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Wednesday, January 10, 2018

Putting a Price On How Much Fundsters Like Tax Reform

News summary by MFWire's editors

It looks like some fundsters are starting to put a price tag on how much they like tax reform: $215 million, with some caveats.

Yesterday, Legg Mason [profile] revealed in an SEC filing that it expects to see a "one-time non-cash tax benefit of approximately $215 million" in its fiscal Q3 2018, the quarter that ended on December 31, 2017. The folks at the Baltimore-based, publicly traded, multi-boutique asset manager also expect their effective tax rate to drop from 31 percent last year to between 22 and 26 percent. Legg doesn't provide a projection as to the value over time of that effective rate reduction.

Yet the tax reform bill will also reduce the value of Legg's "tax shield" by about $230 million, to about $930 million, according to the filing. Legg (LM on the NYSE) has a market cap of $3.94 billion.

Seeking Alpha reported on on Legg's tax reform projections.

It remains to be seen how other asset managers will be affected by tax reform. Though there were some bumps along the way, fundsters' fears about "FIFO" and big 401(k) changes never made it into the final version of the tax reform bill that became law. Washington-watching fundsters, including the chief of the ICI, see lots to love in the new law. 

Edited by: Neil Anderson, Managing Editor


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