{"text":[[{"start":0,"text":"The US Treasury on Monday took its first concrete steps towards cracking down on a suite of strategies used by wealthy US investors to cut their tax bills."}],[{"start":15.447,"text":"The department warned that it could clamp down on “potentially abusive” tactics and issued a ruling targeting the aggressive use of ETFs to avoid taxable gains."}],[{"start":25.26,"text":"It said in a notice it was probing the use of strategies that “purport to produce tax results that may be inconsistent with the purpose and proper application of the relevant federal tax rules”."}],[{"start":34.392,"text":"In an accompanying ruling, the Internal Revenue Service targeted a strategy known as the 351 conversion, which allows investors with appreciated assets to rebalance their portfolios without incurring taxable gains."}],[{"start":47.186,"text":"“This is a seismic moment in the ETF market,” said Brent Sullivan, an independent tax analyst and editor of the Tax Alpha Insider newsletter."}],[{"start":55.67,"text":"Strategies that help wealthy Americans minimise their tax bills have surged in popularity in recent years, aided by a US stock market boom that has shifted the focus for some investors towards “tax alpha”, or gains derived from lowering tax liabilities."}],[{"start":71.88,"text":"Hedge funds offering tax alpha strategies accrued more than $90bn between the start of 2025 and April this year, according to FT calculations. Since 2021, ETFs created using 351 conversions have raised a total of at least $21bn, according to Tax Alpha Insider."}],[{"start":91.76,"text":"The 351 conversion is one of several strategies that take advantage of the favourable tax treatment of ETFs, which US investors can usually use to avoid paying capital gains tax by trading “in kind” with market makers so that no cash changes hands."}],[{"start":104.656,"text":"But in a ruling on Monday the IRS said it would treat some of these transactions as taxable exchanges."}],[{"start":110.576,"text":"“Our message on these conversions is clear: they don’t work under existing law,” Treasury secretary Scott Bessent wrote on X. “Treasury is serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code,” he added."}],[{"start":124.932,"text":"Sullivan said the ruling targeted cases in which “someone contributes a portfolio of securities that is out of step with the ETF’s prospectus and then quickly washes those securities via in-kind redemption”."}],[{"start":137.28,"text":"He cautioned: “It’s going to come down to the facts and circumstances of each case” and added that the ruling would not “kill . . . routine tax planning” that involves the 351 conversion."}],[{"start":147.66,"text":"The Treasury’s notice said it was seeking further information on a series of “strategies used by tax-aware funds” together with a list of ETF manoeuvres including the 351 conversion."}],[{"start":158.02,"text":"The written notice marks the Treasury’s first escalation since it signalled its interest in probing tax strategies at an industry event in July, where officials warned they would not turn “a blind eye to aggressive planning”."}],[{"start":168.309,"text":"The Treasury added it was “also considering issuing additional guidance or taking other action to address the transactions described in this notice” and that such guidance could apply “retroactively”."}],[{"start":178.915,"text":"Shares in Affiliated Managers Group, which owns a stake in AQR, a pioneer of the latest breed of tax-aware investing strategies, fell as much as 2 per cent on Monday."}],[{"start":188.826,"text":"AQR is, by some estimates, the largest hedge fund in the world. Together with rival Quantinno, it popularised an approach that uses leverage and algorithmic trading to buy and short securities at scale, and to systematically realise losses on positions."}],[{"start":204.58,"text":"AQR said previously that the “primary draw for investors” should be the returns from its strategies — the “pre-tax alpha”, or market-beating performance — before any tax benefits."}],[{"start":220.3,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790647720_6482.mp3"}