{"id":2347,"date":"2006-05-16T22:16:07","date_gmt":"2006-05-16T22:16:07","guid":{"rendered":"http:\/\/zmetro.com\/?p=2347"},"modified":"2006-05-16T22:16:07","modified_gmt":"2006-05-16T22:16:07","slug":"touching_the_su","status":"publish","type":"post","link":"https:\/\/www.zmetro.com\/?p=2347","title":{"rendered":"Touching the Surface of Our Tax System: Think Warren Buffett is paying $4 billion for Iscar? Think again."},"content":{"rendered":"<p><a href=\"http:\/\/www.globes.co.il\/serveen\/globes\/docview.asp?did=1000092649&amp;fid=980\">Avishay Ovadia<\/a>:<\/p>\n<blockquote><p><i>This brings us to the investment in Iscar. On the face of it, Buffet paid $4 billion for 80% of the Israeli metal cutting toolmaker company. Why only on the face of it? Because in actual fact, the sum was a great deal lower.<\/p>\n<p>While the structure of the deal is not known, it seems that Buffett has set up a local company that will acquire 80% of the activity of Iscar from the Iscar group, controlled by the Wertheimer family. The family will retain control over the old Iscar, which will own 20% of the activity. In the next stage, a company will be formed, into which Iscar&#8217;s activity will be transferred (by both sides), leaving Buffett with an 80% stake in the new company, which will take in all Iscar&rsquo;s activity.<\/p>\n<p>Buffett, therefore, is buying activity, rather than company stock. The significance for tax is a benefit of around $1 billion over a 10 year period. Why? Because income tax regulations allow the recognition of amortization of goodwill on deals for acquisition of current activity at an annual rate of 10% of the goodwill. Almost all the sum paid for Iscar&rsquo;s activity will be attributed to goodwill, resulting in an annual tax-deductible expense of $400 million. This expense will generate a tax saving of $100 million, assuming an effective tax rate of 25% for Iscar (for which it qualifies as a company with approved enterprise status). $100 million over 10 years is the expected saving, amounting to $1 billion.<\/i><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Avishay Ovadia: This brings us to the investment in Iscar. On the face of it, Buffet paid $4 billion for 80% of the Israeli metal cutting toolmaker company. Why only on the face of it? Because in actual fact, the sum was a great deal lower. While the structure of the deal is not known, [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[],"_links":{"self":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts\/2347"}],"collection":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2347"}],"version-history":[{"count":0,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=\/wp\/v2\/posts\/2347\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zmetro.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}