The current edition of Newsweek features a piece by Allan Sloan that details the loopholes and tax incentives attached to the impending sale of the Atlanta Braves (truth be told, I only read the article because it had something to do with baseball. Business writers usually give me boredom seizures).
Anyway, it seems that the sale will be a financial boon for both the seller (Time Warner) and buyer (Liberty Mutual). If you're curious as to how two multi billion dollar companies could both come out ahead in the same deal, well, you haven't been paying attention to the man in the White House's agenda.
How does [President Bush's] Tax Increase Prevention and Reconciliation Act of 2005 involve the Braves? Here's the play-by-play. Time Warner would put the team (valued at about $450 million) and about $1.35 billion of cash into a subsidiary. It would then trade that subsidiary for a Liberty unit that would be holding about $1.8 billion of the Time Warner stock that Liberty already owns. By the time the fat lady sings, Liberty would own the Braves and a slug of cash, and Time Warner would have gotten about 100 million of Liberty's 171 million Time Warner shares.
That sure looks like a sale—but not to tax lawyers, because the tax-cut legislation specifically blesses cash-rich split-offs.
Confused? That's the point – keep us non-financial wizards in the dark while the rich line one another's pockets. I needed to read the next paragraph to fully grasp the sheer ass-rape we're facing:
How much money are we talking about here? A lot. Were Time Warner to sell the Braves outright for $450 million, it would owe about $175 million of federal and state income taxes, by my estimate. (Turner Broadcasting, acquired by Time Warner in 1996, paid just $10 million for the Braves in 1976.) Thus, swapping the team for $450 million of its own stock is a lot better for Time Warner than merely selling it. The deal also offers Liberty a great way to cash in most of its Time Warner stake, much of which dates back to 1987. Were Liberty to make a conventional sale of $1.8 billion of its Time Warner stock, it would owe more than $500 million of tax, by my estimate. Possibly much more.
Does that make any more sense? It is certainly hard to believe, but I think you should be now able to wrap your head around a $700 million savings for two business behemoths. The worst part of this bullshit loophole is that there is absolutely no justification for it other than to save millions of dollars for billionaires. Though he claims that his tax cuts help the middle- and working classes, Bush's plan does nothing for 99% of his constituency.
Actually, that's not quite true. It screws us over…at least those of us who care about education, health care, the environment and/or world peace. You know, the folks he couldn't care less about.
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