May 5, 2009 4:42pm
Warren Buffett provided a notably honest explanation this weekend for why Berkshire Hathaway remains a conglomerate, which is an unpopular form of corporate structure.
On paper, Berkshire makes virtually no sense as an operating entity - it combines everything from insurance and reinsurance to steak houses and confectionery manufacture. Probably a better way to regard it is as an insurance company that invests its cash in portfolio companies as well as securities.
Anyway, Mr Buffett was asked at Berkshire’s annual shareholders meeting in Nebraska about the conglomerate issue, and here was his reply, as reported by Andrew Ross Sorkin:
When asked why the conglomerate structure seemed to work so well for him, he remarkably — and surprisingly, to me — explained the structure is efficient and comes in handy around April 15. “We’ve got this ability in terms of moving money around into various opportunities” without tax consequences, he said, describing how he can invest the profits from one business into another without being taxed.
So now we know. Being a conglomerate is a good way to avoid tax.
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