Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit – Bloomberg

In January 1999, a trust set up by Mitt Romney for his children and grandchildren reaped a 1,000 percent return on the sale of shares in Internet advertising firm DoubleClick Inc.

If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55 percent. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”

The sale of DoubleClick shares received before the company went public, detailed in previously unreported securities filings reviewed by Bloomberg News, sheds new light on Romney’s estate planning — the art of leaving assets for heirs while avoiding taxes. The Republican presidential candidate used a trust considered one of the most effective techniques for the wealthy to bypass estate and gift taxes. The Obama administration proposed cracking down on the tax benefits in February.

While Romney’s tax avoidance is both legal and common among high-net-worth individuals, it has become increasingly awkward for his candidacy since the disclosure of his remarks at a May fundraiser. He said that the nearly one-half of Americans who pay no income taxes are “dependent upon government” and “believe that they are victims.”

via Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit – Bloomberg.

In a past life, I worked in the estate planning and trust business. The Bloomberg article eventually gets around to admitting the IDGT trust is indeed “legal and common” but unless you read fairly far into it, you’d get the impression no taxes are paid on the DoubleClick shares.

In fact, capital gains taxes were paid on the sale of the DoubleClick shares. If Mitt hadn’t transferred the shares to the trust, he would have paid the same capital gains tax rate on the sale. So the government got its slice.

What the IDGT does avoid is a second round a taxation at the time of transfer. Let’s say Mitt didn’t put the shares in trust. If they were part of his estate at the time of his death, they would then be subject to estate taxation. This is in addition to already paying the capital gains tax on them.

Tell me, is it really fair of the US government to impose a 55% tax on someone just for giving away their money? Because that’s what the estate tax is. You may not transfer more than a set lifetime amount without the government taking a huge slice of it.

4 thoughts on “Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit – Bloomberg”

  1. Where’s that clip of Obama talking about how he favors redistribution? Because that’s what estate taxes are, the taking of your wealth and giving it to others without any regard to your wishes.
    To choose a well-known example, this is why Jack Kent Cooke couldn’t give his son the Redskins when he died – the taxes would have put his son into incredible debt. More simply, if a farmer wishes to leave his farm to his children, he probably can’t unless he had loads of cash that they could use the remnants of to pay the estate tax. Similarly, a convenience store owner whose wealth is tied up in the property and inventory can’t pass his store along to his children either.
    Don’t worry, though. The One will make it alright.

  2. Not only is it unfair, it’s theft. Things would be different if the FedGov stayed in its constitutional cage. Not because some savior would rescues us from the theft, but because FedGov would not be digging anywhere and everywhere for money it could steal and give away to bribe people.

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