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View Diary: Updated x4 w poll: Bain Tax Bombshell Bigger than Before (150 comments)

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  •  whenwego - partnerships are flow through (12+ / 0-)

    entities. Each tax year all the profits are losses are allocated to the owners of the partnerships. Unlike C corporations, who have a corporate level tax liability, you can't keep "money" inside the partnership if it represents a profit without paying tax on it. This actually does happen and it is called "phantom income" where you have a tax liability, but haven't actually receive any cash to even pay your taxes.

    "let's talk about that"

    by VClib on Fri Aug 24, 2012 at 10:00:35 AM PDT

    [ Parent ]

    •  Then please explain how Romney could end up (7+ / 0-)

      with a total tax rate of less than 14% when even cap gains rate is 15% and partnership income should be taxed as ordinary income unless it's cap gains by the partnership.

      There are way too many holes for anyone to take a position that everything is on the up and up.

      "If you trust you are not critical; if you are critical you do not trust" by our own Dauphin

      by gustynpip on Fri Aug 24, 2012 at 11:04:24 AM PDT

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    •  VClib, experts, help us avoid RW memes, pls (10+ / 0-)

      IANAL, accountant, tax expert, etc. could you please explain to ppl that speculating about what the Obama Campaign can release about Romney's taxes is accusing the President of a felony, one that the RW regularly accuses him of when someone they know is the object of an audit.

      googling " audit enemies president" will give you plenty of examples of RW accusations.

      Maybe if you tell them that in saying so they are equating him with Richard Nixon during Watergate, who planned to use the IRS to harass the people on his enemies list, they will understand their speculation does real harm to the President's reputation.

      Anyway ((gchaucer2)) who has tried to straighten ppl out on this.

      "Are you bluish? You don't look bluish," attributed to poet Roger Joseph McGough, for the Beatles' Yellow Submarine (1968).

      by BlueStateRedhead on Fri Aug 24, 2012 at 11:10:24 AM PDT

      [ Parent ]

    •  Good point @VClib (4+ / 0-)

      But profits in the partnership have to be "realized". If the partnership got into a stock in a private entity (as most Bain holdings are) at the entry price, it can pretty much value that stock at a valuation price (as of last private round) rather than the "public price" which is what it would realize if sold publicly.

      This difference could be ENORMOUS in VC and PE circles.

      •  whenwego - you are definitely correct (3+ / 0-)
        Recommended by:
        whenwego, FarWestGirl, JVolvo

        There is no tax event until appreciated capital assets are sold, just like for individuals. Appreciated assets can be kept within the partnership for its entire term. However, unlike corporations, partnerships have a finite life and the institutional investors in the Bain Capital funds pressure the managers to wrap these up within a ten year period.

        "let's talk about that"

        by VClib on Fri Aug 24, 2012 at 11:35:07 AM PDT

        [ Parent ]

      •  Bain Holdings (3+ / 0-)
        Recommended by:
        FarWestGirl, whenwego, PinHole

        Some of those holdings may be corporations, but to the extent the holdings in the partnerships are partnerships (or LLCs taxed as partnerships), then the income flows through two tiers of entities.   Moreoever, the VC and PE funds harvest gains and losses throughout the life cycle of the fund.  I find it hard to believe that the Bain funds had no ordinary flow through income at all and had not realized at least some gain/loss.

        That being said, they are unique in the world of taxpayers in that they have a signficant amount of control over the timing, source, and character of their own income.  

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