Scaramucci Seeks Federal Tax Break on SkyBridge Sale

Anthony Scaramucci wants to put off a tax bill that could reach millions of dollars on the pending sale of his stake in SkyBridge Capital, according to people familiar with the matter. But the incoming White House communications director might have a problem.

The sale was announced before he became a government employee, and that could make him ineligible for a tax break that’s designed to let investors serve in government without getting hit with massive tax penalties, experts say.

Scaramucci entered an agreement to sell the fund-of-hedge-funds firm in January, when he first announced he’d be joining President Donald Trump’s administration. But no government job materialized for months, and that may make the tax break null and void.

At issue is a federal law that allows new executive-branch employees to defer capital-gains taxes on assets they’re forced to sell to avoid conflicts of interest in their official roles. To qualify, a sale must be required by federal ethics officials after a review of the applicant’s finances. But because Scaramucci didn’t receive the January job, he couldn’t have been required to divest when he agreed to sell SkyBridge, some experts say.

“Even if the sale of SkyBridge Capital hasn’t closed yet, it would be hard to argue that the government forced him to enter into the deal to resolve conflicts of interest” in his planned new role as White House communications director, said Walter Shaub, the former director of the federal Office of Government Ethics, in a message posted to Twitter on Sunday. Shaub resigned earlier this month.

By tapping Scaramucci for a White House role, Trump capped a months-long saga that began before his inauguration. Scaramucci’s name surfaced in connection with two previous administration appointments, neither of which came to pass. He took a job last month as chief strategy officer at the Export-Import Bank of the United States, a post widely viewed as temporary.

Working to Divest

Scaramucci was offered a position with the Trump administration in January, and has been working with federal ethics officials since then to “ensure that he divests all identified assets that could pose a conflict of interest under all federal laws and regulations,” said his attorney, Elliot S. Berke of Berke Farah LLP.

Those officials will determine whether he’s entitled to defer taxes on his asset sales, Berke said in an email — “not former officials or talking heads (or former officials who want to be talking heads).”

The White House press office, which is scheduled to begin reporting to Scaramucci on Aug. 15, provided an emailed statement:

“The president takes ethical obligations of all his employees very seriously,” said spokeswoman Kelly Love. “The White House is treating Mr. Scaramucci the same as every incoming official and is carefully considering all aspects of his holdings and businesses as part of the incoming ethics and legal review process.”

A spokeswoman for the Ex-Im Bank confirmed that Scaramucci had requested a so-called certificate of divestiture, which allows appointees to defer capital gains on the assets they’ve sold. The bank didn’t specify what assets were included in that request, but a person familiar with it said it included the sale of SkyBridge and SALT, the SkyBridge Alternatives Conference, an annual gathering of hedge fund professionals in Las Vegas that Scaramucci founded.

‘Mega-Opportunity Cost’

Two other people familiar with Scaramucci’s recent thinking said that after the first job didn’t materialize, he was eager to take another government post partly because he wants to defer the capital-gains tax on the SkyBridge sale.

During a July 21 news conference regarding his appointment, Scaramucci said he had worked with the federal Office of Government Ethics “to take care of all my business conflicts.” He also said that his start date in the communications role would “be in a couple of weeks so that it’s 100 percent totally cleansed and clean.”

“You want to go serve the country, and so the first thing you have to do is take on this mega-opportunity cost by getting rid of all your assets,” he said. “But I’m willing to do that because I love the country.”

Scaramucci’s SkyBridge announced the planned sale to HNA Group Co. and RON Transatlantic EG on Jan. 17, three days before Trump’s inauguration. The deal was said to value the asset manager at $180 million or more depending on performance. Analysts called the price high. Scaramucci’s roughly 45 percent stake in the firm was valued at about $80 million. Scaramucci said the price was fair and that he had turned down higher offers.

It’s unclear how much gain the transaction would bring Scaramucci, in part because his tax basis — that is, his capital investment in SkyBridge — is unknown.

In Limbo

Meanwhile, the SkyBridge sale is in limbo as it awaits sign-off by the Committee on Foreign Investment in the United States. That inter-agency group vets sales of American companies to foreign buyers for national security risks. CFIUS is facing a backlog of cases because the administration hasn’t yet filled senior posts at the committee’s member agencies. A person close to the deal said last week that it was expected to close in the next four to six weeks.

At the time the sale was announced in January, Scaramucci was telling reporters at the World Economic Forum in Davos that he’d be joining the Trump administration as an assistant to the president. But that job evaporated days later, after media reports in the New York Times and Bloomberg highlighted information about the SkyBridge buyers: a politically connected Chinese conglomerate, and a little-known investment company linked to a Venezuelan-born banker known for close ties to the Hugo Chavez regime.

Then, in June, Trump was poised to nominate Scaramucci to become the U.S. ambassador to the Paris-based Organisation for Economic Co-operation and Development, according to people familiar with the plan. That post was slow to take shape, and in the meantime, Scaramucci took the job at the Ex-Im Bank.

Now, federal officials will have to decide whether he qualifies for the tax benefit. Under federal law, appointees who receive certificates of divestiture must agree to invest proceeds from their asset sales in Treasuries or a government-approved list of mutual funds. In return, they may defer capital-gains taxes until they sell any of the replacement assets.

Tax Basis

The law effectively transfers their tax basis in the old assets to the new assets.

Experts say that a request for the tax deferral on a pending asset sale would be unprecedented — though there’s disagreement on whether the SkyBridge sale should qualify.

“This is a new one,” said Stan Brand, an ethics attorney at Akin Gump Strauss Hauer & Feld. Still, Brand said, federal ethics officials should approve a tax deferral for Scaramucci, because the law’s main objective is to ensure individuals aren’t penalized for government service.

Others disagreed. “It’s probably a gray area, but I don’t think he should get it,” said Larry Noble, general counsel of the Campaign Legal Center. Noble said asset sales qualify only in cases where government officials order them — a process that normally would begin after a potential appointee files a required financial-disclosure document.

Scaramucci has filed a financial disclosure form with the Ex-Im Bank, bank spokeswoman Linda Formella said.

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