Bracket Creep

“It is not legal,” said Victor Fleisher, a tax law professor at the University of Colorado, in an interview this week. He noted that different money managers used variations, some of which he said were less likely than others to withstand an audit. “Bain,” he said, “is on the aggressive end of this.”

via A Private Equity Tax Tactic May Not Be Legal – High & – Low Finance – NYTimes.com.

Wish someone had checked the spelling of my name.  People always forget the c.

Of greater interest, though, is Norris’ reporting on the book-tax difference:

One manager of private equity funds, Apollo Global Management, wants to have it both ways. As a public company, it wants to persuade investors that it has steady fee income. So it shows the waived management fees as ordinary income in the financial statements it files with the Securities and Exchange Commission. But those same reports disclose that it passes the deferred fees on to its partners and employees, who take advantage of the tax benefits.

Book-tax differences are always a big red flag.