Irish American billionaire escapes paying $200m in taxes
Property purchases in Ireland help Liberty Global chairman John Malone avoid tax
Billionaire Irish American businessman John Malone, who owns a number of prestigous properties in Ireland, didn’t just reduce his company’s tax bill when he shifted the address of UPC parent Liberty Global from Colarado to London last year.
He also took precautions to avoid the capital-gains hit that the so-called inversion would trigger for him and other investors.
The day before the deal was announced, Mr Malone – the company’s chairman and controlling shareholder – transferred $600 million of his shares into a tax-exempt charitable trust. He avoided paying taxes on his remaining stake, worth about $260 million, by exploiting IRS regulations meant to block a different loophole.
All told, Mr Malone escaped about $200 million in personal taxes, and Liberty Global’s US shareholders together likely saved more than a billion dollars, according to data compiled by Bloomberg.
“He’s congenitally averse to paying taxes,” said Robert Willens, an independent tax accounting analyst in New York City. As the Obama administration attempts to implement anti-inversion rules announced in September, Liberty’s strategies illustrate how billionaires and their companies find their way around tax regulations, and take advantage of unintended consequences.
Mr Malone – whose net worth is $7.5 billion, according to the Bloomberg Billionaires Index – has a history of creative tax- avoidance tactics.
Over the years, many of the 73-year-old media billionaire’s biggest deals, such as buying the Atlanta Braves, have helped his companies to cut their tax bills. Mr Malone, who owns the The Westin and the Trinity Capital Hotel in Dublin, as well as Humewood Castle in Co Wicklow, has at least four other charitable trusts, with more than $210 million in assets, IRS records show. Such trusts permit wealthy individuals to use the tax-exempt status of a charity to shelter income.
In the past two years, he has also taken advantage of an Irish tax break to buy a number of properties in Ireland.
A Connecticut native, Mr Malone runs his growing media empire from his adopted state of Colorado. He recently surpassed Ted Turner as the largest private landowner in the US, according to The Land Report magazine. He owns about 2.2 million acres, including more than 5 per cent of Maine’s total land mass.
Mr Malone, a Yale graduate with a doctorate in operations research from Johns Hopkins University, began his career doing research for the old Bell Labs. He built his reputation turning a tiny Denver cable company called Tele-Communications Inc. into the country’s largest cable operator. He sold it to ATandT for $59 billion in 1999.
Malone and his three main companies – Liberty Media, Liberty Global and Liberty Interactive – have held stakes in a virtual Who’s Who of big media, Internet and telecom businesses: News Corp, Viacom, Time Warner, QVC, Discovery , Court TV, DirecTV, Sirius, Barnes and Noble, and Expedia.
Since 1995, Mr Malone has served as an unpaid director of the Washington-based libertarian think tank Cato Institute, which advocates for lower taxes.
In his business life, Mr Malone has put that anti-tax philosophy to work. In 2006, for example, Liberty Media cashed out its stake in Time Warner without triggering a capital gains tax. Along with the $1.4 billion it got in cash from shedding the shares, Liberty also received ownership of the Atlanta Braves baseball team from Time Warner.