Addendum on taxability of PFE-AZN deal: I draw a distinction between a taxable merger where: a) the shareholder receives cash; and b) a deal such as PFE-AZN where the shareholder receives no cash and hence may have to liquidate another asset to pay the capital-gains tax triggered by the merger, possibly generating an additional forced capital-gains tax on the second asset. The former is bad, but the latter is worse.
Most hedge funds are organized in a master-feeder or parallel fund structure, with an offshore entity and domestic entity. The offshore entity is taxed as a foreign corporation and has US tax exempt ( mainly pension funds) and foreign investors and it is not subject to tax on capital gain, short or long. The US side frequently makes a mark to market election under code section 475 and so is indifferent about gain recognition.
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