US Treasury Flags Concern Over Potentially Abusive Tax Trades

The US Treasury Department has expressed concern over a number of high-profile tax strategies touted by Wall Street, which it says may be 'too good to be true.' Speaking at a Wall Street Tax Association seminar, Treasury officials Kevin Salinger and Erika Nijenhuis stated the department considers some of these products potentially abusive and is actively evaluating tools to address them, though they stopped short of announcing new guidelines. The strategies under scrutiny include 351 conversions, box-spread exchange-traded funds, products that offset ordinary income, and funds that avoid dividend income by flipping between ETFs. Officials highlighted the AQR TA Delphi Plus Fund, which had $6.6 billion in assets and generated ordinary losses equal to 28% of capital invested. Salinger warned investors to be cautious when something looks too good to be true. Following the comments, Affiliated Managers Group Inc., which owns a stake in AQR Capital Management, dropped 7%.