Warren Buffett has been a staunch advocate for higher taxes on the wealthy for some time, but he sings a different tune when it comes to his Berkshire Hathaway.
The company agreed to buy Duracell battery from its owner Procter & Gamble for approximately $4.7 billion Thursday. Berkshire will use its own P&G shares to pay for the purchase.
That allows Buffett to unload his shares of P&G, which has struggled for the past few years, without incurring a massive capital-gains tax bill.
“It’s a brilliant financial deal,” Buffett biographer Andrew Kilpatrick told Bloomberg. “He’s getting a tremendous deal, tax-wise.”
Berkshire paid approximately $336 million for its P&G holdings, now worth about $4.7 billion. The tax bill might have totaled more than $1 billion if Buffett sold the shares in the open market, according to The New York Times.
The structure of the Duracell deal is known as a “cash-rich split-off,” which benefits P&G too. Such a transaction allows businesses to be sold using stock without taking a big tax hit.
An IRS decision that the transaction doesn’t generate taxes should be “eminently achievable,” Robert Willens, an independent corporate tax adviser, told The Times.
As for Buffett, he may have been the most important supporter of President Obama’s attempts to raise taxes on the wealthy since he took office in 2009. Obama called one of his tax hike proposals “the Buffett Rule.”
The Oracle of Omaha has repeatedly mentioned that his secretary pays taxes at a higher rate than he does.
The Duracell deal wasn’t the only tax-advantaged transaction for Berkshire this year. Others include its purchase of lubricant maker Phillips Specialty Products, a Miami TV station and Burger King.
Buffett has shrugged off the idea that he’s a hypocrite on taxes. “I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe,” he told Fortune magazine.