Accidental Tax Break Saves Wealthiest Americans $100 Billion - Bloomberg

Accidental Tax Break Saves Wealthiest Americans $100 Billion - Bloomberg

Federal law requires billionaires such as Adelson who want to leave fortunes to their children to pay estate or gift taxes of 40 percent on those assets. Adelson has blunted that bite by exploiting a loophole that Congress unintentionally created and that the Internal Revenue Service unsuccessfully challenged.
By shuffling his company stock in and out of more than 30 trusts, he’s given at least $7.9 billion to his heirs while legally avoiding about $2.8 billion in U.S. gift taxes since 2010, according to calculations based on data in Adelson’s U.S. Securities and Exchange Commission filings.

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From the Republican side of the aisle, you’re committed to killing the thing,” he says, adding that Democrats don’t want to tackle an issue affecting a handful of people. “And that handful are all in the class of campaign donors.”
Facebook Inc. Chief Executive Officer Mark Zuckerberg and Lloyd Blankfein, the CEO of Goldman Sachs Group Inc., are among the business leaders who have set up GRATs, SEC filings show.
JPMorgan Chase & Co. helps so many clients use the trusts that the bank has a special unit dedicated to processing GRAT paperwork, says Joanne E. Johnson, a JPMorgan private-wealth banker. “I have a client who’s done 89 GRATs,” she says.
Goldman Sachs disclosed in a 2004 filing that 84 of the firm’s current and former partners used GRATs. Blankfein has transferred more than $50 million to family members with little or no gift tax due, according to calculations based on data in his SEC filings.
Committees in the House and Senate are working on what they call comprehensive tax overhaul bills. Neither plans to address estate or gift taxes.
Covey suggests one reason for the lack of action: Wealthy donors to politicians, both Democratic and Republican, want to keep the loophole in place.
“I’ve done a lot for Democratic contributors,” he says with a smile.
No one knows for sure how much all of these GRATs cost the U.S. government. The IRS estimates the number of gift-tax returns filed in connection with new GRATs each year; there were about 1,946 in 2009, according to the most recent publicly available data.