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How to defer US taxes
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Re: How to defer US taxes
#92> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate. > Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant ta…
Why is the Canadian approach fairer?
Re: How to defer US taxes
#93> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate. > Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant ta…
Well, except for that pesky "inheritance tax" thing, which definitely affects people who have net worths that hit multimillion levels.
Sure but would you rather have an inheritance that gets you to pay that tax or one that doesn't?
Because getting a multi million dollar inheritance isn't something a typical person would feel sad about I would think
Re: How to defer US taxes
#94Earlier quoted context omitted.
The strategy is called "Buy, Borrow, Die" https://www.theatlantic.com/economy/archive/2025/03/tax-loop... (viewable by disabling JS)
What if I live for, say, decades before dying. Surely the lender expects some some amount of repayment before then.
I don't know how these specific loans are structured but in real estate it's relatively common for a loan to be interest only with a balloon payment (the principal) due some number of years in the future. So in theory you could just pay off the balloon payment with a new loan and repeat the process.
Re: How to defer US taxes
#95Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes si…
>People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. But in the U.S. you can't rapidly depreciate real estate, it is generally straight-line over 27.5 or 39 years (residential vs. non-residential). The gain on real estate due to depreciation is technically referred to as Section 1250 gain,…
No, you can do cost segregation to classify some of the real property as Section 1245 (which is accelerated vs Section 1250). People doing this and then selling is how they get unexpected tax bills.
Re: How to defer US taxes
#96Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes si…
>People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. But in the U.S. you can't rapidly depreciate real estate, it is generally straight-line over 27.5 or 39 years (residential vs. non-residential). The gain on real estate due to depreciation is technically referred to as Section 1250 gain,…
Cost seg
Re: How to defer US taxes
#97We should force cost basis to rise some % every few years, in order make tax due on unrealized gains. How would that throw a wrench into these tax deferral schemes?
Re: How to defer US taxes
#98> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate. > Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant ta…
Why is the Canadian approach fairer?
If I understand correctly, the "buy borrow die" strategy of tax avoidance hinges on these aspects of the tax code: Buying an asset is not a taxable event. Holding onto an asset and letting it appreciate is not a taxable event. Borrowing money is not a taxable event. Holding an appreciated asset until death will step up its cost basis to the current market value (thus erasing any capital gains taxes), and it can be passed on but large amounts will trigger inheritance taxes.
Re: How to defer US taxes
#99Earlier quoted context omitted.
Sorry but that's been a meme and a house of cards since the Common Reporting Standard. The fact is that the country whereever you carry any legal activity will require you to prove you're taxed elsewhere not to tax you in place. To carry out economic activity you'll need a presence, if it's a company it's corporate tax, if you're freelance you'll need a registered address. Most banks will freeze you without a TIN and…
You are categorically incorrect. Picking a random country: Italy. Please explain under what legislation or mechanism an Italian citizen who spends 3 months in Japan, 3 months in South Korea, 3 months in the U.S., 3 months in Norway and then repeats the loop for the rest of their life would owe any taxes to any tax authority? Almost every country except the United States only taxes their residents, not citizens. Almos…
Funny pick, because Italy is very strict on this. To stop being considered a tax resident in Italy you need to deregister from your municipality and register in the AIRE (Anagrafe degli Italiani Residenti all'Estero). But for the AIRE to accept your application on the Italian consulate in any of those countries you need to provide proof of permanent residence (address, work contract, company ownership, etc). If you don't do that, you're still considered resident of Italy for tax purposes, if you do it, congrats you're tax resident elsewhere. Registering in the AIRE is mandatory if you move, btw.
If you add the legislative decree 209/2023 article 1 that modifies the tax code and sets the basis for the centre of vital interests, it complicates things even further for the "permanent traveler" for simply having a family or ever having been long term resident in a country.
Re: How to defer US taxes
#100Earlier quoted context omitted.
Why is the Canadian approach fairer?
If I understand correctly, the "buy borrow die" strategy of tax avoidance hinges on these aspects of the tax code: Buying an asset is not a taxable event. Holding onto an asset and letting it appreciate is not a taxable event. Borrowing money is not a taxable event. Holding an appreciated asset until death will step up its cost basis to the current market value (thus erasing any capital gains taxes), and it can be pa…
Yes but why is the Canadian approach more fair than the US approach?