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RE: McGovern's tax shelter deal. 3pgs. [Subject: Campaign] [Memo], no date
Handwritten notes regarding meeting with PJB. 2pgs. [Subject: Campaign] [Other Document], 10/27/1972
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26146559
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WHSF: Contested, 48-43
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26146559
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WHSF: Contested, 48-43
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This file contains:
RE: McGovern's tax shelter deal. 3pgs. [Subject: Campaign] [Memo], no date
Handwritten notes regarding meeting with PJB. 2pgs. [Subject: Campaign] [Other Document], 10/27/1972
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Richard M. Nixon's Returned Materials Collection
Contested Materials Files
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Richard Nixon Presidential Library
Contested Materials Collection
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48
43
Campaign
Memo
RE: McGovern's tax shelter deal. 3pgs.
48
43
10/27/1972
Campaign
Other Document
Handwritten notes regarding meeting with
PJB. 2pgs.
Wednesday, June 03, 2015
Page 1 of 1
This memorandum is to summarize certain facts related to me by
business associates concerning George McGovern's alleged participation
in one or more highly leveraged tax shelter deals. The remainder of the
memorandum covers:
J The structure of the tax shelter deal
J Persons concerned in the deal or witnesses to the representation
that George McGovern is a partner in such a deal.
STRUCTURE OF THE DEAL
The purpose of this particular type of tax shelter limited partnership is
to take accelerated depreciation on foreign-produced films. A typical deal
is structured as follows:
1. A U. S. limited partnership is formed
2. The U. S. rights to a film produced abroad by foreigners is
purchased by the partnership on the following terms (assumes a
film with documentable hard costs of $1, 000, 000):
- $100,000 to $200,000 cash front end
- A note for the balance for a total of 000, 000; payable
on a formula basis against receipts of the film and payable
over 10 years with nominal interest. This note is clearly
specified as excluding any recourse to the partnership
- A depreciation base for the film in the limited partnership
is thereby established as $1,000,000
- The partnership then takes depreciation under the income
forecast method (i. e., using the "normal" forecasted
revenue stream of 40 to 50 percent in the first 3 months,
an additional 40 to 50 percent in the ensuing 12 months,
and any residual depreciation in the following year.
The nature of the deal works out very favorably for tax purposes - i. e.,
for a taxpayer in the 50 percent bracket:
2
Tax Impact of Depreciation Alone
Pretax
After Tax
Equity
$150,000
$ 75,000
First 3 months depreciation
400,000
200,000
Next 12 months depreciation
400,000
200,000
Residual
200,000
100,000
Therefore, for an after-tax investment cost of $75,000, the limited partnership
can shelter $1,000,000 in ordinary income. Put another way, the after-tax
profit impact is $425,000 net of the equity investment. This would seem to
qualify under what George McGovern classifies as tax programs to benefit the
rich.
PARTICIPANTS OR
WITNESSES
A similar deal was proposed to a group of investors (identified below)
by Ira M. Pitchel, a tax attorney in New York, who was introduced to the
group by Douglas Rippeto (a former McKinsey associate who now does tax
and benefit consulting) earlier this Fall. During the presentation, Pitchel
represented under close questioning that this type of deal was safe under
unfavorable political conditions because George McGovern was a partner in
one or more of his preceding deals. Pitchel subsequently repeated his
representation during a luncheon this week.
Witnesses to Pitchel's original representation of McGovern's participation
in such a tax shelter deal were:
1. Norman N. Barnett, Chief Financial Officer of Moller Industries,
67 Broad Street, New York, 212/422-1500
2. Paul Hubeck, a member of Barnett's staff
3. Charles Tennesson, former chief executive of Phillip Carey and
Panacon, 3124 North East 40th Street, Fort Lauderdale, Florida
33308, 305/565-1387
4. Arnold Brosser, independent attorney for Moller and Meshulam
Riklis, 711 Fifth Avenue, New York, 212/752-0100.
Witnesses to Pitchel's second representation were Barnett and Brosser.
Pitchel is an independent operator who works in conjunction with a number
of entities. His business card lists no address, but he can be contacted at
212/889-1610.
Rippeto's address is 253 Riverside Avenue, Westport, Connecticut,
203/226-3508. He is represented as having played no part in McGovern's
alleged tax shelter deal.
Obviously, if these allegations check out, it would have a substantial
impact on McGovern's credibility, particularly if the film were "X" or
worse.
Muting w w/PJB 10:55 AM. 10-27-72 Disns
PJB meet w/ RN in AM. 45 these
matters.
MC - his sellout - begging staff
Slives Gute - HAK visit to
pains done. most immed this even
all the incidental of M '6's
far left suner der proposal
Chayes
- MB seed
- Begging
Be "reider
"
- I'd grab Came
offer w) both hands
Emeriless
/ mc6's statements on
5m K's crawling quote
mining J .
RN- "don't return any calls from
Post libeled Stans Mitchell HRH
(HAIC) Henry, don't talk to hander talk to Thus.
MCC wanted to surrender
we 808 honorable peace.
Political ? (tandi brohethe
perse silence, not us.
Kich hell out Am & Shins,
+ media,
RN wants white paper within
Take MC6 attachs answer then
one byone - Full documentation
on the things MC6 did to use -
attach on our ndetes Dich
Tuch no involvement in
Watergate.
-