Audit and Accounting Guide: Investment Companies

Chapter 6 Taxes

Update 6-1 Regulatory: Tax Cuts and Jobs Act of 2017

The 2017 tax reform reconciliation legislation (the Act) makes changes to certain aspects of the taxation of investment company products such as mutual funds, business development companies (BDC)s, and master limited partnership focused corporations (MLP Funds). The impact of the Act on investment companies was somewhat muted by the exclusion of proposals to change retirement plan contribution limits, require a first-in, first-out lot selection method for security sales, and modernize the tax treatment of derivatives. Due to the complexity and current uncertainty of the Act, a full discussion is outside the scope of this document; funds and their auditors should consult with their tax advisors.

Overview

6.01 This chapter provides information on the Internal Revenue Code of 1986, as amended. Its intended purpose is to provide auditors with background information, not as a detailed explanation of the IRC. Thus, the auditor should consult a tax adviser with respect to tax issues that arise in the course of an audit. Auditors may not be able to resolve tax issues that arise in the course of an audit based solely on the background information provided in this chapter.

6.02 This chapter has been divided into two sections to focus on distinct aspects of taxes for investment companies: “Financial Statements and ...