Soooo, do you remember when Harry Reid claimed Romney paid close to $0 in taxes before he knew he was going to run for president? Well, turns out he was right...
In 1997, Congress cracked down on a popular tax shelter that allowed rich people to take advantage of the exempt status of charities without actually giving away much money.
Individuals who had already set up these vehicles were allowed to keep them. That included Mitt Romney, then the chief executive officer of Bain Capital, who had just established such an arrangement in June 1996.
The charitable remainder unitrust, as it is known, is one of several strategies Romney has adopted over his career to reduce his tax bill. While Romney’s tax avoidance is legal and common among high-net-worth individuals, it has become an issue in the campaign. President Barack Obama attacked him in their second debate for paying “lower tax rates than somebody who makes a lot less.”
In this instance, Romney used the tax-exempt status of a charity -- the Mormon Church, according to a 2007 filing -- to defer taxes for more than 15 years. At the same time he is benefiting, the trust will probably leave the church with less than what current law requires, according to tax returns obtained by Bloomberg this month through a Freedom of Information Act request.
In general, charities don’t owe capital gains taxes when they sell assets for a profit. Trusts like Romney’s permit funders to benefit from that tax-free treatment, said Jonathan Blattmachr, a trusts and estates lawyer who set up hundreds of such vehicles in the 1990s.
Near zero
“The main benefit from a charitable remainder trust is the renting from your favorite charity of its exemption from taxation,” Blattmachr said. Despite the name, giving a gift or getting a charitable deduction “is just a throwaway,” he said. “I used to structure them so the value dedicated to charity was as close to zero as possible without being zero.”
When individuals fund a charitable remainder unitrust, or “CRUT,” they defer capital gains taxes on any profit from the sale of the assets, and receive a small upfront charitable deduction and a stream of yearly cash payments. Like an individual retirement account, the trust allows money to grow tax deferred, while like an annuity it also pays Romney a steady income. After the funder’s death, the trust’s remaining assets go to a designated charity
Romney’s CRUT, which is only a small part of the $250 million that Romney’s campaign cites as his net worth, has been paying him 8 percent of its assets each year. As the Romneys have received these payments, the money that will potentially be left for charity has declined from at least $750,000 in 2001 to $421,203 at the end of 2011.
So what I was going to add to this is what was already added in the comments;
Well, up until 1997, if you were rich, you could "rent" non-profit status from your favorite charity.
Huh? How can an individual rent tax-exempt status from a charity? It's pretty intricate, but the way it worked was, in Mitt's case, he used the Mormon church as a tax shelter by setting up a Charitable Remainder Unitrust (CRUT), that paid him a specific amount of money per year from dividends while also donating the smallest amount possible to the church.
Estate and trust attorney Jonathan Blattmachr told Bloomberg that he had set up many of these for clients prior to the 1997 law banning them: "I used to structure them so the value dedicated to charity was as close to zero as possible without being zero."
Huh? How can an individual rent tax-exempt status from a charity? It's pretty intricate, but the way it worked was, in Mitt's case, he used the Mormon church as a tax shelter by setting up a Charitable Remainder Unitrust (CRUT), that paid him a specific amount of money per year from dividends while also donating the smallest amount possible to the church.
Estate and trust attorney Jonathan Blattmachr told Bloomberg that he had set up many of these for clients prior to the 1997 law banning them: "I used to structure them so the value dedicated to charity was as close to zero as possible without being zero."
Yes, we should elect Mitt Romney, or he promises he will go back into business! Or maybe he'll just buy all the money. There will be no more money left. He will have it all.
I'm worth four and a half billion dollars! How am I suppose to afford Job creation in this climate?! Currently rumors are circulating that Barack Obama has no personal wealth whatsoever. Go ahead and show us the bank statements, Mr. President!
How exactly does Obama justify flying around in a huge airplane at our expense when he can't even afford a personal jet of his own?! How could he use the secret service to take him out to the hamburger restaurant. That's my tax money! He should stay home and eat tinned beans and water. It's MY tax dollerz, yo. DAOLLRS! MONEY. IT'S ALL MINE!
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