By Alison Fitzgerald and Ryan J. Donmoyer - - Bloomberg Business News - -
The Internal Revenue Service has begun an inquiry into suspected tax abuses at hedge funds and private- equity firms after determining many firm partners don't file returns and may have improperly characterized transactions.
The tax-collection agency is studying whether funds improperly structured stock swaps to avoid withholding taxes, whether they dictated loan terms to banks before agreeing to buy loan portfolios, and whether they improperly classified income as capital gains to take advantage of the lower rate.
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