4 ms·

By definition, charities (well, U.S. 501(c)(3) organizations) cannot have their assets or income inure to insiders. Can Buffett's charity pay a salary to his ch

By definition, charities (well, U.S. 501(c)(3) organizations) cannot have their assets or income inure to insiders. Can Buffett's charity pay a salary to his children? Sure. Can it pay them an excessive salary? Maybe, but the IRS will look closely upon it. Can the children buy a megayacht using charity money and sail around the world, while drawing a salary? Probably not. I think you're overestimating the degree to which they can "own" the charitable organization. No one is denying that Buffett's children will live very comfortable lives without having to lift a finger, but that should be neither surprising of nor prohibited to one of the world's richest people, who got there by helping rise the tide.

lurquer 6y ago
its a hit more convoluted than that. One example I have personal knowledge of... The foundation leases an office building owned by ABC, Inc. ABC is owned by child of foundations grantor. The lease payments are double the mortgage payments. Within a few years, the mortgage is paid off. ABC then sells the building and gets the money.
- hpkuarg 6y ago
  Right, I'm not saying those things don't happen, but the example you gave is exactly what the IRS should be looking for -- transactions between insiders and related parties. Of course, they've been trying to gut the IRS...
  - lurquer 6y ago
    You give me a law, I'll give you a way to legally avoid it. It's difficult to legislate this stuff. Indeed, I would contend it is impossible. Unless -- like we did with income -- we implement incredibly invasive procedures (such as withholding, W2s, 1099s, etc.) for ALL transactions. It's not as simple as you think. For instance, Chelsea Clinton received a &600k salary from NBC along the following compensation from Barry Diller’s IAC/InteractiveCorp. Salary for Chelsea: $300,000. The board position also pays an annual retainer of $50,000 and a $250,000 grant of restricted stock. This is how wealth is funneled from one generation to the next. Meanwhile, the Clinton foundation pays exorbitant fees or rents to the Dillers step-kids' charities and foundations. (As an example of how such arrangements work... I don't have any details.) There is simply no way to keep track of who is paying whom. (Especially when you toss in the 'art' auction business... the greatest money-laundering scheme ever invented.... Rich Kid A gets $45mill for some crap painting from Rich Dad B, while Rich Kid B gets $45mill from Rich Dad A. Etc, etc. )

lurquer 6y ago

its a hit more convoluted than that. One example I have personal knowledge of... The foundation leases an office building owned by ABC, Inc. ABC is owned by child of foundations grantor. The lease payments are double the mortgage payments. Within a few years, the mortgage is paid off. ABC then sells the building and gets the money.

hpkuarg 6y ago
Right, I'm not saying those things don't happen, but the example you gave is exactly what the IRS should be looking for -- transactions between insiders and related parties. Of course, they've been trying to gut the IRS...
- lurquer 6y ago
  You give me a law, I'll give you a way to legally avoid it. It's difficult to legislate this stuff. Indeed, I would contend it is impossible. Unless -- like we did with income -- we implement incredibly invasive procedures (such as withholding, W2s, 1099s, etc.) for ALL transactions. It's not as simple as you think. For instance, Chelsea Clinton received a &600k salary from NBC along the following compensation from Barry Diller’s IAC/InteractiveCorp. Salary for Chelsea: $300,000. The board position also pays an annual retainer of $50,000 and a $250,000 grant of restricted stock. This is how wealth is funneled from one generation to the next. Meanwhile, the Clinton foundation pays exorbitant fees or rents to the Dillers step-kids' charities and foundations. (As an example of how such arrangements work... I don't have any details.) There is simply no way to keep track of who is paying whom. (Especially when you toss in the 'art' auction business... the greatest money-laundering scheme ever invented.... Rich Kid A gets $45mill for some crap painting from Rich Dad B, while Rich Kid B gets $45mill from Rich Dad A. Etc, etc. )