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How to defer US taxes

taylor.town

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Re: How to defer US taxes

#81

Post by fer »

3rodents wrote: post #61
unclad5968 wrote: post #59

Earlier quoted context omitted.

Where are you living that you don't have to pay taxes?

That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.

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 and address.

Plus the whole can of worms of the centre of vital interests or source-based taxation systems.

In the moment you input an address in the financial system, the tax administration will know, and they will knock your door for any significant income, plus arrears, pulling one of the cards from your house, and it's not going to be pretty.

Re: How to defer US taxes

#82

Post by PopAlongKid »

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...

The story I read recently involved Montana (MT), not Minnesota (MN).

Re: How to defer US taxes

#83

Post by hparadiz »

dminor wrote: post #76
phkahler wrote: post #33

Earlier quoted context omitted.

This is what they call "buy borrow die" or some such. Buy an asset, borrow against it, die to reset the basis. Your estate will still have to repay the loans, but... that one part I don't really understand. Do they just refinance, taking a new loan against the newly valued asset? This all seems to benefit from low interest rates. Was it a thing in the 90's? Or even the 80s when rates were much higher?

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.

Re: How to defer US taxes

#84

Post by 3rodents »

fer wrote: post #81
3rodents wrote: post #61

Earlier quoted context omitted.

That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.

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. Almost every country follows the typical 180 day rule for tax residency.

Re: How to defer US taxes

#85

Post by trollbridge »

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…

Well, except for that pesky "inheritance tax" thing, which definitely affects people who have net worths that hit multimillion levels.

Re: How to defer US taxes

#86

Post by heyjon »

PopAlongKid wrote: post #80
jaxefayo wrote: post #51

Earlier quoted context omitted.

I’ve never heard of anyone doing this, but now I kind of wish everyone did. Maybe it would force the IRS to just give us a bill instead of having us try our best to calculate what we owe, submitting that, and then hoping that we don’t get an angry letter when the IRS calculates it themselves and their answer doesn’t jive with ours.

>an angry letter when the IRS Do you have an example? I've seen dozens of IRS letters for dozens of different taxpayers and none of them had any "angry" language in them. The myth that the IRS is trying to scare or traumatize you is just a dark pattern by certain 3rd party "tax resolution" services. The IRS is quite tolerant of the person who breaks the law by not filing and paying on time and provides many opportuni…

I file every year and I had one year where the IRS miscalculated my taxes twice on an older return. I got the first notice which was ok and they requested me to respond, which I did. The 2nd notice they recalculated what I owe and said I owed more than the original notice and said if I didn't pay in the next 1-2 months I owe tens of thousands of dollars plus interest. I ended up calling them and getting someone who needed help from someone else. She ended up laughing and hanging up the phone. I called again and got an old lady who immediately knew they made a mistake and I ended up with a $0 balance. If you get the right person, it is ok. I was kind of scared I would have to owe all this money I already paid and then some. It ended well but I lost sleep for days thinking about it.

Re: How to defer US taxes

#87

Post by PopAlongKid »

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…

>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, and if there is no gain (which is calculated against your adjusted basis, not purchase price), then it follows that there is no Sec. 1250 gain (often mistakenly called "depreciation recapture").

Re: How to defer US taxes

#88

Post by [deleted] »

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…

[deleted]

Re: How to defer US taxes

#89

Post by BeetleB »

PopAlongKid wrote: post #80
jaxefayo wrote: post #51

Earlier quoted context omitted.

I’ve never heard of anyone doing this, but now I kind of wish everyone did. Maybe it would force the IRS to just give us a bill instead of having us try our best to calculate what we owe, submitting that, and then hoping that we don’t get an angry letter when the IRS calculates it themselves and their answer doesn’t jive with ours.

>an angry letter when the IRS Do you have an example? I've seen dozens of IRS letters for dozens of different taxpayers and none of them had any "angry" language in them. The myth that the IRS is trying to scare or traumatize you is just a dark pattern by certain 3rd party "tax resolution" services. The IRS is quite tolerant of the person who breaks the law by not filing and paying on time and provides many opportuni…

I've had to deal with them multiple times.

They weren't angry with me. They were, however, obstinate. They disputed an education related credit. Each time I called them, they told me what documents they would need. I'd send it, and they'd continue the dispute. The cycle would repeat.

Here's what happened:

University sends me tax form. I file with my taxes.

"Just because they sent you the form doesn't mean you actually attended the school and paid your fees. Send us proof you paid them."

Sent proof of payments to the university.

"Just because you gave them money doesn't mean it was for tuition. For all we know they could be parking tickets. Send us the billing statement"

Called the university[1] to get a copy of the billing statement. Sent to the IRS to show the payments matched the tuition billed.

"Sorry, that's not enough. Send us a statement from the university with a line item showing the tuition was paid."

Sent it. They finally accepted it.

The university told me they'd never heard from any student that the IRS didn't simply accept the original tax form they send out.

[1] Keep in mind that this conversation happened 2-3 years after graduating.

Re: How to defer US taxes

#90

Post by PopAlongKid »

>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 only addresses a subset of economic activity. The larger portion of the adult population are wage earners or retirees, not business owners. For them, large investments in Traditional IRAs or 401k plans are most definitely not able to escape upon death the income taxes that were deferred.

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