Here’s a description of how this works:
Let’s look at a concrete example to get a better sense of what’s going on. A taxpayer has a property which has appreciated. It currently has a market value of $1 million, with a cost basis [how much was paid for it] of $100,000. This taxpayer wishes to conduct an outright sale. If that happens, though, the taxpayer would incur a significant liability because of the sizable gain [capital gains tax on the difference between the cost basis and the sale price]. The taxpayer, therefore, finds a related party who has a much higher basis of, say, $950,000 on a property with a current market value of $1.1 million. The parties then conduct a direct swap exchange.
Based on the foregoing example, the related party receives a property with a market value of $1 million. Meanwhile, the cost basis of $950,000 stays the same. The related party then ultimately sells the relinquished property and incurs a much, much, smaller liability [capital gains tax] from the sale. The two parties then distribute the profits between themselves. Eventually, the related party reacquires the replacement property with a deed back.
This type of transaction may not run afoul of the requirements of Section 1031 on paper. Clearly, though, it offends the underlying purposes of Code Section 1031. The sole purpose of the related party is to realize greater profits. The courts have now collapsed these types of transactions. “Basis shifting” is now a well-established violation of the related party rules.
Of particular note, this is already a violation. What the IRS wants to do is actually enforce the rules that this behavior violates.
Can’t wait to see all these wealthy assholes never move the money they’ve threatened to expatriate over this. Tax these fucks.
Maybe they should take it to Russia with them, instead of trying to bring Russia here.
*The IRS estimated earlier this year that if Republicans don’t succeed in rolling back funding increases, the agency could collect roughly $560 billion from big corporations and rich tax cheats over the next 10 years. *
50 Billion a year, almost nothing.
And if they spend 10% of that into thoroughly investigating tax fraud and -avoidance, they will probably unearth at least twice the total amount again. All without needing to raise any taxes, just by making the culprits pay what is due.
The real loophole to close is the theft of the working class’s surplus labor value.
But then how would our politicians get their campaign contributions?
The super rich are the ones who created basically everything in the economy. Including this loophole, the closing of this loophole and the existence of all other loopholes.
They created you and me and the earth itself.
So the rich are God? Explains why so many people worship them.
They created basically everything in the economy? What do you mean by that and what do you think “economy” means?
It was sarcsm, I’m pretty sure.
Thank you kindly for pointing it out. It seemed just realistic enough to be sincere.
Yet, it’s still a fucking joke. 50 billion over TEN YEARS when the debt is 34T and we still have a 1.17T deficit.
