Republican Mitt Romney is expected to pull in millions from top Texas Republicans during a two-day swing across the state this week.
At least some of that haul will be thanks to a San Antonio billionaire who used a controversial tax loophole to avoid more than $44 million in taxes last year.
Red McCombs, the billionaire founder of Clear Channel Communications and a prominent donor in Republican politics, is one of several fundraisers hosting an event for Romney in San Antonio today.
Last year, the IRS ordered McCombs to pay $44.7 million in taxes after he used a lucrative tax strategy widely peddled on Wall Street as a way to dodge paying tens — or even hundreds — of millions in capital gains taxes.
The loophole works like this: A wealthy taxpayer borrows from an investment bank using their shares as collateral with a promise to deliver the stock a few years later. In the meantime, the investor gets the cash and the taxes are deferred to a later date. Because the loan isn’t a transfer or sale of stock, the investors and their lawyers argue that the transactions should not be subject to capital gains taxes.
In McCombs’ case, he reported a $9.8 million loss on his tax return and failed to include about $259 million from a lucrative stock transaction.
After an audit, the IRS ordered him to pay $44.7 million in back-taxes. McCombs sued the agency. The case settled in March 2011 for about half that amount, Bloomberg News’ Jesse Drucker reported.
The IRS has attempted to crack down on these kinds of deals, Drucker reported, which have been used by a number of wealthy executives to lop millions off their tax bills.
Romney has promised to limit certain deductions and exemptions for high-income tax payers. His campaign did not return a request for comment today on the specific loophole used by McCombs.