[Blackstone] Paid capital gains at 15% then arranged to get deductions for $3.7 billion worth of good will at 35 percent rate

Tax Loopholes Sweeten a Deal For Blackstone | July 13, 2007, Friday | By DAVID CAY JOHNSTON (NYT); Business/Financial Desk | Late Edition - Final, Section A, Page 1, Column , 1153 words

Blackstone Group devises way for its partners to effectively avoid paying taxes on $3.7 billion of the $4.75 billion it raised last month from selling shares to public; plan, laid out in fine print of Blackstone's financial documents, is similar to one used by other private equity firms and hedge funds that have gone public; Congress is debating how much managers at private equity firms like Blackstone and hedge funds should pay in taxes on their compensation; at issue is whether most of compensation that fund managers earn should be taxed at 35 percent rate that applies to other highly paid Americans, or at 15 percent rate for capital gains; Blackstone's tax maneuver hinges on its use of good will, accounting term for value of intangible assets that are built up by company over time; Blackstone partners paid 15 percent capital gains rate on shares they sold, then arranged to get deductions for $3.7 billion worth of good will at 35 percent rate; diagram ...