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How to defer US taxes

taylor.town

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Re: How to defer US taxes

#101

Post by asdff »

celeritascelery wrote: post #64
racingmars wrote: post #54

Earlier quoted context omitted.

Is there really any correlation between tax revenue and spending at the federal level anymore? It seems the U.S. government is willing to spend at huge deficit levels. If everyone stopped paying federal taxes I suspect nothing would change.

What would change is the government would need to greatly increase their debt. In 2025 the government got about $5.23 trillion in tax revenue and spent about $7 trillion. So most of the government spending is financed by taxes. Remove that and the rate of debt quadruples (and by extension inflation).

When do we finally hit the cliff? Deficit has been going up for decades.

Re: How to defer US taxes

#102

Post by usefulcat »

codemog wrote: post #55

> If you aren't actually reinvesting capital, pay your damn taxes. Don't be an asshole. Why? So my government has more missiles to blow up children? No thanks.

The federal government can basically print money. The only reason they "need" your tax money is to limit inflation.

Re: How to defer US taxes

#103

Post by [deleted] »

fredgrott wrote: post #67

Funny thing, states like CA, TX, TN going after folks who thought it good idea to register vehicles in MN and not pay their own local state sales taxes... Please consult a real tax lawyer before even following such advice... Why? They have skin in the game such losing their license if they do something wrong and illegal...

[deleted]

Re: How to defer US taxes

#104

Post by singron »

hparadiz wrote: post #83
dminor wrote: post #76

Earlier quoted context omitted.

It's a strategy that's only really available to the ultra wealthy, because the banks are willing to give them a bespoke loan with a much lower interest rate that's payable after they die. There's also a complex trust setup to pass the asset to their heirs.

These laws are the way they are so that if a kid has their parents die they aren't facing an immediate giant tax bill on cap gains. It applies to basically anyone inheriting even a normal house. The difference in cost basis could be 90% of the value.

You only pay cap gains if you realize gains, so you would only face a huge tax bill if you had a pile of cash dumped on you. E.g if you inherit a $1M house and sell it, and the IRS thinks you own 20% taxes on $900,000 of gains, then you have $1M of cash on hand to pay $180K in taxes.

(Also, if you live in the house for 2 years and then sell it, you can exclude $250K-$500K in gains, but that has nothing to do with inheritance).

Re: How to defer US taxes

#105

Post by skeeter2020 »

nayuki wrote: post #72

> 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…

Alberta doesn't have an estate tax either, only a capped probate fee of (I think) a couple hundred bucks.

Re: How to defer US taxes

#106

Post by fer »

CGMthrowaway wrote: post #100
nayuki wrote: post #98

Earlier quoted context omitted.

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?

Because wealthy people can perform buy borrow die and poor people can't, artificially amplifying generational wealth differences.

Re: How to defer US taxes

#107

Post by twoodfin »

fer wrote: post #106
CGMthrowaway wrote: post #100

Earlier quoted context omitted.

Yes but why is the Canadian approach more fair than the US approach?

Because wealthy people can perform buy borrow die and poor people can't, artificially amplifying generational wealth differences.

You don’t have to be wealthy:

Homes get a step up basis on inheritance like any other capital asset, and home equity loans are quite popular.

Less common but not obscure financial options include borrowing against your 401(k) or other equities.

Re: How to defer US taxes

#108

Post by kccqzy »

jeffreyrogers wrote: post #9

Pretty 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…

This is exactly why many people became landlords, but changed their mind and found that there is no way out. You might decide one day to buy some investment property, but after a few years when you lost interest in the pursuit, quitting would actually give you a huge tax headache in the form of unrecaptured section 1250 gain. This is unfair. You can quit a W-2 job or a hobby without tax consequences.

Re: How to defer US taxes

#109

Post by toast0 »

CGMthrowaway wrote: post #100
nayuki wrote: post #98

Earlier quoted context omitted.

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?

In the Canadian approach, as I understand it, all capital gains taxes are assessed upon disposition; including disposition at death.

In the US approach, capital gains disposed at death avoid capital gains taxes.

Here are two similar scenarios where the difference in actions is small, but the difference in net estate distributed to heirs is large.

Both scenarios: Parent P buys (split adjusted) 100,000 shares AMZN on Jan 3, 2000 at close for $4.47. Parent P has no other assets.

Scenario 1: Parent P sells March 9, 2026 at close for $213.49 per share; realizing $209.02 in capital gains per share, ~ $20.9M capital gains, $21.4M proceeds. Parent P dies March 10, 2026. If cap gains tax is 20% uniformly (which it isn't), ~ $4.2M goes to income tax, the estate at time of death is $17.2M. If estate tax is uniformly 40% of amounts over $15M (which it isn't), the estate tax is about ~ $0.9M, and the net estate is $16.3M

Scenario 2: Parent P dies March 10, 2026, without selling. The estate promptly sells at close for $214.33. $21.4M proceeds, ~ $20.9M capital gains, but no capital gains tax is due. Again assuming 40% estate tax over $15M, estate tax is $2.6M and the net estate is $18.8M

How is it fair for the heirs of Parent P in scenario 2 to get so much more than in scenario 1 when the circumstances are so similar?

If you use actual tax brackets, you could make the example numbers more accurate, but I don't think it will change the results significantly.

Re: How to defer US taxes

#110

Post by richwater »

nayuki wrote: post #72

> 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 should the government collect taxes on jewelery I pass down to my children? I already paid income taxes on the money I used to buy it and sales tax at the point of purchase. Why the hell are they entitled to more?
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