When a private sector executive heads for Washington, one of the first and biggest obstacles to overcome is shedding their investments in a reasonable manner. William Daley, President Obama’s new Chief of Staff and former JPMorgan Chase (NYSE: JPM) exec now faces this issue.
To help overcome this, he will be able to 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 restricted shares and stock appreciation rights for almost 202,000 shares 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 67 cents to $44.38 at 12:26 p.m. in New York Stock Exchange composite trading.
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, and he resigned from the boards of Boeing and Abbott Laboratories on the same day.
Daley was President Bill Clinton’s commerce secretary from January 1997 to June 2000. He served as president of SBC Communications Inc., now AT&T Inc., for more than two years before moving to JPMorgan in 2004.
