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Tuesday, August 14, 2012

New attention to Romney's role in 'Son of Boss' tax scam

Posted By on Tue, Aug 14, 2012 at 1:53 PM

Heard yet of "Son of Boss"? It's a dubious tax avoidance scheme set up and executed for the Marriott Corp. when Mitt Romney headed the Marriott board's audit committee. Wikipedia summarizes:

One of the companies accused of abusing "Son of BOSS" tax shelter schemes has been Marriott Corporation. In Marriott International Resorts, LP, et al. v. United States, the "Son of BOSS" loss was the planned result of a series of transactions entered into by Marriott-affiliated entities with the intention of recognizing a tax loss based upon the premise that the obligation to close a short sale is not considered a liability for partnership-tax-basis purposes. The Internal Revenue Service took issue with this premise and disallowed the claimed loss.

The federal appeals court invalidated the maneuver by Marriott in a 2009 ruling, siding with the U.S. Department of Justice, which called Marriott’s transaction and attempted tax benefits “fictitious,” “artificial,” “spectral,” an “illusion” and a “scheme.” Marriott had argued the plan predated government efforts to close such shelters.

Mitt Romney who joined the company’s board in 1993, headed the audit committee for Marriott when it began to use the "Son of Boss" tax shelter. As a Marriott director, his responsibilities included oversight over the tax planning conducted by management.

A New York tax law expert and a California law professor have written commentary on it for CNN. They note that, while Romney is keeping personal income tax records secret, the public record is full of on-the-record indications of Romney's view on taxes.

Son of Boss and its related shelters represented perhaps the largest tax avoidance scheme in history, costing the U.S. many billions in lost corporate tax revenues. In response, the government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations.

In addition, the Son of Boss transaction was listed by the Internal Revenue Service as an abusive transaction, requiring specific disclosure and subject to heavy penalties. Statutory penalties were also made more stringent to deter future tax shelter activity. Finally, the government brought successful criminal prosecutions against a number of individuals involved in Son of Boss and related transactions not associated with Marriott, including principals at major law and accounting firms.

In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations

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Even if Romney DID pay some taxes during the secret years, you can bet he pushed tax avoidance to the maximum.

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