It appears that Blackstone partners may avoid taxes on their IPO profits completely.

Here is the short form:

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The paper says that of the $4.75 billion raised by the Blackstone IPO, the firm attributed $3.7 billion to good will, an accounting term that estimates the value of the intangible assets rather than tangible assets such as buildings and equipment owned by the firm.

That $3.7 billion is taxed at a 15 percent tax rate used for capital gains, meaning that the firms’ partners had to pay taxes of $553 million on their gain.

But by transferring that good will to a new corporate structure, the firm is able to deduct that $3.7 billion as a business expense at a 35 percent tax rate, reducing taxes by $1.3 billion over a 15-year period, according to the report.

The Times reports that under terms of the IPO, the Blackstone partners are entitled to 85 percent of those tax savings, or $1.1 billion. They are also able to account for those savings as a lump sum, when adjusting for the current value of those savings over the next 15 years. That brings current tax savings to $751 million, or $198 more than they had been required to pay in taxes on the $3.7 billion gain seen from the IPO.
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Damn!!! It’s enough to make one a Marxist.

Truth is, I am, but Groucho, Chico, Harpo, Zeppo, and Gummo, not Karl.