Warren Buffett's $1.2 billion share buyback
from a single unnamed investor likely helped that person's estate save
substantially on taxes, just one day after the Berkshire Hathaway CEO
said the rich should actually be paying more, not less, when they die.
With the "fiscal cliff" looming and estate taxes set to
rise dramatically in less than three weeks, the timing was seen as
advantageous - and, according to Berkshire watchers, also out of place
in the context of Buffett's recent tax activism.
"I would say 'Warren, would you please just keep your
nose out of this.' He's not in a position to criticize what's good for
America and for everyone else's estate," said Anthony Sabino, a
professor of business at St. John's University. "He's no doubt utilized
the present tax code to maximum effect."
Berkshire said it bought 9,200 Class A shares from "the
estate of a long-time shareholder," whom it did not name, at $131,000
per share, a price in line with where Berkshire has traded in recent
weeks.
Buffett's assistant didn't respond to a request for
comment on the shareholder's identity. The shares represent 1 percent of
Berkshire's Class A stock.
The repurchase came less than a month ahead of the
looming "fiscal cliff," automatic tax hikes and spending cuts set for
January 1 that the White House and members of Congress have been
negotiating to avoid.
Among other levies, the estate tax is expected to rise
in the new year package by as much as 20 percentage points, which may
have spurred the anonymous shareholder to sell now.
Buffett was a signatory of an open letter released
Tuesday that called for a lower starting point for the tax and a higher
taxation rate, beginning at 45 percent.
"We believe it is right to have a significant tax on
large estates when they are passed on to the next generation. We believe
it is right morally and economically, and that an estate tax promotes
democracy by slowing the concentration of wealth and power," the 33
signers wrote in the letter released by the campaign, United for a Fair
Economy.
He has also been publicly campaigning for more than a
year for higher taxes on the wealthy, even lending his name to a
proposal called the "Buffett Rule" that failed in Congress.
DEATH AND TAXES
Berkshire also said Wednesday it raised the threshold
for future share buybacks to 120 percent of book value from 110 percent,
the level it chose when it first approved a repurchase program in
September 2011. The higher level allowed Berkshire to complete this
latest buyback, which was above the old threshold.
After news of the buyback, Berkshire's shares were up 3.1 percent at $134,850.
Based on the company's book value at the end of the
third quarter, the buyback limit would stand for now at $134,061.60. The
stock has traded below that level for most of this quarter.
Buffett was always loath to offer share buybacks and
consented to it last year only after Berkshire hit historically low
valuations. In its most recent quarterly filing, Berkshire said it had
not made any repurchases in the first nine months of 2012, after
spending just $67.5 million on buybacks in 2011.
"I don't expect a significant repurchase program to be
announced as (Buffett) is clear that he is in acquisition mode," said
Michael Yoshikami, founder and CEO of Destination Wealth Management and a
long-time Berkshire investor.
Berkshire ended the third quarter with $47.78 billion
in cash, and Buffett has made no secret of his desire for a purchase in
the $20 billion to $30 billion range.
Yet given his wealth and his own self-professed low tax
rate, Buffett has been called out in some quarters for not practicing
what he preaches.
"I have a problem with Warren, who's basically done
with this (issue), to say 'yeah, raise the estate tax,'" Sabino said. "I
think, again, with all due respect for his sagacity at selling stocks,
he's being incredibly short-sighted."
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