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Akkula

Wealthy Tax Scams

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7 minutes ago, 818SUDSFan said:

So phucking what?

As to your second comment, see above.

Well, 818. I put out an example. What should this hypothetical person pay?? Fair share is too vague. Give me a number. 

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4 minutes ago, bornontheblue said:

Well, 818. I put out an example. What should this hypothetical person pay?? Fair share is too vague. Give me a number. 

How about 37%....like the marginal tax rate that successful surgeons and NBA players have to pay?  It defies logic for everyone that people who have met their basic needs millions of times over are paying lower taxes than someone struggling to put a roof over their heads every month.  

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11 hours ago, Maji said:

I'd like to read a particular user's thoughts on tax policy, but I can't remember his username. I'm pretty sure he's an economist too. He's a solid, but infrequent poster

Wouldn't mind your thoughts again either :)

I'm always somewhat fluid, but I still think we need to move to more of a hybrid income/consumption tax system at the federal level. Some of the progressive consumption tax designs are somewhat complex, and I would move gradually from a fairly efficient current income tax system (despite its many issues).  I'm definitely for a FTC at some low level with the HFTs getting hit the hardest.  I also think a UBI offsets much of the concerns of income inequality.  That's the quick version.

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21 hours ago, bornontheblue said:

Give me numbers. What is considered fair share? This term has always been used vaguely, and means nothing. 

If I have the following income amounts what would my fair share be for this simplified example 

Realized LT capital Gains 150,000

Realized LT Capital Losses (25,000)

Wages 750,000

Income from Pass through Entities 150,000

Section 179 Deductions: 10,500

Interest $1,000

Qualified Dividends 12,000

How Much Should I write the check out for to cover my fair share?

Somewhere between $300-450k would sound about right.

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41 minutes ago, Akkula said:

How about 37%....like the marginal tax rate that successful surgeons and NBA players have to pay?  It defies logic for everyone that people who have met their basic needs millions of times over are paying lower taxes than someone struggling to put a roof over their heads every month.  

Someone who is struggling to have enough income to cover basic needs like a roof over their head probably pays 0 in tax. They probable have the benefit of refundable child tax credits and earned income credits, so they have a negative effective rate. Bezos may benefit from preferred rates on capital gains, but I guarantee  you he does not have a negative effective rate. The myth that billionaires payer a lower percentage than the poor is just that, an absurd myth. 

 

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Not sure if this has been posted yet, but the tax "strategy" employed by billionaires and the wealthy is outlined pretty well. You can say it's legal and all that and you wouldn't be wrong, but the concentration of wealth and the use of this loophole are real issues that will need be addressed at some point. 

https://www.businessinsider.com/american-billionaires-tax-avoidance-income-wealth-borrow-money-propublica-2021-6

 

 

 

 

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If you ever wondered why the CEO of a large financial institution is mostly compensated with financial instruments and not a lot of actual wages they are engaging in this exact strategy.

 

 

 

 

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13 minutes ago, AztecSU said:

If you ever wondered why the CEO of a large financial institution is mostly compensated with financial instruments and not a lot of actual wages they are engaging in this exact strategy.

A lot of executive pay received as stock awards are non statutory stock options that are included as ordinary wages taxed at 37% They are reported in W-2 box 12 code V. I do a lot of returns with these stock options for people who work at a fortune 500 tech company here in Boise. 

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9 minutes ago, bornontheblue said:

A lot of executive pay received as stock awards are non statutory stock options that are included as ordinary wages taxed at 37% They are reported in W-2 box 12 code V. I do a lot of returns with these stock options for people who work at a fortune 500 tech company here in Boise. 

So are you saying that incentive based and non statutory compensation plans aren't common? I would think the wealthier the individual the more likely they would be, no?

 

 

 

 

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2 minutes ago, bornontheblue said:

A lot of executive pay received as stock awards are non statutory stock options that are included as ordinary wages taxed at 37% They are reported in W-2 box 12 code V. I do a lot of returns with these stock options for people who work at a fortune 500 tech company here in Boise. 

CEO types also may receive statutory stock options which is a whole different ball game. There are rules about when you can purchase them, how they are awarded and when you can sell them for any realized gain or loss. 

As far as borrowing against shares to avoid taxable income  well middle class people borrow against assets and get tax free money too! If you take out a HELOC, or get a reverse mortgage etc that is not considered income. If you take out a loan from your 401(k) it is not taxable income. It is not just the elite uber rich who do this. 

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1 minute ago, AztecSU said:

So are you saying that incentive based and non statutory compensation plans aren't common? I would think the wealthier the individual the more likely they would be, no?

They are very common. What I am saying is that they are taxed at ordinary rates the same as wages. They are not taxed at preferred rates.  Gains from the sale of statutory shares sold do get the preferred rates , however there are many rules about when you are eligible for them, how they are awarded, and the ,length of time they must be held. 

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2 minutes ago, bornontheblue said:

CEO types also may receive statutory stock options which is a whole different ball game. There are rules about when you can purchase them, how they are awarded and when you can sell them for any realized gain or loss. 

As far as borrowing against shares to avoid taxable income  well middle class people borrow against assets and get tax free money too! If you take out a HELOC, or get a reverse mortgage etc that is not considered income. If you take out a loan from your 401(k) it is not taxable income. It is not just the elite uber rich who do this. 

I'm a regular old managerial accountant (controller) so I don't pretend to know the tax code as well as someone like you. However, wouldn't taxes on these options be withheld until their sold? I get what you are saying, home owners aren't paying taxes on the realized value gains when they refi...and you have a point, but should everyone be able to engage in this? Just seems like line needs to be drawn somewhere. 

 

 

 

 

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1 minute ago, AztecSU said:

I'm a regular old managerial accountant (controller) so I don't pretend to know the tax code as well as someone like you. However, wouldn't taxes on these options be withheld until their sold? I get what you are saying, home owners aren't paying taxes on the realized value gains when they refi...and you have a point, but should everyone be able to engage in this? Just seems like line needs to be drawn somewhere. 

Taxes are withheld on the sale of non statutory shares through your W-2. I am pretty sure they even withhold social security and medicare tax too. The rules regarding statutory shares are very complex. I would need to spend a few hours brushing up on the rules before I feel confident discussing much about it here or with a client. Maybe @Joe from WY has more experience with this??? 

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58 minutes ago, bornontheblue said:

Well, 818. I put out an example. What should this hypothetical person pay?? Fair share is too vague. Give me a number. 

I'm not talking about some hypothetical American and how much they should pay. I'm talking about the uber-rich who have bought and sold politicians to create an income tax system which massively favors them. Although once composed almost entirely of rightwingers, that cohort now includes a number of Democrats as well so should be a bipartisan issue to modify except Republicans in Congress have shown zero inclination to do so.

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On 6/10/2021 at 8:45 PM, bornontheblue said:

So you are saying a property owner doesn’t get to deduct the cost of purchasing, or constructing an income producing asset over time  like any other business would. And by they couldnt deduct the cost of maintaining said asset. Commercial and residential  rental properties are a vital part of our economy, if you make tax laws that make producing those properties more expensive , all you do is increase the price of rent. Cmon , think this through 

If you are an investor and build new single family home, I would propose no change because you're doing a good thing by adding to housing supply. I would be okay with no changes if you own apartments or commercial property. I'm not sure about condominiums. Heck, I would propose an additional perk for investors who add to the housing supply by building new units that they get long-terms capital gains treatment upon sale on the entire gain with no depreciation recapture. Anyway, for an investor who purchases an existing single family home, they should be taxed at ordinary income rates based on Gross cash flow with no deductions. In fact, they should be penalized an additional 10%, similar to early withdrawal from a 401k because they phucked over a family from owning a home and rentals in the neighborhood contribute to the decline of the neighborhood. Investors who purchase existing housing supply should not get long-term capital gains treatment upon divestiture, they didn't add anything of value to society, they robbed an opportunity for family to own a home. Airbnb should be outlawed in every neighborhood, I'm sure @toonkee would agree with that.  The tax code should incentivize home ownership of the family's primary home, not vacation homes and rental investment portfolios.

Lower demand for housing will cause prices to fall which will be a good thing for everybody except real estate investors / landlords.

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1 hour ago, modestobulldog said:

If you are an investor and build new single family home, I would propose no change because you're doing a good thing by adding to housing supply. I would be okay with no changes if you own apartments or commercial property. I'm not sure about condominiums. Heck, I would propose an additional perk for investors who add to the housing supply by building new units that they get long-terms capital gains treatment upon sale on the entire gain with no depreciation recapture. Anyway, for an investor who purchases an existing single family home, they should be taxed at ordinary income rates based on Gross cash flow with no deductions. In fact, they should be penalized an additional 10%, similar to early withdrawal from a 401k because they phucked over a family from owning a home and rentals in the neighborhood contribute to the decline of the neighborhood. Investors who purchase existing housing supply should not get long-term capital gains treatment upon divestiture, they didn't add anything of value to society, they robbed an opportunity for family to own a home. Airbnb should be outlawed in every neighborhood, I'm sure @toonkee would agree with that.  The tax code should incentivize home ownership of the family's primary home, not vacation homes and rental investment portfolios.

Lower demand for housing will cause prices to fall which will be a good thing for everybody except real estate investors / landlords.

If you sale an apartment building  or a pre existing home you bought any depreciation you have taken on the building is recaptured as ordinary income taxes at regular rates. 
 

This  a completely stupid idea. What if I buy a few houses in a depressed neighborhood that are badly dilapidated and I put several thousand dollars into them turning them into a decent place to live , this improving the community and improving the tax base. Still no depreciation. ? Cmon now!  

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21 hours ago, 818SUDSFan said:

I'm not talking about some hypothetical American and how much they should pay. I'm talking about the uber-rich who have bought and sold politicians to create an income tax system which massively favors them. Although once composed almost entirely of rightwingers, that cohort now includes a number of Democrats as well so should be a bipartisan issue to modify except Republicans in Congress have shown zero inclination to do so.

There are as many wealthy Democrats that benefit from the tax code as Republicans. Also, look at who donates to party election campaigns. The Democrats receive huge donations from Wall Street and large corporations and uber rich as do Republicans.

This isn’t one sided despite what you say. Neither party wants to change the tax code. In addition to that look how many politicians become wealthy during their tenure as Congressmen. As previously stated those with the gold make the rules. The rest of us are just pawns that whine the game is rigged. Kind of dumb when half of the pawns pay no federal income taxes at all.

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53 minutes ago, bornontheblue said:

If you sale an apartment building  or a pre existing home you bought any depreciation you have taken on the building is recaptured as ordinary income taxes at regular rates. 

Good to go.  To incentivize new construction, allow original builder investor to get an extra perk, tax depreciation recapture at LT Capital Gains rate.

This  a completely stupid idea. What if I buy a few houses in a depressed neighborhood that are badly dilapidated and I put several thousand dollars into them turning them into a decent place to live , this improving the community and improving the tax base. Still no depreciation. ? Cmon now!  

I would be open to depreciation on distressed areas such as Detroit, but better to get those improved units into families, not landlords.

Bottom line, tax and government policy should incentivize supply of homes for families to own, not creating a shortage of housing for families to own as is currently the case.

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2 hours ago, soupslam1 said:

There are as many wealthy Democrats that benefit from the tax code as Republicans. Also, look at who donates to party election campaigns. The Democrats receive huge donations from Wall Street and large corporations and uber rich as do Republicans.

This isn’t one sided despite what you say. Neither party wants to change the tax code. In addition to that look how many politicians become wealthy during their tenure as Congressmen. As previously stated those with the gold make the rules. The rest of us are just pawns that whine the game is rigged. Kind of dumb when half of the pawns pay no federal income taxes at all.

There is some merit to what you say; but just watch. If any of the Dems now start an effort to change the tax code to force the uber-rich to pay a fair percentage of their income in taxes, Moscow Mitch will lead the charge to stifle the effort. You can bet the equity in your home on that.

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