tax strategies

[ERICOPOLY]

Obama just threw out this softball which will probably make me richer over time even though he's fiddeling with my IRA:

 

Obama proposes cutting the top U.S. corporate tax rate to 28 percent from 35 percent, now the highest in the industrialized world.

 

http://www.cnbc.com/id/100630036

 

Makes holding companies like Berkshire, MKL, etc... a hell of a lot more valuable to the individual investor.

 

I believe my tax rate on selling the BAC warrants (short term cap gain) is well north of 50%.  I'm serious!  It's totally crazy. 

 

Sanjeev needs to start a holding company along the lines of LUK.  Sign me up.  I can't invest in partnerships -- too much tax.

 

 

[hyten1]

i like to learn about this holding company as well

 

taxes has always been a headache

[premfan]

Obama just threw out this softball which will probably make me richer over time even though he's fiddeling with my IRA:

 

Obama proposes cutting the top U.S. corporate tax rate to 28 percent from 35 percent, now the highest in the industrialized world.

 

http://www.cnbc.com/id/100630036

 

Makes holding companies like Berkshire, MKL, etc... a hell of a lot more valuable to the individual investor.

 

I believe my tax rate on selling the BAC warrants (short term cap gain) is well north of 50%.  I'm serious!  It's totally crazy. 

 

Sanjeev needs to start a holding company along the lines of LUK.  Sign me up.  I can't invest in partnerships -- too much tax.

 

 

 

Sign me up too.

[racemize]

corner of berkshire holding co!

[Guest valueInv]

One word - bitcoins.

[mikazo]

corner of berkshire holding co!

 

It would be interesting to do this on the message board, each person with a different role, and run it like an actual holding company, etc., even if it were just for fun.

[ericd1]

How about buying an old worthless textile company and then an insurance co?  Ok skip the textile co.

 

Count me in!

[giofranchi]

Obama just threw out this softball which will probably make me richer over time even though he's fiddeling with my IRA:

 

Obama proposes cutting the top U.S. corporate tax rate to 28 percent from 35 percent, now the highest in the industrialized world.

 

http://www.cnbc.com/id/100630036

 

Makes holding companies like Berkshire, MKL, etc... a hell of a lot more valuable to the individual investor.

 

I believe my tax rate on selling the BAC warrants (short term cap gain) is well north of 50%.  I'm serious!  It's totally crazy. 

 

Sanjeev needs to start a holding company along the lines of LUK.  Sign me up.  I can't invest in partnerships -- too much tax.

 

 

 

Sign me up too.

 

+1

 

That would be really great!

 

giofranchi

[beerbaron]

I'd put some money into a something similar to LUK managed by Parsad as well... even if it trades in the pink sheets.

 

BeerBaron

 

 

[biaggio]

I'd put some money into a something similar to LUK managed by Parsad as well... even if it trades in the pink sheets.

 

BeerBaron

 

+ have eric invest a portion (say 20%) in some option strategy in some really deep value company or 2 max

[hyten1]

guys any REAL tax strategies out there?

 

- always long term capital gain if possible

 

 

what do you guys do when the numbers gets very large, i am sure there are people on this board with millions in long term gains realized on a yearly basis. how do you do to lower you taxes?

 

 

[hyten1]

fyi

 

http://taxfoundation.org/article/high-burden-state-and-federal-capital-gains-taxes

 

 

[Mephistopheles]

corner of berkshire holding co!

It would be interesting to do this on the message board, each person with a different role, and run it like an actual holding company, etc., even if it were just for fun.

How about buying an old worthless textile company and then an insurance co?  Ok skip the textile co.

 

Count me in!

 

And maybe if we get really good one day, value investors of future generations will start a message board named after us!

[jay21]

Has anyone done the math or thought about 401K contributions?  Obviously I contribute enough to get the match offered by my employer, but I am wondering if I should be contributing more in order to avoid taxes.  I do not like indexing, but the tax savings might make it worth it.  My tax rate is not very high rate now, but it will be increasing.

 

What variables should I consider when I am building a model?

[LC]

Has anyone done the math or thought about 401K contributions?  Obviously I contribute enough to get the match offered by my employer, but I am wondering if I should be contributing more in order to avoid taxes.  I do not like indexing, but the tax savings might make it worth it.  My tax rate is not very high rate now, but it will be increasing.

 

What variables should I consider when I am building a model?

Can't you do the same via some insurance policies and have more control over your investments? I'm no tax professional so I may be wrong but it's worth looking into.

[berkshiremystery]

Have you noticed that Apple pays only a 2% tax outside of the US.

 

Apple paid only 2% corporation tax outside US

http://www.bbc.co.uk/news/business-20197710

 

 

 

[berkshiremystery]

Eric Schmidt (Google) wrote some interesting article about international tax law.

 

At Google we aspire to do the right thing. So we welcome a debate on international tax reform

The chairman of Google responds to criticism that companies such as his are not paying their fair share of taxes.

 

http://www.guardian.co.uk/commentisfree/2013/may/18/google-tax-reform-eric-schmidt

 

 

------

 

 

Fresh questions for Amazon over pittance it pays in tax

 

Exclusive: Guardian investigation shows key role of British-based staff in pushing tax rulebook to its limits

 

http://www.guardian.co.uk/technology/2013/may/15/amazon-tax-bill-new-questions

 

 

Company filings showed Amazon's main UK company paid just £3.2m in corporation tax on sales of £320m last year. However, the Seattle-based group has told investors its 2012 UK sales were £4.2bn.

 

The Guardian investigation has found Amazon pushing definitions close to breaking point; and tax authorities unable, or unwilling, to prevent the imposition of aggressive tax avoidance structures.

 

The company would pay much more tax if its sales were booked through a UK business but they are all routed through Luxembourg. Altogether it has taken £12bn from online shoppers in the UK in the last four years.

 

Amazon avoids paying many tens of millions of pounds in tax because it tells the taxman its main UK-focused business, which collects revenue from British shoppers but is incorporated in Luxembourg, cannot be classed as a "permanent establishment" in Britain.

 

Amazon has a permanent establishment in the UK that operates the warehouses and provides "corporate support services" to the wider group. Despite employing 4,191 staff – and an additional 10,000 temporary workers to cope with the Christmas rush – it had a tax bill for 2012 of just £3.2m because British shoppers are invoiced from Luxembourg.

[berkshiremystery]

I might want to make some remark about the above posted articles about tax avoidance of big corporations like Google or Amazon. So ironic and provocative it might sound, but I'm quite optimistic in Fairfax stake in the Bank of Ireland. This situation might not last for another hundred years, but quite for some while. I noticed myself quite often while purchasing in online shops worldwide, that the billing is done in a different country than the actual shop, at least this applies for Amazon, Apple iTunes and Inditex (Zara). So to a certain degree the Bank of Ireland is some Amex-like toll bridge for international corporations to conduct this tax strategy for at least the foreseeable future in Ireland. Things might change,... long term probably, but not by tomorrow.

 

-----

 

Quote:

 

Hodge said: "Part of the problem is that this is a ridiculously complex issue. HMRC has got to get much tougher in policing the system, but we also need to simplify our tax system so that companies cannot keep exploiting these grey areas."

 

Ernst & Young have already acknowledged that these rules are broken. Many of these rules were drawn up before the internet revolutionised the way people shop, and did not foresee a new generation of tax structure engineering made possible.

[berkshiremystery]

From the WSJ

 

Apple Avoided Taxes on Overseas Billions, Senate Panel Finds

 

http://online.wsj.com/article/SB10001424127887324787004578495250424727708.html?mod=WSJEurope_hpp_LEFTTopStories

 

The result: Apple pays little or no taxes to either country on much of its revenue earned outside the U.S., according to the report.

 

One of the units, Apple Operations International, hasn't filed a corporate tax return anywhere in the past five years, the Senate panel found. The unit is the main holding company for Apple's business outside of the Americas.

 

"Despite reporting net income of $30 billion over the four-year period 2009 to 2012, Apple Operations International paid no corporate income taxes to any national government during that period," the report found.

 

-----

 

Meanwhile, the U.S. is undergoing a debate about the earnings that U.S. companies are keeping overseas. The profit at foreign subsidiaries are out of the reach of the IRS, and largely unusable to their U.S. operations.

 

The sums amount to an estimated $1.9 trillion, according to an analysis by Audit Analytics, which reviewed filings from more than 1,000 companies in the Russell 3000 Index that report the figure.

 

 

[CorpRaider]

Jay,

 

I've come across a few articles on the subject on the internet and while it requires some projection of your future tax rates, it is probably a good idea to take the top marginal tax rate deduction now and then you will be spreading the $17,500 deduction across the bottom rate, unless you become rich like Eric did.  Also, apart from the federal income tax considerations, you can move to florida or texas in retirement and have zero state tax.  People pay alot of money for advice leading to deferral of income and the attendant tax.  So while most personal finance columnists extol the virtues of the roth options, (which I believe provide nice tax diversification) a good motto is a deduction (or deferral) in the hand is probably worth two in the "bush".

 

 

[meiroy]

 

What if you didn't have to pay taxes of any sort in any sort of account or situation.  What would be your general strategy then?

[watsa_is_a_randian_hero]

Has anyone done the math or thought about 401K contributions?  Obviously I contribute enough to get the match offered by my employer, but I am wondering if I should be contributing more in order to avoid taxes.  I do not like indexing, but the tax savings might make it worth it.  My tax rate is not very high rate now, but it will be increasing.

 

What variables should I consider when I am building a model?

 

 

This is definitely worth it, for the tax benefits alone.  If you're not a fan of indexing, there are 2 things to consider:

 

1.  you can max out your 401k @ 17500 and then subsequently take a loan from the 401k for 50% of balance, and invest this outside your 401k while guaranteeing a return (mine is 4.75%) to your 401k as the loan is repaid.

2.  you will likely not be at your employer for long term.  Average employment these days is less than 5 years I believe.  You can pursue option (1) above or invest in bond funds while you await the day you can rollover to an IRA and invest in individual stocks.

3.  Some 401ks have self-directed options allowing for individual stocks.

4.  If you have the ability to do so, consider doing at least part in roth.  The legal limit for roth 401k is the same ($17,500), but the effective value of putting $17,500 in roth 401k vs traditional is much higher.  Effectively, its as though the government offers a higher limit for deferrals to roth 401ks then it does to traditional.

[CorpRaider]

 

What if you didn't have to pay taxes of any sort in any sort of account or situation.  What would be your general strategy then?

 

Party?

[ERICOPOLY]

I suppose buying AAA short term tax-free muni bonds with margin is a way of earning tax free income while writing off the margin interest.

[moore_capital54]

Hi Guys,

 

I wanted to opine on the idea of having a COBF Fund/HoldCo. I have previously wanted to bring this subject up privately with Sanjeev. I think it would be very interesting for this group to run (by committee) real money in a transparent manner via a fund structure (or a hold co). Audits, performance etc. It's not such a crazy idea when you think about it, upon formation a committee of investors would be chosen and no investment decision would be made unless the committee collectively decided we liked it. The whole thing would be done transparently in a dedicated thread (or several threads) and the actual trading could be handled by one or two designated members (Sanjeev comes to mine).

 

Anyhow I would like to say that I would be willing to commit $1mm (real money) into such a structure for the group to manage. I would also be willing to pay for all startup costs (administrator, incorporation, audit). I would be very interested in the results.

 

A Holdco would be even more interesting but require much more start-up capital to run effectively. A Fund could be started with $1-2mm and once a track record was built the money would come flowing in.

 

As for fee split etc, all that would be discussed in depth (a few logical ideas come to mind) prior to initiation. I am sure we could come up with something interesting and fair.

 

Hope you are all doing well, Cheers!