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More insight into how the top 1% manages to get out of paying taxes.
[h=1]Romney’s Cayman Islands holdings complicate tax return debate[/h]
Remember all of this is likely legal. It's part of the tax code written by congressmen... who get their biggest donations from wealthy people.
Who is looking out for the rest of us?
[h=1]Romney’s Cayman Islands holdings complicate tax return debate[/h]
“This is a classic example of how good tax planning avoids taxes until you want to pay taxes on the money,” said Martin Lobel, a Washington lawyer and chairman at Tax Analysts, a provider of information for tax specialists.
Even many Americans with sophisticated tax advisers “can’t take advantage of that kind of loophole,” Lobel said.
According to an August 2011 financial disclosure, Romney’s individual retirement account included a stake valued at $5 million to $25 million in something called BCIP Trust Associates III.
Regulatory filings show that the partnership, related to Romney’s career at the corporate buyout firm Bain Capital, is registered in the Cayman Islands.
The offshore arrangement could have spared Romney a form of U.S. tax that can apply even to individual retirement accounts, experts say.
IRAs are widely used investment vehicles that allow people to save money and postpone paying taxes on it until their golden years. But even within the shelter of tax-exempt entities such as IRAs or nonprofit organizations, some investments can trigger taxes by throwing off profits known as “unrelated business taxable income.”
That includes returns on debt-financed investments. Hedge funds and private equity funds are especially likely to trigger the tax because they often seek to magnify their returns by using borrowed money.
To spare investors the tax bite, hedge funds and private equity firms often set up corporate shells known as “blockers” in havens such as the Cayman Islands, experts said.
Remember all of this is likely legal. It's part of the tax code written by congressmen... who get their biggest donations from wealthy people.
Who is looking out for the rest of us?