Comments on: Were Some Derivatives Trades Primarily About Tax Avoidance? http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily.html Mon, 23 Nov 2009 02:08:55 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily.html#comment-254 Anonymous Thu, 19 Jul 2007 21:01:00 +0000 http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily-about-tax-avoidance/#comment-254 Were Some Derivatives Trades Primarily About Tax Avoidance? Of course. Dividend arbitrage has been going on for at least 20 years. It's good to see the IRS ahead of the game...<br/><br/>C'mon, if company A has low tax on a dividend and company B has high tax, there are all kinds of derivatives that A and B can trade where both make money. If that's not economic, what is? A sells a call, B buys the call. Using its tax rate, company B thinks the implicit vol is x; using its tax rate, company A thinks the implicit vol is x + something. Then A turns around and buys a put from someone, and B sells a put. Now both A and B have pretty close to a riskless position and a sure profit, all thanks to the taxman who has devised arbitrable rules. Were Some Derivatives Trades Primarily About Tax Avoidance? Of course. Dividend arbitrage has been going on for at least 20 years. It’s good to see the IRS ahead of the game…

C’mon, if company A has low tax on a dividend and company B has high tax, there are all kinds of derivatives that A and B can trade where both make money. If that’s not economic, what is? A sells a call, B buys the call. Using its tax rate, company B thinks the implicit vol is x; using its tax rate, company A thinks the implicit vol is x + something. Then A turns around and buys a put from someone, and B sells a put. Now both A and B have pretty close to a riskless position and a sure profit, all thanks to the taxman who has devised arbitrable rules.

]]> By: dd http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily.html#comment-253 dd Thu, 19 Jul 2007 13:23:00 +0000 http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily-about-tax-avoidance/#comment-253 As anyone who has followed the saga of LTCM knows, it's all about tax avoidance. The district court opinion is a great read especially the Scholes/Stiglitz smackdown @78-86 http://www.usdoj.gov/tax/082704JBALongTermUS.pdf<br/>Long Term Capital Holdings v. United States, 330 F. Supp.2d 122, 199 (D. Conn. 2004), aff’d 2005 U.S. App. LEXIS ... As anyone who has followed the saga of LTCM knows, it’s all about tax avoidance. The district court opinion is a great read especially the Scholes/Stiglitz smackdown @78-86 http://www.usdoj.gov/tax/082704JBALongTermUS.pdf
Long Term Capital Holdings v. United States, 330 F. Supp.2d 122, 199 (D. Conn. 2004), aff’d 2005 U.S. App. LEXIS …

]]> By: Anonymous http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily.html#comment-251 Anonymous Thu, 19 Jul 2007 06:33:00 +0000 http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily-about-tax-avoidance/#comment-251 christ. how much f***ing money do these people need ???<br/><br/>wankers. christ. how much f***ing money do these people need ???

wankers.

]]> By: leftcoast http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily.html#comment-250 leftcoast Thu, 19 Jul 2007 05:26:00 +0000 http://www.nakedcapitalism.com/2007/07/were-some-derivatives-trades-primarily-about-tax-avoidance/#comment-250 Time to scrap the Federal Income Tax and subsitute the Automated Payment Transaction Tax proposed by a University of Wisconsin Econonmics professor several years ago. Time to scrap the Federal Income Tax and subsitute the Automated Payment Transaction Tax proposed by a University of Wisconsin Econonmics professor several years ago.

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