Romney 2012?

You're right. It never was funny. Romney apparently is speaking out of both sides of his ugly mouth. To the Democrats, "Oh, it's just merely a light hearted joke. Just lighten up." To die hard conservatives, he's dead seriously trying to rally the troops.

Mitt Romney Tax Returns May Have Employed Legally Dubious Maneuvers, Tax Experts Say

WASHINGTON -- Tax experts who have begun to examine the Bain Capital documents released Thursday by Gawker are raising questions as to whether presumptive GOP presidential nominee Mitt Romney has paid all the taxes he owed.

At issue are two tax-avoidance techniques employed by Bain Capital, the firm founded by Romney, which have been commonly used in the private equity world but have come under increasing legal scrutiny.

The first scheme involves owning U.S. dividend-paying stocks in an offshore account and pretending, for accounting purposes, not to own the stock. Instead, the taxpayer tells the Internal Revenue Service that he owns a derivative product that is identical in every way to the stock -- except it isn't the stock, so therefore no U.S. taxes are owed. It's called a "total return equity swap," because the buyer still gets the benefit -- the "total return" -- of owning the stock, or equity.

"This use of total return equity swaps, such as to avoid the U.S. dividend withholding tax, was very widespread for more than a decade, and may not be dead yet, although the IRS issued a shot-across-the-bow Notice concerning the practice in 2010," writes Daniel Shaviro, the Wayne Perry Professor of Taxation at New York University School of Law. "But taxpayers who engaged in it to avoid the dividend withholding tax were coming perilously close to committing tax fraud, in cases where the economic equivalence to direct ownership was too great."

The second technique is "not legal," according to Victor Fleischer, a tax expert and professor of law at the University of Colorado. A taxpayer saves substantial amounts of money by pretending that regular income received as a management fee for running a private equity firm is not income, but is instead a capital gain. That drops the tax rate on that income from 35 percent to 15 percent.

Citing the Gawker documents, Fleischer notes that Bain engaged in the management-fee maneuver to reduce the tax bill of its investors. "Unlike carried interest, which is unseemly but perfectly legal, Bain’s management fee conversions are not legal. If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income," he writes.

Shaviro, meanwhile, notes that Bain employed a version of the total return equity swap and says that taxpayers who engage in the practice have little legal justification for doing so. "[T]he only leg that taxpayers had to stand on in some of these cases was common practice and the apparent lack of IRS enforcement (not a very strong leg if the correct application of the law was clear)," he writes. "How far out on the limb were Bain-affiliated foreign entities that were making money through total return equity swaps, and claiming not to owe U.S. withholding tax? And what should we make of this, for purposes of the presidential campaign, if what they were doing, while legally dubious, was common practice?"

"The unauthorized disclosure of a number of confidential fund financial statements is unfortunate," said Charlyn Lusk, a spokeswoman for Bain Capital. "Our fund financials are routinely prepared by auditors and demonstrate a commitment to transparency with our investors and regulators, and compliance with all laws."

Michele Davis, a spokeswoman for the Romney campaign, said that Romney is not responsible for whatever tax strategy employed. "As we have said many times before, Governor and Mrs. Romney's assets are managed on a blind basis. They do not control the investment of these assets, the investment decisions are made by a trustee," he said.

But if Bain used improper tax-avoidance techniques, the Romneys would be required to amend their returns regardless of the blind nature of the investments.

Private equity managers already get the vast majority of their income from capital gains, which are taxed a lower rate, but also take a fee -- typically 2 percent -- off the top. That management fee is income. But some private equity managers have claimed to "waive" that fee in exchange for future capital gains.

"In exchange for a minimal amount of economic risk, the tax benefit is enormous: the compensation is transformed from ordinary income (taxed at 35%) into capital gain (taxed at 15%). Because the management fees for a large private equity fund can be ten or twenty million per year, the tax dodge can literally save millions in taxes every year," writes Fleischer. "The problem is that it is not legal."

The IRS says the fee cannot be waived in exchange for capital gains if the income "relates to a substantially certain and predictable stream of income from partnership assets." In other words, Bain investors would need to convince a judge that their revenue stream was risky and not "substantially certain and predictable."

Fleischer says he doesn't think the tactic would hold up in court. "Because the deals vary in their aggressiveness, there is some disagreement among practitioners about when it works and when it doesn’t," he writes. "But in my opinion, and the opinion of many tax practitioners, the practices that were common in the private equity industry in the 2000s became very, very questionable, and it’s unlikely that they would have stood up in court."

But did Romney himself benefit from these maneuvers? And is Romney responsible for the legally dubious tax avoidance strategies Bain employed? Yes, Fleischer concludes:

I laughed when I heard it. It was a political jab. If you don't get that, you are taking this waaaaay too seriously.

Does anybody trust their money and/or wife with a known liar?

Just asking.

Abe Lincoln

Well first, show me a politician who has never lied

Krumple wrote:

Well first, show me a politician who has never lied

First, show a person* who has never lied.



*"person" meaning an adult person. Two year olds don't count.

That's a typical answer from you; a blank, a nothing response.

Try to provide evidence to the contrary if you can; you can't.

I heard that Romney also bought Albania in 1993 and he doesn't want anyone to know about that expenditure.