John Paulson was one of the few winners during the 2008 financial crisis. A couple of years prior, he saw the housing bubble coming and started buying derivatives that would profit when mortgages began to default. And when they finally did, he earned an astounding $15 billion for his fund and $4 billion for himself personally.
Of course, a big payday also comes with a commensurately large tax bill, but Paulson took advantage of a provision that at the time allowed him to defer taxes on that gain until 2018. But the time has come, and this past April he paid a total of $1.5 billion in federal income taxes, which is probably one of the largest personal tax bills in history.
As you can imagine, the logistics of paying a sum that large can be challenging: On top of choosing which assets to liquidate, the actual transfer of possession to the Treasury can also be tricky. He could simply wire the money, but then he would forgo interest on the time it takes the government to process his payment.
On the surface, that may seem like a silly concern. But consider this—even assuming a modest interest rate (1%) over a short process period (3 days), Paulson could accrue over $80,000 in interest. He may be a billionaire, but eighty grand is still eighty grand. And if there is a way to pay a bill while simultaneously earning that much money, you do it.
The other almost laughable concern is physically having enough space on the check to write the amount due—after all, that’s a lot of zeros. And apparently, the IRS won’t accept checks greater than $100 million. So it looks like Paulson may be writing several checks for $99,999,999.
He’s paying his fair share, but leave it to a tax hero to get a ten-year deferment and somehow make money off paying the IRS.