Romney Trust Gives Heirs Triple Benefit

http://www.classwarfareexists.com/bloomberg-romney-used-tax-avoidance-scheme-with-100-million-family-trust/#axzz27uA6Y5UI

http://www.bloomberg.com/news/2012-09-27/romney-i-dig-it-trust-gives-heirs-triple-benefit.html

By Jesse Drucker - Sep 27, 2012

n January 1999, a trust set up by Mitt Romney for his children and grandchildren reaped a 1,000 percent return on the sale of shares in Internet advertising firm DoubleClick Inc.

If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55 percent. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”

The sale of DoubleClick shares received before the company went public, detailed in previously unreported securities filings reviewed by Bloomberg News, sheds new light on Romney’s estate planning -- the art of leaving assets for heirs while avoiding taxes. The Republican presidential candidate used a trust considered one of the most effective techniques for the wealthy to bypass estate and gift taxes. The Obama administration proposed cracking down on the tax benefits in February.

While Romney’s tax avoidance is both legal and common among high-net-worth individuals, it has become increasingly awkward for his candidacy since the disclosure of his remarks at a May fundraiser. He said that the nearly one-half of Americans who pay no income taxes are “dependent upon government” and “believe that they are victims.”

Romney’s effective income tax rate in 2011 was about 14 percent. He has also enhanced his family’s wealth by moving assets worth $100 million into a trust while taking steps to avoid paying any gift taxes. The trust’s value isn’t counted in the $250 million that his campaign cites as Romney’s net worth.

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“People like Mitt Romney make a lot of money, but they pay very little income tax,” said Victor Fleischer, a tax law professor at the University of Colorado who has written extensively about private equity and taxes. “Then by dodging the estate and gift tax, they are able to build dynastic wealth. These DoubleClick documents really show that tax planning in action.”

The Obama administration estimates that closing the loophole Romney used would bring the federal government almost $1 billion in the coming decade.

That’s a “laughable” under-estimate, said Stephen Breitstone, co-head of the taxation and wealth preservation group at law firm Meltzer, Lippe, Goldstein & Breitstone LLP. A single billionaire could pay $500 million more in estate taxes if these trusts are shut down by the Obama administration, Breitstone said.

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Romney “uses every trick in the book,” Breitstone said. “It’s going to be harder to do tax planning in the future. He’s bringing attention to things that weren’t getting attention.”