Blackstone Partners Profit on IPO Taxes

Loopholes pay off for buyout firm managers after $3.7 bil offering
By Sam Gale Rosen,  Newser Staff
Posted Jul 13, 2007 10:54 AM CDT
Blackstone Partners Profit on IPO Taxes
Traders crowd the floor at the post that handles Blackstone Group LP at the New York Stock Exchange as they wait for the stock to open on the initial public offering, Friday, June 22, 2007. Blackstone Group LP, the investment firm known for making billion-dollar bets to buy huge companies and take them...   (Associated Press)

The Blackstone Group's partners have expertly negotiated a labyrinth of loopholes to dodge taxes on $3.7 billion they raised with an IPO last month, the Times reports. The maneuver comes as congress discusses what to tax private equity managers, but analysts say the rate debate misses the point; firms are just too good at dancing through the tax code.

Blackstone is selling the intangible asset of "good will" to itself and shoring up tax deductions to be spread out over the next 35 years; in the end, they may actually turn a significant profit on the deductions. “These guys have figured out how to turn paying taxes into an annuity,” one tax lawyer says. (More Blackstone Group stories.)

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