ERICOPOLY

The argument is usually that the wife deserves to be able to maintain her standard of living "to which she has become accustomed". Well, billionaires and millionaires -- aren't they entitled to retirement spending "to which they have become accustomed"? Hence, the $200k argument is suspect. No, they aren't entitled to anything. Divorce is the dissolution of a partnership agreement between two private individuals. IRAs are a government handout with public money. Divorce settlement analogy just doesn't apply at all. It was sloppy policy in the first place to leave IRAs uncapped. That is so obvious, this really can't be a shock to anyone. Capping was an inevitability. Note to Canadians: TFSA's and RRSP's will 100% guaranteed have caps in the future. Read this to understand my point -- courts can rule that the wife deserves spousal support in line with the standard of living established during the marriage: http://www.virginiadivorceattorney.com/blog/support-me-in-the-lifestyle-to-which-ive-become-accustomed-jeffrey-d-tarkington.cfm Just because a husband is obligated to support a wife's lifestyle doesn't mean the govt. is obligated to support yours. The government isn't obligated to support mine. I put the money in the account The government put nothing into the account. I made a deal with the government where I agreed to pay my tax upfront for the Roth Conversion. They agreed to it... The arrangement is that if I then go on to lose 100% of the investment in the account, they keep my tax money -- I get no deduction or clawbacks for that. So it's perhaps an even better deal for the government than for me in that regard -- depending on how things work out. Some people really do lose money in their Roth IRAs. But every now and then a person wins at the casino and walks out with a million dollars after putting only a dollar into the machine.

Not as much as you'd think. Once we had pensions, now we have IRAs. Without the pension expenses, corporations report higher taxable profits!

The argument is usually that the wife deserves to be able to maintain her standard of living "to which she has become accustomed". Well, billionaires and millionaires -- aren't they entitled to retirement spending "to which they have become accustomed"? Hence, the $200k argument is suspect. No, they aren't entitled to anything. Divorce is the dissolution of a partnership agreement between two private individuals. IRAs are a government handout with public money. Divorce settlement analogy just doesn't apply at all. It was sloppy policy in the first place to leave IRAs uncapped. That is so obvious, this really can't be a shock to anyone. Capping was an inevitability. Note to Canadians: TFSA's and RRSP's will 100% guaranteed have caps in the future. Read this to understand my point -- courts can rule that the wife deserves spousal support in line with the standard of living established during the marriage: http://www.virginiadivorceattorney.com/blog/support-me-in-the-lifestyle-to-which-ive-become-accustomed-jeffrey-d-tarkington.cfm

A couple of points about my Roth IRA: 1) I can't deduct losses against anything. So if I lose 100% of my RothIRA it's a true 100% loss. 2) I can't withdraw any of the gains to give them to my children (I can't shove it into a trust today or I'll be hit with early withdrawal penalties and income tax on the gains). Thus, the RothIRA is going to blow up the size of my taxable estate and thus I'll still be sharing it with all the masses in the end. The only way I avoid the estate tax is to leave the country when I'm able to withdraw it all tax-free. That would be age 59.5 unless these guys shift the rules on me. The so called "exit tax" only hits unrealized capital gains. But I would just be holding cash at that point. Then I can take it to Australia, renounce my US citizenship, and enjoy the fact that there are no property taxes there on primary residence and no double taxation on dividends from Australian corporations. There are no gift taxes there and no estate taxes -- they only tax the unrealized capital gains when such transfers of wealth happen. But there won't be much to tax if I do that gift soon after I'm 59.5. So here's a big middle finger to my present government if they turn it into my life mission to stiff them on inheritance taxes. They'll get less in the end.

The argument is usually that the wife deserves to be able to maintain her standard of living "to which she has become accustomed". Well, billionaires and millionaires -- aren't they entitled to retirement spending "to which they have become accustomed"? Hence, the $200k argument is suspect.

Real estate capital gains are largely never taxed for a man like Trump. They just do a 1031 exchange when they sell one property to buy another. Then you die holding onto the capital gains and your heirs enjoy the tax-free step up in cost basis. No capital gains taxes ever. The IRA at least attempts to capture this in spirit -- you sell one stock to buy the other. But none of this is income to you until you withdraw your equity from the account. So it's like a 1031 exchange (at least for the capital gains treatment of it) without the paperwork and lawyers.

Yeah, don't you have to have earned income to contribute. And then it could only grow from your own investments and contributions. Something seems off here. Variable annuities are effectively the same as IRAs and have no earned income provision for contributions. In fact there are no limits whatsoever on contributions. So you could be worth $100bn and put the entire thing into variable annuities. Thus your money would be compounding tax-deferred in mutual funds wrapped in the variable annuity policy. You can have it in managed funds, or index funds, it's all the same type of thing. And the withdrawal rules/penalties are similar to IRAs. So why is he picking a fight with the IRAs instead? So as not to piss off the powerful political allies?

Okay, do you own any stocks that have a large variable annuities business? How about AIG? Millionaires would have no interest in buying variable annuities anymore if they already have $3m in them including their IRAs and 401ks. Plus, they might be forced by the law to liquidate their current variable annuities products if they exceed $3m today.

Less cash with the dividend I believe you meant to say. Assuming a dividend tax of course. Dividend paying stocks don't have more IV. They just return cash differently. The IV of $1 distribution is $1 (before tax) no matter how you slice it. But the tax man slices it, and that's why dividends are *always worse if you pay taxes. * Unless your capital gains tax rate is substantially higher than your dividend tax rate -- and your cost basis is very very low. But nearly always it's better to repurchase shares no matter how high they trade. Usually it's only someone like Berkshire Hathaway that pays a 35% tax on capital gains versus a 14.5% tax on dividends. Oh, and how ironic it is that he is always bitching about buybacks unless the price is ridiculously low.

Here is what I do next in my RothIRA if they make this the law. 1) Keep the balance in cash at exactly $3m and never grow it (after being forced to withdraw the current excess). 2) Borrow $3m on margin in my taxable account to purchase Berkshire Hathaway 3) Hedge the margined shares with puts and write an offsetting number of puts in RothIRA Therefore, I get margin interest deduction and tax-deferred compounding. When the cash-covered puts expire for a gain in the RothIRA I have an offsetting loss in my taxable account. Better, I can be doing this margin scheme in a trust account for my kids to eliminate a good deal of my taxable estate. The problem with my RothIRA is I can't gift it to my kids without it being a taxable withdrawal. So it's an inheritance tax nightmare. And the Crummy Trust allows me to keep my kids from getting control until I determine them to be capable (like when they are 40 or something).

I am afraid I don't completely agree.. At a 150% overvaluation, isn't the company buying back a 66 cents dollar bill for 1 dollar? Which I think is rather value destructive as a shareholder of this company? I would think that buybacks are optimal as long as the stock is undervalued, fairly valued and overvalued just until the level that the tax implication on the dividend will be less value destructive than the buyback.. The company is buying what the shareholder is selling. So the overvaluation is a wash, the cash transfers to the shareholder without taxation.

According to celebrity net worth website, Obama is worth something like $11m. He's not really a socialist, rather he has made himself very wealthy from peddling socialism (his books).

I imagine the financial services lobby will be active -- there is no limit to how much you can contribute to variable annuities, which are really just tax-deferred plans like IRAs (even have similar withdrawal restrictions/penalties).

How do I vote for Romney? That guy has a $100m IRA -- guarantee this wouldn't be proposed by him.

Scenario 1: A) I buy a stock at 150% of intrinsic value B) It pays a $1 dividend and I pay 30% tax on it. C) I have 70 cents of cash Scenario 2: A) I buy a stock at 150% of intrinsic value B) It uses that same $1 to repurchase shares and I in turn sell $1 worth of shares (no tax due) C) I have 100 cents of cash So it's much better to buyback shares when stock is heavily overvalued (if the alternative is dividends).

What's up with the multiply.com website? By "closed", do they mean like a bathroom break and they'll be right back? multiply.tiff

I believe the next 10 years of stock market returns will depend on corporate earnings for the next 10 years. The Shiller PE10 argument suggests that if earnings were substantially lower in the recent past 10 years, then they'll undergo a period of weakness over the future 10 year period and that's what is going to kill stocks. I take this attitude because the current year P/E is not all that dangerously high. The argument rests on profit margins being at all time highs, or artificial stimulus, etc... Things won't be that bad if the profit metrics don't unwind -- the PE10 argument is basically predicting that they will. So it says, in effect, corporate profits don't suddenly "just up and get this good" so quickly. Maybe it's right, but I think it's better to just have an argument over what is driving the currently high profits and take it from there.

Neither did Florida though. However there may be other reasons why you won't have a problem, but the non-recourse issue doesn't seem to be the source of the problem in the US (if it was, then why wasn't Florida spared?).

I guess the Berkshire Hathaway report, at only 112 pages, would be the much longer of the two if it provided an equivalent amount of information about each subsidiary.

If we want to imagine scenarios, imagine if Buffett had donated all the money he made from his paper routes and subsequent endeavors to charity and never compounded it. Is that a better scenario? Suppose he put his money in a foundation that can compound it tax-free while distributing the required 5% annually. 5% annual bleed of the foundation's money is similar to being taxed only 16.7% on a 30% gain. So if he could have achieved 30% annually on his own after winding up the Buffett partnership then he should have done better than owning Berkshire. But, that's all with hindsight 20/20. And he deserves to live an interesting life, and being the Chairman of Berkshire has made his life perhaps far more interesting.

I was thinking about this delta return today. Implicitly it means they have confidence that their delta will exceed what they could otherwise earn in fixed income. Otherwise, why not just buy bonds instead? Yup. They go by the balance sheet, giving it a lot more weight than I would when it's a crappy business. For this reason, there is huge basis risk in their "hedging". Nevertheless, It's hard to argue with their long term success. You also had that "Buffett put" strategy with Berkshire trading down near 1.1x book value. Fairfax bought none! That seemed to be a possible holding for them that wouldn't require too much (if any) hedging, and could compound away tax-deferred for a long time. Perhaps they think they can do better than Berkshire with their delta? Or they don't believe in the Buffett put, or they don't want to own Berkshire. Or they believe the hedges won't take long to be wildly useful. Hmm... It's got to be better than JNJ as a defensive blue chip holding, either way.

I was thinking about this delta return today. Implicitly it means they have confidence that their delta will exceed what they could otherwise earn in fixed income. Otherwise, why not just buy bonds instead?

You need to throw in Andrew Carnegie as well. Absolutely fascinating. And he is very "OG" on American philanthropy -- leading by example and inspiring/imploring other wealthy to give. We only hear about Buffett's "Giving Pledge", but check Carnegie's view on philanthropy via his Gospel of Wealth. He was also a strong advocate of the first inheritance tax. Once I read about Carnegie I began to wonder if Buffett was inspired by him. However, in business it's a bit dirty -- no insider trading laws in Carnegie's time. So he had connections to railroad executives who needed Carnegie's capital to partner with. They'd buy up land in the middle of nowhere, have the railroad build a stop (and town there), and make an instant killing on the land development/sale. Carnegie came to America in rags, literally.

I guess you should be careful for what you fear. The recession the ECRI has so accurately predicted has been great for BAC's stock price thus far. There you go, famous last words. Now the market goes down 50%.

The question is then, why is Russia protecting it's tax evaders? The answer might be, the tax evaders are powerful.