In another of those moments designed to make you feel like you'd have to be a forensic accountant to have the most basic understanding of Mitt Romney's financial dealings, Bloomberg has uncovered yet another Romney tax avoidance vehicle, this one working through the Mormon Church. Charitable remainder unitrusts allow rich people to defer capital gains taxes by basically renting a charity's tax exempt status, then investing the money in the trust free from capital gains taxes, getting an annuity for years, and then, at the end, leaving the charity whose tax exempt status made it all possible whatever crumbs are left when the funder dies. In 1997, Congress passed a law saying the charity had to get at least 10 percent of the initial investment, but grandfathered in existing trusts like Romney's. Romney is of course taking advantage of that; his trust is expected to pay the Mormon Church around 8 percent of the money that was initially invested in it. That wouldn't be legal under current law, but, like so many other Romney investments, it slides in under the wire, in this case because of the grandfather clause.
In 2011, the Romneys' trust earned just $48, due to a conservative investment strategy, but paid them $36,696.
The current investing strategy favors the Romneys over the charity because they get a guaranteed payout, said Michael Arlein, a trusts and estates lawyer at Patterson Belknap Webb & Tyler LLP.The Mormon Church has received plenty of Romney money from other sources, though, and is perfectly happy to let them avoid taxes for another smallish donation at the end. Meanwhile, you have to wonder how many other tax avoidance vehicles at the outer edges of legality Romney has that we don't know about yet.'The Romneys get theirs off the top and the charity gets what's left,' he said. 'So by definition, if it's not performing as well, the charity gets harmed more.'
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