William M. Daley, President Obama’s new chief of staff. Photographer: Tim Boyle/Bloomberg
William Daley, President Barack Obama’s new chief of staff, can defer the payment of capital
gains taxes on his sale of almost $8.3 million of JPMorgan Chase
Co. shares, based on government ethics rules.
Daley filed a notice with the Securities and Exchange
Commission yesterday on the sale of 186,190 shares of JPMorgan,
where he was vice chairman. As Daley divests his holdings to
work at the White House, he is eligible to take advantage of a
law that allows people forced to sell assets when they accept
government jobs to reinvest the proceeds and delay capital gains
liability until the new investments are sold.
Daley likely will still face a steep income tax bill this
year, said Robert Willens, founder and president of Robert
Willens LLC, a consulting firm that advises investors on tax and
accounting rules. On Jan. 6, Daley acquired almost 202,000
restricted shares and stock appreciation rights for an average
of about $17.23 apiece, according to an SEC filing.
Daley probably would owe income tax on the difference
between the cost of acquiring those shares and the market price
that day, when JPMorgan closed at $44.48, Willens said.
The capital gains deferral could let Daley put off payment
of upwards of $625,000, assuming the average acquisition price
of his total JPMorgan holdings is roughly half the current share
price, Willens said. JPMorgan rose $1.04 to $44.75 in New York
Stock Exchange composite trading.
Daley listed yesterday in the filing as the approximate
date of sale for the 186,190 shares.
Taxpayer’s Option
The capital gains deferral is the taxpayer’s option and
Daley doesn’t have to exercise it. Full details about Daley’s
divestitures would likely be released in personal financial
disclosure documents that are due within 30 days after he
assumed the job.
To delay capital gains taxes, Daley would have to reinvest
the proceeds from the sale within 60 days and he could only do
so in permitted property, which includes any U.S. government
obligation or any diversified investment fund approved by the
Office of Government Ethics, Willens said.
“In effect, he will have converted his concentrated
position in JPMorgan into a diversified position which is always
considered a favorable or a positive investment move,” Willens
said. “But, unlike everybody else, he’s going to be able to do
it without tax consequences.”
Conflicts of Interest
To join the White House, Daley can’t hold a specific
equity, such as the JPMorgan shares, unless he seeks a waiver.
Like all top federal executives, judges and members of Congress,
Daley also must disclose assets, liabilities and memberships on
boards to comply with conflict-of-interest rules under a 1974
ethics law. Those documents will give a fuller picture of
Daley’s wealth.
Daley’s last day as a vice chairman at JPMorgan was Jan. 7.
He resigned from the boards of Boeing Co. and Abbott
Laboratories the same day.
He replaced Pete Rouse, whom Obama named on Oct. 1 to fill
the role on an interim basis after Rahm Emanuel resigned to run
for mayor of Chicago. Daley is the brother of the city’s current
mayor, Richard M. Daley, who is retiring.
Daley’s background in business and finance — he joined New
York-based JPMorgan, the second-biggest U.S. bank by assets, in
2004 — was among the reasons Obama picked him for the job.
Daley was President Bill Clinton’s commerce secretary from
January 1997 to June 2000. He served as president of SBC
Communications Inc., now ATT Inc., for more than two years
before moving to JPMorgan.
To contact the reporter on this story:
Julianna Goldman in Washington at
jgoldman6@bloomberg.net;
To contact the editor responsible for this story: Mark Silva in Washington at
msilva34@bloomberg.net.