While Warren Buffett has called for minimum tax on millionaires, The Weekly Standard
reports of one instance where Buffett nearly walked away from a deal because his share of the proceeds would have been consumed by taxes.
Citing a story recounted by author Alice Schroeder in her 2008 biography, “The Snowball: Warren Buffett and the Business of Life,” The Standard details an early investment by Buffett’s hedge fund in Sanborn Map, a company that mapped utility lines.
Having grown frustrated with the company’s management and desiring for greater dividends, Buffett bought more stock – and once amassing control, he sought to have Sanborn broken into two entities.
The company’s board eventually gave in to Buffett’s demands, but one director proposed a clean break of the company, regardless of the tax consequences, suggesting, "Let's just swallow the tax."
But Schroeder quotes Buffett himself as saying in response to the suggestion: “And I said, 'Wait a minute. Let's -- "Let's" is a contraction. It means "let us." But who is this us? If everyone around the table wants to do it per capita, that's fine, but if you want to do it in a ratio of shares owned, and you get ten shares' worth of tax and I get twenty-four thousand shares' worth, forget it.'”
“Buffett was willing to walk away from a deal because the taxes would have taken too much of a bite out of it,” The Standard reports. “Fortunately for him, the board gave in and allowed him to structure the deal that he liked.”
The Standard also discusses how Schroeder’s book later detailed how Buffet structured his investments under Berkshire Hathaway's corporate umbrella, rather than as part of his hedge fund's general portfolio, “precisely because of the tax advantages.”
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