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NetJets Fight Sheds Light on Tax Break for Super Wealthy
02 Apr 2012 EDT - CNBC.com
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Warren Buffett

has been one of President Barack Obama’s favorite investors at least since last year, when the Berkshire Hathawaychief pointed out that he paid less of his income in taxes than his secretary did. That led to the “Buffett Rule,” under which anyone earning $1 million a year or more would pay 30 percent of their income in taxes. Obama has been pressing Congress to turn it into law.

Now a lawsuit in Ohio may call into question Buffett’s commitment to paying his fair share.

The federal government is suing NetJets, the Berkshire Hathaway company that sells and manages fractional ownership in private planes, for $366 million in back taxes. The government’s case is based on a transportation tax airlines collected on commercial airline flights. A “ticket tax” equal to 7.5 percent is added to the price of every ticket sold by commercial carriers, plus an additional $3.80 for each leg of the trip.

Wealthy jet owners—even partial owners like NetJetters—get to fly tax-free. The IRS argues, however, that NetJets is providing a taxable transportation service to the owner-customers of its fleet—and therefore should be charging the ticket tax. (My colleague Andrew Ross Sorkin describes the case in greater detail here .) NetJets, and by extension Buffett, is saying their customers should be exempt.

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