Berkshire Hathaway’s $29 Billion Tax-Reform Benefit

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The Tax Cuts and Jobs Act provided a big boost to many U.S. companies, and Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) is no exception. Now, the company's investment gains will be taxed at a lower rate. Here's what it means for Berkshire's shareholders.

A full transcript follows the video.

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This video was recorded on Feb. 26, 2018.

Michael Douglass: One of the first things, one of the big things that Buffett highlighted in his letter, is something that we've been hearing a lot about lately, which is tax reform.

Matt Frankel: Yeah. Berkshire was a big beneficiary of tax reform, and not for the reasons that you've heard being talked about with other companies. Berkshire benefited because of its stock portfolio. Just to name one example, Buffett acquired their massive Coca-Cola investment for about $1.3 billion, and it's worth a little over $18 billion today. So, if Berkshire were to sell that, they would owe tax on it. Now the corporate tax rate has dropped from 35% to 21%, all of Berkshire's stock positions have less of what's called a deferred tax liability. And this is a big deal, because Berkshire's stocks are worth about $96 billion more than he paid for them. So, this is a big benefit. Overall, it was $29 billion in increased book value immediately following the passage of the tax bill. This is a big deal for Buffett and his shareholders.

Douglass: Yeah. It's interesting that it was a different issue than we've seen elsewhere in financials when the banks benefited, most of which, in their case, was by short-term damage from tax reform, because they had to write down some liabilities, but, of course, long-term benefit to their tax rates.

Matthew Frankel owns shares of Berkshire Hathaway (B shares). Michael Douglass owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.