{"id":68,"date":"2012-10-16T18:07:53","date_gmt":"2012-10-16T18:07:53","guid":{"rendered":"http:\/\/sommers-taxapedia.com\/articles\/?p=68"},"modified":"2021-03-31T19:17:19","modified_gmt":"2021-03-31T19:17:19","slug":"romenys-2011-tax-return","status":"publish","type":"post","link":"https:\/\/sommers-taxapedia.com\/articles\/romenys-2011-tax-return\/","title":{"rendered":"ROMNEY\u2019S 2011 TAX RETURN"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

\u00a0\u00a0\u00a0 Mitt and Ann Romney\u2019s 2011 income tax return reveals that $6.0 million (44%)<\/a> of their Adjusted Gross Income (\u201cAGI\u201d) came from foreign investments, $4.5 million of which received a favorable capital gains preference.<\/p>\n

\u00a0\u00a0\u00a0\u00a0 Because tax filings are confidential, the public release of Romney\u2019s 2010 and 2011 tax returns offer a rare opportunity to analyze how the richest Americans structure their investments to reduce their effective tax rate far below the average percentage paid by middle-class workers. \u00a0Romney\u2019s 2011 return contains several interesting and potentially controversial issues. See the attached spreadsheet analysis<\/a>.<\/p>\n

Cooking the Numbers<\/strong><\/p>\n

\u00a0\u00a0\u00a0 Romney reported $13.7 million of AGI, although an earlier version of his 2011 tax return showed AGI of $20.9 million.\u00a0 So how did $7.2 million disappear from his tax return?\u00a0 His charitable deductions dropped from $4.0 million to $2.25 million 1<\/a><\/sup> for political reasons: he wanted his tax rate a minimum of 14%. \u00a0If he reported the original $20.9 million and the full charitable deduction, the rate would drop to between 4-6%.<\/p>\n

\u00a0\u00a0\u00a0\u00a0 By failing to report the full deduction, Romney may have violated the sworn statement accompanying his signature:<\/p>\n

\n

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete<\/span><\/em>. [emphasis added]<\/p>\n<\/blockquote>\n

\u00a0\u00a0 Obviously, filing a tax return that deliberately leaves off $1.75 million of charitable deductions is not a true, correct and complete tax return.\u00a0 2<\/a><\/sup>.\u00a0 In Rev. Rul. 67-460<\/em>, the IRS refused to allow a taxpayer to manipulate his charitable deduction in this manner. 3<\/a><\/sup><\/p>\n

Alternative Minimum Tax Issues<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0 Romney paid $647,512 in alternative minimum tax (AMT). In 2010, he paid $232,989 for a total of $880,501 for both years.\u00a0 His tax reform proposal eliminates the AMT and would have saved him $880,000 for 2010 and 2011. \u00a0\u00a0Assuming he paid an average of $440,000 AMT per year, the savings over a 10-year period amounts to $4.4 million.\u00a0 Absent payment of the AMT, Romney’s tax rate would have been $13.27% in 2009 and 9.79% in 2010, or an average of 11.92%.\u00a0 Romney\u2019s position on AMT directly affects his tax liability, another reason why presidential candidates should release a decade\u2019s worth of returns.<\/p>\n

Marriott Director Payments<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0 Romney received director’s fees from Marriott of $260,000 in 2011, even though he announced his candidacy for presidency in June. \u00a0Did he remain on the Marriott payroll while running for president?\u00a0 In 2010, he earned $110,000. \u00a0Why did he earn 2.35 times the fee in 2011 while working just half the year?<\/p>\n

Payroll Tax Inclusion<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0 Brad Malt, Romney\u2019s personal attorney who runs his blind trust 4<\/a><\/sup>, claimed that Romney paid 14.1% in “income” taxes in 2011 per his tax return.\u00a0 This is misleading:\u00a0 Malt included $23,179 in self-employments taxes (these are payroll taxes, not income taxes).\u00a0 The true percentage of income taxes paid to the U.S. was 13.77%.\u00a0 More importantly, this attempted sleight-of-hand demonstrates why a full review of past returns is needed.<\/p>\n

\u00a0Church Contributions<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0 Romney is supposed to donate (tithe) to his church (the Church of the Latter Day Saints) 10% of his income. \u00a0His 2011 tax return shows AGI of $13,696,951, but his church contribution was $1,115,489 or 8.14% of AGI, not 10% 5<\/a><\/sup>.\u00a0 On his 2010, return, he gave just 7.2% percent to his church.\u00a0 His failure to meet his tithe requirement could be a major reason why Romney refuses to release earlier tax returns.<\/p>\n

\u00a0Rafalca \u2013 The Dancing Horse Deduction<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0 In 2010, Ann Romney her occupation as homemaker.\u00a0 Yet, Romney claimed passive activity losses (\u201cPALs\u201d — permitted only if one has an active business, rather than a hobby) for Rafalca – their dancing (dressage) horse. The horse endeavor, Rob Ron Enterprises, LLC, earned $50 in 2010, but Romney claimed $77,731 in losses. 6<\/a><\/sup><\/p>\n

\u00a0\u00a0\u00a0 Ann was not involved in an active business, since her occupation was homemaker and Mitt has stated several times he has nothing to do with the activity.\u00a0 Rob Ron Enterprises, LLC does not appear on his 2011 return.\u00a0 In fact, of the $2.275 million in unused PALs claimed in 2010, only $320,000 were reported in 2011.<\/p>\n

\u00a0\u00a0\u00a0 What happened to the $2.0 million in unused losses that somehow dropped off the 2011 return, including Rafalca? \u00a0This suggests that $2.0 million in PALs claimed in 2010 could not survive IRS scrutiny.<\/p>\n

\u00a0Conclusion<\/strong><\/p>\n

\u00a0\u00a0\u00a0 Even with the whole world watching, Romney\u2019s 2011 tax return raises multiple controversial issues. \u00a0Forty-four percent of his income is traceable to foreign sources. The income and deductions may have been manipulated for political purposes, in violation of his sworn tax return statement. \u00a0Whether he stiffed his church is, of course, between him and his church, but it appears that he did.\u00a0 Why did Mr. Malt include payroll taxes in his calculation of income taxes and was this \u201cmistake\u201d repeated in previous years to boost Romney\u2019s tax percentage paid?<\/p>\n

\u00a0\u00a0 More troubling is his connection with Marriott Corporation and whether he continued on its board after his presidential announcement.\u00a0 If not, then why was his 2011 directors\u2019 fee $150,000 more than in 2010?<\/p>\n

\u00a0\u00a0\u00a0 Finally, why did he ditch $2.0 million of accumulated PALs claimed in 2010, including the losses attributable to Rafalca?<\/p>\n

—————————<\/p>\n

Footnotes<\/span><\/p>\n

\n
<\/div>\n
    \n
  1. Romney has three years to amend his original return to claim the $1.75 million unreported charitable contribution. ↩<\/a><\/span><\/li>\n
  2. \u00a0See Charles I. Kingson, Did Romney Violate the Jurat?<\/em>, 137 Tax Notes 107 (Oct. 1, 2012) ↩<\/a><\/span><\/li>\n
  3. Id. See: Rev. Rule 67-460<\/em>, which involved a taxpayer not claiming a full charitable deduction to meet certain requirements under the tax code.\u00a0 The IRS held: \u201c\u2026 the full amount of the taxpayer’s charitable contributions must be taken into account in computing his income tax liability. It is not permissible in such computations to take into account only a portion of the actual charitable contributions for the purpose of increasing the income tax liability thus computed\u2026”. ↩<\/a><\/span><\/li>\n
  4. The blind trust is \u201cblind\u201d in name only. It does not meet the federal blind trust requirements ↩<\/a><\/span><\/li>\n
  5. Note: AGI was used by Romney’s CPAs to calculate his average charitable donation as a percentage of income. so AGI is the proper measurement for this issue. ↩<\/a><\/span><\/li>\n
  6. The PALs were claimed on Form 8582 and could be used to offset future income. ↩<\/a><\/span><\/li>\n<\/ol>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    Introduction \u00a0\u00a0\u00a0 Mitt and Ann Romney\u2019s 2011 income tax return reveals that $6.0 million (44%) of their Adjusted Gross Income (\u201cAGI\u201d) came from foreign investments, $4.5 million of which received a favorable capital gains preference. \u00a0\u00a0\u00a0\u00a0 Because tax filings are confidential, the public release of Romney\u2019s 2010 and 2011 tax returns offer a rare opportunity …Continue reading<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,7,6],"tags":[21,24,23,12,22],"class_list":["post-68","post","type-post","status-publish","format-standard","hentry","category-general-tax-information","category-tax-trust-scams","category-tax-shelters","tag-21","tag-agi","tag-analysis","tag-mitt-romney","tag-tax-return"],"_links":{"self":[{"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/posts\/68","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/comments?post=68"}],"version-history":[{"count":31,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/posts\/68\/revisions"}],"predecessor-version":[{"id":97,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/posts\/68\/revisions\/97"}],"wp:attachment":[{"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/media?parent=68"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/categories?post=68"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sommers-taxapedia.com\/articles\/wp-json\/wp\/v2\/tags?post=68"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}