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Willard Mitt Romney's 2010 tax return shows that there has been a very serious change in foreign assets over the past 10 years, especially removing foreign assets recently.
IRS form 1116 is used to document Foreign Tax Credits (see www.irs.gov/pub/irs-pdf/i1116.pdf ). There are two classes of foreign tax credits:
•    Passive Category Income which consists of passive income and specific passive category income.
o    Passive income generally includes dividends, interest,  royalties, rents, annuities...
o    Specific passive categories ..(domestic  international sales corp.)...
•    General Category Income which is income that is not passive income.... General category can include:
o    Wages, salary, and overseas allowances...
o    Income earned in the active conduct of a trade or business.
o    gains in the sale of inventory or depreciable property used in a trade or business.
o    Note that financial services Income is considered specifically as general category income if it is derived by  a financial services entity.
•    More infrormation on the classes of income are described in the IRS forms cited above.

What does Willard Mitt Romney' s 2010 Federal  1040 show related?  Look closely at page 163 (statement 30) and page 166 (statement 33) which are titled " supplement to Form 1116". The categories of Foreign Tax Credit  for "Passive Category Income" and "General Category Income" are listed for tax years from 2000 thru 2010 and are summarized in the table below.

Year - Foreign Tax Credit   Passive Cat Income  General Cat Income  Total Foreign
                                                                                                 Tax  credit
      2000                           $31,838.00             $0                                $31,838.00
      2001                $25,771.00             $0                                $25,771.00
      2002                          $28,875.00             $0                                $28,875.00
      2003                          $11,173.00             $0                                $11,173.00
      2004                          $87,550.00             $0                                $87,550.00
      2005                     $333,149.00             $0                              $333,149.00
      2006                        $276,386.00                     $0                        $276,386.00
      2007                     $275,488.00         $148,510.00                             $423,998.00
      2008                        $151,015.00         $636,440.00                             $787,455.00
      2009                          $81,461.00           $56,891.00                             $138,352.00
      2010                                              $690.00                                   $690.00

           page 163, statement 30    page 166, statement 33   

Notice how the total foreign tax credit was rising thru 2008 to a maximum of $787,455.00 in the year that Romney was a vice presidential candidate and then went into a rapid decrease to $690. in 2010.

Now recently John McCain is cited (Mitt Romney's Tax Returns Have Nothing 'Disqualifying,' John McCain Says ) in The Huffington Post  |  By Sabrina Siddiqui Posted: 07/17/2012 4:39 pm Updated: 07/17/2012 5:07 pm ) as saying -
 "Sen. John McCain said on Tuesday he can "personally vouch" there was nothing disqualifying in the 23 years' worth of tax returns that Mitt Romney submitted to his team in 2008, when he was vetted for a vice presidential spot.
"Everything was fine," McCain told reporters on Capitol Hill. "I can personally vouch for the fact that there was nothing in his tax returns that would in any way be disqualifying for him to be a candidate."
There is no information in Romney's 1040 which would 'disqualify' him if we use the meanings of "disqualify" from a Google of the word which gives the following meaning:
1.    Pronounce (someone) ineligible for an office or activity because of an offense or infringement: "he was disqualified from driving".
2.    Eliminate (someone) from a competition because of an infringement of the rules.

Which leads to exactly what are the qualifications for Vice president of the USA? The vice-president must be qualified to be President. According to the twelfth amendment of the Constitution, "no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President of the United States."

In order to be President, a person must be a natural-born citizen at least 35 years of age and a resident of the United States for at least 14 years.

Thus John McCain could easily make his statement concerning the 23 years of tax returns did not show Willard Mitt Romney was not at least 35 years old in 2008 and he had resided in the USA for the last 14 years.

But  the average American might be very concerned that Romney place what is probably large amounts of money to generate these foreign  tax credits from foreign sources. If money creates Jobs, then this created foreign jobs!

Sat Aug 25, 2012 at 3:26 PM PT: The New York Times published on August 24th, a more detailed article on this subject. the NYT author took the basic data to several experts. The experts conclusions are very interesting. See: Tax Credits Shed Light on Romney
By JAMES B. STEWART
Published: August 24, 2012

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Comment Preferences

  •  FIX TITLE! (2+ / 0-)
    Recommended by:
    janmtairy, phonegery

    You're giving this Grammar Policeman fits.  You have:
    "Romneys Foreign Tax Credits shows .."

    When it should be:
    "Romney's Foreign Tax Credits show..."

    Please, for the love of all things decent, correct your title.

  •  Please elaborate! (1+ / 0-)
    Recommended by:
    phonegery

    I am sure you are on to something here, but it would be much appreciated if you would spell out more clearly what this could mean?    It seems you are suggesting that Romney cleaned up his foreign holdings problems after the McCain vetting?   What kind of assets are you suggesting?   Foreign business holdings?   Foreign accounts?  

    Why tax credits?   Help out those of us who aren't fully versed in this form and its typical uses.  

    Thanks

    •  Look at the URL cited - the IRS is specific (1+ / 0-)
      Recommended by:
      maybeeso in michigan

      Look at instructions for IRS form 1116 --URL cited in article.  This form is used to claim CREDITS on US taxes for taxes which were paid in a foreign country.  As Romney has  stated 'I paid every legal amount owed, and not a penny more' (or similar)'. But by claiming every legal amount there is a least a small window into his foreign holdings in this analysis, and how these holdings have gone significanty down.  What is real interesting to thinks over is the "General Category Income" which peaked in 2008 at $633,440.00 - this is not passively 'clipping bond coupons'. I suggest you reread the article looking carefully  where General Category Income is defined.

      •  Thanks jsugrue, I did look at the IRS site (1+ / 0-)
        Recommended by:
        phonegery

        I'm just intrigued about how the 2010 form 1116 might be different in details regarding earlier years than form 1116 as filed (or not) in earlier years themselves may be.    Romney is stating today that he's paid every legal amount he owed, but maybe he can only say that post a 2009 amnesty.   Now the money going into the Swiss accounts probably wasn't from income in the US.   So how were these foreign sources of income (acknowledged on the 2010 form) handled in previous years?   As I said below, any amnesty on a Swiss account would have involved all kinds of refilings of previous returns, etc.   (But we know how good Mitt is a retro-activity!)

        Hard to believe that Romney would suddenly divest himself of holdings sufficiently profitable to provide such large tax credits (presumably for having paid taxes to foreign entities??) simply to make himself look more "on shore" with his patrotism?    For me the question is why he suddenly has such a changed financial picture.

    •  Private equity funds invest in foreign countries (2+ / 0-)
      Recommended by:
      sandrad23, VClib

      and wind up paying a lot of foreign tax credits.  Those credits get "passed through" to the partnership investors.  Nothing terribly unusual or unexpected about that.

      (although there is something unexpected about his foreign tax credits, but I'll save that for my diary)

      •  Don't you mean paying a lot in foreign taxes and (0+ / 0-)

        thereby earning the tax credits?    Interesting that it is the fund that pays the taxes but the credits go through to the partners.   Do the funds "expense" the tax liability as well?  

        Sorry if I am showing my ignorance of international finance here, but I still wonder if income from some of these foreign investments was showing up correspondingly on the tax returns.   And what link might there be to either a) the 2008 crash here:   And the theory that Mitt might not have paid any taxes at all in 2008 or 2009?   Like I've said, I don't begin to understand how it all fits together, but wouldn't that Form 1116 amount for 2008 have really reduced any tax liability?

        OR b)  the Swiss accounts that may or may not have held untaxed money.   Again, the peak of these credits seems to fit with the 2009 amnesty timeline.   Any possible connection??

        Anyway, I look forward to your diary as always.

        •  One or the other (1+ / 0-)
          Recommended by:
          sandrad23

          First of all, a partnership does not, for U.S. tax purposes, take credits or deductions;  these pass through to the partners.  The partnership may, though, be the taxpayer for foreign tax purposes.

          Second, the U.S. partner either deducts the taxes or takes a foreign tax credit.  Generally, the credit is preferable, but in certain circumstances a deduction is more beneficial (or, depending on the nature of the foreign tax, it might not qualify for the U.S. foreign tax credit and thus can only be benefically deducted).

          "Well, I'm sure I'd feel much worse if I weren't under such heavy sedation..."--David St. Hubbins

          by Old Left Good Left on Sat Jul 21, 2012 at 12:35:52 PM PDT

          [ Parent ]

  •  Interesting analysis. Did McCain see 2007 data? (0+ / 0-)

    Keep in mind that R-MONEY did not have to file 2007 until April 15, 2008, or October 15, 2008 with an extension.

    So McCain may not have even seen the 2007 numbers before Palin was nominated in September 2008.

    Just sayin'.

    "The battle, sir, is not to the strong alone; it is to the vigilant, the active, the brave." -- Patrick Henry

    by BornDuringWWII on Sat Jul 21, 2012 at 07:52:16 AM PDT

  •  Disqualify from McCain's criteria (0+ / 0-)

    I think you're parsing 'disqualify' in a strange way. Clearly, it doesn't mean anything about legal qualifications for the job. It's a simple reference to political qualifications to help McCain get elected. And anything significantly embarrassing would be an automatic disqualification. I'd drop that whole line of discussion from your diary, it's just a bad distraction.

    However, the financial analysis looks interesting, though I don't quite see what it means. Yea, his money changed categories, but so what? You're on the path to something interesting, but I don't know what it is.

    But we already know McCain didn't think there was anything bad in there, which is why people are pointing to 2009 as the year in which bad things happen. And that's why the Swiss Banking amnesty deal keeps coming up as a likely suspect.

    •  Maybe this fits the 2009 senario? (1+ / 0-)
      Recommended by:
      aznavy

      Which is why I asked for elaboration.    If these credits were associated with the Swiss Account(s) somehow, then the 2009 amnesty could explain why the numbers peaked in 2008 and trailed off in 2009.   ???

      •  The Swiss accounts themselves would produce (0+ / 0-)

        passive income, but they could also have been a holding place for other types of income.    And although these are clearly shown on the 2010 form, that doesn't mean they didn't appear there post a 2009 amnesty deal.   All kinds of tax machinations and manipulations could be associated with "cleaning up" after the fact in 2009.   None of these figures may have been the same in, say, a 2008 form 1116.  (through 2008 figures, of course)

        If a 2008 form 1116 looked substantially different from a 2010 form 1116 well then that would point to some major reworking of previous years' taxes, as an amnestry deal would involve, wouldn't it??

    •  It is not even clear that the investments (0+ / 0-)

      are changing categories.  For example, passive income is recharacterized as active income if the foreign tax rate is as high as the U.S. rate, so maybe the peak is due to a change in foreign tax rates.

      "Well, I'm sure I'd feel much worse if I weren't under such heavy sedation..."--David St. Hubbins

      by Old Left Good Left on Sat Jul 21, 2012 at 12:30:26 PM PDT

      [ Parent ]

    •  Also (1+ / 0-)
      Recommended by:
      johnny wurster

      I don't know how this would have affected Romney, but there used to be nine baskets of foreign income--these were collapsed to two beginning in 2005 or thereabouts.  Wurster will probably discuss this in his upcoming diary.

      "Well, I'm sure I'd feel much worse if I weren't under such heavy sedation..."--David St. Hubbins

      by Old Left Good Left on Sat Jul 21, 2012 at 12:51:07 PM PDT

      [ Parent ]

  •  Money does not create jobs. (0+ / 0-)

    Money is a measuring instrument or recording instrument, akin to the inch or the alphabet.  Money is a symbol and intrinsically worthless, now that it is no longer made out of precious metals.

    As a measuring instrument, we might also compare money to a watch.  A watch "tells" time as money records value.  But, where time is actually related to the physical transit of our earth around the sun and through space, the value we place on material things and spiritual things is entirely dependent on human emotions and interests -- valid, but not dependent on a physical reality.

    Money is compensation for labor, but not necessarily so.  Some labor occurs without compensation and some money is passed around for nothing.  The latter seems to be what happens with most of the money Willard has accumulated and stored in various banks. The dollars get passed around and, like a rider on the merry-go-round, each pass gives him a thrill.  And some people give him more for letting them play with his hoard.

    Willard's forte = "catch 'n' cage"

    by hannah on Sat Jul 21, 2012 at 09:42:31 AM PDT

  •  funny, I've been writing a diary about (1+ / 0-)
    Recommended by:
    VClib

    exactly this topic.  I'll probably publish it tomorrow.  Needless to say, his FTC situation is pretty odd.

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