Need Your Help

[QueEx]

This is a request for Help
directed to the many
'Great Minds'
that lurk, post, and
respond on BGOL

I hate to name names because I am certain
to omit many of the guilty, but some of them,
just some of them, and in no particular order:

Lemarr

Upgrade Dave

actinanass

ThoughtOne

Muckraker10021

sharkbait28

Camille

ballscout1

Fuckallyall

cthomas0964

VegasGuy

eewwll

Costanza

wewanttoplay

Dmain_Event

cheyisrameyah

GhostofMarcus

Heat Mizer

MASTERBATER

. . . and to the many, many, deserved more that in my haste I have
failed to name, a million apologies, my brothers, sisters and others.

But I need your help . . .

[QueEx]

What is

'Son of Boss'

and what, if anything, does it have
to do with the 2012 Presidential race


?

This is your mission, should you refuse to accept it, I ain't mad atcha!

[Upgrade Dave]

Kinda rushing since me and the wife are going out for our anniversary (16 yrs today) but this is the first thing I saw addressing it. I never heard of it until your post.

I picked the Forbes article since no one can call Forbes a piece of the "liberal media"

http://www.forbes.com/sites/peterjre...ner-challenge/

[QueEx]

Originally Posted by Upgrade Dave

Kinda rushing since me and the wife are going out for our anniversary (16 yrs today) but this is the first thing I saw addressing it. I never heard of it until your post.

I picked the Forbes article since no one can call Forbes a piece of the "liberal media"

http://www.forbes.com/sites/peterjre...ner-challenge/

Bro,

No rush at all, cause . . .

[bigirl]

http://www.son-of-boss.com/

[QueEx]

Originally Posted by bigirl

http://www.son-of-boss.com/

Thanks BG; but I'm kind of bogged down with work right now, so its hard for me to read and digest it all, at the moment.

So, if your preciousness doesn't mind, tell me in your words what you think this "Son of Boss" is - - and what it might mean in this presidential race.

Thanking you in advance,

QueEx

[Lamarr]

Originally Posted by Upgrade Dave

Kinda rushing since me and the wife are going out for our anniversary (16 yrs today) but this is the first thing I saw addressing it. I never heard of it until your post.

Congrats UD, have a great day bruh!

I saw my name first, so I better read up on this. As of now, I'm unfamiliar with the topic.

[QueEx]

Originally Posted by Lamarr

Congrats UD, have a great day bruh!

I saw my name first, so I better read up on this. As of now, I'm unfamiliar with the topic.

You're cool.

[bigirl]

Originally Posted by QueEx

Thanks BG; but I'm kind of bogged down with work right now, so its hard for me to read and digest it all, at the moment.

So, if your preciousness doesn't mind, tell me in your words what you think this "Son of Boss" is - - and what it might mean in this presidential race.

Thanking you in advance,

QueEx

Real messed up tax loophole the wealthy use that SHOULD be illegal. I would imagine mitt would want to keep it and would hope Obama would want to abolish it...

I also have been and am EXTREMELY busy so havent been studying the politrix too much as of late. Sorry.

[MASTERBAKER]

brb...

[MASTERBAKER]

Son of Boss
A tough new ad from the Obama campaign takes on Mitt Romney's taxes and even suggests Romney may have paid no taxes at one point.

The ad also says Romney approved an illegal tax avoidance scheme while a Marriott board member.

Meanwhile, an aide to Sen. Harry Reid (D-NV) tells the Huffington Post that the accusation Romney paid no taxes for ten years comes from "an investor in Bain Capital, a Republican also, and somebody who has been dealing with Romney's company for a long, long time and he has direct knowledge of this."

Here's the video:

[MASTERBAKER]

Romney, Marriott And Son Of Boss ---- For Dummies
Now that the question of Mitt’s knowledge of Son of Boss deals has been raised by CNN, I thought it might be a public service to explain Son of Boss deals. A lot of commentators seem to think that they are too hard to understand, but I don’t think so. I’ve told my friends at Dogs Against Romney that they might not want to bother filling in the beagles and the mastiffs , but I think the border collies and the poodles are ready for it.

Basis

I have previously explained Son of Boss using the ill fated tax shelter of EMC founder, Richard Egan, who got into the game in its waning days. His advisor, Stephanie Denby, commented on the beauty of the deals:
Secondly, some of the transactions focus on generating basis as opposed to capital loss. Basis is more discrete [sic] and less likely I believe to cross the IRS radar screen.
Romney Has A Duty To Exploit Every Tax Loophole? Horse Feathers! Janet Novack Janet Novack Forbes Staff
Romney Returns - Could Son Of Boss Deals Be Worrying Him? Peter J Reilly Peter J Reilly Contributor
Richard Egan Estate Subject to 40% Penalty on Doomed Shelter Peter J Reilly Peter J Reilly Contributor
Supreme Court Has Taken Ammunition From IRS In Son Of Boss Cases - Time To Fix Bayonets ? Peter J Reilly Peter J Reilly Contributor

We are taxed on income, not gross receipts. That means that when you sell something you get to deduct your basis. 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 a dollar. Of course it can be more complicated if you acquire assets in other ways, such as by gift or inheritance or in a like-kind exchange. The important point though is that when you sell something the higher your basis the less your gain or the greater your loss.

Once you own something though it is kind of hard to increase its basis. If it is a partnership interest you increase your basis by the income that flows through to you, so your gain will be less if you sell the partnership interest, but that is like hitting your head against the wall because it feels so good when you stop. If it is a tangible asset, you could spend money to improve it, but that doesn’t really feel that satisfying. Of course, if it is an appreciated asset, you could die, but that is kind of extreme. The way that the designers of the Marriott deal came up with involved combining two things each of which is only slightly complicated – short sales and the formation of a partnership. Here is a link to the decision if you want to follow along, but I’ll try to break it down for you.

Short Sales

When I was a kid, my father used to tell me jokes. There was a problem though. He worked on Wall Street. He did not have a particularly lucrative career (He was a senior order clerk) but he had a Wall Street sensibility to him . So the jokes that he told me were incomprehensible to an eight year old. One of them that I finally got when I was about thirty, was his little ditty about short sales “He who sells what isn’t hissen, buys it back or goes to prison.” 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.

Partnership Formation

When you put stuff into a partnership, the partnership’s basis in the stuff is your basis in it. You increase your basis in your partnership interest by your basis in the stuff you put in. Another important principle is that your share of the liabilities of a partnership is part of your basis in the partnership. If you increase your share of the liabilities it increases your basis, but if it decreases it reduces your basis, just as if you took out cash. Your basis can never go below zero. If a loss allocation would drive it below zero, the loss is suspended, but a liability decrease, like a cash distribution, will cause you to recognize gain. If you put leveraged property into a partnership and the liability shifts away from you or is paid down by the partnership, you may end up recognizing gain.

Now you are ready to do your Son of Boss deal. Here are the steps:
Marriott International sells short two-year Treasury notes and invests the proceeds in five-year Treasury notes. Marriott International, as a limited partner, and a third party, as the general partner, form a partnership. Marriott International contributes the five-year Treasury notes, subject to the short-sale obligations, to the partnership and the general partner contributes some cash. The partnership obtains additional assets and subsequently sells the five-year Treasury notes and closes the short sale obligation on the two-year Treasury notes.

Marriott International transfers its partnership interest to another Marriott subsidiary.

No gain or loss is recognized on the transfer, but the partnership-interest transfer results in a technical termination of the partnership which causes a deemed distribution of the assets to each partner and a re-contribution of the assets to a new partnership.

The tax basis of the assets takes on the “outside” tax basis of Marriott International’s interest, i.e., the value of the five-year Treasury notes Marriott International contributed to the first partnership, which value is not reduced by the short-sale obligation.

The remaining additional assets later are depreciated or are sold, and Marriott International recognizes the resulting tax losses.

I always had a hard time understanding these deals, because of my training as an accountant. You can’t get the damn thing to work without an unbalanced entry. Essentially though the money that Marriott got for the short sale allowed it to buy something that it had basis in. Marriott argued that the obligation to cover the short sale was not a liability as defined by Code Section 752. So even though it didn’t really have to come up with any money out of its own pocket, it had basis in the partnership interest. The rest of the maneuvers are a little technical, but essentially the free basis gets shuffled around until it is actually used. In Richard Egan’s version of the deal EMC stock was contributed to the partnership that had been created. The IRS and the Court’s didn’t put it the way a confused accountant would – “Ok, I have a debit, now what the hell am I supposed to credit ?”, but they essentially got to the same bottom line -

The initial short sale, which generates the cash proceeds, and the subsequent covering transaction are “inextricably intertwined,” because under Regulation T the proceeds are chained to the obligation to close the short sale. Thus, the proceeds of the first step in the short sale transactions are also subject to the uncertainties of closing the short sale. In short, if contribution of the proceeds of the short sale increased the partners’ outside basis, the contribution of the obligation to return the Treasury notes that had been sold short required a decrease in the partners’ outside basis.

I never ran into these deals in their heyday. If I had I would have scratched my head, but I might have bought into it because of the letters from the tax attorneys who are supposed to know this stuff better than I do even if they don’t know a debit from a credit. So I would not be shocked if Romney did one of these deals for himself. Presumably the statute of limitations would be closed. That didn’t stop Tim Geithner from paying for his mistakes though. If Romney did do a Son of Boss deal, it really does not tell us anything about him that we do not already know, but if we want to hold him to the Geithner standard, he should pay regardless of the statute of limitations.
You can follow me on twitter @peterreillycpa.

[MASTERBAKER]

Originally Posted by QueEx

This is a request for Help
directed to the many
'Great Minds'
that lurk, post, and
respond on BGOL

I hate to name names because I am certain
to omit many of the guilty, but some of them,
just some of them, and in no particular order:

Lemarr

Upgrade Dave

actinanass

ThoughtOne

Muckraker10021

sharkbait28

Camille

ballscout1

Fuckallyall

cthomas0964

VegasGuy

eewwll

Costanza

wewanttoplay

Dmain_Event

cheyisrameyah

GhostofMarcus

Heat Mizer

MASTERBATER

. . . and to the many, many, deserved more that in my haste I have
failed to name, a million apologies, my brothers, sisters and others.

But I need your help . . .

who and wtf?MASTERBATER

[GhostofMarcus]

Yeah, read about that the other day.
Motherfuckers got caught doing shady tax shit and Romney approved of the shady tax shit, so he must be shady too.

[Upgrade Dave]

Still not quite sure what it is exactly but with it just bubbling up, it's going to be another thing that's going to take Romney off message.

Mitt really had no idea what he was getting into.

Thanks for the well wishes.
With my son going to San Antonio with the rest of my family from Tuesday to Sunday, both of us on vacation, and it being a pay week for both of us, it's been a dizzyingly good time.
The debauchery has been nearly ancient Greek-like.

[QueEx]

Originally Posted by Upgrade Dave

Thanks for the well wishes.
With my son going to San Antonio with the rest of my family from Tuesday to Sunday, both of us on vacation, and it being a pay week for both of us, it's been a dizzyingly good time.
The debauchery has been nearly ancient Greek-like.

Damn

Greek and debauchery.

Sounds like my college days !!!

[Upgrade Dave]

Originally Posted by QueEx

Damn

Greek and debauchery.

Sounds like my college days !!!

[bigirl]

In very basic laymans terms is something very similar to setting up 2 corporations in a very specific way then selling them back and forth so both corps show HUGE fake losses and no taxes are paid yet all the $ still there. Yet a spliff is illegal

[sharkbait28]

Sorry I missed this QueEx...

Originally Posted by Upgrade Dave

Still not quite sure what it is exactly but with it just bubbling up, it's going to be another thing that's going to take Romney off message.

Mitt really had no idea what he was getting into.

Thanks for the well wishes.
With my son going to San Antonio with the rest of my family from Tuesday to Sunday, both of us on vacation, and it being a pay week for both of us, it's been a dizzyingly good time.
The debauchery has been nearly ancient Greek-like.

Congrats!

Honestly Romney benefits from a couple of things here;

1) Son of Boss involves arcane tax laws which don't lend themselves to news coverage due to the need for concision.

2) Remember that story about Romney's magical IRA? The one with with $20 million - $101 million in it? Obviously this guy is employing warlocks to manage his finances.... this should be a huge story... one that paints him as exactly what's wrong with our current brand of capitalism. No traction though.... because this stuff is complicated and un-sexy. Son of Boss is like twice as complicated and inscrutable.

Looks like this won't do much damage at all.

[QueEx]

Originally Posted by bigirl

Real messed up tax loophole the wealthy use that SHOULD be illegal.

I would imagine mitt would want to keep it and would hope Obama would want to abolish it...

I also have been and am EXTREMELY busy so havent been studying the politrix too much as of late. Sorry.

You're on it. Sorry I got busy too and failed to thank you for your response.

Thank you.

`

[Upgrade Dave]

Originally Posted by sharkbait28

Sorry I missed this QueEx...



Congrats!

Honestly Romney benefits from a couple of things here;

1) Son of Boss involves arcane tax laws which don't lend themselves to news coverage due to the need for concision.

2) Remember that story about Romney's magical IRA? The one with with $20 million - $101 million in it? Obviously this guy is employing warlocks to manage his finances.... this should be a huge story... one that paints him as exactly what's wrong with our current brand of capitalism. No traction though.... because this stuff is complicated and un-sexy. Son of Boss is like twice as complicated and inscrutable.

Looks like this won't do much damage at all.

You were correct. This really didn't make it out of the wonk circles. When he picked Paul Ryan as his running mate, Romney took all eyes off this. Not that it helped much.

[QueEx]

S.O.B.

Mitt Romney has long had close ties to hotel operator Marriott International Inc. Mitt, whose full name is Willard Mitt Romney, was named after the chain’s founder, J. Willard Marriott, a friend of his father. Mitt joined Marriot International's board in 1993, and has served on it for 11 of the past 19 years, including six as chairman of the audit committee.

During Romney’s tenure as a Marriott director, the company repeatedly utilized complex tax-avoidance maneuvers, prompting at least two tangles with the Internal Revenue Service, records show. In 1994, while he headed the audit committee, Marriott used a tax shelter known to attorneys by its nickname: “Son of BOSS.”

In 1994, an investment banker faxed a presentation to a longtime Marriott tax-department executive that laid out how the company could use a series of newly created partnerships to trigger a tax loss without any real economic harm -- this scheme called Son of BOSS helped a Marriott subsidiary sell about $81 million of mortgage notes and yet report a roughly $71 million tax loss.

A federal appeals court invalidated Son of Boss in a 2009 ruling, calling it “fictitious,” “artificial,” “spectral,” an “illusion” and a “scheme.”

[QueEx]

Did Romney enable a company's abusive tax shelter?

Son of Boss and its related shelters represented perhaps the largest tax avoidance scheme in history, costing the U.S. many billions in lost corporate tax revenues. In response, the government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations.

In addition, the Son of Boss transaction was listed by the Internal Revenue Service as an abusive transaction, requiring specific disclosure and subject to heavy penalties. Statutory penalties were also made more stringent to deter future tax shelter activity. Finally, the government brought successful criminal prosecutions against a number of individuals involved in Son of Boss and related transactions not associated with Marriott, including principals at major law and accounting firms.

In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations.



SOURCE