Posts Tagged ‘Tax loopholes’

Taxes: Ravens’ Flacco moving to Puerto Rico?

March 12, 2013

Oops.  Got the stories crossed.

It’s John Paulson moving to PR.

Flaaco just signed a contract making him the highest paid NFL player ever.

Well, kinda  … more on that below.


It’s being reported that hedge fund legend John Paulson is considering leaving New York to go to Puerto Rico, where a tax loophole would let him reduce taxes on the $9.5 billion he has in his own hedge fund.

Bloomberg reports that several wealthy Americans have already taken advantage of the year-old Puerto Rican law that lets new residents pay no local or U.S. federal taxes on capital gains.

Note: The marginal tax rate for affluent New Yorkers can exceed 50 percent.

Back to the Flacco story … (more…)

Remember the last big IPO? … You know, the one before Facebook

May 21, 2012

Well, Facebook went out at $38 and closed at $38.

The pundits are whining that the IPO was a failure because there wasn’t a big first day pop.

My take: one of the rare times that the IB’s priced a deal at fair market value.

Oh my, “flippers” didn’t get a chance to earn millions by just showing up for work.

Sounds ok to me.

* * * * *
What I didn’t like about the Facebook IPO is that it got most analysts talking about the Government Motors IPO.

Given the chatter, I got curious and checked out the stock price

Oops, down almost 40% from the IPO price …. during a period when the overall market was up over 10%.


Geez, since Bin Laden is dead and GM is alive, why the stock dip?

The company claimed record profits of $7.6 billion in 2011, the “highest profits in the 100 year history of that company” according to President Obama.

And, the company paid no Federal income taxes on taxes those record earnings.


Because New GM came out of bankruptcy “owning” all of the tax loss carry forwards from old GM.

That’s not supposed to be allowed when a company goes through bankruptcy — a deterrent to companies trying to simply buy losses to offset some of their taxable earnings.

How did it happen?

According to several sources:

The Obama administration quietly snuck in a special tax break for GM, which allows the company to write off approximately $45 billion in post-bankruptcy losses against post-bankruptcy profits.

It’s good for twenty years.

The $45 million tax write-off is in addition to the more than $50 billion given to General Motors in the bailout,

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Corporations that don’t pay U.S. income taxes …

November 9, 2011

CTJ (Citizens for Taxpayer Justice) recently released a report titled “Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010”

Here’s their list of the Top 30 “Tax Dodgers”  … below the table is CTJ’s decoding of how they do it



Accelerated Depreciation

In early 2008, in an attempt at economic stimulus for the flagging economy, Congress and President George W. Bush dramatically expanded depreciation tax breaks by creating a supposedly temporary “50% bonus depreciation” provision that allowed companies to immediately write off as much as 75 percent of the cost of their investments in new equipment right away.

This provision was extended and expanded through 2012 under President Barack Obama.

Stock options

Most big corporations give their executives (and sometimes other employees) options to buy the company’s stock at a favorable price in the future.

When those options are exercised, companies can take a tax deduction for the difference between what the employees pay for the stock and what it’s worth (while employees report this difference as taxable wages).

Paying executives with options took off in the mid-1990s, in part because this kind of compensation was exempt from a law enacted in 1993 that tried to reduce income inequality by limiting corporate deductions for executive pay to $1 million per executive.

Tax options were also attractive because companies didn’t have to reduce the profits they report to their shareholders by the amount that they deducted on their tax returns as the “cost” of the stock options.

Industry-specific tax breaks.

The federal tax code also provides tax subsidies to companies that engage in certain activities. For example:

  • research (very broadly defined);
  • drilling for oil and gas; providing alternatives to oil and gas;
  • making video games;
  • ethanol production;
  • not moving operations offshore;
  • maintaining railroad tracks;
  • building NASCAR race tracks;
  • making movies;

… and a wide variety of activities that special interests have persuaded Congress need to be subsidized through the tax code.

Offshore tax sheltering.

Over the past decade or so, corporations and their accounting firms have become increasingly aggressive in seeking ways to shift their U.S. profits, on paper, into offshore tax havens, in order to avoid their U.S. tax obligations.

These typically involve various artificial transactions between U.S. corporations and their foreign subsidiaries, in which revenues are shifted to low- or no-tax jurisdictions, while deductions are created in the United States.

Some companies have gone so far as to renounce their U.S. “citizenship” and reincorporate in Bermuda or other tax-haven countries to facilitate taxsheltering.

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