Mitt Romney exited Bain Capital with rare tax benefits in retirement
Source: Washington Post
Details of Romney’s retirement assets are somewhat vague because he has released only one year of full tax returns and declined to provide additional specifics about his personal finances. But interviews with Bain executives and accounting professionals show that he was able to take advantage of tax benefits in innovative ways open only to a narrow slice of extremely affluent people — mostly those who work in private-equity firms and other investment partnerships.
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Romney’s IRA growth could be dramatic, in part, because he, like other Bain employees, was given access to a type of shares in Bain-backed companies that were often private and low-valued when the employees bought in and then were managed by Bain for growth and an eventual sale or public share offering that would maximize shareholder value.
These “A-shares” were priced by Bain at a fraction of another category of stock known as “L-shares,” which functioned like preferred stock, paying dividends and getting priority for payouts. The A-shares, or common shares, were riskier and thus priced lower, so it was possible that a relatively small IRA investment could buy significant amounts of the A-shares in some companies. The use of a dual-share structure is not unusual in the financial industry, and under financial accounting rules the A-shares must reflect a true market value of the underlying assets. Often, the value of these initially cheap A-shares soared, along with the company’s value.
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By leveraging a series of successful A-share investments, taking profits and reinvesting the money into new A-shares, a Bain IRA fund could easily accumulate millions of dollars without any tax penalty. On the disclosure statements Romney files as a candidate for federal office, he reports his financial holdings and values them by assigning a dollar range to each one. By adding these values together, The Washington Post calculated that the holdings in his IRA were worth between $20 million and $102 million in 2011. The total range shifted downward this year, with Romney valuing the holdings in his IRA at between $17 million and $87 million.
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Read more: http://www.washingtonpost.com/politics/mitt-romney-exited-bain-capital-with-rare-tax-benefits-in-retirement/2012/09/02/1bddc8de-ec85-11e1-a80b-9f898562d010_story.html
The Post said one tax expert told them Bain may have undervalued the A shares, a possibility I've seen mentioned in other stories. That was contradicted by a tax lawyer who's worked for Bain, who told the Post that the share values were worked out "by all the investors at arm’s length based on the company’s prospects and economic condition at the time of the investment."
Romney also benefits because when he left Bain he spent over a year negotiating a severance deal that allows him "to continue sharing in the profits of the company for 10 years in the same way that active managers received compensation. These carried-interest profits would be taxed at a 15 percent rate, less than half the rate that retirees might pay on other income, including payouts from pensions, IRAs and stock options."
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It probably is legal. Consider who writes the laws. It sure isn't the little people.
I am no expert. And it's possible that the hired henchmen in Congress have allowed a loophole so this could be legal. 
That was the worst of days.....! 
