Billionaire Warren Buffett Set to Save More Than $1 Billion on Taxes in Swap

Story by Bloomberg
Written by Noah Buhayar, Richard Rubin and Zachary Tracer

Warren Buffett is again showing how to use the U.S. tax code to his advantage.

For the third time in a year, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A) has structured a deal in which he buys businesses in exchange for stock that has appreciated. The transactions, called cash-rich split-offs, allow him to avoid capital gains taxes that would be incurred if he sold the shares in the open market.

Berkshire announced today that it would turn over about $4.7 billion in Procter & Gamble Co. (PG) stock in exchange for P&G’s Duracell battery business, which will be infused with about $1.7 billion in cash.

Since Buffett’s cost basis on the shares was about $336 million, and corporate capital gains are typically taxed at 35 percent, structuring the deal in this way could save Berkshire more than $1 billion. P&G also stands to reduce its tax liability on the sale.

Read more: http://www.bloomberg.com/news/2014-11-13/buffett-seen-saving-more-than-1-billion-on-taxes-in-swap.html