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View Diary: Mitt donated 30% to charity? (53 comments)

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  •  notagain - it's never free (0+ / 0-)

    See my longer comment upthread.

    You are always cash ahead to keep your money rather than give it to charity, even after the tax benefit. I do think the wealthy like the thought that some of their money that would go to taxes instead goes to organizations pursuing activities where they have a personal interest. That may be a food bank or a think tank.

    "let's talk about that"

    by VClib on Sat Oct 13, 2012 at 11:49:02 AM PDT

    [ Parent ]

    •  I once read this book.. (0+ / 0-)

      "The Rich and the Super-rich" by Ferdinand Lundberg. It's available for free download from the soil&health library, due to its copyright expiration, should anyone care to read it. There is a chapter called    PHILANTHROPIC VISTAS:
          THE TAX-EXEMPT
      fascinating reading. Since the book was written in the 60's, I'm sure the laws are even more favorable to tax-exempt foundations. Here's a little sample:

      Protean Uses of Foundations

         While the largest foundations and flotillas of foundations have been mentioned, size is not alone important. Smaller foundations act as conduits and control points, useful in all sorts of secret business affairs and especially in tax evasions. Nearly every large corporation and many of the large banks now have their own foundations. And small foundations often suddenly flower into huge growths.

         -Among other things, as Patman found, foundations can become tax-free receptacles for capital gains. An individual or corporation may have an investment it wishes to liquidate but which stands to incur a huge capital gain on large long-term appreciation. Payment of a capital gains tax may be avoided by turning the investment over to a foundation (no gift tax) and then having the foundation sell the investment (no capital gains tax). The foundation may now lend the entire liquid sum back to the donor at a nominal interest rate (no law requires that the foundations seek maximum earnings), or it may with the untaxed money obtain a controlling block of stock in some company the original donor wishes to control. With this control he can raise or lower the company's dividend rate, obtain power over its possibly large cash funds and management and perhaps even obtain for himself some further low-interest loans.

         With low-interest loans received, a donor can make lucrative investments. He could, for example, with a loan on which he paid 1 per cent, itself tax deductible, go out and buy tax-free local government bonds paying him a tax-exempt 3 per centThere is a chapter called "

      •  notagain - while foundations don't need to (0+ / 0-)

        maximize returns they do have a minimum annual 5% distribution of assets. So if they make 1% loans to insiders eventually the foundation will self liquidate. Plus even if someone has a large unrealized capital gain, the rate is only 15%, so they do get to keep 85%. The use of foundations, and other complex tax avoidance mechanisms, are much more compelling when marginal tax rates on the 1% are much higher.

        "let's talk about that"

        by VClib on Sat Oct 13, 2012 at 06:56:40 PM PDT

        [ Parent ]

        •  The book (1+ / 0-)
          Recommended by:

          explains far better how these foundations, and trusts work then I could ever attempt to. Math and I are not friends, so there are many parts of the book that make my eyes glaze over. It is my understanding that it is not the dollars and cents, but how much control is wielded via ownership of blocks of stock in various corporations, ownership of banks, board positions, etc., and how they all interplay.

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