You know what’s less cool than owing $500 million in taxes?
Owing $1 billion in taxes.
John Paulson knows what we’re talking about…
By April 17, the hedge-fund manager must make federal and state tax payments of about $1 billion, on top of roughly $500 million in taxes he paid late last year, said people close to the firm. That sum is so big it dwarfs the maximum amount the Internal Revenue Service will allow any single taxpayer to pay with a single check. (That’s $99,999,999, in case you’re wondering.)
Apparently, J-Paulz still owes the IRS a nice chunk on his windfall from shorting the subprimes a decade ago. After pulling down all those billions, Paulson took advantage of the loophole that allowed hedge funders to roll offshore profits forward by deferring fees and compensation. That loophole was closed in 2008 and the feds gave everyone a decade to pay up, that bill comes due this year.
Somehow [likely in the thick miasma of losing so much money] Paulson seems to have forgotten about this whole situation and now he’s looking at one one tax lawyer told the WSJ : “It is safe to say it is one of the largest tax bills on earned income in history.”
That is, wow…We don’t even know what to say. Did it never occur to him to “Pull A Tepper” and realize all that income as a newly-minted Floridian? And how does he even plan to pay that much in taxes?
Mr. Paulson has been turning to his Credit Opportunities fund—one of several funds he operates—for the money, the people close to the firm said. This fund held about $3.5 billion in assets late last year, the bulk represented by Mr. Paulson’s own interests. He pulled about $500 million from the fund late last year to make an initial tax payment and will pay another $1 billion from the fund by April 17, the people said. Mr. Paulson is the largest investor in the fund, which gained 10% last year, one of these people said.
Well, that’s definitely yet another bummer for Paulson’s remaining investors, but we meant how does he literally plan to actually pay the IRS?
Paying the tax bill may itself be something of a chore for Mr. Paulson. He could wire the money but may wish to pay by check if he’ll earn interest on the money until tax authorities cash the check. If so, the IRS only accepts checks or money orders of less than $100 million. He could submit multiple payments, though tax attorneys note that clients can have problems fitting such huge numbers onto the line on a check.
Holy hell, John. This is even more embarrassing than your 2016 fireside chat with economic genius and presidential candidate, Donald Trump. And, by the way, he really owes you a Coke for helping to foot the bill on those tax cuts.