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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Buffett's Tax Bill Date: 10/13/2011 7:03 AM
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There is a thread over at the Berkshire Board that looked at the recent disclosure by Warren Buffett of his tax bill. No particulars, but his federal taxes are about 11% of AGI.
http://www.marketwatch.com/story/buffett-discloses-tax-info-...

The thread:
http://boards.fool.com/buffetts-tax-bill-29600093.aspx?sort=...

It made me look at my own bill and it was a lot lower, as a percentage of AGI, than mine.

His massive charitable contributions come to mind, but with AMT and donation caps I still don't understand.

Would any of the experts here care to speculate?

Thanks!

Hockeypop
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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114091 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 7:29 AM
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People in Buffett's financial class get much of their income from dividends and capital gains. They are taxed at 15%.

For some who push a flat tax even 15% is too much. They would not tax dividends or capital gains at all. Is it any wonder guys like Steve Forbes, who inherited his wealth and gets most of his income from dividends and cap gains, think that's a great idea.

How about a flat tax on ALL income? I'd be willing to look at that. But instead we get proposals for a national sales tax which will hit the poor and middle class far harder than it hits the rich. No thanks!

BTW, I also benefit from the treatment of dividends and cap gains but no where near as much as the super millionaires.

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114093 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 10:38 AM
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I understand cap gains and dividends, but with AMT, how do you show $63 million AGI and still get down to 11% tax of AGI?

HP

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114094 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 11:49 AM
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I understand cap gains and dividends, but with AMT, how do you show $63 million AGI and still get down to 11% tax of AGI?

AMT doesn't affect the cap gain/dividend rate or the charitable deduction, and the high-income reduction of itemized deductions doesn't apply after 2009.

I'll simplify the numbers a bit and make some things up just for show and tell.

AGI: $60 million
LTCG: $60 milliion
Charitable Contributions: $30 million

Since he doesn't get personal exemptions under AMT his taxable income is $30 million, and 15% of that is $4.5 million. That's 7.5% of $60 million. (It actually would be a little less because of the 0% tax up to the top of the 15% bracket.)

Phil
Rule Your Retirement Home Fool

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Author: fleg9bo Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114097 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 2:03 PM
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AGI: $60 million
LTCG: $60 milliion
Charitable Contributions: $30 million


While Buffet advocates for higher taxes for the rich, he avoids taxes by making charitable contributions. Nothing wrong with that, but it demonstrates his belief that his money will do more good in the hands of private organizations than in the hands of government.

I wonder why he doesn't urge more charitable giving by the rich rather than higher taxes. It's what he does.

--fleg

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114100 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 2:35 PM
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I wonder why he doesn't urge more charitable giving by the rich

He does. He and Bill Gates have personally contacted many other billionaires to encourage them to contribute a significant portion of their estates to charitable causes. Here's an article: http://features.blogs.fortune.cnn.com/2010/06/16/gates-buffe...

rather than higher taxes

It doesn't have to be an either/or situation. It appears to me that he's encouraging both charitable giving AND higher taxes.

--Peter

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114101 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 2:52 PM
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Charitable Contributions: $30 million

I thought charitable giving contributions were capped. If not, then that probably explains it.

HP

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114102 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 2:54 PM
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Sorry,

If the donor is contributing cash to the charity, the general rule is that there is only one limitation on the total amount that he is entitled to deduct: He may only deduct his contribution to the extent that it does not exceed 50% of his adjusted gross income.

HP

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Author: fleg9bo Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114103 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 2:58 PM
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It appears to me that he's encouraging both charitable giving AND higher taxes.

Good for him. But why, if he thinks higher taxes are a good idea, doesn't he just pay more himself? The Treasury Department will happily accept all contributions above and beyond what's legally owed. When I'm hungry, I don't wait for the government to tell me to eat lunch.

--fleg

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114104 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 3:15 PM
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I thought charitable giving contributions were capped.

They are capped, sort of. One year I got a windfall and gave more than half my adjusted gross income to few 501(c)(3) charities. I could deduct only 1/2 my adjusted gross income, but I could carry the balance over to the next year. The next year, I could deduct most of that, but carried the rest until the third year. If I remember correctly, these can be carried over until they are all used up.

Mr. Buffett could carry the balance over to the next year (and probably does), but I do not see that doing him any good because he will be making comparable charitable gifts each year. He can probably deduct $3000 of it each year from ordinary income, for all the good that would do him.

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114105 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 3:28 PM
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They are capped, sort of. One year I got a windfall and gave more than half my adjusted gross income to few 501(c)(3) charities. I could deduct only 1/2 my adjusted gross income, but I could carry the balance over to the next year. The next year, I could deduct most of that, but carried the rest until the third year. If I remember correctly, these can be carried over until they are all used up.

Mr. Buffett could carry the balance over to the next year (and probably does), but I do not see that doing him any good because he will be making comparable charitable gifts each year. He can probably deduct $3000 of it each year from ordinary income, for all the good that would do him.

=============================

The carryover period for contributions is limited to 5 yrs.
The $3,000 limit is for capital losses; the limit for contributions is 50% of AGI, as you mentioned, but further limited to only 30% for stocks and other capital gain property.

I don't think Buffett believes in capital losses.

Bill

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114109 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 5:28 PM
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<<<But why, if he thinks higher taxes are a good idea, doesn't he just pay more himself?>>>

He thinks taxes are too low for many (not all) of the super wealthy.

He was asked in an interview last week - why don't you just pay more taxes voluntarily? - because that has been a complaint of his critics. His answer? He might consider actually doing that - IF he could get a group of the super wealthy to join him.

Sorry I can't provide a link to that interview. He gave many interviews last week, and it was one of the latter ones.

ML

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114110 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 5:33 PM
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I believe? I remember Buffett saying that apprx 99% of his charitable giving will be unuseable for tax benefits.

ML

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114111 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 5:55 PM
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<<<I believe? I remember Buffett saying that apprx 99% of his charitable giving will be unuseable for tax benefits.>>>

Perhaps that was in reference to his personal income tax return? The bulk of his estate may transfer to the Gates Foundation after his death. I have no clue as to the tax benefit of that but I'd think it'd be substantial.

All to say ... that the 99% remark made by Buffett - may have been in reference to his personal tax returns before death.

Is that possible?

Remember. Roughly $30B value today. 5% of remaining shares given away each year, i.e., a declining # of shares given each year. BUT, Buffett has said that the VALUE of the gift each year could very well INCREASE. Buffett's life expectancy at 82?

Can it be that 99% of his giving won't produce a tax benefit - on his personal tax returns? I'm almost certain that he said 99%.



ML

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114112 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/13/2011 5:58 PM
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I believe? I remember Buffett saying that apprx 99% of his charitable giving will be unuseable for tax benefits.

I posted an analysis on the original thread on BRK, so you can read it there.

In short, the figures you quote are roughly correct. In 2010, the value of the stock donation was around $1.6 billion. The usable deduction on his tax return I estimated at just under $19 million.

Of course, he's donating appreciated stock, and doesn't have to recognize and pay tax on the appreciation. There's some benefit to that. ;-)

--Peter

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114119 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/14/2011 6:44 AM
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Peter and everyone -- thank you for your help! Hockeypop

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Author: fleg9bo Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114123 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/14/2011 2:22 PM
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http://mjperry.blogspot.com/2011/10/buffett-rule-act-for-und...

Rep. Steve Scalise (R-LA) and Sen. John Thune (R-SD) introduced the Buffett Rule Act last week. The bill would instruct the IRS to add a check box on 1040 forms for taxpayers to indicate that they want to voluntarily pay extra. In a statement, Thune said the bill would make it easy for people to pay more to the Treasury if they believe they are undertaxed.
___________________

--fleg

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114134 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/15/2011 12:44 PM
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Peter

<<<I posted an analysis on the original thread on BRK, so you can read it there.>>>

Thanks a lot for that analysis. However, it just occured to me that Buffett makes gifts to 4 other Foundations yearly. The #s at the BRK wesite were published 6/2006, before the 50:1 BRKB split.

Gates Foundation .......... 10M shares Xs 50 = 500M shares split adj
Susan Buffett Foundation ... 1M shares Xs 50 = 50M shares split adj
Howard Buffett Foundation .. 1M shares Xs 50 = 50M shares split adj
Sherwood Foundation ........ 1M shares Xs 50 = 50M shares splt adj
NOVO Foundation ............ 1M shares Xs 50 = 50M shares split adj

The last 4 on the list? - Buffett's deceased wife Susan and their 3 children: Howard, Suzie, and Peter.

http://www.berkshirehathaway.com/donate/webdonat.html

You linked an article on the BRK board saying that the value of Buffett's contribution to the Gates Foundation was roughly $1.6B in 2010. Thankfully, the #s are round for the other 4 Foundations listed above. 10% Xs $1.6B Xs 4 or $0.16B Xs 4 = $0.64B.

Buffett's total charitable contributions in 2010 = $1.6B + $0.64B = $2.24B.

It's presumptious of me to ask, but would you consider doing another analysis of Buffett's personal taxes given that he donates shares to 4 other Foundations in addition to Gates Foundation? If I could do it myself? I would. But I can't.

$21M?/or $23M of "other income" in your original post? seemed high for Buffett. Maybe the $0.64B additional giving is the missing piece? Buffett does serve on a few BODs.

If you prefer not to revisit your original analysis over on the BRK board, I understand totally. I for one would very much appreciate it though. :-)

Regards,

ML

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Author: StockGoddess Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114136 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/15/2011 12:53 PM
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Fox News was criticizing Buffett for saying the rich should pay more, saying he used "tricks" to pay less taxes.

Buffett said he'd lay his tax return on the table if Rupert Murdoch would do the same.

So far, silence from Murdoch....(crickets).

8D

Buffett is a feisty old dude.

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Author: fleg9bo Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114137 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/15/2011 1:03 PM
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Buffett said he'd lay his tax return on the table if Rupert Murdoch would do the same.

What's Rupert Murdoch got to do with anything? Buffet went public with his opinion that the super-rich are not paying enough, yet he's unwilling to pay more himself unless others are forced to do so. Waiting for government to coerce others to do what he thinks is right before he becomes willing do it, is not exactly strong leadership, IMO.

--fleg

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114138 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/15/2011 1:13 PM
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<<<Fox News was criticizing Buffett for saying the rich should pay more, saying he used "tricks" to pay less taxes.>>>

This is what gripes me NO END. Ugh.

I think Peter (ptheland) confirmed here that Buffett gets to use about 1% of his charitable deduction. The rest? goes unused. Buffett has said the same if I remember correctly. He does NOT "give" to avoid taxes. Arghh.

Equivalent to you or I donating $1000 and getting to deduct $10 of it! to save on taxes? I don't think so! Tax savings $2.50?

Buffett is also criticized for not "voluntarily" paying more taxes - if he thinks his tax RATE is too low. Well, news flash.

In a recent interview (last week), he said that he would consider doing just that - if a group of his peers were to agree to do the same.

Anyway .... much of what Buffett says, writes, and intends - gets twisted, IMO.

ML

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114140 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/15/2011 2:39 PM
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However, it just occured to me that Buffett makes gifts to 4 other Foundations yearly.

Those won't make a difference. They're all donations of appreciated stock and are subject to a limit of 30% of AGI. The Gates Foundation donation alone is more than enough to get over the limit.

--Peter

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114160 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/16/2011 1:24 AM
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Thanks Peter.

<<<Those won't make a difference. They're all donations of appreciated stock and are subject to a limit of 30% of AGI. The Gates Foundation donation alone is more than enough to get over the limit.>>>

I told you I couldn't do it. And it was so simple! Sigh. A forest/tree thing. :-)

Thanks again.

ML

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Author: stevenjklein Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114183 of 121061
Subject: Re: Buffett's Tax Bill Date: 10/16/2011 5:39 PM
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For some who push a flat tax even 15% is too much. They would not tax dividends or capital gains at all.

But some of us who favor a flat tax think dividends and capital gains should be taxed, but corporate profits should not be taxed.

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