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United States

George Soros donates US$18 billion to his charity, minimising tax bill as deadline looms

The huge transfer beats a December 31 deadline set in 2008 for US-based investors to bring cash home and pay accumulated taxes

PUBLISHED : Wednesday, 18 October, 2017, 2:32pm
UPDATED : Wednesday, 18 October, 2017, 2:37pm

US investor George Soros has donated US$18 billion to his charitable foundation, in part to minimise a tax bill that hedge fund managers are facing this year.

Money managers have until the end of the year to pay taxes on fees they earned from investors in offshore funds and had deferred payment on. Many are now turning to charitable donations – including to their own foundations – to help offset the levies coming due.

Soros, founder of US$26 billion Soros Fund Management, has transferred almost US$18 billion to his Open Society Foundations over the past several years, according to a foundation official.

The figure “reflects an ongoing process of asset transfer that has been underway for several years,” spokeswoman Laura Silber said on Tuesday.

Soros “plans to leave the vast majority of his wealth to the Open Society Foundations,” Silber said.

Tax experts have estimated that collectively US managers have at least US$100 billion offshore, based on tax-advisers’ conversations with clients, brokers and fund-service providers. A New York-based money manager such as Soros, 87, could be subject to a top US federal income tax rate of 39.6 per cent, plus state and city levies.

When Congress eliminated the tax break in 2008, it gave hedge fund managers until December 31, 2017 to bring the cash home and pay the accumulated taxes.

At the end of 2013, Soros had amassed US$13.3 billion in his Soros Fund Management through the use of deferrals, according to Irish regulatory filings. It’s unclear how much more that pool of money has grown since then. The sum of the total transfer to date was reported Tuesday by the The Wall Street Journal.

Open Society Foundations is the second-richest charity in the US after the Bill & Melinda Gates Foundation, which has an endowment of over US$40 billion, according to the National Philanthropic Trust. Its stated mission is to promote democracy, human rights and freedom of the press.

Soros, a Hungarian-born investor known for his risky financial bets, chairs OSF and three of his children are members of the board.

Soros started his career in New York City in the 1950s and gained a reputation for his investing prowess in 1992 by netting US$1 billion with a bet that the UK would be forced to devalue the pound.

His Quantum fund returned an average of 20 per cent annually until 2011, when he returned outside investors’ money and converted his firm into a family office investing solely on behalf of Soros and his family members and his Open Society Foundations.

Soros Fund Management has returned 11 per cent annualised in the last decade.

Additional reporting by Agence France-Presse