Warren Buffett, Tax and Capital Growth relationship

In Uncategorized by Jeff OsborneLeave a Comment

It is interesting to read that Warren Buffett, one of the most famous, one the richest and one of the most successful investors in the world, has been able to defer $61.9 billion of corporate taxes.

This figure is a reminder that Mr Buffett understands how putting off the moment when taxes are due gives him more money today to invest elsewhere.
This is a savvy approach also used by smart property investors.
While the average investor in Australia tries to build the cash flow- on which they have to pay tax; smart property investors focus on building their asset based through capital growth – and this of course is tax-free.
Capital growth is in fact really tax-deferred rather than tax free.
In other words you don’t pay tax until you sell your property, but of course smart investors never sell their properties – just like Warren Buffett who’s favourite holding period is “for ever.”
Until Berkshire’s tax comes due, Mr Buffett is able to use the money for other investments with returns compounding over time — a situation he has described as an interest-free loan from the government.

Similarly property investors can borrow against the increased equity in their properties and use it as a deposit to buy their next investment…

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