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Berkshire Hathaway benefits from the US tax plan UU

Warren Buffett

have a man to thank

Berkshire Hathaway

BRK.A 0.87%

$ 29 billion in extraordinary profits in 2017: President

Donald Trump.

The Omaha billionaire backed Mr. Trump's opponent

Hillary Clinton

during the 2016 presidential campaign. But the new tax cuts that the president enacted last December gave Berkshire the considerable single profit that helped inflate annual profits to almost $ 45 billion.

Other American corporations like it

AT & T



Large paper profits were also recorded as a result of the new tax legislation.

Mr. Buffett, Berkshire president and Democrat, expressed reservations last year about the need for corporate tax cuts. But he also said that any fall in corporate taxes would benefit many of Berkshire's businesses and shareholders.

"I received a million shareholders at Berkshire Hathaway, and everyone would love to see a corporate tax cut," he told CNBC in October. But, he added, "we have many companies, 60 or 70. I do not think any of them are not competitive in the world because of the corporate tax rate."

When asked by CNBC in January whether he would have voted in favor of the new tax law, Mr. Buffett objected: "I would have had a different bill."

The tax changes reduced Berkshire's estimate of how much it would have to pay in taxes if it sold the investments in shares it currently owns. Berkshire has about $ 100 billion in unrealized gains in capital investments, Buffett said, and it is now expected that those profits will be taxed at a rate of 21%, below 35%.

The immediate immediate net gain for Berkshire was $ 29 billion, which helped boost Berkshire's net profit to $ 44.94 billion in 2017 from $ 24.07 billion the previous year, while offsetting declines in certain business. Berkshire's operating profit fell 18% from $ 17.6 billion in 2016 to $ 14.5 billion in 2017, as hurricanes and other catastrophes caused losses in the company's insurance operations.

The book value of Berkshire increased by 23% in 2017, the company said, compared to a 22% total return on the S & P 500, including dividends. Its total net value increased by $ 65 billion, $ 29 billion from tax benefits and $ 36 billion from operations.

Mr. Buffett said in a letter delivered to shareholders on Saturday that the increase in the company's net worth was "real," but that "a large part of our profit did not come from anything we have achieved in Berkshire."

Mr. Buffett's annual letter is widely read by investors and analysts. This year, the 16-page document was shorter than usual and omitted some of Mr. Buffett's usual topics on the economy and the future prospects of the US. UU

"This is a company that would like to sustain itself as if it had a superior business model and a superior strategy, but the bust of the results came from something that was not their job," said Cathy Seifert, an income analyst. variable of CFRA Research. "It was a very thin letter."

Fiscal gain is the latest example of how Berkshire has benefited from Trump's election. The stock price of the company increased in the months following the election with the expectation that the reduction of taxes and regulations would boost Berkshire's businesses, ranging from railroads and services to industrial and retail manufacturers.

Mr. Buffett also said last year that the company planned to sell some of its investments in losing shares in 2017, when they would be more advantageous from a fiscal point of view. Berkshire sold shares of

International business machines

throughout 2017 and drastically reduced its participation in IBM in the fourth quarter.

However, at the Berkshire annual meeting last May, Buffett said the rising health care costs were a greater threat to the competitiveness of American businesses than taxes. Berkshire joined



JPMorgan Chase

& Co. in January to form a new company to discover how to reduce health care costs for its employees. The company is in the early stages of planning, and Buffett did not write about it in his letter.

Addressed the growing cash pile of the conglomerate and lamented the lack of acquisition opportunities at a good price. Berkshire's cash, which is invested primarily in Treasury bills, soared to a record $ 116 billion at the end of the year.

"We will have to make one or more huge acquisitions," Buffett wrote in his letter. The prices of the companies were too high for their taste in 2017, he said, but "our smiles will be extended when we have redistributed the surplus Berkshire funds into more productive assets."

In October, Berkshire took a 38.6% stake in the truck stop Pilot Travel Centers LLC, which will increase to an 80% stake in 2023. But last year two major potential deals were reduced.

Kraft Heinz

an offer of $ 143 billion fell, which would have been supported in part by Berkshire, for


ANONYMOUS SOCIETY. And the Texas Oncor power transmission company finalized an agreement with the Berkshire utility arm in favor of a higher supply of

Sempra Energy

Some of the 60 Berkshire subsidiaries completed acquisitions, but those offers tend to be small. Berkshire spent $ 2.7 billion on closed acquisitions in 2017, the company said, compared to $ 1.4 billion the previous year.

Mr. Buffett also avoided giving new clues about his succession planning after promoting two executives to vice presidents last month.

He reiterated his advice that individuals should passively invest and avoid high money management fees while discussing the final count of their bet that an S & P 500 index fund would outperform a basket of hedge funds in more of a decade.

Write to Nicole Friedman at nicole.friedman@wsj.com

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