Act” or “RIC Mod”) brought an array of changes beneficial to RICs. Certain of these changes allow RICs more flexibility in electing whether or not to defer or to recognize in the current taxable year certain “late year losses.” Late year losses is a new term introduced into tax parlance by RIC Mod which encompasses all post-October net capital losses, losses on certain enumerated items of ordinary income (such as code section 988 foreign currency losses and the decline in value in an investment in a passive foreign investment company (“PFIC”)) and post-December ordinary losses not so enumerated.

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PCAOB Issues New Standard for Auditor Communications With Audit Committees: What You Need To Know

Posted by admin Sep 11, 2012 4:50:34 PM

Effective two-way communication between audit committees and external auditors is an integral part of the audit process. Such communications improve the ability of the audit committee to provide oversight and provide an opportunity for the auditors to discuss relevant matters with a forum other than management. These types of communications are essential to a high quality audit.

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Should Warrants Be Considered Derivatives? | BBD, LLP

Posted by admin Jul 26, 2012 3:12:00 PM

Current financial markets provide various incentives for entities interested in raising capital for their developing enterprises to offer potential investors. One example of an incentive used is a warrant issued along with a debt instrument. The warrants could theoretically be exercised at a future date for a common stock interest in the company, once the capital raised from the debt issuance begins to bear fruit and the enterprise value increases. For mutual and hedge funds investing in these developing companies, the financial statement disclosure requirements have drastically increased due to the Statement on Financial Accounting Standard No. 161, Disclosures about Derivative Instruments and Hedging Activities (the “Statement or FAS 161”). The Statement has been included in the FASB Codification (the “Code”) under 815-10 Derivatives and Hedging. FAS 161 was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.

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UBTI Issues For RICs and RIC Shareholders- Part III | BBD, LLP

Posted by admin Jul 13, 2012 11:13:37 AM

In this, the third and final post in our series on UBTI issues for RICs and RIC shareholders, we will examine IRS guidance for RICs and REITs on excess inclusion income. As stated in our previous posts on this topic, the most common source of excess inclusion that we believe a RIC may have will typically come from its investment in a mortgage oriented REIT. The rules for passing through excess inclusion income to shareholders for RICs are almost identical for the rules on the same for REITs. RICs with investments in REITs that have mortgage investments could potentially receive excess inclusion allocations from their REIT investments. Therefore, this post will focus on REITs as the source of RIC excess inclusion income. However, a RIC can have excess inclusions from direct investments in taxable mortgage pools or REMIC residual interests, as previously discussed.

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UBTI Issues For RICs and RIC Shareholders- Part II

Posted by admin Jul 6, 2012 2:22:57 PM

In this, the second post in our series of RIC UBTI issues, we give a high level overview of the circumstances where a RIC or RIC shareholder can find themselves subject to tax on UBTI, despite the fact that a RIC generally will act as a UBTI blocker of such income.

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UBTI Issues For RICs and RIC Shareholders- Part I

Posted by admin Jul 3, 2012 4:52:23 PM

The tax treatment of income reported by a regulated investment company (RIC) to its shareholders is for the most part, fairly straightforward. From that perspective, a shareholder of a RIC organized under subchapter M of the Internal Revenue Code is, with some exceptions, treated as a shareholder of any other corporation. However, is a tax exempt entity, which is a RIC shareholder, necessarily treated the same as if it were a shareholder of a corporation? In this three-part series of posts, we will examine the general rules that must be considered by a RIC and its shareholders when a RIC’s investments generate “unrelated business taxable income (UBTI).”

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What You Need to Know About Regulated Investment Companies and Indian Capital Gains Tax

Posted by admin Jun 18, 2012 6:54:23 PM

The Indian Department of Revenue, as required under the India Income Tax Act of 1961 (“the Act”), assesses a tax on short-term capital gains recognized on the sale of Indian securities. The cost of acquisition and holding period must be determined by the first-in-first-out method (“FIFO”). Long-term is any holding period greater than one year. Short-term is any holding period less than one year.

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Investment Management Group Partner John Braun Featured in "Ignites" Q&A: How Should Fund Audit, Compliance Pros Collaborate?

Posted by admin Jun 1, 2012 12:07:00 PM

How should mutual fund audit professionals interface with compliance teams? What would an auditor say are the four things every mutual fund compliance team needs to know to build effective relationships? John Braun, a partner in BBD's Investment Management Group, answers these questions for the latest "Your Q&A" column in "Ignites."

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Investment Management Group Partner Jim Kaiser Participates in Webinar on Current Valuation Issues Regarding Third-Party Pricing Vendors

Posted by admin Apr 4, 2012 10:21:00 AM

Jim Kaiser, a partner in BBD's Investment Management Group, recently recorded a Webinar with Kristin McCann, Compliance Officer for Gemini Fund Services, LLC, discussing the use of a third-party pricing vendor and why we all need to become more of a valuation expert. Jim and Kristin offer valuable insight in the Webinar to both fund management and fund boards.

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BBD Investment Management Group Partner Jim Kaiser Featured in "Ignites" Q&A: Are SOX Challenges Decreasing for Funds?

Posted by admin Mar 29, 2012 3:25:00 PM

Are SOX challenges decreasing for Funds? Jim Kaiser, a partner in BBD's Investment Management Group, answers this question for the latest "Your Q&A" column in "Ignites."

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