IRS Court Win Paves Way for Higher Taxes on Hedge-Fund Managers

The Internal Revenue Service scored a significant win over the hedge-fund and asset-management industries this week in a case that could bring higher taxes for many fund managers. 

The U.S. Tax Court’s ruling could require managers to pay self-employment taxes of more than 3% on much of their income. If the opinion survives additional legal battles and is applied broadly, it would close off a popular technique that lets them exclude millions of dollars in income from self-employment taxes and related levies that others must pay.