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How to have a billion dollar exit with zero capital gains tax

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Re: How to have a billion dollar exit with zero capital gains tax

#51

Post by PeterisP »

cercatrova wrote: post #26

Wow, this is awesome. So for even a small amount of money, such as in the Kara $1120 example, you simply need to have offices or even cowork in a particular area and you get to write off all capital gains taxes. I'll need to look more into this for my corporation...

Well, it's not "simply that", the corporation also needs to be registered in a particular way and the investment in that corporation needs to be done in a particular way, as the article describes - complying accurately seems tricky, but seems doable if you want to.

Re: How to have a billion dollar exit with zero capital gains tax

#52

Post by ryan_j_naughton »

sweis wrote: post #45

You can't just base a business in a QOZ and call it a QOZB. It needs to generate 50% of its gross income from within the zone and 40% of its intangible property (e.g. software) must be used for business within a zone. Further, there are restrictions on what kind of business it can be. It can't be, for example, a golf course or a liquor store.

The "50-percent of gross income test" is actually that you have to meet 1 of 3 standards[1]:

Qualified Opportunity Zone Business QOF 50-percent of gross income test Q56. What is the 50-percent-of-gross-income test?

A56. Each taxable year, a QOZ business must earn at least 50 percent of its gross income from business activities within a QOZ. The regulations provide three safe harbors that a business may use to meet this test. These safe harbors take into account any of the following—

- Whether at least half of the aggregate hours of services received by the business were performed in a QOZ;

- Whether at least half of the aggregate amounts that the business paid for services were for services performed in a QOZ; or

- Whether necessary tangible property and necessary business functions were located in a QOZ.

Q57. Must a QOZ business meet all three safe harbors to satisfy the 50-percent-of-gross income test?

A57. No. A QOZ business satisfies the 50-percent-of-gross income test if it satisfies any one of these safe harbors. For example, if 50 percent or more of all the hours of services that a business receives and uses were performed in one or more QOZs, then the business satisfies the hours of services received test and, therefore, satisfies the 50-percent-of-gross-income test.

[1] https://www.irs.gov/credits-deductions/opportunity-zones-fre...

Re: How to have a billion dollar exit with zero capital gains tax

#53

Post by PeterisP »

jhugo wrote: post #16
Layke1123 wrote: post #10

Earlier quoted context omitted.

Or...the government is corrupt and used by the wealthy to write loop holes that allow them to escape paying taxes.

Seems to me that "the wealthy" could come up with simpler loopholes without the pesky requirement to actually invest money in depressed areas.

It's not like the actions proposed by this article amount to any investment at in those depressed areas, it's just registering your company there but not actually doing anything which would benefit that neighborhood.

Re: How to have a billion dollar exit with zero capital gains tax

#54

Post by imgabe »

nobodyandproud wrote: post #33
imgabe wrote: post #13

Earlier quoted context omitted.

I assume when you file your taxes, you refuse all deductions and tax credits that you're eligible for, because obviously the most moral thing is to give as much of your money to the government as possible, right?

Most of us don’t lobby the government to write laws that carve out near-zero tax burdens. Which, with the growing wealth inequality, explains that why the tax burden on the middle income keeps stable or grows; while services and benefits keep shrinking.

Tax returns with AGI over $200k represent 5.7% of returns filed and account for 61.7% of taxes paid. [1]

What ratio would you consider fair?

[1] Data is from 2019, the latest available from the IRS: https://www.irs.gov/statistics/soi-tax-stats-individual-stat...

Re: How to have a billion dollar exit with zero capital gains tax

#56

Post by sjburt »

modeless wrote: post #48
umeshunni wrote: post #44

Earlier quoted context omitted.

I think that's East Palo Alto, a historically low income area: https://opportunitydb.com/zones/06081612100/

Yeah but most of East Palo Alto isn't in the zone, and part of Menlo Park is.

The borders are based on census tracts with low average income. The complete list of zones is here: https://www.irs.gov/pub/irs-drop/n-18-48.pdf

I'm not sure who draws census tract lines.

Re: How to have a billion dollar exit with zero capital gains tax

#57

Post by jusssi »

0xy wrote: post #17
Layke1123 wrote: post #2

Is this really what people strive for in the USA. To avoid contributing anything back to the country that helped them achieve everything they've ever wanted?

Capital gains tax is a parasitical tax that punishes people for being responsible with their after-tax money. It also creates massive, massive loopholes that can be abused. The fairest solution is to scrap CGT and associated capital loss write-offs. This allows the middle class to thrive by investing in productive enterprises and not getting taxed yet again to do so. It's the worst kind of tax that punishes success b…

There are two groups slicing the worker's cheese. One is the state, they claim tax. The other is the investors, they claim profit.

Calling out other parasites, don't forget you also are one.

Re: How to have a billion dollar exit with zero capital gains tax

#58

Post by imgabe »

thereare5lights wrote: post #37
imgabe wrote: post #6

Earlier quoted context omitted.

The government is not a charity. If they have deemed something to be non-taxable, it's because the government (and by extension, the people it represents) want to incentivize that particular activity, in this case investing in economically depressed areas. If at some point we no longer want to incentivize that behavior, the government can simply remove the tax break. Moralizing about how people shouldn't engage in th…

> (and by extension, the people it represents) This is where your argument breaks down. Gerrymandering has completely eliminated this as a reasonable belief in most places. Most voters don't even care about issues, they care about parties, their team. As such, they don't care or want to incentive anything except their own team winning. > the government can simply remove the tax break. If most people want abortion to…

> Most voters don't even care about issues, they care about parties, their team. As such, they don't care or want to incentive anything except their own team winning.

Seems like the problem is the voters then.

> If most people want abortion to be legal, the government can simply legalize it.

Per your earlier statement, that is not what most voters want. They want their team to win.

Re: How to have a billion dollar exit with zero capital gains tax

#59

Post by moistly »

imgabe wrote: post #6
Layke1123 wrote: post #2

Is this really what people strive for in the USA. To avoid contributing anything back to the country that helped them achieve everything they've ever wanted?

The government is not a charity. If they have deemed something to be non-taxable, it's because the government (and by extension, the people it represents) want to incentivize that particular activity, in this case investing in economically depressed areas. If at some point we no longer want to incentivize that behavior, the government can simply remove the tax break. Moralizing about how people shouldn't engage in th…

> If at some point we no longer want to incentivize that behavior, the government can simply remove the tax break.

Yes, as we’ve seen, it is very easy to get the government to repeal a loophole that enables a billion-dollar company to dodge a tax. Why, it is virtually child’s play! The poors just need to hire a lobbyist, outspend the tax-dodging lobbyists, and Bob’s yer uncle! The government, as you say, will simply remove the tax break.

Re: How to have a billion dollar exit with zero capital gains tax

#60

Post by kevin_thibedeau »

imgabe wrote: post #6
Layke1123 wrote: post #2

Is this really what people strive for in the USA. To avoid contributing anything back to the country that helped them achieve everything they've ever wanted?

The government is not a charity. If they have deemed something to be non-taxable, it's because the government (and by extension, the people it represents) want to incentivize that particular activity, in this case investing in economically depressed areas. If at some point we no longer want to incentivize that behavior, the government can simply remove the tax break. Moralizing about how people shouldn't engage in th…

> investing in economically depressed areas.

Except the wealthy play games like extending Harlem through central park to midtown so that they can fund building their own luxury apartments as economic development in a "depressed" area.

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