A taxation consultant told me the following:
“Hank Paulson, the incoming Secretary of the Treasury, with the personal happening of USD 700,000,000 has the right to good from the code brand new taxation grant accessible usually to those in supervision which is the right to sell all of his USD 700,000,000 of land as well as barter them in to index supports or book bonds, as well as compensate zero, that’s right, 0 taxation upon his USD 600,000,000 of profits.
I take it the crux of it is:
- New order exempts supervision employees from taxation upon any collateral gains satisfied upon the sale of treasuries.
- Paulson has $700MM of Goldman stock, with $100MM basis.
- Paulson could traffic his Goldman batch for Treasury securities, as well as which sell of bonds would be the non-taxable event, so the basement of the treasuries would be $100MM.
- Paulson could afterwards sell the Treasuries for $700MM, though as the sovereign worker be exempted from taxation upon the $600MM gain.
Is this research correct?
{ 2 comments… read them below or add one }
I try to track new federal tax legislation and I have not heard of a law with any such provision.
I read a news article on the subject. Since you piqued my interest, I looked it up.
Section 1043 of the Internal Revenue Code was enacted in 1989. It allows executive branch employees to defer – not avoid – tax on gains realized when they are forced to sell their holdings due to conflict of interest rules. The proceeds must be reinvested in Treasury securities or approved mutual funds.
The basis of the reinvestment property is adjusted so that the deferred gain will be taxed when that property is disposed of.
I am not aware of any rule that would allow that gain to be untaxed because he is a federal employee.