The Canadian hedge fund industry has grown dramatically in recent years. This article discusses the structuring and taxation of Canadian hedge funds under current and proposed provisions, including alternative structures, eligibility for deferred plans, and selected tax issues: characterization of gains and losses in respect of short sales; Section 39(4) election; Carried interest of general partner; Securities lending arrangements; Foreign investment entity rules; Is the hedge fund is an exempt taxpayer? Does the hedge fund have a participating interest in the foreign entity? Is the investment in a foreign investment entity? Is the participating interest an exempt interest? Is the interest a tracking entity?