The move is part of a broader push by Treasury Secretary Scott Bessent to end what he called abusive financial engineering. US authorities have issued notices banning prearranged Section 351 ETF conversions and the use of in-kind redemptions for straddles and box spread strategies. Treasury and IRS officials have clarified that ordinary ETF in-kind creation and redemption mechanics remain permitted under existing law.
Tuesday, October 20, 2026
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IRS Threatens Retroactive Tax Hits for AQR Hedge Fund Strategy
US Politics17 days ago
Wealthy investors who used specific asset management trades to reduce their tax liability may be forced to pay back those savings. The IRS is targeting tax-slashing strategies, including those popularized by AQR Capital Management, the world's largest hedge fund, and has warned that its enforcement of the rules may be retroactive. These trades were designed to eliminate or defer capital gains and ordinary income taxes through the use of novel ETF constructions.
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