I haven't researched any of this, or followed the news reports on it, but here's one guess at how it might be done .... Mitt (along with 19 other business partners or relatives) creates a new closely-held company ("IRA Co"). The preferred stock of IRA Co is initially worth only $1/share, so it easily can go into an IRA account. But over the years, each of the founders transfers huge sums of money (perhaps $1m/year each, or maybe more) into IRA Co. After a few years, the preferred stock of IRA Co, which is all held in retirement accounts, is worth several million dollars per share.

Would something like that make sense?

The media has had several IRA experts on and they cannot figure how in the hell this could happen, even if the stock he put in were worth pennies.

It would be interesting to see what the other members of Bain IRAs' returns where during the same time. If I was an investor with Bain and had lower returns during that time I would be pissed.

I'm sure that Mitt's partisans (you can't reallly say "supporters") would say that Mitt's MITTiculousness made him very SUCCESSful as an investor. And maybe his Anglo-Saxon CULTURAL background helped as well.

The most plausible explanation, according to tax professionals, is that Mitt was, to put it charitably, "very aggressive" in assigning extremely low valuations to company shares put into his IRAs.

Anonymous wrote:if you say 5k a year for 10 years, roi is 114%. Bain was not giving those types of returns.

First it is Bain capital not Bain.

Second in a business where 9 of 10 investments go south, and valuations of winners are infrequently updated, you can get outsized returns by putting expected winners in the tax protected account and expected losers in a taxable account to generate losses to deduct.

Also in case no one has figured this out, you can Xfer your 401k and other retirement assets to an Ira when you leave a company. So that Ira may encompass far more than annual contributions.

Is it a traditional IRA or a SEP IRA? Minimums are much higher for SEPs.

if you say 5k a year for 10 years, roi is 114%. Bain was not giving those types of returns.

Anonymous wrote:Well, his business was managing a hedge fund. At some point he is issued shares in a company, and that company is very early stage. So maybe a stock is worth pennies because it is new, or because it is in bankruptcy, etc. That stock could grow from $1 to $30 very quickly. A guy like that also has lots of losers in a portfolio (ie stocks that become worthless). But he gets to pick and choose which assets belong in an IRA.

So I guess that would be the way to do it.

No it wasn't. He was in venture capital and private equity. He didn't run a hedge fund.

Ha ha
Invest 5k a year and you it is because stock grew?
Is he the founder of facebook?

Well, his business was managing a hedge fund. At some point he is issued shares in a company, and that company is very early stage. So maybe a stock is worth pennies because it is new, or because it is in bankruptcy, etc. That stock could grow from $1 to $30 very quickly. A guy like that also has lots of losers in a portfolio (ie stocks that become worthless). But he gets to pick and choose which assets belong in an IRA.

So I guess that would be the way to do it.

The US treasury

How do you think he did it? The cap is 5k a year. Do you think he undervalued the assets he put in it or did something else? With these type of deals, there is always a winner and a loser. I wonder who came out on the short end?