CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

In an unusual move, Blackstone went public in 1997 as a master limited partnership in an effort to avoid the higher tax rates imposed on corporations. In order to retain these tax advantages, Blackstone also had to avoid classification as an investment company. This practice is often referred to as:
A. Regulatory advantage.
B. Regulatory circumvention.
C. Regulatory arbitrage.
Explanation: Regulatory arbitrage is the use of regulation by an entity to exploit differences in economic substance and regulatory interpretation or in regulatory regimes to the entity's benefit. Through carefully negotiating the tax regulations, Blackstone hopes to exploit a 'regulatory arbitrage' between the tax code's legal definitions and economic substance.

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