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How to defer US taxes

taylor.town

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Re: How to defer US taxes

#121

Post by jedberg »

richwater wrote: post #110
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?

To prevent royalty. That is literally the reason. To prevent family dynasties.

Re: How to defer US taxes

#122

Post by jedberg »

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…

It's two sides of the same coin. Imagine a simple example:

Mom and dad buy a house for $100,000. When they die it's worth $1,000,000. In Canada, you'd pay gains on the $900,000 difference. In America, you'd pay inheritance tax on the full $1,000,000 (but no capital gains). So in America you're paying tax on a little bit more (I'm of course ignoring the cap gains baseline exception).

But the reason America does it the way it does is because imagine it's not a house but a piece of art that mom and dad bought 50 years ago. No one know how they got it or what they paid for it. How does Canada even reconcile such a thing? How can you pay cap gains on it if you have no idea what it cost and no one is alive to even help you guess?

Re: How to defer US taxes

#123

Post by twoodfin »

Groxx wrote: post #112
twoodfin wrote: post #107

Earlier quoted context omitted.

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.

401k and home ownership count as "wealthy" in many circles. It's not "I can do whatever I want any time" wealth, but it does still mean "this is not an option for people who likely need it the most" which is the real issue.

How are income taxes a serious burden on “people who likely need it the most”?

Those who truly need it the most are typically well into the plus column on government transfer payments: On net, the government is paying them far more than they’re paying it.

Re: How to defer US taxes

#124

Post by toast0 »

singron wrote: post #104
hparadiz wrote: post #83

Earlier quoted context omitted.

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 inh…

It would depend... elsewhere on thread, someone says Canada treats death as disposition, and capital gains tax is due for a transfer on death.

Family farms are the sympathetic example of choice. Let's say your parent's family farm, that they started from nothing in the 1950s is now worth $20M. If you have to sell it to pay the taxes, because the estate doesn't have $4M to pay capital gains tax, plus $2M for estate taxes, then another family farm goes corporate.

Maybe you can inherit the capital property at the original owner's basis... then you'd only owe the cap gains tax if you sold it, and you'd have money to pay it because you sold it. That could work... although one nice thing about the step-up in basis on death is that nobody has to dig through to find the old records to establish basis when there's a clearly established death instead.

Re: How to defer US taxes

#125

Post by buellerbueller »

charcircuit wrote: post #70
buellerbueller wrote: post #45

Or, just pay your taxes. We collectively benefit from them.

We collectively benefit if you give me $1000 and I give you $1. That doesn't mean it's a good deal.

Your example is zero sum; there is no collective benefit. Investment in roads enable commerce. Investments in education enable future technology.

Re: How to defer US taxes

#127

Post by buellerbueller »

pwenzel wrote: post #71
buellerbueller wrote: post #45

Or, just pay your taxes. We collectively benefit from them.

Up to now, I would have agreed with you. However, many residents of cities victimized by ICE see paying federal taxes as money that goes directly toward an enemy that is destroying their communities. I will happily pay my city and state taxes, but I no longer feel that my my federal tax dollars are helping much. I live in Minneapolis, MN. The Federal government has cut public health grants, Medicaid, laid off a large…

>The Federal government has cut public health grants, Medicaid, laid off a large portion of he Department of Health, cut Department of Human services, cut school funding, cut University of Minnesota funding, cut heating assistance, cut flood mitigation, cut USDA programs, and cut SNAP.

Not paying taxes isn't going to re-fund these things. In fact, it will ensure they don't get funded.

There are always people who don't agree with a particular government's funding priorities; if we didn't pay when we don't agree, government would happen when we do support its priorities.

Re: How to defer US taxes

#128

Post by pinkmuffinere »

jedberg wrote: post #122
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…

It's two sides of the same coin. Imagine a simple example: Mom and dad buy a house for $100,000. When they die it's worth $1,000,000. In Canada, you'd pay gains on the $900,000 difference. In America, you'd pay inheritance tax on the full $1,000,000 (but no capital gains). So in America you're paying tax on a little bit more (I'm of course ignoring the cap gains baseline exception). But the reason America does it the…

Wow this is a great question. How does this work? +1

Re: How to defer US taxes

#129

Post by Tiktaalik »

jedberg wrote: post #122
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…

It's two sides of the same coin. Imagine a simple example: Mom and dad buy a house for $100,000. When they die it's worth $1,000,000. In Canada, you'd pay gains on the $900,000 difference. In America, you'd pay inheritance tax on the full $1,000,000 (but no capital gains). So in America you're paying tax on a little bit more (I'm of course ignoring the cap gains baseline exception). But the reason America does it the…

Easier than you'd think.

The value of homes is very well known and assessed annually in many provinces (some have weirdly become laggards). So no real problem there.

Any piece of art that is of any real value would have a provenance and it would be very well known what the value it was at any given time and at sale. If no one knows the artist or can determine the value it is very safe to say its value is nil.

Re: How to defer US taxes

#130

Post by [deleted] »

jedberg wrote: post #122
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…

It's two sides of the same coin. Imagine a simple example: Mom and dad buy a house for $100,000. When they die it's worth $1,000,000. In Canada, you'd pay gains on the $900,000 difference. In America, you'd pay inheritance tax on the full $1,000,000 (but no capital gains). So in America you're paying tax on a little bit more (I'm of course ignoring the cap gains baseline exception). But the reason America does it the…

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