A Rare Look Inside a Hedge Fund Mogul’s Tax Returns
The multimillionaire Boaz Weinstein disclosed why he paid no or little taxes for several years.
If rich people lose money, should they pay tax?
Last week, ProPublica published an article about the tax records of Boaz Weinstein, the multimillionaire hedge fund manager famous for betting against the JPMorgan Chase trader known as the “London Whale.” The article reported that Mr. Weinstein and his wife, Tali Farhadian Weinstein, who is running for Manhattan district attorney and may inherit an investigation into Donald Trump’s New York State taxes, paid no or very little federal tax in “four of six recent years” between 2010 and 2018.
It was the latest in a series of articles that ProPublica has produced based on a trove of private I.R.S. data detailing the taxes of America’s wealthiest individuals. The thesis of the package is that “it demolishes the cornerstone myth of the American tax system: that everyone pays their fair share.” The article about the Weinsteins did not suggest that they did anything illegal, and it said that Ms. Farhadian Weinstein’s run for elected office made their tax history a matter of public interest.
The article about the Weinsteins may leave some readers thinking there is something off about their taxes. Our reporting says otherwise. For those who have covered Mr. Weinstein’s up-and-down career, as DealBook has, it’s well known that he genuinely and repeatedly lost money for a good stretch of the last decade. His fund, Saba Capital Management, had as much as $5.6 billion in assets under management in 2012 — but so many investors withdrew their money because of poor performance that at one point it fell to $1.3 billion.
We asked Mr. Weinstein for his tax returns and — surprisingly — he gave them to us. We also reviewed the reports his hedge fund provided to investors to check for discrepancies between what he reported to the I.R.S. and the fund’s returns. He has told his investors that 95 percent of his net worth is invested in his funds.
- According to the tax returns, from 2010 to present, the Weinsteins paid $86.3 million in federal taxes and $37.7 million in New York State and city taxes, for a total of $124 million. The couple’s adjusted gross income during the same period was $288.9 million; their taxable income was $246 million, lowered in part by $29.5 million in philanthropic gifts.
Mr. Weinstein appeared to come by his tax bill in a straightforward way: He lost money. Unlike many of the individuals ProPublica highlighted whose net worth went up but they reported no taxable income — like Jeff Bezos and Elon Musk — Mr. Weinstein’s wealth was falling in the years he paid little or no tax. He also used a mark-to-market method for tax filing purposes known as a Section 475 election, which meant he paid taxes on both realized and unrealized gains.
- Mr. Weinstein’s flagship fund was down 3.87 percent in 2012, 6.75 percent in 2013 and 10.81 percent in 2014. It eked out a 3.37 percent gain in 2015 and then a 22 percent increase in 2016. In 2017, his fund lost 8.9 percent, before posting an 11 percent gain in 2018. He lost 12.8 percent in 2019 and posted a whopping gain of 73 percent in 2020.
ProPublica’s reporting on the tax bills of the wealthiest Americans should incite an important debate in the country. DealBook has been particularly vocal about the need to reform the tax code. The American public might come to the conclusion that the rich should still pay taxes even in years when they genuinely lose money or simply become less wealthy. But that’s not the way the current system works, in reality or in spirit.