Thursday, December 13, 2012
The Day After Calling for Higher Estate Taxes on the Rich, Warren Buffett Helps Billionaire Save Millions in Taxes
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 ... 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. ... Berkshire said it bought 9,200 Class A shares from "the estate of a long-time shareholder," whom it did not name, at $131,000 per share, a price in line with where Berkshire has traded in recent weeks. ...
Yet given his wealth and his own self-professed low tax rate, Buffett has been called out in some quarters for not practicing what he preaches.
Update: Wall Street Journal: Berkshire, in Rarity, to Buy Holder's Stock:
The estate that sold the shares did so at a time when many investors are unloading some of their winning stocks to avoid an increase in the capital- gains tax next year, and the sale should qualify for this year's top tax rate of 15% on long-term capital gains. Next year the top rate will be at least 18.8% for wealthy Americans, because of a new 3.8% tax on net investment income.
In addition, as part of the debate in Washington over taxes and spending, President Barack Obama has called for a five-percentage-point increase in the 15% rate, so the top rate could be 23.8%.
Exactly how much a difference the coming tax increase would make is unclear. One thing is certain: Even though the Berkshire shares were longtime holdings, the estate appears unlikely to pay tax on all of the stock's rise over the decades that Mr. Buffett has run the company. Estates that sell shares pay tax only on increases in the value of shares after the date of death, according to tax experts.
Mr. Buffett has been a vocal advocate for higher taxes on the wealthiest Americans, arguing that the most affluent people in the country should pay a minimum tax of 35% on taxable incomes over $10 million.