Buffett could easily pay taxes like the rest of us
Warren Buffett has recently been in publications and on television stating that the super rich should pay more taxes.
Buffett’s company, Berkshire Hathaway, is currently involved in legal action with the Internal Revenue Service disputing taxes between the years 2002 and 2009. The IRS states that Berkshire Hathaway owes approximately $1 billion in taxes.
Buffett’s income is not based on ordinary income like the rest of us but is derived entirely from dividends and capital gains. He is deliberately avoiding paying taxes by choosing to pay himself in the manner which is subject to the lowest tax rates.
Buffett is hypocritical. If he wants to pay more in taxes the first thing he could do easily is as the director of his company pay the amount of taxes, approximately $1 billion, which Berkshire Hathaway allegedly owes to the federal government. Second, he could choose to pay himself a salary utilizing ordinary income, thus making his income subject to the same tax rates as all of the rest of us.
IRS must pay $23 million to Berkshire Hathaway Case involved denial of certain deductions
By Kevin O'Hanlon ASSOCIATED PRESS
October 29, 2005
LINCOLN, Neb. – A federal judge yesterday ordered the Internal Revenue Service to pay billionaire Warren Buffett's investment company more than $23 million in taxes and interest for disallowing certain deductions.
The ruling by U.S. District Judge Lyle Strom ended some three years of legal wrangling between Berkshire Hathaway and the IRS.
The case stemmed from two lawsuits that alleged the IRS made an "erroneous, wrongful and illegal" interpretation of the U.S. Tax Code when it denied the deductions.
The original lawsuit, filed in 2002, said the IRS wrongly assessed more than $16 million in taxes and interest against Berkshire in 1989 and 1990. A second lawsuit said the IRS wrongly assessed it nearly $7 million in 1991.
The two lawsuits were combined for trial.
The IRS first disallowed the deductions after tracing $750 million in borrowed money to Berkshire's purchase of stocks in several companies, including Coca-Cola, Time Warner and Wells Fargo, according to court records.
The IRS based the denial on a tax code passed by Congress that reduced deductions if borrowed money is directly attributable to investments in stocks that pay dividends.
Congress passed the code because of concern that some corporations were deliberately borrowing money for the purpose of buying dividend-paying stock, thereby converting pretax losses into after-tax gains.
Berkshire, based in Omaha, borrowed the money several times and put it into a principal bank account, according to court records.
But Berkshire said the money in that account came from several sources, was interchangeable and was used for thousands of transactions.
The company said its goal was not to buy specific stocks but to maintain and enhance its financial strength.
The lawsuits said Berkshire keeps large amounts of cash available to allow Buffett to make investments or acquisitions.
Berkshire argued that is not enough to meet the standard that the borrowed money was directly attributable to the stock purchase.
In his ruling Strom said the "current statutory and regulatory regime makes it virtually impossible for the (IRS) to trace debt proceeds and thus assess tax deficiencies under" the code "against companies like Berkshire who engage in numerous investment transactions."
"However, any decision to loosen the 'direct' connection required between debt proceeds and the purchase of dividend-paying stocks must be made by Congress or the service, not the courts," Strom said.
Berkshire officials did not immediately return a call seeking comment.
Gerald Leedom, one of the lawyers for the IRS, did not immediately return a message seeking comment.
Warren Buffett Takes On the IRS 08/15/2002 - 03:01
Warren Buffett, the colorful chairman and CFO of investment firm Berkshire Hathaway, Inc., has filed a lawsuit against the Internal Revenue Service claiming the agency incorrectly denied his company deductions of $16.3 million.
The IRS has rebuked the claim, stating that Berkshire Hathaway used at least part of the funds to make investments in other companies, and that the tax code reduces deductions for amounts used to invest in dividend-producing resources.
In the lawsuit, Berkshire Hathaway claims that, by disallowing the deductions, the IRS made an "erroneous, wrongful, and illegal" interpretation of the tax code. The company stated that it keeps a large supply of cash on hand, drawn from many sources including but not limited to loans, and that money is used, among other things, for investments and acquisitions. Berkshire Hathaway contends that the IRS cannot attribute the borrowed money directly to the purchase of stocks. Furthermore, the company claims that its objective in borrowing the money was not just to buy specific stocks but to maintain and enhance its financial strength.
An IRS spokesperson said the U.S. Justice Department will file an answer to the lawsuit.
Berkshire Hathaway is the parent company for GEICO Direct Auto Insurance, Borsheim's Fine Jewelry, Fruit of the Loom, International Dairy Queen, Inc., as well as many other subsidiaries. In response to the Securities and Exchange Commission's recent call for certified financial statements, Mr. Buffett and Vice President and CFO Marc D. Hamburg filed and signed sworn statements attesting to the completeness and veracity of the company financial statements.
WOW!!! I wonder what suddenly makes ole Warren such a champion of the IRS and paying taxes? I guess when you can afford an ARMY of tax attorney's, you feel pretty comfortable walking around preaching higher taxes on the 'rich', since you already know with Bershire Hathaway money, you can afford to fight the IRS and not pay. But everybody else that isn't a BILLIONAIRE will have to pay.
WOW!!! I wonder what suddenly makes ole Warren such a champion of the IRS and paying taxes? I guess when you can afford an ARMY of tax attorney's, you feel pretty comfortable walking around preaching higher taxes on the 'rich', since you already know with Bershire Hathaway money, you can afford to fight the IRS and not pay. But everybody else that isn't a BILLIONAIRE will have to pay.
CHA-CHING!!!!!!
his and his buddies virtual value is ch-ch-ch-changing......they no longer know what their worth is because there is a new cock rooster in town....it's called the internet and online banking... and we could be trading buttons on line for all anyone knows.....just ask the rating agencies.....
not to mention I dont think Buffet and company would enjoy seats at our dinner tables......but they would show up for a photo op....like Tonko.....
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
Peter Schiff called him out on this yesterday in an interview.
"In the beginning of a change, the Patriot is a scarce man, brave, hated and scorned. When his cause succeeds, however, the timid join him, for then it costs nothing to be a Patriot."
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