US$29b tax boost for Berkshire?

NEW YORK: Warren Buffett’s Berkshire Hathaway Inc could get a US$29 billion (RM128 billion) boost to its book value under tax-rate cuts advocated by president-elect Donald Trump, according to Barclays Plc.

“We would view this magnitude of increase as favourable for Berkshire shares since it is generally valued on price to book value,” said Barclays analysts led by Jay Gelb on Monday.

Berkshire jumped eight per cent in trading, here, since Trump won the election, helped by the increasing value of Buffett’s holdings in bank stocks as interest rates climbed.

The prospect of lower taxes is also helping.

Gelb’s analysis covered a net deferred tax liability (DTL) of US$50.4 billion at the end of last year, a figure that includes potential costs if Buffett sells investments that gained in value.

The review doesn’t take into account the DTLs at some energy operations, where benefits would be enjoyed by utility customers and not Berkshire shareholders.

The value of the liability is based on the current 35 per cent tax rate and would fall by US$22 billion at a 20 per cent corporate tax rate and drop by US$29 billion at 15 per cent, Gelb wrote.

Trump has called for cutting the business tax rate to 15 per cent, while the House Republican “blueprint” for tax changes proposes 20 per cent.

Buffett has long pursued strategies to limit tax payments made by Berkshire. Bloomberg