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Gingrich Used Payroll Tax Ploy Often Attacked By IRS
Forbes ^ | 01/24/2012 | Janet Novack

Posted on 01/24/2012 4:42:45 AM PST by SeekAndFind

Newt Gingrich avoided tens of thousands of dollars in Medicare payroll taxes in 2010 by using a technique the Internal Revenue Service has consistently and successfully attacked. Republican Presidential candidate Gingrich and his wife, Callista, treated only $444,327 of what they got from Gingrich Holdings. Inc. and Gingrich Productions as compensation to them, while reporting a whopping $2.4 million of their earnings from these corporations as profits or dividends. Medicare taxes are levied at a rate of 2.9% on an unlimited amount of compensation and self-employment income (say, from a consulting contract, speeches or a book) but not on profits from a business.

“It appears that he is not paying his fair share of Medicare tax,’’ Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP concluded, in an email to Forbes, after reviewing Gingrich’s 2010 tax return. McKenzie, a past chairman of the Employment Tax Committee of the American Bar Association Tax Section and a member of the IRS’ Advisory Council, added: “There are a multitude of cases where the IRS has successfully challenged the improper tax strategy of this candidate and his accountants. Service businesses are only allowed to distribute a fair return on investment from an S corp. as profits exempt from Medicare taxes. The remainder of profits must be paid as salary subject to a 2.9% Medicare tax levy.”

Since Gingrich released his 2010 tax return Thursday night during the Republican debate, news coverage has focused on his hefty income tax rate—he paid tax equal to 31.5% of his adjusted gross income of $3.14 million.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: fairshare; gingrich; irs; itslegal; mediabias; medicare; mediscare; newt; tax; taxes
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1 posted on 01/24/2012 4:42:59 AM PST by SeekAndFind
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To: SeekAndFind

Good for Gingrich. The system is set up this way, and we should all strive to do the same thing. Why should any one person need to pay that much into Medicare to pay for other people’s healthcare? It is criminal.


2 posted on 01/24/2012 4:46:22 AM PST by ilgipper (Everything you get from the government was taken from someone else)
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To: SeekAndFind
So what!

At this point I'd vote for Charlie Manson if he ran against the Democrats. He couldn't be any worse.

3 posted on 01/24/2012 4:46:26 AM PST by Savage Beast (Only a powerful intellect and internal moral compass can resist the incessant barrage of propaganda.)
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To: SeekAndFind

“It appears that he is not paying his fair share of Medicare tax”

F*** Fair Share!


4 posted on 01/24/2012 4:47:19 AM PST by jimmyo57
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To: SeekAndFind

I never get into tax arguments. There is no winning them. Whatever the IRS decrees or decides, that’s the win.

That said, be aware that when the nomination is sewn up, the nominee will be under investigation by the IRS. Make that “criminal investigation.” Obama will see to it. And you don’t want it to be an investigation of Romney, which would go on forever and not one in a thousand voters would be able to follow the explanation.

Gingrich’s tax situation is, on the other hand, something most brains can press without herniating.


5 posted on 01/24/2012 4:52:45 AM PST by Lady Lucky (A tea party in name only is worse than no tea party at all.)
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To: SeekAndFind

GOOD!

I am HAPPY he paid as little taxes as possible.

I would vote for him even more now, over “Proud to Pay Taxes” Romney

WHEN ARE ANY OF THEM GOING TO TALK ABOUT THE GOVERNMENT SPENDING $100,000 TO HAND OUT $27,000 IN WELFARE? That’s the equivalent of nearly a full-time government employee for every family on Welfare.


6 posted on 01/24/2012 4:56:56 AM PST by Mr. K (Physically unable to profreed <--- oops, see?)
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To: SeekAndFind

Just like I posted on thread about Romney’s tax returns: he followed the law. I applaud his tax strategies.

No one should bash Romney for his tax return and then give Gingrich a pass. They both followed wise tax strategies that most CPAs employe every day for their clients.


7 posted on 01/24/2012 4:57:27 AM PST by PjhCPA (They all suck. Rick sucks the least.)
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To: SeekAndFind

I’m sure he’s had business records vetted for years and years. If the IRS didn’t grab them, then I don’t see the problem.


8 posted on 01/24/2012 4:57:43 AM PST by Sacajaweau
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To: SeekAndFind

He paid more in taxes than GE did. Just sayin’


9 posted on 01/24/2012 5:02:15 AM PST by BJ1
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To: SeekAndFind

The income from a company is derived from both services and from the investment of capital that its owners make. Capital can be money and/or goodwill.

The medicare tax is only on salary. If Newt was paid a fair salary for his services, there is no underpayment of tax.


10 posted on 01/24/2012 5:03:46 AM PST by Raycpa
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To: Sacajaweau

I also take dividends instead of a salary to reduce my tax burden. It is perfectly legal.

That being said, the IRS laws say whatever they want them to say at any time. Subject to change according to how the auditor feels that minute.


11 posted on 01/24/2012 5:06:48 AM PST by shelterguy
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To: Raycpa

Exactly. $444K is way, way more than a fair salary base for self-employment taxes. Non-story. Stupid author.


12 posted on 01/24/2012 5:08:52 AM PST by Larry Lucido (Six months ago I was all "Go away Newt." Now I'm "Eh, he's the best we got, so 'Go Newt.'")
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To: SeekAndFind
Forbes is surprising me. Well, maybe I shouldn't be surprised. They are the quinessential Republican Elite.

The headline and text is meant to mislead.

Yes, the IRS has attacked this method of minimizing tax debt before -- WHEN IT IS ABUSED.

There is no indication here that this method of minimizing tax debt was abused.

13 posted on 01/24/2012 5:08:57 AM PST by Lazamataz (Norm Lenhart knows nothing about reloading.)
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To: SeekAndFind

“Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP...”

... and then I stopped reading.


14 posted on 01/24/2012 5:09:14 AM PST by ILS21R (Never give up.)
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To: SeekAndFind

You posted the article. What’s your comment?


15 posted on 01/24/2012 5:10:10 AM PST by Larry Lucido (Six months ago I was all "Go away Newt." Now I'm "Eh, he's the best we got, so 'Go Newt.'")
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To: Lady Lucky
That said, be aware that when the nomination is sewn up, the nominee will be under investigation by the IRS. Make that “criminal investigation.” Obama will see to it.

This wasn't Obama's doing.

This was that sleazy POS Romney's.

I simply cannot vote for the bastard after this one, NO MATTER WHAT.

The smoking gun is it was sourced to Forbes.

16 posted on 01/24/2012 5:11:24 AM PST by Lazamataz (Norm Lenhart knows nothing about reloading.)
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To: shelterguy

” Robert E. McKenzie, a partner in the CHICAGO law firm”

Enough said.


17 posted on 01/24/2012 5:11:30 AM PST by littleharbour
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To: Raycpa
The income from a company is derived from both services and from the investment of capital that its owners make. Capital can be money and/or goodwill.

The medicare tax is only on salary. If Newt was paid a fair salary for his services, there is no underpayment of tax.

Exactly. If I invest my own capital in a business and take dividends from the profit, that is not salary.

BTW - tax evasion is illegal, tax avoidance is not (at least that’s the way it used to be).

18 posted on 01/24/2012 5:12:26 AM PST by MD Expat in PA
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To: ilgipper; P-Marlowe; TitansAFC; onyx

Saying that Gingrich has used a tax strategy that has been successfully attacked by the IRS does not say that the IRS has always been successful OR that this is an unreasonable reading on Gingrich’s part of the tax law.

I agree with Gingrich. If that’s the way it appears to be written, then let the IRS correct you.

I also suspect that the man reviewing this form doesn’t have all the data and background info that went into his assessment.

I also suspect that his interest in the case is as an opponent and not as a supporter.


19 posted on 01/24/2012 5:13:49 AM PST by xzins (Retired Army Chaplain and Proud of It! Pray Continued Victory for our Troops Still in Afghan!)
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To: SeekAndFind

Yep, I do the same every month. Pay myself as little salary as legally possible to minimize payroll taxes (most of which don’t do a damned thing for me anyway), and take the rest in dividends.

I’d think he was stupid if he didn’t, and wouldn’t believe a word he said on tax reform or economics in general.


20 posted on 01/24/2012 5:14:24 AM PST by Egon (The difference between Theory and Practice: In Theory, there is no difference.)
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To: SeekAndFind
Says an attorney from a CHICAGO law firm.

There's part of that old Chicago underground. Ya think?

21 posted on 01/24/2012 5:14:42 AM PST by Sacajaweau
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To: SeekAndFind

The only relevant question here is whether or not Gingrich broke any tax laws. I (and millions of others) use every legal tax avoidance strategy at our disposal to pay as little taxes as possible, and I highly doubt the majority of GOP voters will see anything wrong with that. This type of thing may hurt him more in the general had it come out then, but highly unlikely to make an impact in the primary.


22 posted on 01/24/2012 5:14:54 AM PST by lquist1
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To: SeekAndFind

“It appears that he is not paying his fair share of Medicare tax,’’ Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP concluded,...”

That is an odd way to put it. Why not just say he has illegally avoided paying the correct amount of Medicare tax? or is is perhaps more complex and subject to interpretation than that?

Why couldn’t Michele Bachmann render an opnion on the Gingrich and Romney tax returns now? After, she is a former IRS Tax Attorney, as we heard innumerable times last summer and fall.


23 posted on 01/24/2012 5:16:47 AM PST by ngat
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To: Lazamataz

This reaading was sent via email to Forbes. The attorney is from a Chicago firm and I believe associated with Obama. Surprise!!


24 posted on 01/24/2012 5:20:27 AM PST by Sacajaweau
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To: SeekAndFind

I was listening to NPR on my way to work this morning. Romney paid 14.5% the last two years in taxes. Gingrich paid 30%.

I don’t know what Obama paid.


25 posted on 01/24/2012 5:20:37 AM PST by cuban leaf (Were doomed! Details at eleven.)
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To: SeekAndFind

Dude! You’re posting more threads without commenting, reading or replying to this thread.

What the hell??

What is your take on this article?


26 posted on 01/24/2012 5:20:41 AM PST by Larry Lucido (Six months ago I was all "Go away Newt." Now I'm "Eh, he's the best we got, so 'Go Newt.'")
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To: SeekAndFind

More cognitive dissonance from the left on how Conservatives are both overachievers and stupid. Former Speaker and History Professor stealthily navigates and evades tax laws on his own while earning millions. Bumbling George W masterminded the Twin Towers attack. Old Man Reagan was senile, yet brought down the Berlin Wall, traded arms for hostages, created AIDS to kill off undesirables, and so on.

How about journalism majors were the dumbest majors on campus. They didn’t even have to know algebra.


27 posted on 01/24/2012 5:21:54 AM PST by King Moonracer (Bad lighting and cheap fabric, that's how you sell clothing.....)
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To: Lazamataz

Mornin’ Laz! I was referring to the post-primary season.
Obama will sic the IRS on the GOP nominee, no matter who that is.
It’ll be worse for us if it’s Romney, simply because there’s more there.
Moreover, Obama would have a field day exploring the financial sins of Bain.
Gingrich might get winged. Romney would get hung on a lamppost.


28 posted on 01/24/2012 5:21:58 AM PST by Lady Lucky (A tea party in name only is worse than no tea party at all.)
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To: Larry Lucido

I’ve been posting without commenting for YEARS. I WANT to hear people’s comments. If I have an opinion, I’ll give it.

But since you want my take, here it is -— THE FACT THAT OUR ACCOUNTANTS HAVE TO ADVISE US TO USE TRICKS AND PLOYS TO GET AROUND HAVING TO PAY MORE IS AN INDICTMENT, NOT OF THE TAX FILER, BUT OF OUR TAX LAWS ITSELF.

We are ALLOWING our politicians to use tax laws to do social engineering and THAT HAS TO END.


29 posted on 01/24/2012 5:25:03 AM PST by SeekAndFind
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To: SeekAndFind

See? That’s all you had to say.

Slow down on the thread posting and leave some comments (or at least reply to some of the replies). This is give-and-take, not thread-dumping.


30 posted on 01/24/2012 5:28:03 AM PST by Larry Lucido (Six months ago I was all "Go away Newt." Now I'm "Eh, he's the best we got, so 'Go Newt.'")
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To: SeekAndFind

OK let’s just get down to the nuts and bolts of the issue; The Media and “keep it the same elite Republicans” want Newt out.....so to them (for now only) Newt is Bad and Romney is good! Their goal is to get Romney as the GOP then they will turn on him.......GO NEWT!


31 posted on 01/24/2012 5:28:24 AM PST by blueyon (The U. S. Constitution - read it and weep)
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To: ilgipper
Often Attacked By IRS

If Capone was being attacked by the IRS nowadays, I could find sympathy for him.

32 posted on 01/24/2012 5:30:34 AM PST by Never on my watch (WTF happened to my country?)
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To: SeekAndFind; All

Let me see if I understand this correctly: the IRS puts this loophole into the tax code and then, with self - righteous indignation, complains whensomeone actually uses it?

Hey Media...... #sand


33 posted on 01/24/2012 5:32:51 AM PST by TheRobb7 (OBAMA 2012: NO TAX LEFT BEHIND)
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To: SeekAndFind

.........and Romney earns 22 million and pays 3 million in taxes.......and on and on!!


34 posted on 01/24/2012 5:32:51 AM PST by kenmcg (How)
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To: SeekAndFind
So you are for people paying more taxes than they legally have to? Not very conservative of you.
35 posted on 01/24/2012 5:33:33 AM PST by McGruff (Newter Romney!)
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To: Mr. K
WHEN ARE ANY OF THEM GOING TO TALK ABOUT THE GOVERNMENT SPENDING $100,000 TO HAND OUT $27,000 IN WELFARE? That’s the equivalent of nearly a full-time government employee for every family on Welfare.

It's a way to hide the true number of people on welfare: you hire some of the least-illiterate welfare recipients and make them case workers and supervisors.

36 posted on 01/24/2012 5:35:35 AM PST by PapaBear3625 (During times of universal deceit, telling the truth becomes a revolutionary act.)
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To: McGruff
Newt's paying over 30% in taxes? He needs to get better tax adviser's!!!
37 posted on 01/24/2012 5:40:21 AM PST by Springman (Rest In Peace YaYa123 and Bahbah.)
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To: SeekAndFind

More anti-Gingrich propaganda. It’s gonna come hot and heavy until Romney safely has the nomination in the bag.

After last night, I don’t even know if I could vote for the guy... even against Obama.


38 posted on 01/24/2012 5:41:10 AM PST by Pravious
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To: Mr. K
WHEN ARE ANY OF THEM GOING TO TALK ABOUT THE GOVERNMENT SPENDING $100,000 TO HAND OUT $27,000 IN WELFARE? That’s the equivalent of nearly a full-time government employee for every family on Welfare.

Or the equivalent of the entire tax bill of 15 families (approx. 50K income) to pay for EACH full time government employee or welfare family. (I am sure I am grossly underestimating)

39 posted on 01/24/2012 5:42:50 AM PST by Never on my watch (WTF happened to my country?)
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To: SeekAndFind
It appears that he is not paying his fair share of Medicare tax...(sniff, sniff)

If this guy was my tax attorney I'd fire him.

40 posted on 01/24/2012 5:43:41 AM PST by GVnana (Newt 2012 - He Speaks for Us)
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To: SeekAndFind
Since Gingrich released his 2010 tax return Thursday night during the Republican debate, news coverage has focused on his hefty income tax rate—he paid tax equal to 31.5% of his adjusted gross income of $3.14 million.

This is what makes this a non-starter. Newt paid close to a $million in taxes. People can wrap their heads around that. Meanwhile, Romney paid 15% effective tax rate, and has money in offshore accounts. That does not fly well with middle class voters.

41 posted on 01/24/2012 5:47:23 AM PST by PapaBear3625 (During times of universal deceit, telling the truth becomes a revolutionary act.)
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To: SeekAndFind
But since you want my take, here it is -— THE FACT THAT OUR ACCOUNTANTS HAVE TO ADVISE US TO USE TRICKS AND PLOYS TO GET AROUND HAVING TO PAY MORE IS AN INDICTMENT, NOT OF THE TAX FILER, BUT OF OUR TAX LAWS ITSELF.

I agree with you to some extent however it’s not exactly a “trick” or “ploy” to properly and legally report income and deductions in such a way as to minimize tax liability. If you are eligible to deduct mortgage interest or business expenses or charitable contributions or categorize investment or dividend income not as salary subject to employment taxes, is it a “ploy” or “trick” for your accountant to advise you to do so?

Of course we are talking about some much more complex tax issues here but there is IMO no easy solution other than eliminating the tax code completely and going to a flat tax with no exemptions or deductions period.

We are ALLOWING our politicians to use tax laws to do social engineering and THAT HAS TO END.

I’m not sure how this relates to Gingrich’s tax return at the time he was not a politician but a private businessman.

42 posted on 01/24/2012 5:47:45 AM PST by MD Expat in PA
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To: SeekAndFind

“There are a multitude of cases where the IRS has successfully challenged the improper tax strategy of this candidate and his accountants. Service businesses are only allowed to distribute a fair return on investment from an S corp. as profits exempt from Medicare taxes. The remainder of profits must be paid as salary subject to a 2.9% Medicare tax levy.”

The real truth is that you must take a reasonable salary and can not take all of your income as dividends and distribution of profits. In this type of business, if the s corp owns the intellectual property - which I’m sure it did in Newt’s case, a 300K salary was probably fine.


43 posted on 01/24/2012 5:51:03 AM PST by babygene (Figures don't lie, but liars can figure...)
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To: Lazamataz

There’s the old gay connection too. Apparently Romney is well endowed in that regard so them and their friends are attacking Gingrich.


44 posted on 01/24/2012 5:51:03 AM PST by muawiyah
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To: ilgipper

The system is set up this way, and we should all strive to do the same thing.....I just finished my state taxes yesterday. My fed taxes are on $69,000 from my retirement, withdrawals from my IRA, interest and a job I took on in October (as a favor). While doing my state taxes I noticed I was eligible for Tax Forgiveness because ONLY the interest and the job were to be reported as “income”. I took it, after being drop jawed, because it’s there. I STILL feel anybody that works and has some income should pay SOME tax on what they make. But, if these idiots enact this stuff I’m not going to overlook it.


45 posted on 01/24/2012 5:51:09 AM PST by Safetgiver (I'd rather die under a free American sky than live under a Socialist regime.)
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To: ILS21R

“NON-STORY”

bttt


46 posted on 01/24/2012 5:53:14 AM PST by Matchett-PI ("One party will generally represent the envied, the other the envious. Guess which ones." ~GagdadBob)
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To: SeekAndFind

The IRS is on a mission to catch people doing this, and they have tried to close it off. In the 1990’s the IRS proposed a regulation that would have subjected the distributions from S corporations to self employment tax. The speaker of the house sent them a stern rebuke, told them that Congress passes tax laws, not the IRS. That speaker was none other than Newt Gingrich, who seems to have a special affection for that particular loophole.


47 posted on 01/24/2012 5:56:35 AM PST by Daveinyork
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To: Daveinyork

“That speaker was none other than Newt Gingrich, who seems to have a special affection for that particular loophole.”

It’s not a loophole, it was the intent of the law. It’s in line with investment income not being considered wages. I don’t agree with it - I think a person like Mitt should have to pay tax on his as well, but that’s the way it was set up. (for obvious reasons)


48 posted on 01/24/2012 6:08:03 AM PST by babygene (Figures don't lie, but liars can figure...)
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To: SeekAndFind

The author is forgetting about corporate tax. The income Gingrich claims as salary can be claimed as an expense to the corporation and thus reduce its corporate income tax. His income claimed as dividends or capital gains is not counted as a business expense. It is thus taxed twice: once as income to the corporation and then a second time as personal income to Mr. Gingrich.


49 posted on 01/24/2012 6:12:35 AM PST by Petrosius
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To: SeekAndFind
ANYONE with political ambitions ought to have the good sense to order his tax accountant to keep him out of any controversy. It's just not worth the extra money.
50 posted on 01/24/2012 6:13:34 AM PST by Carry_Okie (The Slave Party: advancing popular indenture since 1832.)
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