No. of Recommendations: 3
The break up of Berkshire Hathaway could trigger significant tax liabilities. The company holds substantial unrealized capital gains in its stock portfolio and a breakup could trigger a taxable event. Additionally, selling off individual subsidiaries could result in capital gains taxes for the company.
There are many ways to split up a company without triggering a taxable event. Many companies have done that, e.g. GE. A common way is to spin-off part of the company to shareholders, say BNSF or GEICO. This is usually done if management feels Wall St is penalizing the company's valuation for complexity, and the sum of the parts is worth more than the whole.
Another way, which Buffett has used in the past, is to exchange shareholdings in a company for a division of the company. Buffett did that with Gillette/PG for Duracell. He also did exchanges with Washington Post for local TV stations.
