Winn, who earlier this month pleaded guilty to making illegal campaign contributions, has retired from WinnCompanies. He did not respond to messages left with his attorney and with the company.
Mark-to-Market
Miller, the former chair of the tax section of the New York State Bar Association, has proposed a so-called mark-to-market system to tax the annual appreciation in the stock holdings of the top 1/10th of 1 percent of taxpayers. That would essentially tax gains in a given year regardless of whether the shares are sold. In a 2005 article in the journal Tax Notes he estimated this approach would raise between $490 billion and $750 billion over a decade.
Borrowing against appreciated stock and real estate is a popular tax deferral strategy particularly as interest rates plummet, said Randy Beeman, a private wealth manager at The Wise Investor Group in Reston, Virginia, a unit of Robert W. Baird & Co. The interest rate on loans to some wealthy individuals has hovered around 1 percent.
Vikings Purchase
McCombs, ranked 312 on the most recent Forbes 400 list of the richest Americans, made his fortune in automobiles, real estate, and then by building Clear Channel into a large radio station operator and outdoor advertising business. He is now the chairman of Xe Services LLC, the military security contractor formerly called Blackwater Worldwide.
In the late 1990s, McCombs borrowed about $300 million to finance the purchase of the National Football League's Minnesota Vikings. By 2002, the Clear Channel shares pledged as collateral were falling in value and McCombs faced margin calls from lenders. He didn't want to sell his shares, partly because of "a strong emotional attachment to his ownership in the company," according to a filing by his lawyers in U.S. Tax Court.
Instead, he entered into a series of variable prepaid forward contracts, receiving about $259 million from JPMorgan Chase & Co. in exchange for an agreement to deliver his Clear Channel stock in one to three years. The transaction was structured to limit his potential losses by varying how many shares he would deliver at the end of the transaction.
He loaned those shares to JPMorgan in the interim. That allowed the New York-based bank to short the stock -- selling the borrowed shares to hedge against any decline in the price of the stock it would eventually receive from McCombs.
Lawyers said the cash received up front didn't have to be reported as income because it wasn't a taxable sale until McCombs turned over those shares for good.
The IRS said the transaction was a cash sale of the shares, generating taxable income of as much as $213 million.
Benefits And Burdens