The US Internal Revenue Service (IRS) has come up with new guidance to address the tax concerns raised by the money market fund industry about potential industry reforms, according to Reuters.
The Securities and Exchange Commission (SEC) has proposed changes to the US$2.6 trillion money market fund industry aimed to reduce the risk of abrupt withdrawals from money funds.
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The proposal calls for prime funds used by institutional investors to make a transition from a stable price of US$1 per share to a floating net asset value.
The industry has opposed a switch to a floating net asset value (NAV) saying investors would lose interest in the product, partly due to tax and accounting burdens.
The IRS’s proposed guidance would grant investors in money market funds with a floating NAV some relief from those "wash sale" tax rules, as long as the loss was not more than 50 basis points, or one half of 1%, according to Reuters says.
The Financial Stability Oversight Council, a group of regulators created by the Dodd-Frank reform law, had asked the IRS in 2012, to look into the tax concerns raised by the fund industry.
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By GlobalDataThe IRS’ proposed guidance will be open for a 90-day comment period and would be finalized if the SEC ultimately decides to adopt rules requiring some funds to have a floating net asset value.
