A Reuters article recently shined some light on the way that some of the very rich, like former Massachusetts Gov. Mitt Romney, handle their obligations to God and government.
More specifically, it showed how Romney tithed to the Mormon church and received large tax deductions at the same time. By donating stock he had obtained through his dealings at Bain Capital, he not only avoided paying capital gains taxes on any stock that had appreciated in value — which would have been necessary if he had sold the stock and either pocketed or donated the money from the sale — but he was allowed to deduct some or all of the value of the donated stock from his taxable income. Typically, the church would sell the stock immediately after it was donated and pay no tax on the sale.
While Romney should be commended for sticking to the tenets of his faith, even as it potentially cost him millions of dollars in future profits, the tax loophole that stock donations appears to exploit is a curious one. Stock tithing seems to allow both Romney and the Mormon church from paying taxes that other stockholders might have to pay.
In light of recent controversies about Romney’s tax returns, and the relatively low tax rate he pays on his earnings from investments, this end-around on paying taxes on appreciated stock could be interpreted as more proof that Romney is out of touch with those voters who don’t have millions of dollars worth of stock to donate.
– Benjamin Nanamaker, InvestorPlace Money & Politics Editor
The opinions contained in this column are solely those of the writer.
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