Wednesday, December 12, 2012

Another Tax Escape Angle to Buffet's Stock Buyback

Earlier today, I pointed out that Berkshire Hathaway, controlled by Warren Buffett, sheltered cash from income taxes for Berkshire Hathaway shareholders by buying back Berkshire stock instead of paying out the cash as a dividend. Well, it turns out Buffett helped out another person in the buyback transaction---the seller.

The entire $1.2 billion buyback was made by buying from just one seller. Since estate taxes are will most assuredly going to go up next year, this likely means hundreds of millions of dollars in tax saving for the seller. Buffett, in other words, helped someone big time by buying the stock which will help the seller escape the estate tax increase being called for by Buffett.

Reuters has the details:

Warren Buffett's $1.2 billion share buyback from a single unnamed investor likely helped that person's estate save substantially on taxes, just one day after the Berkshire Hathaway CEO said the rich should actually be paying more, not less, when they die. 
With the "fiscal cliff" looming and estate taxes set to rise dramatically in less than three weeks, the timing was seen as advantageous - and, according to Berkshire watchers, also out of place in the context of Buffett's recent tax activism.
"I would say 'Warren, would you please just keep your nose out of this.' He's not in a position to criticize what's good for America and for everyone else's estate," said Anthony Sabino, a professor of business at St. John's University. "He's no doubt utilized the present tax code to maximum effect."

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