Can Warren Buffett owe billions of dollars? Berkshire Hathaway shareholder concerns grow

Warren Buffett always likes to say that his favorite time horizon for holding a stock is "forever." This simple strategy has not only provided him with great investment performance, but also the ability to avoid paying billions of dollars in taxes in some cases. But lawmakers want to shine a light on this through a new law. What will this mean for Berkshire Hathaway stock itself? And should investors react to it?

Is Warren Buffett himself worried about the new laws?

Warren Buffett likes to buy shares of companies like Apple $AAPL+0.5%, Coca-Cola $KO-0.5% and American Express $AXP+0.1%, which have very strong brands and Berkshire Hathaway can hold them for a long time without having to worry about these companies losing the long-built loyalty of their customers. It's not for nothing that Berkshire has owned Coke and American Express for over 30 years.

One of the benefits of this approach has been minimizing taxes, since Berkshire Hathaway $BRK-B-0.2% only paid taxes when it sold the shares it held at a profit. According to Buffett's annual letter to shareholders, Berkshire had unrealized gains of about $245 billion in its stock portfolio at the end of last year, almost all of which was held in Apple, Coke, American Express and Bank of America $BAC+1.3%.

Berkshire reports a deferred tax liability on its balance sheet related to these gains, but under the old accounting rules these taxes may never be paid or will not be paid until many years from now.

New rules (and debts) on the horizon?

Berkshire, however, may have to start paying taxes on annual unrealized gains on its $327 billion stock portfolio starting in 2023 under the new 15% corporate minimum tax that was included in the new inflation reduction law recently signed by U.S. President Joe Biden. The tax applies to companies with annual profits of more than $1 billion.

Given the size of Berkshire's portfolio, annual profits, especially during a bull market, can be extremely high. For example, in 2021, Berkshire had unrealized investment gains of $58.6 billion in its stock portfolio due to last year's market rise. No taxes were paid on these "paper" gains.

That is likely to change when the alternative minimum corporate tax comes into effect in 2023. Robert Willens, a New York tax expert, says that if Berkshire had $50 billion in unrealized gains in one year, it would likely have a tax bill of $7.5 billion.

"For ordinary tax purposes, gains are taken into account only when they are 'realized,' that is, when a security is sold or 'otherwise disposed of. If a company recognizes a gain for accounting purposes but not for tax purposes, a deferred tax liability arises. Now, with a minimal accounting tax, this deferred tax liability becomes an actual or current tax liability," Willens wrote in an email to Barron's.

In an analysis published in Tax Notes International in November 2021, Martin Sullivan, a tax expert and chief economist at Tax Notes, estimated that Berkshire would owe one of the largest amounts of tax among giant corporations based on the 15% corporate minimum tax for the 2018 to 2020 period. Its annual tax bill would increase by an average of $3.2 billion over that period.

The good news for shareholders, however, is that the Berkshire Hathaway group is so capital strong that this new law shouldn't complicate its business either. So as spectacular as those billions of dollars of debt sound, I certainly wouldn't sell $BRK-B-0.2% stock.

Read the full article for free? Go ahead 👇

Do you have an account? Then log in . Or create a new one .

Chceš se se stát úspěšným akciovým investorem?

Začni studovat prestižní Bulios akademii a získej přístup k unikátnímu vzdělávacímu obsahu, analýzám a praktickým nástrojům!

very nice information

It's amazing

very nice bro you add this

Thanks!

info

Bitcoin is pseudonymous meaning that funds are not tied to real-world entities but rather bitcoin addresses Owners of bitcoin addresses are not explicitly identified but all transactions on the blockchain are public In addition transactions can be linked to individuals and companies through idioms of use e g transactions that spend coins from multiple inputs indicate that the inputs may have a common owner and corroborating public transaction data with known information on owners of certain addresses 65 Additionally bitcoin exchanges where bitcoins are traded for traditional currencies may be required by law to collect personal information 66 To heighten financial privacy a new bitcoin address can be generated for each transaction
A wallet stores the information necessary to transact bitcoins While wallets are often described as a place to hold70 or store bitcoins due to the nature of the system bitcoins are inseparable from the blockchain transaction ledger A wallet is more correctly defined as something that stores the digital credentials for your bitcoin holdings and allows one to access and spend them 7 ch 1 glossary  Bitcoin uses public-key cryptography in which two cryptographic keys one public and one private are generated 71 At its most basic a wallet is a collection of these keys
Jeez, how could you be that smart?
A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value The history of cryptocurrency has been marked by several speculative bubbles Some economists and prominent investors have expressed the view that the entire cryptocurrency market constitutes a speculative bubble Adherents of this view include Berkshire Hathaway board member Warren Buffett and several laureates of the Nobel Memorial Prize in Economic Sciences central bankers and investors
Your hair looks stunning!
Trade involves the transfer of goods and services from one person or entity to another often in exchange for money Economists refer to a system or network that allows trade as a market An early form of trade barter saw the direct exchange of goods and services for other goods and services 1 i e trading things without the use of money 1 Modern traders generally negotiate through a medium of exchange such as money As a result buying can be separated from selling or earning The invention of money and letter of credit paper money and non-physical money greatly simplified and promoted trade Trade between two traders is called bilateral trade while trade involving more than two traders is called multilateral trade
This is really good! I would love to have the recipe!
Just desire to say your article is as surprising The clearness in your post is simply spectacular and i could assume you are an expert on this subject Well with your permission let me to grab your feed to keep up to date with forthcoming post Thanks a million and please continue the gratifying work
Your hat is so cool!