Republican presidential candidate Mitt Romney's newly released tax return shows sprawling international financial interests, with one of his biggest foreign investments sheltered from U.S. taxation, partly because it is based in the Cayman Islands.

Republican presidential candidate Mitt Romney’s newly released tax return shows sprawling international financial interests, from Bain Capital entities based in Luxembourg to a Goldman Sachs fund in Dublin. It discusses a foreign-currency transaction and details foreign tax credits.

But one of Romney’s biggest foreign investments is sheltered from U.S. taxation, partly because it is based in the Cayman Islands.

“This is a classic example of how good tax planning avoids taxes until you want to pay taxes on the money,” said Martin Lobel, a Washington lawyer and chairman at Tax Analysts, a provider of information for tax specialists. Even many Americans with sophisticated tax advisers “can’t take advantage of that kind of loophole,” he said.

According to an August 2011 financial disclosure, Romney’s individual retirement account included a stake valued at $5 million to $25 million in something called BCIP Trust Associates III.

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Regulatory filings show that the partnership, related to Romney’s career at the corporate buyout firm Bain Capital, is registered in the Cayman Islands.

The offshore arrangement could have spared Romney a form of U.S. tax that can apply even to individual retirement accounts, experts say.

IRAs are widely used investment vehicles that allow people to save money and postpone paying taxes on it until their golden years. But even within the shelter of tax-exempt entities such as IRAs or nonprofit organizations, some investments can trigger taxes by throwing off profits known as “unrelated business taxable income.”

That includes returns on debt-financed investments. Hedge funds and private equity funds are especially likely to trigger the tax because they often seek to magnify their returns by using borrowed money.

To spare investors the tax bite, hedge funds and private equity firms often set up corporate shells known as “blockers” in havens such as the Cayman Islands.

David Miller, a lawyer at the Cadwalader firm who works with private equity firms and hedge funds, said Bain might have formed entities in the Cayman Islands to help clients such as foundations and endowments, tax-exempt organizations trying to steer clear of the tax on unrelated business income.

In the past week, following news reports about the Cayman connection, the Romney campaign has been on the defensive about the issue. In a statement Tuesday, the campaign said the former Massachusetts governor’s IRA “uses investment structures just as those commonly used by charities and pension funds, including union pension funds, to maintain their tax exempt or tax deferred status.”

“The Romneys’ investments in funds established in the Cayman Islands are taxed in the very same way they would be if the Romneys held their shares of the fund investments directly in the U.S. rather than through a Cayman fund,” the statement said. It was not clear whether that part of the statement applied to the IRA.

It is unclear how, if at all, Romney’s taxes were affected by the offshore arrangement.

A Bain spokesman did not respond to questions Tuesday.

Among the details that may spur fresh debate: The returns show that Romney was able to cut his taxable income by $4.8 million because of losses carried over from previous years. Under the tax code, taxpayers who lose money from their investments can deduct those losses against their capital gains. If a taxpayer ends up losing so much that the losses outweigh the gains in a given year, the rest of those losses can be carried to the next year and subtracted from income.

The returns confirm, however, that Romney continues to benefit from his association with Bain Capital, the private-equity firm he founded in 1984 and left in 1999. His earnings through Bain have drawn controversy because they are treated as capital gains rather than wages and thus are taxed at the lower rate of 15 percent.

Critics say such income, known as “carried interest,” should not be counted as investment earnings because private-equity partners are mostly relying on the money of others rather than their own. The returns show that Romney earned more than $13 million in “carried interest” over the past two years.

Complicated as they are, the tax returns provide only a partial picture of Romney’s wealth. They don’t show the full extent of his net assets, which are estimated to be worth between $190 million and $250 million. Romney has an individual retirement account worth between $20.7 million and $101.6 million, according to his 2011 financial disclosure. He also has a blind trust for his wife, Ann, containing $10 million.