It's half price to renounce citizen ship now, but that doesn't get you out of all of the obligations.
How to defer US taxes
161–170 of 186 posts
Re: How to defer US taxes
#162Earlier quoted context omitted.
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?
Why should your children not pay tax on the valuables that they acquired without any work, when everyone else has to earn money and both pay income tax and then pay sales tax to acquire the same jewellery? (And you don’t enter into the equation. You are dead by the time the taxation happens.)
Why?
Because their parents already bought and paid the taxes.
Re: How to defer US taxes
#163Along with already mentioned "Buy, Borrow, Die" strategy is the more widely practiced "Expense everything" strategy which often ends in tax disaster for the practitioner.
One of the early adopters was https://en.wikipedia.org/wiki/B._C._Forbes the founder of Forbes.
He expensed lavish Gatsby style parties and everything.
I remember reading a biography of his that one way in 1920s he accomplished was by having bought some big mostly useless plot of land and technically his lavish parties were sales presentations to sell this land. Occasionally some of his acquintances would actually buy a parcel of mostly useless land in middle of nowhere thus the business use was actually maintained. Again, highly unlikely to fly today with IRS and even then there were tax lawsuits.
The issue is that it is impossibly hard to pull off without going into tax fraud territory.
Another interesting case of "Expense everything" were ABBAs stage dresses and suits. They were purposely flashily impractical to avoid falling afoul of Swedish tax laws.
That said tax authorities in most countries do allow some leeway for the small fish. Basically pragmatic tax authorities give you certain limits for certain expenses that you can expense.
So in my European country you can expense a certain amount of gas, travel, clothing, eating out, etc as a self-employed. Yes you should have receipts, but if you stay within limits, it is up to you how honest you want to be about that "business" lunch.
I remember it being it common in US too, someone takes you to lunch and you are supposed to mention their business and talk a few minutes about their business, then in their eyes it was a business expense.
However, the moment you start going over these limits you will face increased scrutiny and you are in for a bad time for claiming as business expense lunch with your friends at Dorsia.
Re: How to defer US taxes
#164I'm not sure to understand how deferring taxes is a better deal than paying it here and now. Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas. I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow s…
Suppose I defer $1 million in taxes until after I'm dead, and my estate conveniently does not have $1 million in assets left. What happens? In the meantime, I gave all the assets to my children while I was alive The answer is nothing. The government eats the loss.
What loss? It was never the state's money to begin with.
Re: How to defer US taxes
#165Earlier quoted context omitted.
>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.
Most of the time 1245 property is not real property, it is personal property, which is why I didn't mention it in this context.
Re: How to defer US taxes
#166Earlier quoted context omitted.
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…
This year, the first $15,000,000 of an estate is exempt from federal taxes, so unless it is on top of a different $14,000,001 in estate net assets, the estate tax (a tax on the estate) on that $1,000,000 house is $0. [0] Some U.S. states have an additional inheritance tax (payable by the inheritors). Those rules vary. [1] [0] https://www.irs.gov/businesses/small-businesses-self-employe... [1] https://www.investopedia…
This fact has me foaming at the mouth rn.
Re: How to defer US taxes
#167Earlier quoted context omitted.
Your example is zero sum; there is no collective benefit. Investment in roads enable commerce. Investments in education enable future technology.
What if you were keeping the $1000 in a bank account and I will invest $900 into a scholarship to pay for someone's education. You can invest $0.90 into roads. Now the example has a collective benefit for both of us.
You keep making these silly examples that are not how taxes work. Try again with everyone investing $0.90 into roads, and everyone investing $900 into education.
Re: How to defer US taxes
#168Earlier quoted context omitted.
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…
The question is not whether the alternative is perfect, the question is can it be made better than the status quo. It’s not that hard to come up with potential mitigations for the problems you state. - A taxable threshold, so people who can’t afford lawyers and accountants don’t need to deal with it. Works well for family gifting. - You don’t need to tax immediately, tax it when it the profit is realized, eg. When yo…
This seems like the key.
You don’t suddenly owe taxes you maybe can’t afford when inheriting the family house.
You can afford those taxes when selling it for a massive profit so you should owe then. Likewise for realizing gains by taking a loan
Re: How to defer US taxes
#169Earlier quoted context omitted.
The federal government can basically print money. The only reason they "need" your tax money is to limit inflation.
You’re not wrong, unchecked inflation is bad for most people though. Stable currency is pretty important for trade and economic stability. Unless you prefer heating your home by burning stacks of cash
Oh, I agree. I never said unchecked inflation was at all desirable or even ok.
My point was that local and state governments do need your tax dollars, in the sense that that is literally their income. But for the federal government it's different. If federal tax revenue declines, they can just sell more treasury notes and continue to spend as much as before. In that sense, federal tax revenue has no direct effect on federal spending.
Re: How to defer US taxes
#170Pretty 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…
The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.
Investment interest is deductible like mortgage interest