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How to make the 99% look like fools with a 401K

Posted by david52 z5CO (My Page) on
Sat, Jul 14, 12 at 18:47

(Reuters) - In the wake of news reports last week that presidential contender Mitt Romney owns an individual retirement account worth as much as $101 million, questions are growing over how it could have gotten so big when contribution limits are capped at $5,000 or $6,000 a year.

Tax lawyers and accountants suggest an answer: Romney may have made use of an Internal Revenue Service loophole that allows investors to undervalue interests in investment partnerships when first putting them into an IRA. These assets can produce returns far in excess of those that could be generated from other investments made at the capped level.

An investor could even set an initial value for a partnership interest at zero dollars, because under tax regulations an interest in a partnership represents future income, not current value, said Chris Sanchirico, co-director of the Center for Tax Law and Policy at the University of Pennsylvania Law School.

Whether Romney used this technique, which is legal, when he put partnership interests into his IRA is a question that won't likely be answered when he discloses his 2010 tax returns on Tuesday.

Romney's IRA, valued at between $20.7 million and $101.6 million, as reported by The Wall Street Journal last Thursday, holds stakes in 13 investment entities run by Bain Capital, the private-equity firm he cofounded and led for 13 years.

"One possibility for its size is that he put his Bain partnership interests into the IRA and valued them at a very low number," said David Weisbach, a law professor who focuses on tax at the University of Chicago Law School. snip / end quote

As CEO he made contributions to his 401k, which were managed by ... Bain. This allowed him to buy a special class of stock from ... Bain. This stock had the very special property that it paid huge dividends regularly and almost immediately based on the profits of ... Bain.

/well, when you make an obscene amount of money shutting down steel mills and sending jobs to China, you have to put those profits to work somewhere, amirite?

Here is a link that might be useful: link


Follow-Up Postings:

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RE: How to make the 99% look like fools with a 401K

"Romney may have made use of...

An investor could even set an initial value...

Whether Romney used this technique, which is legal,...

Romney's IRA, valued at between $20.7 million and $101.6 million,


One possibility for its size is that...

Here is a link that might be useful: link"

______________

Man, speculation is SO MUCH more credible when it comes with a linky dink; doncha think?


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RE: How to make the 99% look like fools with a 401K

Yeah, you're right, elvis. The country is rife with people of 401K's worth 10 of millions of dollars. Sure there are. Nothing to see here, folks; move right along and leave the poor investor alone.


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RE: How to make the 99% look like fools with a 401K

Why is it legal for an investor to set the value of his own investment partnerships? What would prevent him from reporting a lower value?


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RE: How to make the 99% look like fools with a 401K

I'm sorry, but that is not a valid news report. "May have?" "Could have?" I neither trust nor respect Romney, but that article is feeble.


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RE: How to make the 99% look like fools with a 401K

"the 99%" is that warmed over expression from OWS movement. Can anyone here remember that? It is the movement that David and a few others claimed would be the salvation of the world.
We're gonna see alot of this over the next few months. Distraction from real issues such as the Jobs Report will be the MO.

Here is a link that might be useful: June Jobs Report


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RE: How to make the 99% look like fools with a 401K

Elvis and Elly, I think your questions regarding the speculations can be answered in the first paragraph: "questions are growing over how it could have gotten so big ..."

People, experts, are trying to understand how this is possible.


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RE: How to make the 99% look like fools with a 401K

401K plans were designed for wage earners and salaried workers to invest for their retirement years by putting aside some of their income in interest bearing accounts to be accessed when retirement arrived, or with penalty before that.

Multi-million dollar 401K accounts read to me like tax shelters.


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RE: How to make the 99% look like fools with a 401K

You know, a guy like Romney works hard, in the office, and heck his dad hoed corn when he was young so it's a Romneys-in-rags-to-riches story.

Segue: it's an American Dream, proof that it happens very, very occasionally.


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RE: How to make the 99% look like fools with a 401K

An IRA is very different than a 401k. 401ks were never intended to be only interest bearing accounts. Owners of IRAs can invest their money in just about anything. The Reuters author touches on that. What's the point of this thread?


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RE: How to make the 99% look like fools with a 401K

snip -

The general partners' cut of the profit, known as carried interest, is taxable each year if the funds in which the IRA is invested earn certain management fees or borrow to make their investments. Tax lawyers say they want to know whether Romney's IRA holds any carried interest and whether it has paid tax on it - something not disclosed in his personal financial summary or on a federal income tax return. "In the context of a $100 million IRA, that is what we would want to know," said David Miller, a tax lawyer at Cadwalader Wickersham & Taft.

The average IRA held by Americans holds $42,500, according to the Investment Company Institute, a trade group. While the Romney campaign has said that some of his IRA consists of retirement savings rolled over from previous plans, accountants say rollovers would not likely explain the size of his IRA.

"Even if he rolled over a 401k, with the annual caps on contributions, you're still only talking about a few million dollars," said Robert Green, an accountant who is founder of Green Trading, a tax and accounting firm that caters to the investment industry. Last year, individuals could contribute a maximum of $16,500 a year to their 401(k) plans.

Tax lawyers say it is also important to know whether Romney's IRA holds stakes in Bain funds directly, or through related, offshore entities.

These entities, commonly used by tax-exempt investors such as Romney's IRA, legally allow the investors to avoid having to pay a special tax, known as the unearned business income tax, or UBTI.

While the Wall Street Journal suggested on Thursday that avoidance of the special tax was a big reason for the size of Romney's IRA, some tax lawyers said that its size might simply reflect the extreme profitability of a carried interest held by the IRA. "The best guess is that he put the carried interest into the IRA," Miller said.

Romney's IRA produced income of $1.5 million to $8.5 million over 2010 and through August 12, 2011, according to his financial summary, but it is unknown what, if any, taxes the IRA may have paid on its carried interest. Saul, Romney's campaign spokeswoman, declined requests for comment.//

from the same link in the op

Heckuvan IRA


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RE: How to make the 99% look like fools with a 401K

Posted by david52 z5CO (My Page) on Sun, Jul 15, 12 at 0:10

"The general partners' cut of the profit, known as carried interest, is taxable each year if...

-snip

While the Romney campaign has said that some of his IRA consists of retirement savings rolled over from previous plans, accountants say rollovers would not likely explain the size of his IRA.

-snip

Even if he rolled over a 401k, with the annual caps on contributions, you're still only talking about a few million dollars...

-snip

Tax lawyers say it is also important to know whether Romney's IRA holds stakes...

-snip

While the Wall Street Journal suggested on Thursday that avoidance of the special tax was a big reason for the size of Romney's IRA, some tax lawyers said that its size might simply reflect the extreme profitability of a carried interest held by the IRA. "The best guess is that he put the carried interest into the IRA," Miller said.

-snip

Romney's IRA produced income of $1.5 million to $8.5 million over 2010 and through August 12, 2011...

from the same link in the op"

____________________

What, again?


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RE: How to make the 99% look like fools with a 401K

So, I'm guessing all of Romney's followers are livin' large, too... so there really must be nothing to see; move along...


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RE: How to make the 99% look like fools with a 401K

from the Wall Street Journal -

snip -
Under current tax law, anybody investing an IRA in a private-equity fund, as Mr. Romney did, would likely incur a hefty special tax on "unrelated business income," also known as UBIT. This tax, assessed at a maximum 35% rate, is meant to discourage tax-exempt entities such as an IRA, pension plan or endowment fund from unfairly competing with for-profit, taxpaying entities by operating a business without paying taxes on it. Investing in a partnership that uses debt to buy companies would trigger the tax, experts said.

It isn't known whether Mr. Romney paid UBIT. His filings suggest use of a strategy involving offshore funds sometimes employed to avoid it, according to several experts.

One method used by tax lawyers is to have the IRA invest through an offshore affiliate of the private-equity firm, known as an offshore blocker corporation, which in turn invests the same money in the private-equity partnership. The tax is avoided because the IRA technically is investing in the offshore corporation, not in a private-equity partnership.

Tax experts say that might explain why Mr. Romney's IRA includes holdings in Bain entities based in offshore locations, including one Cayman Islands entity that Mr. Romney listed as having a value between $5 million and $25 million.

snip

But, you see, nobody can do anything but guess about this because he refuses to let the citizens of the United States see what their presidential candidate does/did to amass such an astronomical sum in his retirement fund

Here is a link that might be useful: link


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RE: How to make the 99% look like fools with a 401K

So, are you saying that guessing is what makes the 99% look like fools with a 401k?


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RE: How to make the 99% look like fools with a 401K

No, I'm saying that in a society where the average IRA is $41,000, here's a guy with one worth $100,000,000 or so , and everybody thinks thats just okeydokey, to the point they're willing to elect him president, even though the Wall Street Journal thinks he used off-shore accounts to skirt a basic tax law.

The fools are out there defending this.


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RE: How to make the 99% look like fools with a 401K

Mitt Romney shouldn't be criticized for using off-shore tax havens because "it's really American to avoid paying taxes, legally," Sen. Lindsey Graham (R-S.C.) said Tuesday.

The presumptive GOP presidential nominee has come under fire for stashing assets overseas in places like Bermuda and Switzerland.

Graham argued that Congress is responsible for tax avoidance because it has crafted such convoluted rules and said he was fine with Romney's taking advantage of the loopholes.

So according to Lindsay Graham, it's as American as apple pie to avoid paying taxes. Elvis, would you please drag out that dictionary, and let me know what the meaning of "loophole" is? I would guess you would find that although loopholes may be technically legal, their purpose is to circumvent the intent of the law. I don't think any lawmaker should be crowing about how peachy it is to take advantage of a flaw in the system.


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RE: How to make the 99% look like fools with a 401K

  • Posted by ohiomom 3rdrockfromthesun (My Page) on
    Sun, Jul 15, 12 at 9:53

....yes many of us "remember that"

Just because you don't see it, doesn't mean it is not there :)

Here is a link that might be useful: source of course


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RE: How to make the 99% look like fools with a 401K

I would guess you would find that although loopholes may be technically legal, their purpose is to circumvent the intent of the law

"Loopholes" ARE the law.


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RE: How to make the 99% look like fools with a 401K

"Loopholes" ARE the law.

*

EXACTLY.

A loophole isn't illegal.
It's THE LAW and it's promulgated from Washington, D.C.

We should change the tax code so that it is not so complicated--no "loopholes" and everyone has to contribute.


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RE: How to make the 99% look like fools with a 401K

Loopholes are not "illegal" but that doesn't make them the law. The are unintentional and people like Romney have figured out ways to abuse them.


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RE: How to make the 99% look like fools with a 401K

se or abuse? it's all amatter of perspective, isn't it?

f loopholes were/are so terrible, why aren't they closed???


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RE: How to make the 99% look like fools with a 401K

f loopholes were/are so terrible, why aren't they closed???

Because the wealthy take advantage of them, and Congress won't allow them to be negatively affected.


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RE: How to make the 99% look like fools with a 401K

"... people like Romney have figured out ways to abuse them."

Romney probably hired tax attorneys to figure out this scheme. Access like that, and the lobbyists to maintain the laws that permit this usually isn't available to the 99%ers.


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RE: How to make the 99% look like fools with a 401K

Can't close loopholes. It would be viewed upon as raising taxes.


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RE: How to make the 99% look like fools with a 401K

Ripping off the public by exploiting loopholes, just because they can? People with integrity and ethics wouldn't.

Simple as that.


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RE: How to make the 99% look like fools with a 401K

I think it is really unfair to be critical of Romney taking advantage of "loop holes". The tax loopholes, credits, deductions etc are there to be used. They were put there deliberately and they benefit every economic strata...and everyone uses them to the extent they can.

What is wrong is the mindset that establishes these loopholes. They almost always are to the financial enrichment of individuals and corporations at the expense of the National Debt which requires astronomical tax dollars in interest payments alone. money that could be better spent or better yet not spent at all.

For those who think they would like a flat tax and the removal of the loopholes, Romney is not your man. It is the last thing he would do because of the negative impact on the personal wealth of rich Americans including himself. He has shown that he will take advantage of all legal deductions and has also moved huge amounts of money of shore, all to avoid taxes. Nothing wrong with that EXCEPT that is insight into how he views taxes.

I have heard Romney say in fact that he would INCREASE loopholes and lower taxes. What I have not heard him say is how he will pay for all that. Not sure why that appeals to people.


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RE: How to make the 99% look like fools with a 401K

chase: I do not believe that loopholes are there deliberately. I believe that rich people hire tax attorneys to figure out how to game the system. A loophole is an unintended consequence of an unnecessarily complicated system of taxation. They are not "get out of jail free" cards.


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RE: How to make the 99% look like fools with a 401K

It's kind of too bad "loopholes" have a dishonest, unethical connotation. I have integrity and am an ethical person, but I take advantage of a few. I don't have a team of tax attorneys on retainer working around the clock on my behalf...

But - do any of you use your home as a major deduction? Do you defer income? How about all those charitable donations? Offset gains by selling stocks? Max out your 401(k)? Flexible Spending Account? Buy tax exempt municiple bonds? I bet no one else here claims to be unethical either.

Yeah, Romney's over the top, but in that rarified atmosphere anything goes and for some bizarre reason is generally found to be a-okay. Make sure the ultimate prize of the Presidency is just beyond his grasp, but no one's going to find a way to take his wealth away.


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RE: How to make the 99% look like fools with a 401K

duluth: I am not sure if your examples are loopholes if they are allowed by the tax code. Loopholes happen when words are subject to interpretation. Very rich people are willing to be aggressive thinking that if they get audited they have an army of tax accountants who can get them out of trouble. It not about what the tax code says, it's about how people interpret it. I think it's a really legitimate question how Romney's IRA got so huge. How is he interpreting the tax code that his IRA is $100 million when most people's IRAs are in the $40,000 range?


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RE: How to make the 99% look like fools with a 401K

az, I was using the term in the broader sense, loopholes, deductions , credits etc. I agree that the very wealthy can go looking for opportunities to interpret the code to their advantage. However, it is the responsibility of federal auditors to identify those loopholes and for Congress to close them....and that's what I mean by a mindset, it will never happen!


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RE: How to make the 99% look like fools with a 401K

From Investopedia: A loophole is "a technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones with lower taxes or none at all."

I interpret what I enumerated above as falling broadly within the above definition.


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RE: How to make the 99% look like fools with a 401K

A loop hole isn't something like the mortgage deduction, thats an official social/tax policy to encourage home ownership.

That isn't even close to whats going on here, unless its now the official Gvt policy to encourage massive investments in secret off-shore tax havens to skirt taxes that the vast, vast majority of citizens pay.

But hey, keep on defending this sort of stuff, all the way to the election.


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RE: How to make the 99% look like fools with a 401K

Don't for one minute think I'm defending Romney or any of the ways he might have/most likely could have employed to amass an obscene amount of wealth.

Just musing that these items are often referred to as "loopholes" (rightly or wrongly) and could possibly be closed in any sweeping tax reform.


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RE: How to make the 99% look like fools with a 401K

IRAs ( other than Roth IRAs) and 401Ks are tax deferred refirement plans. One delays paying taxes on that money until one hopefully is in a lower tax bracket. They are ways to delay paying taxes - not a way to avoid paying taxes. Either the Romneys or their beneficiaries will pay taxes on that money. IRAs and 401Ks do not get a stepped up basis when someone dies. They are included in one's estate.

Also, that money will all be taxed as ordinary income when it is distributed from the retirement account. It losses it's character as long term capital gains or any other tax advantaged type of income.


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RE: How to make the 99% look like fools with a 401K

"They are included in one's estate"

And that may not be taxed at all, if the bozos get their way.


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RE: How to make the 99% look like fools with a 401K

What is estate tax about anyway, David? Why in the world should we pay tax on our parents' estate (say, they leave us their home and accompanying real estate) when they paid tax on the money they earned to buy it in the first place? You should never be taxed on the same money more than once. That's always made me crazy. :-(


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RE: How to make the 99% look like fools with a 401K

I happen to agree with Elvis on this point. I don't subscribe to an inheritance tax. In fact in our, tax crazy, socialistic country there is no such thing as an inheritance tax. The estate does have to pay all applicable deferred taxes and capital gains before the proceeds are dispersed...which is fair ball.

Under a flat tax on all income, earned and unearned, inheritances would be taxable.


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RE: How to make the 99% look like fools with a 401K

It won't happen in that purest form, because I do happen to believe that estate taxes should be eliminated, and of course, that means that people that get perks from their job or from others would be subject to paying tax on that income, and that means people that of course are recipients of settlements or awards in civil suits (such as in automobile accidents) would be subject to paying income taxes, as well as life insurance proceeds.

Right now, my recollection is that if proceeds from litigation or settlement "make one whole" then there is no income tax due. I haven't looked it up in years, so I don't know if that is still true, and to what extent.

We would need to hire thousands of new IRS agents to crack down on the underground bartering system--it's a gold mine waiting to be cracked wide open for more government revenue, especially since the economic downturn the last four years.

But if we're going to tax all income, then we tax social security benefits, food stamp benefits, medicare benefits, inheritances, money from lawsuits, life insurance, etc.

So that's why a total flat tax on all income won't happen without exceptions.


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RE: How to make the 99% look like fools with a 401K

So, see, this is how it works. Using incredibly dubious methods, Romney socks away $100,000,000 in a retirement account that isn't taxed. He then passes it on to his heirs an in estate..... that isn't taxed. Along with all the other stuff he accumulated which have enormous capital gains built in.

And thus vast fortunes in the billions are made and passed on, never taxed. And everybody knows that if we can concentrate all the wealth of the country in just a very few hands, everything always works out the best for all of us.

But hey, let nobody consider that dead multi-billionaires could possibly pay some of this gargantuan wealth in taxes to fund health care for our wounded veterans or maybe fuel a few navy ships or something.

No, because really, really rich people are like gods. "Job creators", and can't be bothered with mere mortal stuff like paying for roads and schools and military protection and safe food.


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RE: How to make the 99% look like fools with a 401K

Well if you believe that you shouldn't be taxed twice, then there goes taxing social security income and medicare benefits (FICA) because you paid those as taxes taken out of your paycheck.

And really the double taxation argument is kind of fallacious because you didn't actually pay taxes on the estate - your parents did. The income coming to you is new income so technically you should pay taxes on it. That being said you would have to inherit a nice fortune to even come close to having to pay taxes.


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RE: How to make the 99% look like fools with a 401K

Isn't the exemption 5.12 Million right now, but expiring at the end of 2012? Then it'll revert back to the 2002 level of 1 million, I think.

State tax can take a bite out of an inheritance; varies from state to state.


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RE: How to make the 99% look like fools with a 401K

"Then it'll revert back to the 2002 level of 1 million, I think."

Oh. Good!

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Posted by jerzeegirl 9 (My Page) on Sun, Jul 15, 12 at 15:34

"Well if you believe that you shouldn't be taxed twice, then there goes taxing social security income and medicare benefits (FICA) because you paid those as taxes taken out of your paycheck."

They were taken out, but not as taxes. More like a retirement fund. If it wasn't taxed before it was deducted, it should be taxed when withdrawn, I think.


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RE: How to make the 99% look like fools with a 401K

They were taken out, but not as taxes.

You can call it what you want elvis. The government calls them "Social Security & Medicare Taxes" (employment taxes).


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RE: How to make the 99% look like fools with a 401K

Just imagine what all the conservatives on this board and everywhere would be saying if roles were reversed and Obama had all that money in off shore accounts, refused to release his tax returns and used all those sketchy loopholes.

Of course, they would be saying it's ok because it's all "legal". NOT!

I think I will end this post the way MrsK ends 99% of her posts...LOL


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RE: How to make the 99% look like fools with a 401K

Some people don't seem to have a good grasp between illegal vs. immoral.

What Rosa Parks did was illegal but heroic and highly moral.

India might not be free today if Mohandas Gandhi had not led tens of thousands to the sea to gather illegal salt in 1930.

Conversely when someone does something that is not illegal but the question of its morality comes up...some want to give a free pass. When one is extremely wealthy, one can afford the best advice. I don't begrudge Romney's wealth, I won't vote for him anyway. So for me, it wont matter. But for some it might.

I always think of the word 'loophole' as an action which skirts an illegality.

-Ron-


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Posted by jerzeegirl 9 (My Page) on Sun, Jul 15, 12 at 16:37

They were taken out, but not as taxes.
"You can call it what you want elvis. The government calls them "Social Security & Medicare Taxes" (employment taxes)."

Yikes. Let's not go there re: what's a tax?

Anyway, you get my point. It wasn't taxed, and theoretically, you will get that money back in spades.


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RE: How to make the 99% look like fools with a 401K

Romney makes so much that it extremely unlikely that he made tax deferred contributions to a IRA.

Both his IRA and 401K will be included in his estate. His estate will pay estate taxes on the value of his IRAs And 401Ks. I have no idea what the rate will be but most likely it will be between 35% and 55%. Your guess is a good as mine. Then, the beneficiary of his IRA or 401K will again pay taxes on that money as ordinary income - not as tax advantaged long term capital gains but as ordinary income. So that money will be taxed twice - once at the estate level and once on the beneficiary's return when he takes the required minimum distribution.

There are some very specific laws regarding taking distributions from and the taxes due on distributions from inherited IRAs and 401Ks.


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RE: How to make the 99% look like fools with a 401K

Anyway, you get my point. It wasn't taxed, and theoretically, you will get that money back in spades.

I think your point is incorrect. Your income is taxed. You paid employment taxes on your income (SS and FICA) (up to the cap). SS and FICA are taxes that reduce your income. This is in addition to federal tax and state tax. You also will pay taxes on your social security money when you start drawing it if your income is over a certain level. Elvis, just get out pay stub and take a look at it.


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RE: How to make the 99% look like fools with a 401K

Well, I just don't know. I've never done payroll. I was under the impression that Social Security & Medicare were deducted from gross earnings, and THEN federal & state were applied against this reduced amount. Wrong?


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RE: How to make the 99% look like fools with a 401K

I was under the impression that Social Security & Medicare were deducted from gross earnings, and THEN federal & state were applied against this reduced amount. Wrong?

Yes, your impression is quite wrong.


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RE: How to make the 99% look like fools with a 401K

So, Nancy, you're saying that we are taxed, then the Social Security & Medicare are deducted, then later when we collect the SS and use the Medicare, we are taxed again for the Social Security if we make more than X amount of dollars by bagging groceries or whatever, for which we are also taxed.

That's double taxation. Sure doesn't seem right. Please note that I didn't say you aren't correct; it just doesn't seem right at all.


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RE: How to make the 99% look like fools with a 401K

Elvis, FICA, Medicare, federal and state income taxes are all calculated on gross earnings for the period.


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RE: How to make the 99% look like fools with a 401K

Yes, way off the mark. I've just been doing my company's payroll for this pay period ending today.


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RE: How to make the 99% look like fools with a 401K

I'm not being deliberately obtuse.

Nancy, I do know that Social Security is calculated on the gross earnings for the period. Just want to make sure I have this straight. So we are paying federal income tax on the Social Security amount (which is part of gross earnings), before that Social Security amount is deducted from our earnings.

That stinks...


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RE: How to make the 99% look like fools with a 401K

So we are paying federal income tax on the Social Security amount

Federal and state income tax are calculated on gross earnings. Say you earn $1,000 per week. FICA is 4.2% of $1,000; Medicare is 1.45% of $1,000; federal and state income tax are calculated on $1,000 per week according to your filing status and exemptions claimed. Then FICA, Medicare, FIT and SIT are all deducted from your gross and the net amount is your paycheck. (California also has mandatory state disability insurance deductions - again, calculated on gross earnings for the period.)

FICA contributions stop once gross earnings are $110,100; there is no cap on Medicare contributions.


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RE: How to make the 99% look like fools with a 401K

Ah. So at the time you start collecting SS, you haven't paid taxes on it already. That's different; never mind.

Thanks for clearing that up--I was all set to be outraged.


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RE: How to make the 99% look like fools with a 401K

David, as jhug wrote, all money in an IRA or 401K DOES NOT escape a tax. Since no tax was paid on it when it was deposited in the IRA or 401k, ordinary income tax will be assesed against it when it is with drawn during the persons's lifetime. If it is not withdrawn, then the heirs MUST withdraw it over a certain amount of time and it will be taxed at their ordinary income tax rate.

Elvis, Social security taxes are taxed before they are contributed. You make $10,000 a year, over 7 percent is put into SS and Medicaid, but you are taxed on the $10,000, not on the $9,000 plus that you have after the SS and Medicare taxes are paid.


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RE: How to make the 99% look like fools with a 401K

OK, youse guys are the experts. An IRA is taxed when the heirs spend it.

But lets focus more on how he was able to manipulate the tax system to create a $100,000,000 retirement fund, using off-shore accounts.

I mean, like, maybe the manager guys at McDonalds who have benefits could, you know, take advantage of this as well.


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RE: How to make the 99% look like fools with a 401K

Wait! I'm back to outraged. So according to dockside, I AM taxed on that SS up front. And maybe later. Again.

Aargh.


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RE: How to make the 99% look like fools with a 401K

Anyone can contribute to an IRA.

I don't think having an IRA makes people that don't look like fools. But people that could have IRAs and choose not to save are foolish, in my opinion.

There was a time when savings were considered a good thing.

I couldn't care less how much money anyone saves as long as they didn't break any laws. It's a good thing--one less drain on the taxpayers.

And yes, there are very specific rules for inheriting an IRA and yes you have to pay taxes. Sooner or later.


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RE: How to make the 99% look like fools with a 401K

Elvis: You will be getting more money than you put in and so it's appropriate to be taxed again because it's "new" money. So you can be a little less outraged.


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RE: How to make the 99% look like fools with a 401K

And, Elvis, you will only be taxed on 85% of your total SS income if you have additional income over a certain amount. It's a very complex formula.


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RE: How to make the 99% look like fools with a 401K

Well, thanks for all the info, Jerzee and Dockside.


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RE: How to make the 99% look like fools with a 401K

"How to shelter $100,000,000 in an IRA
Recent controversy over Mitt Romney's tax returns has included questions over his IRA (individual retirement account) which is reported to contain well over $100,000,000.

For those of you who do not have an IRA, it is important to note that regulations impose a $5000 limit to the annual contribution that an individual can make to it and even less than this was allowed in the years before 2012.

If Mitt Romney worked at Bain Capital for 25 years, then at the current allowable deposit amount and excluding interest, Mitt's principal would grow to $125,000 in that time. Yet Romney has nearly 1000 times that amount in his IRA. So let's say that the investments made by the IRA gave Romney a 15% return each year. After twenty-five years that IRA should contain about $1,600,000. Still a far cry from $100,000,000.

So how could Romney's IRA contain so much more? Allow me to speculate.

When Romney founded Bain Capital, it was created as a Private Corporation. Legally, Private Corporations do not have the financial transparency that Public Corporations have. The stock of the Private Corporation is not sold to the public and usually remains under the ownership of the partners of the Investment firm.

The United States Treasury Office began to see a phenomenon occurring with Private Corporations around year 2000. In increasing numbers, Private Corporations began to find tax shelters to protect their profits from United States taxes. Additionally, certain stock based compensation plans did not comply with what IRS called "deferred compensation" tax rules. For example, certain individuals were given stock options with an exercise price that was less than the fair market value of the company's common stock. To block this practice after year 2000, regulations were adopted to add an additional 20% tax on these transactions. The idea was to discourage evading taxes by writing regulations that made it less profitable to do so.

In certain companies (Bain may be one of them), under-priced stocks were given to the owners and directly deposited into their IRA accounts. So let's say the $5000 limit on the IRA deposit was achieved by under-pricing these stocks by a huge amount. For example, let's speculate that the per share fair market value of the stock was $50.00 but the owners got shares deposited into their accounts at $0.10. In that case, the number of shares at the fair market value is 100, but at the reduced price is 50,000. For reporting to the IRS, the Individual Retirement Account meets the regulations and only $5000 is reported as being deposited. Yet in reality, the true value of the number of shares is 50,000 shares x $50.00 per share = $2,500,000.

Repeat this year after year and you will soon have $100,000,000. Even if you do not reduce the price of the stock as much as in my example, you will still be there in no time.

If the individual has a Roth IRA, then the situation is even more favorable. With a Roth IRA, the taxes are paid on the deposit amount and are not taxed upon withdrawal at retirement. So in our example above, the Roth IRA owner would pay taxes on $5000 up front and not on the $2,500,000 withdrawn during retirement.

So if you want to shelter $100,000,000 in an IRA, open a Private Corporation, setup a Roth IRA and give yourself stock options at a seriously reduced price. Pay taxes on $5000 and enjoy the tax-free high life at retirement."

end quote. Which also might explain why he doesn't want to release his tax forms.

Here is a link that might be useful: link


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RE: How to make the 99% look like fools with a 401K

and enjoy the tax-free high life at retirement.

So he'll have tax free advantages for the rest of his life with millions of dollars. Not something the rest of us can hope to achieve. Guess those perks are just for the big boys.


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RE: How to make the 99% look like fools with a 401K

David you can speculate all you want but it is not going to make Mitt Romney's money go away.

He is a very smart astute business man( which I admire)
and if anyone thinks they are going to "catch him up"
so to speak, in something as easy to uncover as tax evasion or some such.......it ain't gonna happen.

He has the best of the best handling his finances and I think he is a man of honor knowing his religious background and teachings.
He has I'm pretty sure taken care to keep everything LEGAL.

When you are as wealthy as he is (I love that about him) :)
what is 100 million more?

Its jealousy again in its finest when it comes to his money.


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RE: How to make the 99% look like fools with a 401K

Not jealous about his money - irked about how he is able to game the system (legally!) to take advantage of things 99.9% of Americans can't. And in taking advantage of these "tax advantages" (like claiming stocks are worth much less than they really are) ... he shorts the system of money that would have flowed into it. He shorts the American taxpayers.

He widens the income gap between him and the rest of us by using his money to influence tax laws and pay for lawyers and accountants to find every loophole they can.

It takes money to make money and Mitt Romney is one of the finest examples of how to do that. Year after year, men like him have lobbied their congressmen and women to grant the very loopholes that they now use. Do you think that I could get a loophole created in my favor? Doubtful. I don't have the money to make that happen.

Sure, you can admire him, of course. But many will see him as a leech that sucks the system for his own benefit.

Not jealousy. Anger.


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RE: How to make the 99% look like fools with a 401K

Then where is the anger for Bill Gates $59B.
Warren Buffett $39B
George Soros $22B
Michael Bloomberg $19.5B

Go to Forbes web site and pull up the 400 richest people
in the USA.

Where is the outrage for their wealth?
Where is the outrage for their IRA?
Where is the outrage for their loopholes?

Rich celebrities Jennifer Lopez $52 mil.
Now there is a success story.

Most of the wealthy are success stories if not all .
Even if some were born with a silver spoon....they have
to be successful to maintain and grow that wealth.

I have not heard anyone bad mouth Buffett's wealth or Soro's so it leads me to think Romney's wealth is jealousy.


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RE: How to make the 99% look like fools with a 401K

No, see, thats whole idea of 'jealous of his money' is a total red herring. It doesn't work.

Much the same as accusing you of being 'jealous" of those welfare queens buying steak with their food stamps.

The question here is how does somebody get an IRA to be worth $100,000,000.

And one way to do that would be to contribute grossly under-valued shares to an IRA, and since you started the company, and valued the shares you gave yourself, I'd think that would border on fraud.


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RE: How to make the 99% look like fools with a 401K

David: "And one way to do that would be to contribute grossly under-valued shares to an IRA, and since you started the company, and valued the shares you gave yourself, I'd think that would border on fraud."

"I WOULD think that WOULD border on fraud."

Well IF that's how it came down, MAYBE so.

So are we now going to speculate about what Romney MAY be guilty of IF he did this or IF he did that? Isn't that what a reasonable person WOULD put in the category of gossip?

You can put "what if?" in front of lots of statements. As long as you keep in mind that David's theory is not based on firm evidence, knock yourself out.


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RE: How to make the 99% look like fools with a 401K

Would you like to suggest a legal way for someone to obtain an IRA valued at $100,000,000?


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RE: How to make the 99% look like fools with a 401K

It's not a matter of what's legal, what one can get away with... it's a matter of what's morally right. There's a big difference... even more so when one sings the moral praises of religion and family values.


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RE: How to make the 99% look like fools with a 401K

The larger question is, as long as it's legal, what business is it of yours?


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RE: How to make the 99% look like fools with a 401K

No David; even if I had enough knowledge of how that might be done, I would presume to speculate on the same.

And Jodi, I'm not the morality police. And even if I was qualified to judge Mitt Romney's or anyone else's morality, I would not insinuate that there might be a moraliy issue regarding a situation that might or might not even exist.


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RE: How to make the 99% look like fools with a 401K

As a taxpayer, it is my business. Romney, and others like him (could be Soros, Buffett, Gates, Adelsman, etc.) are getting special tax breaks that I and the rest of us in the middle class don't get. It may be legal, but it's not fair. So, our natinal debt increases because those in the .01% aren't paying their fair share.

That's why it's my business


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RE: How to make the 99% look like fools with a 401K

The larger question is, as long as it's legal, what business is it of yours?

Same business as 49% of this population legally not paying federal taxes is yours, right, Demi? Just because something's legal doesn't mean one must squelch all criticism of it.

But like David, I too would be very curious to hear any proposed legal means of acquiring such extremely unusual amounts in one's IRA.


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RE: How to make the 99% look like fools with a 401K

Posted by circuspeanut 5 (My Page) on
Sun, Jul 29, 12 at 23:48

The larger question is, as long as it's legal, what business is it of yours?

Same business as 49% of this population legally not paying federal taxes is yours, right, Demi? Just because something's legal doesn't mean one must squelch all criticism of it.

*

Well of course anyone is entitled to have an opinion on the matter.

For the 47% that does not pay any income taxes, that is certainly their right and they should not as long as they are not required to by law, unless they want to.

I've never known anyone to volunteer to pay taxes they do not owe, no matter how much they say their care about their fellow man.

That aside, the fact that almost half of the country does not contribute to federal revenue is our business, while as long as someone pays their taxes and yet acquires money doesn't seem to me to be anyone else's concern.

Perhaps they are interested in someone else's business, but as long as they are paying taxes, what business is it of anyone's how much is left over after paying taxes?

Why do you care what is left after taxes are paid?


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RE: How to make the 99% look like fools with a 401K

Even simpler than that, Dockside, is the fact that we, the people are still in charge... we are represented by elected officials who work for us... therefore, it IS our business. We only want a level playing field and rules that apply to everyone equally, across the board.

Expire the tax cuts, close the loopholes, and force other countries to report monies sequestered in overseas banks for taxing purposes. That would help our revenue situation quite nicely.

Actually, many loopholes are being closed, I recently read... and other nation are beholden to the IRS to report certain amounts of monies kept or invested with overseas banks. So, the IRS will be getting more revenue.


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RE: How to make the 99% look like fools with a 401K

"force other countries to report monies sequestered in overseas banks for taxing purposes"

That sounds like bullying to me. I thought you didn't want the USA to be a bully anymore. Exactly how would you suggest we force them without bullying?


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RE: How to make the 99% look like fools with a 401K

I have not heard anyone bad mouth Buffett's wealth or Soro's so it leads me to think Romney's wealth is jealousy.

I would be happy for all of them to come under the microscope. No one was looking at Romney's until he decided to run for President. Step into the spotlight and you can expect the light to shine on you.


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RE: How to make the 99% look like fools with a 401K

  • Posted by vgkg 7-Va Tidewater (My Page) on
    Mon, Jul 30, 12 at 8:52

Buffet, Soros, Gates? None of them are running for prez.
Plus they all want to be taxed more to help the nation pay it's bills. Romney on the other hand wants to lower his own taxes, why? to create jobs in overseas banks I suppose.


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RE: How to make the 99% look like fools with a 401K

Romney on the other hand wants to lower his own taxes, why?

Oh, you silly. Paying 13.9 percent is too high, if you earn 20-something million a year. Because, you guessed it, at that income you are in that worshiped set of the mega-wealthy now known as "Job Creators" .

I mean, look at the hundreds of thousands of people Mitt personally employs.


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RE: How to make the 99% look like fools with a 401K

"The larger question is, as long as it's legal, what business is it of yours?"

The day he declared his candidacy for President of the United States it became the business of every American.

Americans should demand to understand Romney's finances, the manner in which he invests, the taxes he pays and the methods he uses to avoid taxes.

It speaks to his personal and business values, his fiscal policies, the direction he is likely to set in terms of federal taxation and perhaps the degree to which he may have been "creative" in finding and using loopholes...which are not the same at all as deductions. Information voters should be able to evaluate before casting their vote!

An even larger question is why is he creating an environment of secrecy that ferments speculation? That tells me he either has very poor skills in judging people or he has a reason to keep the information away from the voting public.


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RE: How to make the 99% look like fools with a 401K

New tax regulations do, indeed, require other nations' banks and investment firms to report US monies of certain amounts, for taxation purposes, that are kept or invested within that nation/bank. Asia had been a great haven for hiding large sums, but since new rules went into effect, less Asian banks and investment firms are handling US customers, and many are refusing them, altogether.

I can't recall exactly where I read it, but I do believe it was from an article someone linked here at one time, at HT. I can't recall which thread, but it must have been one about taxes or something financial.

It's always been my opinion that the entire monetary system we use globally is inherently and quite purposely flawed to make the "money changers" wealthy, while everyone else is kept in perpetual debt. And the funny thing is, anyone in power who has tried to change this has been assassinated...

Bankers are no different than any other cartel... they simply figured out a plan to make their theft legal, beginning with the National Banking Act...


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RE: How to make the 99% look like fools with a 401K

Slow it down, folks. Let him get the nomination first.


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RE: How to make the 99% look like fools with a 401K

In the wake of news reports last week that presidential contender Mitt Romney owns an individual retirement account worth as much as $101 million, questions are growing over how it could have gotten so big when contribution limits are capped at $5,000 or $6,000 a year.

...and mine lost 40% of its value in 2008...

-Ron-


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RE: How to make the 99% look like fools with a 401K

force other countries to report monies sequestered in overseas banks for taxing purposes"
That sounds like bullying to me. I thought you didn't want the USA to be a bully anymore. Exactly how would you suggest we force them without bullying?

Well, my bank here has to report to the IRS on what ever interest (snort, at an annual rate of 0.5%) I earn, and I should think it fairly easy to tell Credit Suisse that hey, if you don't report the income on accounts held by American Citizens in Switzerland, then we won't let you operate a subsidiary in the US.

Which is, I believe, pretty much what they did. I don't have a problem with that.

/but not to worry, there's always the Caymans


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