Sloan Sessions: Great-West tax solution
TEXT OF INTERVIEW
SCOTT JAGOW: This month the Canadian insurance company called Great-West Lifeco said it's buying Putnam Investments. Putnam's one of the biggest mutual fund managers in the U.S. Right now, it's owned by insurance company Marsh & McLennan. Ordinarily, this deal would be kind of a snoozer. But Newsweek's Allan Sloan found something that caught his attention.
ALLAN SLOAN: Great-West has figured out how to do something that has bedeviled people for years, which is how to get money today for tax savings it thinks it'll have sometime over the next 15 years.
JAGOW: How is it going to do that?
SLOAN: Ah, it's going to do the Wall Street thing. It's going to sell a security. The way Great-West, which is in Winnipeg, Manitoba where it is really cold . . .
SLOAN: But anyway, they have this hot idea that the way they're buying Putnam, they get to deduct the entire purchase price from their taxable income over 15 years, which would produce a lot of money. So what they're doing is they've sold a security to somebody, or they will see a security to somebody, somewhere on Wall Street that gives them $550 million today that in return for a piece of the tax cuts in the future and then they take that money and use it to help buy Putnam. I just think it's hilarious.
JAGOW: What do you think the IRS will say about this?
SLOAN: I think if the IRS has anything to say about it at all, they will bless it because this doesn't involve taxable income. On the other hand, the seller, which is Marsh & McLennan, is gonna have to pay a very large capital gains tax bill and I think the value of the tax that Marsh & McLennan pays will be roughly the same as today's value of the tax savings, so in the end, all of us taxpayers will roughly break even. I'm just trying to figure out how to get the government to give me money I haven't paid in taxes yet. And as soon as I figure that out, you'll be among the first to know.
JAGOW: Among the first, alright that's a deal. Allan, thanks a lot.
SLOAN: My pleasure Scott.
JAGOW: Allan Sloan, the Wall Street editor for Newsweek magazine.