Saturday, August 11, 2012

Mitt Romney and Marriott "Son of Boss" Tax Scam

The Marriott hotel chain was founded by the Mormon missionary J. Willard Marriott in 1927. Mitt Romney has had a close, long-standing, personal and business connection with Marriott International and its founders for decades; and Romney served as a member of the Marriott board of directors for many years.

From 1993 to 1998, Romney was the head of the audit committee of the Marriott board. During that period, Marriott engaged in a series of complex and high-profile maneuvers, including "Son of Boss," a notoriously abusive prepackaged tax shelter that investment banks and accounting firms marketed to corporations such as Marriott. In this respect, Marriott was in the vanguard of a then-emerging corporate tax shelter bubble that substantially undermined the entire corporate tax system. More here at CNN...

From Wiki: Son of BOSS is the informal name for a type of tax shelter used in the United States, one that was designed and promoted by tax advisors in the 1990s to reduce federal tax obligations on capital gains from the sale of a business or other appreciated asset. "BOSS" is an acronym for "bond and option sales strategy", an earlier tax shelter that Son of BOSS resembled.

We are taxed on income, not gross receipts. That means that when you sell something you get to deduct your basis (initial investment). In its simplest manifestation, basis is the amount of money that you paid for something. You buy something for five dollars and sell it for six, your income is one dollar. That could be done with stocks, real estate, or by investing in SWAG (silver, wine, art, and gold)

EXAMPLE: A dime made in 1873 was recently sold for $1.6 million (plus a 15% buyer's fee) at an auction to an anonymous bidder. If the unidentified buyer later sells the dime for a profit, they should be subjected to a 15% capital gains tax on the profit. If they sell it for less than what they paid for it, it might be considered a realized capital loss.

It can be more complicated if you acquire assets in other ways, such as by gift or inheritance. The important point though is that when you sell something, the higher your basis the less your gain or the greater your loss.

The way that the designers of Marriott's "Son of Boss" tax scheme came up involved combining two things – "short sales" and the formation of a partnership. The important tax principle is that the proceeds of a short sale are not gross income. You recognize gain or loss when you close the short sale. Details for the tax scam can also be found at Forbes Magazine: Romney, Marriott And Son Of Boss ---- For Dummies

Because of the tax laws congress writes, every year $1 trillion in personal income from capital gains by high-income earners like Mitt Romney is not taxed at all for Social Security or Medicare, and it is taxed at a lower rate for federal income taxes than Warren Buffett's secretary.

In a campaign advertisement released on August 9, 2012, incumbent President, Barack Obama made specific reference to his GOP opponent Mitt Romney and his involvement in Son of BOSS tax avoidance as a Marriott International board member. - Four ways Romney helped Marriott avoid paying taxes - August 8, 2012

"Son of Boss" tax shelter: Marriott executed a Son of Boss trade in mid-1994—a scheme that manufactures “a gigantic tax loss out of thin air” to offset actual gains “without any economic risk, cost, or loss.” Marriott later filed a return claiming an artificial loss to lower the company’s taxable income. Son of Boss schemes were notorious, involving about 1,800 people and costing the IRS an estimated $6 billion, and was described as “perhaps the largest tax avoidance scheme in history.”

“Spray and pray”: Marriott purchased four synthetic fuel plants in 2001 in order to benefit from federal tax credits for synthetic fuels, a strategy which was dubbed “spray and pray”. In 2002, the company legally claimed $159 million of those credits, reducing their effective tax rate to just 6.8 percent—far below the normal corporate rate of 35%. Even Sen. John McCain criticized Marriott’s behavior: “One of the greatest beneficiaries of this tax shelter—and that is all that it is, a tax shelter—is a very profitable hotel chain: Marriott.’’

"Profit-shifting" to Luxembourg: In 2009, Marriott collected $229 million in revenue—primarily from royalty, licensing and franchising fees—at its Luxembourg subsidiary, Global Hospitality Licensing. The subsidiary reported having only one employee. By the end of 2011, the company $451 million in offshore earnings that it left overseas to delay paying US income taxes. Under Romney’s proposed corporate tax plan, Marriott would never have to pay U.S. taxes on those earnings.

Questionable deductions: The IRS challenged $1 billion in deductions Marriott took related to an employee stock ownership program from 2000 to 2002. The company eventually agreed to pay about $220 million of what it owed in income taxes, excise taxes, and interest to the IRS and a number of states.

Marriott ultimately had to pay over a $220 million fine for using this "Son of Boss" tax sham. As usual, no one went to prison for ripping off the U.S. government -- the government that Romney wants to lead. This "Son of Boss" tax scheme is but just one of thousands of tax "avoidance" tools that the top 1% uses to avoid paying their fair share of taxes.

On February 2012, Marriott International announced the construction of tallest hotel in the Dubai.

Below: One of my first political ads I created and posted to YouTube last week.

GOOGLE: Bud Meyers tax evasion

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