Dell’s proposed leveraged buyout is essentially a huge tax-avoidance scheme.

Dell CEO Michael Dell, along with private equity fund Silver Lake Partners, Microsoft and four banks, reached an agreement to buy the company for $24.4 billion. But media attention has focused on the fact that it would be the largest buyout deal since the recession began and one of the largest ever, not on its tax implications.

Leveraged buyouts have been defended as a way to bring in new and better management. But the management won’t change after this deal. The CEO is already the largest shareholder, and the leadership team will remain. Only the company’s financial structure will change, notes Slate.

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Although the PC maker has hit hard times due mainly to the rise of smartphones and tablets, it still holds loads of cash generated during the PC’s prime years. The bad news, for the company, is that it’s in offshore accounts to avoid U.S. taxes, according to Slate. For company shareholders to be receive the cash as dividends or for the firm to use the money to buy out the shareholders, the money would have to be repatriated and be clipped by the 35 percent U.S. corporate income tax.

In a leveraged buyout, money to buy shares are borrowed from banks. Interest payments can be made, at least in part, with the money from repatriated money. The good news, for Dell, is that interest payments on corporate debt are tax-deductable, which lets the company avoid the corporate tax.

“Like magic, Dell’s shareholders would be extracting money from the firm without giving Uncle Sam nearly as big a cut,” Slate states.

Other reasons are behind the buyout deal, but avoiding taxes is a major one, according to Slate.

Plenty of politicians in Washington say they want to reform the tax code to lower corporate rates and eliminate loopholes, but never manage to actually do it.

“Until they do, expect to see more eye-popping deals that are basically about financial engineering rather than business strategy,” concludes Matthew Yglesias, Slate’s business and economics correspondent.

Most of the computer maker’s $14.2 billion in cash and investments was outside the United States, Bloomberg reports, citing regulatory filings. The buyout deal depends on bringing that money home.

American companies hold at least $1.6 trillion overseas where it cannot be taxed by the U.S. government — unless they bring it home, according to Bloomberg.

Companies employ a slew of techniques, such as mergers or buyouts, to avoid the corporate tax when repatriating offshore funds.

“There are ways of doing it in the context of a buyout or merger that are more flexible than what you can do in the normal operation of a business,” Reuven Avi-Yonah, a tax professor at University of Michigan Law School, tells Bloomberg.

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