Buffett’s no Trump, but he’s not a saint on taxes

When Warren Buffett disclosed information from his own personal tax returns and stomped Donald Trump so skillfully a few days ago, the stories just wrote themselves.

Buffett, who has called early and often for tax increases on America’s biggest earners, punched out the tax-dodging Trump for saying during a presidential debate that Buffett “took a massive tax deduction” and that he was dodging taxes the same way Trump was.

However, if Trump had done some homework, he could have said that Buffett, like Trump himself, has pursued aggressive, money-saving tax strategies.

But Buffett has pursued these strategies not for himself, but for the company he runs: Berkshire Hathaway.

In transactions in 2014 and last year, Berkshire did three “cash-rich split-off” transactions that allowed it to end up with lots of cash and assets while avoiding what I estimate to be a total of about $2.5 billion in capital gains taxes.

Berkshire did what amounted to complicated trades with three companies whose shares it had owned for years, swapping those holdings for a combination of cash and operating assets. The transactions are treated by the IRS as tax-free trades, rather than sales. The companies were Phillips 66, Graham Holdings (former owner of the Washington Post) and Procter & Gamble.

By my count, the three transactions that yielded cash and assets were worth $6.2 billion more than Berkshire’s $1 billion total cost for its stock in the companies.

I’m not trying to imply that Berkshire’s transactions are either illegal or unethical. They’re not.

Buffett the person’s tax practices qualify him for sainthood, because among other things, his generous donations of Berkshire stock to charitable causes generate billions of dollars more in tax deductions than he will ever use.

Buffett the CEO’s tax practices qualify him … to be a CEO, trying to maximize profits for his shareholders.

His behavior is much better than Trump’s, because Berkshire is highly profitable and pays substantial income taxes. But Buffett the CEO is no saint.