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CFA L3 IPS and Tax Regimes
CFA L3 IPS and Tax Regimes
Constructed response
• Focus on one-time liquidity distributions (removed from asset base if near term).
Liquidity • Ongoing liquidity distributions are not considered a constraint (included in required return).
• Comment about illiquid assets and cash reserves if stated in the question.
• Identify the tax treatment applied to the investor. Point out any potential issue that could trigger a
Tax
significant tax liability.
Tax Regime Ordinary income Interest income Dividend income Capital gains
Light capital gain tax (2nd most observed) Progressive Ordinary Ordinary Favourable