ERICOPOLY

I didn't mean to say that he would use company assets for his consumption. I meant to say that if the personal holding company tax applied to Berkshire, then he'd likely be paying a dividend because it would make it uneconomic to retain 100% of earnings and purchase passive investments with the proceeds. One reason (but clearly not the only reason) why he has operating companies is that if he didn't, then he'd be in violation of the personal holding company tax -- it would violate the income test The PHCT is a tax on “undistributed personal holding company income” of a “personal holding company.” Let's put this differently: Would you object to repealing the personal holding company tax for everyone? If not, why not? Note that the reason why we have it is to prevent rich people from not distributing their corporate earnings, where the tax rates on corporate passive income is far lower than the tax rates on personal passive income. Sound familiar? Anyone we know of that doesn't distribute corporate earnings, and holds the bulk of his passive investments in his holding company instead of his personal brokerage? However, Buffett has got Berkshire organized in such a way that he doesn't trip the tax (ownership test and income test), but those thresh holds could easily be tweaked. For example, you could drop the ownership test to 30% or modify the income test. One could really crack down on these billionaires who reinvest undistributed earnings in passive investments (which they could just as easily hold in a brokerage account). This is the very behavior that the personal holding company tax was meant to discourage, but he dances within the lines of that law (meets the ownership test and income test). Are the ownership tests and income tests too generous? Or, as I mentioned earlier, my preferred method is just to insure that INTER-company dividends (from passive investments) are taxed as regular income. That will sure as hell discourage Berkshire as a vehicle for sheltering his passive investment dividends.

Here is a decent summary behind the reasons for the special personal holding company tax. Anyhow, in spirit I believe Buffett has effectively created the same form of tax shelter through Berkshire. http://wraltechwire.com/business/tech_wire/opinion/story/2458989/ As explained in the Conference Report for the American Jobs Creation Act of 2004, “[t]he personal holding company tax was originally enacted to prevent so-called ‘incorporated pocketbooks’ that could be formed by individuals to hold assets that could have been held directly by the individuals, such as passive investment assets, and retain the income at corporate rates that were then significantly lower than individual tax rates.” Berkshire was also chosen as his investment vehicle back when the top personal income tax rate was 70%. He probably never noticed though, right?

I agree with you there. I would exempt groceries for example, but not restaurant meals. I would exempt (a certain reasonable dollar amount of) every car purchased. etc... etc... My concern is not whether billionaires are paying the same tax rate as mere millionaires, but rather my concern is that we don't raise the cost of living for the people who can barely get by. At a certain subsistence level, there should be nothing taxed at all. Anywhere I say "should", it can be reasonable to assume I really mean "I believe but everyone has their own opinion". It's just lazy style, not meant to be pushy. Cash that is locked up in a vehicle like Berkshire is not available for consumption It's available, he just needs to hit the "distribute" button. I'm not the first one to notice this distinction: http://en.wikipedia.org/wiki/Holding_company Berkshire however is not classified as a "personal holding company". I really think though the distinction with what he's got going for himself via Berkshire isn't all that different in spirit.

The key word is "taxable" income. Why doesn't he have more? Well, it doesn't make sense to pay a dividend and use the proceeds to buy KO in his personal account. After all, that would raise his TAXABLE income. Much better to retain the earnings and buy KO within berkshire, where his tax rate is far lower than even the 15% rate that he claims to be too low. But yes, we both agree that something here is disingenuous. He speaks of coddling the rich, but he didn't become a billionaire from his taxable income. So addressing taxable income is laughable -- it's the untaxable income that's made him a billionaire. Does he even have a billion in his personal account? No. Would he still be a billionaire if Berkshire paid a fair amount of tax on it's inter-company dividends? Yes, he would still be a billionaire, just not a coddled one. Anyhow, I suppose I'm advocating a corporate income tax on INTER-company dividends, and leaving the INTRA-company dividends alone.

A consumption tax would most elegantly address that, not an income tax. I don't see the connection between income taxes and consumption. Especially when the conversation turns towards coddling the billionaires, who are the least likely to consume their entire income. One could justify a lower tax rate for them on these grounds.

Not the way I would structure it. I'd give an exemption based on ownership. In the case of BAC, they own 0% so I'd tax all dividends as normal corporate income. Berkshire does not own BAC, so it's not double-taxation. They are separate companies. However, if Berkshire held a 10% stake in the common, then I'd exempt 10% of the dividend from taxation. And if they owned 100% (takeover), then the dividends could be enjoyed without any taxation.

+1 I have yet to see him advocate a tax that would materially impact him.

Yes it sounds like nonsense. Who pays him? I ask this because he says things so absolutely bizarre that I question where his motivations come from here?

Why not sell all of CCB? It's non-core after all.

They have been tracking for non-GAAP earnings in excess of $5 in FY11. And management continues to claim $7 in 2014. Will they make deals that will jeopardize the EPS targets they are promising? In the end, they will be graded on only one thing.

Before I heard the term "value investing" I heard the term "buy low and sell high". They are actually the same, of course. Buy low and sell high relative to what value? The idea of an embedded value is implicit.

I found the 2008/2009 crash to be scary, but not the crash of the past few weeks. People are afraid to touch something like WFC at 6x earnings? What the hell is wrong with these people!

That company is a value destroying sink hole IMO. They manage however to externalize the costs.

Yikes, 25g of fructose/day is too much for the liver to handle. That's hardly anything. "about the amount contained in one 12-ounce soft drink" No Coke for you!

I don't like that, kind of a threat, conflict of interest, stock is down more than 50%, so what? He should put out more presentations to investors on AIG's investor relations website. Citigroup does a much better job at this -- you've lost all trust and scared the hell out of the world, to build it back takes a bit of extra effort. Spoon feed it. Organize the information and push it out there in power point. Or not, instead complain when people don't "get it".

Historical industry average growth -- that's why it's reasonable.

I don't know how this will all end up, but I suspect KO will go through a low P/E phase somewhere down the line: http://arkansasmedicalnews.com/avoidance-of-fructose-could-do-double-duty-preventing-type-2-diabetes-and-alzheimer-s-cms-913

I don't either. I was a math major so perhaps I'm just relieved that in this game you can get full credit for merely writing down the correct answer. That goes both ways, as Berkowitz is discovering. I was interested in the company after I saw his huge concentration. His top holding. My comment just means that if I get the idea from him and it works out, I get full credit. In math if you cheat off of someone else, you don't get full credit if you merely write down the correct answer. That's what I mean. Anyone who invests in his fund is taking his answers and getting full credit. I'm just looking at what he deems his best ideas, and making a more focused fund out of it. And sometimes I'll be copying the wrong answer. However the room for error is wide at less than 1/2 book.

I actually don't think there is such a thing anymore as a "proprietary API" in current Windows versions. Recognize that it's incredibly difficult to pull off such a feat. The apps that microsoft builds are linked to the public libraries and include the public headers. Same as everyone else gets access to. Legal problems aside, an application team that links to a private library is going to have major headaches when the Windows team updates the API in the future. That's the whole reason why there are public libraries! More trouble than it's worth, yet the conspiracy theories abound. There are however a number of bugs in the public Windows API that cannot be fixed for application compatability reasons. And there are a number of bugs in the documentation that don't properly describe how to deal with this behavior. That must have driven the WINE people bonkers, because if they try to implement the API as it is supposed to work per the documentation, the app will break! That's just life.

Screwed by Yeung Hung Ho. (I just can't resist. apologies).

He needs to go on Poppy Harlow's show.

Probably bad news for state and muni debt of US border states that rely in part on collection of sales tax. Yes, when i heard that I was wondering with whom the benefit lay but then i realized perhaps it is the fact that less than $1000 duty wasnt easily enforced and time consuming from a benefits std pt. May have to do with border resources allocation - streamline the coming from Canadas pay more attention to the Mexican border? Thats my guess. We have been visiting Canada every winter for a week in Sun Peaks near Kamloops. It is a ski resort. They are hurting very much from the dollar exchange rates. The US ski tourists now consider it not worth the drive -- it was once a significant cost savings, but now it's on par with the big US resorts. Might as well save the driving they figure. But we like it because the slopes are empty, rentals are easy to find, and the place is very beautiful. Plus it's packed with cute Aussie girls, even if I'm not officially allowed to look. Suspect it has something to do with that -- soften the blow for US tourists visiting Canada.

Probably bad news for state and muni debt of US border states that rely in part on collection of sales tax.

Isn't it 10 years these days? (My memory is hazy.) I believe I had the 5 stuck in my head because that is what I remember as being applicable to me, only I said the wrong thing. I need to first pay resident taxes there for at least 5 years out of the prior 15, then revoke my US citizenship. That's the way I avoid the expatriation tax. From IRS i8854.pdf: Certain dual-citizens. You may qualify for the exception described above if you meet the following requirements. • You became at birth a U.S. citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. • You were a resident of the United States for not more than 10 years during the 15-tax-year period ending with the tax year during which the expatriation occurred. For the purpose of determining U.S. residency, use the substantial presence test described in chapter 1 of Pub. 519.

They also take a cut of your unrealized gains when you renounce your citizenship. Unless, like me, you are a dual citizen since birth and are leaving for your other country of citizenship. I think I read that even after renouncing citizenship they will tax any of your gifts for the next five years. So to avoid US estate tax, I will need to renounce my U S citizenship, then reside in Australia for five years, and then give the gifts to my children. Australia has no gift tax.