Question

In: Accounting

Warren Buffett stated that he paid an effective tax rate that was lower than his secretary....

Warren Buffett stated that he paid an effective tax rate that was lower than his secretary. This assertion is probably true. Why? Will that assertion remain true after the full implementation of the December tax reform law? Please provide references if you copy anything.

Solutions

Expert Solution

In 2011, as reported by NYT, Buffet paid just 17.40% effective income tax rate while his employees were paying on an average 36% income tax rate. The reason for the parity is the differnce in taxation rules for salary employee and for investment income. IRS tax rules provide for prosgressive income tax for salary employees whereas for investments, capital gain tax is levied. Capital gain is also short term and long term where short term attracts high income tax rate whereas long term (more than a year of holding) attracts lesser income tax. Since Warren Buffet is known for long term investments, he attracts lesser income tax rates only. (https://www.fool.com/investing/general/2016/02/21/billionaire-warren-buffetts-secret-to-paying-a-low.aspx)

The new tax rules has not changed the way capital gain as well as dividend is taxed keeping it still the effective money making mode(https://www.corporatemonkeycpa.com/2018/02/22/taxes-on-dividends-and-capital-gains-under-the-tax-cuts-jobs-act/)


Related Solutions

Warren Buffett stated that he paid an effective tax rate that was lower than his secretary....
Warren Buffett stated that he paid an effective tax rate that was lower than his secretary. This assertion is probably true. Why? Will that assertion remain true after the full implementation of the December 2017 tax reform law?
Warren Buffett stated that he paid an effect tax rate that was lower than that of...
Warren Buffett stated that he paid an effect tax rate that was lower than that of his secretary. This assertion is probably true. Why?
Warren Buffett, the billionaire investor and chairman/CEO of Berkshire Hathaway, stated that "diversification is protection against...
Warren Buffett, the billionaire investor and chairman/CEO of Berkshire Hathaway, stated that "diversification is protection against ignorance”. Do you agree with his statement? Why or Why not?
Legendary for his business and investment acumen, Warren Buffett is frequently called the “Oracle of Omaha”...
Legendary for his business and investment acumen, Warren Buffett is frequently called the “Oracle of Omaha” after his birthplace in Omaha, Nebraska. As one of the world’s wealthiest business owner-investors, business executives are always interested in any insight or opinion Mr. Buffett might wish to share. Explain each one of the following statements made by Warren Buffett. (Quotations from The Wall Street Journal, September 23, 2002.) “You cannot be the high-cost producer in a commodity business.” “Sometimes it’s not even...
Warren Buffett is a big proponent of a simple asset allocation strategy. He suggests putting 90%...
Warren Buffett is a big proponent of a simple asset allocation strategy. He suggests putting 90% of your money in S&P500 index fund (VFIAX) and keep the rest in cash. In fact, he made a bet with a hedge fund manager that this simple asset allocation strategy would beat any other over a 10-year period. Find out information about the bet. Summarize the bet's outcome. Discuss whether/how these outcomes will shape your own retirement/investment strategy.
Review the Warren Buffett list below for personal wealth accumulation. In no less than 5 sentences,...
Review the Warren Buffett list below for personal wealth accumulation. In no less than 5 sentences, what are the two key rules for accumulating personal wealth
Warren has a loan with an effective interest rate of 5 percent per annum. He makes...
Warren has a loan with an effective interest rate of 5 percent per annum. He makes payments at the end of each year for 10 years. The first payment is 200, and each subsequent payment increases by 10 per year. Calculate the interest portion in the fifth payment. Warren has a loan with an effective interest rate of 5 percent per annum. He makes payments at the end of each year for 10 years. The first payment is 200, and...
The C corporation tax rate is significantly lower than the top individual marginal tax rate. True...
The C corporation tax rate is significantly lower than the top individual marginal tax rate. True False Owners who work for entities taxed as a partnership receive guaranteed payments as compensation. The guaranteed payments are not self-employment income. True False Business income allocations from an S corporation to its shareholders are potentially subject to the 3.8 percent net investment income tax if the shareholders are passive investors in the S corporation. True False C corporations and S corporations are separate...
In 2009, the effective income tax rate paid by the top 1% of households in the...
In 2009, the effective income tax rate paid by the top 1% of households in the U.S. was 20.4%, while the bottom two quintiles actually paid _______ effective income taxes. Select the correct answer below: 1.even higher 2.negative 3.the same 4 zero Which of the following are examples of command-and-control regulation? Select two correct answers. Select all that apply: laws that require the use of filters in automobile tailpipes and smokestacks laws that specify the amount of pollution each producer...
Warren Peace Bookstore issues a note with no stated interest rate in exchange for a building....
Warren Peace Bookstore issues a note with no stated interest rate in exchange for a building. In accounting for the transaction: Multiple Choice The note is recorded at its face amount unless the fair value of the building is readily available. The building should be depreciated over the note’s term to maturity. Both the note and building are recorded at the fair value of the note or the fair value of the building, whichever is more clearly determinable. If fair...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT