May 23, 2024

But Nobody Pays That: Estée Lauder Heir’s Tax Strategies Typify Advantages for Wealthy

To celebrate the 10th anniversary of the Neue Galerie, Mr. Lauder’s museum of Austrian and German art, he exhibited many of the treasures of a personal collection valued at more than $1 billion, including works by Van Gogh, Cézanne and Matisse, and a Klimt portrait he bought five years ago for $135 million.

Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.

The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent.

The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed.

A handful of billionaires like Warren E. Buffett and Bill Gates have joined Democrats in calling for an elimination of the breaks, saying that the current system adds to the budget deficit, contributes to the widening income gap between the richest and the rest of society, and shifts the tax burden onto small businesses and the middle class. Republicans have resisted, saying the tax increases on the wealthy would harm the economy and cost jobs.

An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad.

His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.

And earlier this year, Mr. Lauder used his stake in the family business, Estée Lauder Companies, to create a tax shelter to avoid as much as $10 million in federal income tax for years. In June, regulatory filings show, Mr. Lauder entered into a sophisticated contract to sell $72 million of stock to an investment bank in 2014 at a price of about 75 percent of its current value in exchange for cash now. The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash. But because the I.R.S. does not classify this as a sale, it allows investors like Mr. Lauder to defer paying taxes for years.

It was a common tax reduction strategy for chief executives and wealthy shareholders a decade ago, but in 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. That ruling was enough to persuade most wealthy taxpayers to abandon the technique, according to tax lawyers and records at the Securities and Exchange Commission.

Article source:

Media Outlets Walk Fine Line in 9/11 Anniversary Coverage

But in documenting the 10th anniversary of the Sept. 11 attacks, there is a fine line between commemoration and exploitation.

Mindful of this, television networks, magazines and others planning special coverage of the anniversary have weighed issues like how much American audiences can stomach, and how much such a solemn occasion should be viewed as a business opportunity.

There are no uniform answers, and media outlets are approaching it differently. Time magazine is running no ads at all. Newsweek and People have sold ads just as they would for any other issue. Cable channels, which are devoting big blocks of their schedules to Sept. 11-related programming, are also largely running commercials as usual. But there exceptions; CNN, for example, is to show a joint HBO-Time special commercial free. In its regular Sunday edition on Sept. 11, The New York Times is publishing a special section that will contain only commemorative ads.

“There’s no precedent for something like this,” said Lawrence C. Burstein, the publisher of New York magazine, who added that he initially did not expect to sell many ads in the 10th anniversary issue. But to his surprise, he found that advertiser demand was strong, with the magazine experiencing a 46 percent increase in the number of ad pages in the Sept. 5-12 double issue, compared with the Sept. 13 issue last year.

He and the New York sales and editorial team decided to forgo the typical promotional campaign employed for special issues and gave advertisers who had already bought space in the magazine the option of bowing out.

“It is something that touches people in all kinds of different personal ways,” Mr. Burstein said, “and I felt like it was a decision that the advertiser had to make.”

There are few publications or television channels that are not tackling the issue. The Military Channel will explore why the Pentagon sustained far less damage than the Twin Towers. Animal Planet will run a special episode of the series “Saved,” about survivors of the attacks whose “unique bonds with their pets helped them deal with loss and cope through pain,” according to the show’s promotional materials.

Showtime will broadcast “The Love We Make,” about Paul McCartney’s efforts to organize a benefit concert. CNN is planning four separate documentaries. Fox News is showing a documentary about the construction of the Freedom Tower.

The National Geographic Channel, which is partly owned by the News Corporation, secured one of the biggest coups of the season — its exclusive interview with George W. Bush, the president when the attacks occurred. They wanted to get ahead of the avalanche of coverage and decided to show the interview on Aug. 28.

The interview, heavily promoted on other News Corporation channels including Fox News, was secured with the help of a producer, Peter Schnall, who headed a number of behind-the-scenes programs about the White House while Mr. Bush was in office.

By chance, the scheduled two-day interview began the day after American forces killed Osama bin Laden in Pakistan. Michael Cascio, the senior vice president for production at the National Geographic Channel, said Mr. Bush and his associates had placed no restrictions on the interview.

Mr. Cascio has wondered whether the week of programming his network has planned is sufficient. “Given its magnitude — it is the singular event in our lifetime, in the last 50 years,” he said, “we decided a week almost isn’t enough.”

The National Geographic Channel has scheduled a marathon of related coverage on Sept. 11.

Other outlets also decided to try to get out ahead of the pack. Adam Moss, the editor of New York magazine, decided its issue — an A to Z compendium of Sept. 11-related vignettes — should be published well ahead of the 10th anniversary so it would reach readers before the onslaught of coverage began.

“I’m sure, inevitably, people will feel it’s too much and shut down at some point,” he said. “We just hoped we could get what we feel is a pretty good issue out there before others did.”

Article source: