"An epic tale of tax evasion" -- Bain capital's financial statement

[HiPointDem]

While the NY Times, Wall Street Journal and other leading publications do major stories on Bain Capital “waiving fees” in lieu of increased equity positions, they have failed to ask the most basic question. That is, if these are such good investments and valued at historically low levels when made, why on earth would a limited partner give up an equity stake in lieu of paying management fees. The smart decision is to pay the annual management fee, not only because you don’t dilute your equity but you also get a valuable tax deduction. Investment management fees are indeed a perfectly legitimate tax deduction.

The reason is simple, that is, most of the investors are tax exempt investors including foundations, endowments and public pensions. It makes no difference to them since the tax deductions allocated to them are worthless since they are tax exempt. Put another way, they don’t get the deduction. This also allows the tax exempts to bury fund fees.

The parlor game being orchestated by Pricewaterhouse Coopers and Ropes and Gray is quite simple, that is, to move as much of these unusable tax deductions over to the taxable partners as possible, where they can fetch top dollar, that is be fully utilized. The best way to do this of course is to convert managment fees into priority equity profits which come with an increased allocation of both gains and losses/tax deductions.

It is almost comical how leading tax scholars and analysts don’t see the endgame but are instead debating whether the rate should be capital gain or ordinary income, not seeing the impact of illegitimate carried interest deductions taken...The problem is that this scheme is directly against two important IRS rules...

Of course some investors will say, why not let the Bain Capital’s of the world use otherwise unusable tax deductions belonging to tax exempts. The reason is simple, this degrades the very state and federal tax base that is necessary to fund services, in particular pension commitments. Put another way, the end game of this scheme is higher taxes for the rest of us...

http://blog.billparish.com/2012/09/18/sept-18-2012-bain-capitals-big-untold-story-buried-in-gawker-documents/

[mtasselin]

1. Pay

If I had a company some place around the world, I would want to do business here an why not talk to the right politician get a bill passed so you don't have to pay any taxes and if you are really lucky maybe get a refund. Tell me this system doesn't suck for the average American.

[Berlum]

2. Republican Family Values

As usual.

[AnotherMcIntosh]

3. Yet, a common phrase used by some posters is that tax schemes by the super-rich "are legal."

All of the tax schemes.

Such posters are willing to assume, without comparing the actual activities with the law's requirements, that all tax schemes are legal.

For them, in an Eric-Holder type fashion, they believe that investigations of the rich and super-rich should generally not be conducted. When it is revealed, for example, that someone from the super-rich class has hidden their money in the Bahamas, they immediately say such things as "It's perfectly legal."

[underthematrix]

6. white collar crime is least prosecuted of all crimes.

[underthematrix]

4. Thank you for posting this. Can you imagine what would

happen if an ordinary citizen did this?

[sulphurdunn]

5. It should be required

that financial statements be written in English, for the sake of clarity and not obfuscation.

[BlueStreak]

7. And let us not forget the bottom line impact

When the ultra-rich are able to evade paying taxes, that means the rest of us get taxed more (or get our benefits cut) to make up for the freeloaders.

[They_Live]

8. Reversing all of the loopholes used by Bain Capital

is the blueprint for fixing our economy.

That, and eliminating subsidies for companies raking in record profits (oil), taxing churches, taxing the billionaires, and cutting the over-inflated Military budget.