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Thread: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

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    re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by DashingAmerican View Post
    Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002
    I don't know if I want to laugh and say IRONY or not be shocked.
    In the words of Spock, “Interesting!”

    This is a microcosm of what American politics have become in an era of the Internet (where anyone can post anything) and opinion marketed as news. Some guy that has no clue what he is taking about packages facts they do not understand, puts a spin on those facts designed to incite those that know even less about the subject than he then feeds those facts to people of ignorance hungry for something to support their preconceived ideas of the world. Anyone that takes this as some type of indictment of Buffett has been had.

    Let's start with the simple items:
    1. Berkshire Hathaway is a public corporation, not Buffet’s personal holding company.
    a. Berkshire has 1,200 institutional holders. All of the insiders, including Buffet, collectively hold less than 14% of the business. They do not have control. In fact, Buffet isn’t even the largest holder of BH, the Bill Gates Foundation is. It has 3 times the number of shares of Buffet.

    BRK-A Major Holders | Berkshire Hathaway Inc. Common Stock - Yahoo! Finance

    b. As a public corporation, it has a duty to its shareholders to maximize shareholder value, usually through maximizing profits. A part of maximizing profits is minimizing tax (see discussion of deferred taxes).


    2. All corporations have two sets of books.
    a. Accounting for income taxes and accounting for shareholders (generally accepted accounting principles or GAAP) are different things. Often there are different rules about expense and revenue recognition. For example, the IRS allows for more aggressive write-offs of equipment (even expensing) then GAAP which requires they be depreciated over useful lives.
    b. Companies seek to maximize book profit and minimize taxes, so they are far more aggressive on expense recognition on the tax books and less aggressive on the book books….
    c. The IRS and GAAP each require an accounting of the reconciliation between book income and tax income. On the tax return, this is on schedule M-1. On the books, its called deferred tax accounting, which is usually found on the balance sheet with a very extensive explanatory footnote.
    d. Illustration: If you had $100 in revenue, $40 in cost, you would have a $60 profit. At a 35% tax bracket, the tax would $20. However, if your bought a $40 computer and expensed that year for tax purposes (and over 5 years for book purposes) suddenly you have different results. The tax books would show $20 of taxable income and $7 in tax; the book books would show $52 in taxable income and $18.20 in tax as follows:

    Deferred tax revenue.jpg




    So, given the company only paid $7.00 in taxes, but accrued $18.20, the difference is recorded as a deferred tax liability. They did not pay all of the tax associated with the profits of business, but elected to defer payment. This deferment can go on for years. This is the way every responsible company operates.

    Of course, the above example is very basic. It gets a lot more complicated with international conglomerates such as BH, which does acquisitions and has holdings in insurance and railroads (very complex). The BH tax situation is very complex.

    This brings us the assertion that BH is not paying its taxes.

    Update: Warren Buffett’s Company Owes Nearly $1 Billion in Taxes | TheBlaze.com

    What an absurdly naïve statement! Whoever came up with this knows zero about corporate finance and/or knows they play to an audience that knows even less. Let’s start with the assertion that they owe $1B in back taxes…. No, the deferred tax liability (taxes according to the books, that are not yet paid) is actually $35B, but there is not abnormal about that. The $1B being discussed in the article has NOTHING to do with taxes owed, in fact, unrecognized tax benefits are the opposite of owing money; it’s a potential tax liability offset (receivable), that because of accounting convention, is not on the books (just footnoted). See footnote 15 to the Berkshire Hathaway audited financial statements, which reconciles the company’s long-term and current deferred tax situation (between books and tax)

    http://www.berkshirehathaway.com/2010ar/201010-K.pdf

    Then there is this whole dialogue about IRS audits. Again, this is silliness. A company with a $34B in deferred tax liabilities often are under constant audit. In fact, often the IRS maintains a de-facto office inside the corporate headquarters.

    Sorry, but this whole thing is a bit analogous to someone looking at the balance sheet, seeing liabilities and yelling “hey, they aren’t paying their bills”
    I appreciate the fact that people want to argue tax policy, and I further appreciate the fact that taxes are complex, maybe too complex, but people should use restraint and not talk authoritatively about things they knew little about.

    Sorry cons, but on this one, you were conned.
    Last edited by upsideguy; 10-14-11 at 04:01 PM.

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    re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by Simon W. Moon View Post
    Damn, those're hella requests. I doubt that anyone in the world could do those things, let alone on the int4rweb5.

    Doesn't seem to be a realistic expectation on your part. ymmv

    But why is there such a focus on his motivations?
    Is there some reason why focusing on the issues instead won't serve your purposes?
    His motivations are key

    the rich haters cyber fellate the man because they think he is looking out for the losers and ne'er do wells

    those who understand how higher taxes benefit the uber wealthy are less likely to paen this asswipe



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    re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by TurtleDude View Post
    His motivations are key
    the rich haters cyber fellate the man because they think he is looking out for the losers and ne'er do wells
    those who understand how higher taxes benefit the uber wealthy are less likely to paen this asswipe
    But the rest of us can't understand the issues that make his proposal a bad idea, so you're just gonna stick to trashing the man instead of his ideas?
    I may be wrong.

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    re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by Simon W. Moon View Post
    But the rest of us can't understand the issues that make his proposal a bad idea, so you're just gonna stick to trashing the man instead of his ideas?
    You claim to be a conservative and you cannot find fault with treating capital gains differently for someone who has no salary income and makes 5 million versus someone who has 4 million in LTCG and a million in salary?



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    re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by Μολὼν λαβέ View Post
    Just like a wolf in sheep's clothing...
    Its fun watching the gullible engage in slurpage of a guy who would sell their body parts for cash if he could get away with it



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    Re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by conservativeguy View Post
    . Most folks that start a business from scratch often have little to no basis in the stock of the company.

    So you claim, do you have anything to back it up? Most people have to put up their own money as capital in returns for the equity. When calculating the basis for capital gain tax, who would be stupid enough to choose the lower value?


    Your last comment says a lot about you.

    You're entitled to your opinion, but you're not answering the question.
    Quote Originally Posted by Free_Radical View Post

    And I wasn't making an appeal to authority, I was making an appeal to the philosophical body of work of the founders, the worth and content of which should be well-known to anyone with a cursory understanding of basic history and philosophy.

    Brian

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    Re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Duplicate.
    Last edited by nonpareil; 10-18-11 at 10:24 PM.
    Quote Originally Posted by Free_Radical View Post

    And I wasn't making an appeal to authority, I was making an appeal to the philosophical body of work of the founders, the worth and content of which should be well-known to anyone with a cursory understanding of basic history and philosophy.

    Brian

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    Re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by ElijahGalt View Post
    That's a horrible analogy. If the US were to stop importing oil tomorrow, possibly every industry would seize up and we would face a crisis ten times more severe than the Great Depression. If Warren Buffet believes in paying higher taxes, yet refuses to donate a single dollar to the Treasury, it is absolutely hypocritical. A far more accurate analogy would be a rich man who believes the wealthy should pay their "fair share" yet refuses to step up and pay his "fair share." Oh wait a minute, I guess I don't need an analogy.

    According to some people's rationale here, to be not hypocritical, he should take actions that hurt himself (the fact that he has fiduciary duty to his company doesn't seem to matter to some), so for the US to not be a hypocrite, it should take actions that hurt itself. Which is why I call it stupidity. Now do you get the point?

    Buffet has pledged most of his wealth to charity, so you're still way off base.

    Further, Buffet never said that anyone should pay more than what the rule says they should pay, he said the rule should change to make some people pay more. It doesn't matter if he pays the Treasury more out of pocket or not, call him a hypocrite if that makes you happy (just don't be a hypocrite yourself and judge others differently), the fact remains that his tax burden is lower than his secretary because of the lower capital gain tax.
    Last edited by nonpareil; 10-18-11 at 10:24 PM.
    Quote Originally Posted by Free_Radical View Post

    And I wasn't making an appeal to authority, I was making an appeal to the philosophical body of work of the founders, the worth and content of which should be well-known to anyone with a cursory understanding of basic history and philosophy.

    Brian

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    Re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Quote Originally Posted by VanceMack View Post
    No...the example I cited CT is precisely applicable and accurate. Buffet CAN do everything he says he SHOULD do...he simply doesnt do it.
    The problem is that you don't get what he is saying. Where did he say that he should pay more than what the tax rate requires him to pay? If he, and only he alone, pays $10m more a year, then what would that do for revenue? Not very much. But if everyone was required to pay a few percents more a year, the difference is substantial. Most of you who criticise him just don't seem to understand that concept.

    So not only is Buffet a liar...he doesnt pay less taxes than his secretary, he is also a hypocrite AND to cap this gem off...we have the president using his lie to promote 'the Buffet Rule'...which isnt even what Buffet wants or suggests. See how insipid this all is?
    Why don't you provide us with a link and we can really see if Buffet lied about anything.
    Quote Originally Posted by Free_Radical View Post

    And I wasn't making an appeal to authority, I was making an appeal to the philosophical body of work of the founders, the worth and content of which should be well-known to anyone with a cursory understanding of basic history and philosophy.

    Brian

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    Re: Warren Buffett's Berkshire Hathaway Owes Taxes Going Back To 2002 [edited]

    Here's an opinion piece Warren Buffett wrote:

    “OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

    While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

    These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.”
    No matter what we think of the guy...whether or not he's a hypocrite...what he says here is not only true, but a disgrace. Really.

    Quote of the Day: Warren Buffett - Political Ruminations

    As to him being a hypocrite, if his company is delaying their tax consequences through legal means, well, I guess that's gotta' be okay. But there's something in the law called "unclean hands." In the law, it means that if a person expects a court to intervene, that person must have "clean hands." IOW, you can't ask the court to enforce your contract to sell drugs to your dealer. I think this doctrine is why people (myself included) think he's a hypocrite. Just because something is legal doesn't mean it's moral.

    And this **** is what the Wall Street protesters should be clamoring about. Not forgiving their freakin' student loans. (But I digress....)
    Last edited by MaggieD; 10-18-11 at 10:43 PM.
    The devil whispered in my ear, "You cannot withstand the storm." I whispered back, "I am ​the storm."

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