Paul Kiel and Jeff Ernsthausen (ProPublica ):How the Wealthy Save Billions in Taxes by Skirting a Century-Old Law (2/9/2023)

Paul Kiel and Jeff Ernsthausen, of ProPublica, have made available for download their article, How the Wealthy Save Billions in Taxes by Skirting a Century-Old Law, published in ProPublica. The abstract is as follows:

At first glance, July 24, 2015, seems to have been a brutal trading day for Steve Ballmer, the former Microsoft CEO. He dumped hundreds of stocks, losing at least $28 million.

But this was no panicked sell-off. Among the stocks Ballmer sold were those of the Australian mining company BHP and the global oil giant Shell. Had Ballmer lost confidence in BHP’s management? Was he betting that the price of oil would not soon recover? Not at all. That very day, Ballmer also bought thousands of shares in BHP and Shell.

Why would he sell and buy shares in the same companies on the same day? The answer is counterintuitive to the average person but obvious to a sophisticated investor: A loss, for tax purposes, is valuable; a big one can wipe out millions in potential taxes. Ballmer’s two-step process allowed him to use the loss to lower his taxes, while the near-simultaneous purchase meant he effectively hadn’t changed his investment.

Click here to view Paul Kiel and Jeff Ernsthausen’s summary of How the Wealthy Save Billions in Taxes by Skirting a Century-Old Law

Posted by Kaitlyn Bare, Associate Editor, Wealth Strategies Journal.