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| Source: Wall Street Journal |
To be more precise, he has a revocable trust that owns 99% of a Delaware limited liability company that owns 99% of another Delaware LLC that owns a Scottish limited company that owns another Scottish company that owns the 26-year-old Sikorsky S-76B helicopter, emblazoned with a red “TRUMP” on the side of its fuselage."So write Jean Eaglesham, Mark Maremont, and Lisa Schwartz in the Wall Street Journal
"WTF?" wonders the incredulous reader. Why does Mr. Trump structure his finances with such mind-boggling complexity, to say nothing of astronomic legal costs? The article is pretty thin on explaining the logic of all this.
You can see the Journal writers struggling for a narrative. Is this about Mr. Trump's "conflict of interest" issues? Is this something nefarious about Mr. Trump, efforts to hide something? (You can be sure earnest investigative reporters at the Times will be beating both drums for the next four years. And just as sure that nobody will pay much attention unless they can tempt Mr. Trump into saying something stupid about it all.)
Let me suggest a productive narrative. Mrs. Clinton's email saga laid bare for all of us to see the financial arrangements of prominent public figures -- "charitable foundations" to funnel money around, all "legal." In my view, rightly felt disgust at that look into our political system had a lot to do with the election. Mr. Trump's financial arrangements lay bare for all of us to see the financial arrangements of the super-wealthy in this country, also massively complex, perfectly "legal," and smelling equally of last week's fish. The right response is equal disgust at the obscene tax code and crony capitalist system that produces this mess. Mitt Romney's taxes were 550 pages long, and he only had investments, not operating companies! Fellow peasants, get out your pitchforks!
What are all these shell companies about? I would love to hear from some of the attorneys who set these things up. But we get some hint from the article
LLCs registered in Delaware are widely used for real estate because of their tax advantages.
Delaware LLCs don't have to publish any financial information or even disclose the identity of the owner. In addition, the most a member of an LLC can lose if the company fails is normally the amount he or she has invested in that companyI actually know something about this because, like Mr. Trump I own an aircraft. Mine doesn't even have an engine, but the law is the same. When you register an aircraft, the state sales tax authorities come looking for you and want their share. If you register the aircraft in a Delaware LLC, they have a much tougher time finding you. Google "Delaware Aircraft Registration" and many ads from very nice companies will pop up explaining it all. If your airplane is worth less than $100,000, it's not worth the bother. (Disclosure: I paid the sales tax. Chump that I am.) If its worth millions, it is very much worth the bother. Google the FAA aircraft registry (public, online) and you will see lots of Delaware owners. Hint, there aren't a lot of airports in Delaware.
I suspect this is about a lot more than sales taxes. There has been another drumbeat that Mr. Trump should sell or transfer his businesses to his children. This is ridiculous to anyone who pays taxes. If you actually sell a business you pay a huge capital gains tax, and if you transfer it you pay a huge gift tax. The affairs of real estate moguls are exquisitely structured to avoid estate and gift taxes, through vehicles and trusts that need to operate over long spans of time. It helps a lot to have very complicated structures where nobody knows what anything is worth.
(The second big advantage, mentioned in the above ads, is protection from liability. If the plane crashes into a puppy farm, they won't be able to go after Mr. Trump's other assets.)
The journal article also tries on the narrative that we don't know how much Mr. Trump is really worth, I think keeping up the spin from the campaign that maybe he was lying about his billions. But that too deserves a better narrative. We don't know how much he's worth. Neither does Mr. Trump, pretty obviously. Why did he set up his businesses so it is impossible for even him to know how much he's worth? Well, stated that way, one conjectures it's a pretty good idea for the IRS to be unable to figure out how much you're worth too!
Every time a sensible person pipes up that we should repeat 1986, lower marginal rates of the federal income tax, broaden the base, and simplify the tax code, our friends on the left (including a lot of prominent economists, who should know better than to echo propaganda) scream "tax cuts for the rich!" Reading this story, I can imagine just how much Mr. Trump's lawyers and accountants chuckle when they hear that. Personal income taxes? Who even bothers with those!
What has happened to America that, if you have the money to buy a plane, it is perfectly normal to route that purchase through a network of Delaware LLCs? What has happened to America that any citizen living on an investment portfolio should file 550 pages of personal tax returns? What has happened to America that if you ask for estate planning, even just on the web, it is perfectly normal that any citizen should set up a living trust, a trust A and trust B to get spousal exemptions, a descendants' trust to preserve the generation-skipping limit, and if you have any real money a grantor retained annuity trust and so on? What has happened to America that every wealthy person, and especially sports personalities, politicians and moguls, sets up a "charity" so they can write off private jet travel, the salaries of their entourage, and "employ" their relatives? Workers of America (and by this I mean rather unfashionably people who, like, actually work, and therefore pay taxes) unite, you have nothing to lose but your piles of papers and what should be your seething sense of injustice!
Really, and I appeal to my friends on the left here: Seeing this insanity, don't you want to throw it all out and have a simple VAT or consumption tax -- and nothing else? Both Mr. Trump and Mrs. Clinton would pay a lot more taxes! (The Hall-Rabushka proposal is one good implementation.)
(Previous Trump Tax post here.)
Bravo.The left intelligensia knows better but power corrupts: they play on one of the oldest vices of mankind....coveting. In today's term that is egalitarianism.
ReplyDeleteOtto, I don't get your point ... at all.
Deletei.e. I have no idea what you are trying to say.
Are you trying to say that there are people ("left intelligentsia"; =politicians? =commentators? =plain old folks?) who are now, or have been, doing some kind of incitement?
Please explain.
--E5
This absolutely is a bipartisan, everyone but the tax lawyers agrees, issue. Simplify the damn tax code.
ReplyDeleteEven a very simple income tax code will have problems like these. Issues like annual periods, distinctions between capital and income transactions, entity verses pass through distinctions, and fiduciary owned property will create a lot intellectual complexity in any income tax system.
Delete"Seeing this insanity, don't you want to throw it all out and have a simple VAT -- and nothing else?"
DeleteA comprehensive European style VAT would not produce enough revenue to keep the lights on.
Debt service, a military in a dangerous world, social security, Medicare, and any kind of a Federal Government would need at least 18% of GDP.
At the very least you would have to keep the payroll tax and probably increase it.
I think we ought to adopt a VAT. The best I think you could do would be to move towards using a consumption base for an income tax, and giving a big enough standard decution to allow 90% of people to avoid filing.
Surely it is only a matter of percentages. I have a vague recollection that, in France, groceries had 30% tax in the '60s without producing another revolution. I would not recommend that, as such, but an 18% sales tax along with zero% income tax sounds fine. Just make sure we're all in it together.
DeleteMuch as I was appalled by many of Reagan's attitudes I was pleased to hear that he was in favour of rich people actually paying a fair share of taxes (only practical .... 1% of the population does 1/3 to 1/2 of all the discretionary spending after all). That notion seems to have been abandoned even by Democrat legislators lately. They must have given up. Don't ever give up.
--E5
Not to get into a debate about semantics, but I always wonder what people mean when they say, "fair share." Most of the consumers of government spending are the middle class and rich, but that's because of corruption, not societal design. Second, the rich already pay the lions share of the taxes and would do so even under a flat tax.
DeleteJames,
Delete"the rich already pay the lions share of the taxes" .... I recall this being touted a decade ago in an article handed to me by a right-wing friend of mine. The article essentially amounted to a whine saying that the top 1% pay 30% of the taxes and "that's not fair!".
A little digging revealed that the top 1% were receiving, as income, 25% of GDP.
25% of the income, 30% of the tax..... seems only ever so slightly progressive to me.
--E5
It is not terribly hard to find this information:
DeleteTop 1 Percent
Before-Tax Income 15.0
Federal Taxes 25.4
The Distribution of Household Income and Federal Taxes, 2013
https://www.cbo.gov/publication/51361
Taxable income is not always closely correlated with real income...
DeleteShipping companies are same.., Delaware, Panama, Marshall Islands etc.., Greece is bankrupt - shipowners hide behind shell companies, globalization &'all accompaniments. Drain the swamp, agreed.
ReplyDeleteI submitted two entries because your system borched at 4096 charachters. So much mis information, so little screen space.
ReplyDeletedid the large parts of post get eaten?
DeleteI don't know what this means.
DeleteMr. Cochrane: I tried to explain what happened. Did you not get that answer?
Delete"Did the large parts of post get eaten?" I don't know what this means. If a "borch" (?) means that blogger software has a character limit on comments, there isn't anything I can do about that. Others split longer comments in two, if that helps.
DeleteLet me start from the top.
DeleteI wrote a very long comment about some technical issues in the Federal tax law and state limited liability company acts. I am a lawyer with some expertise in the area.
I submitted it to this website's comment mechanism. In reply, it gave me an error message that the comment could not be posted because it was more than 4096 characters.
I then split the comment into two pieces, and submitted them separately. I did not receive an error message after those submissions.
But, neither half of the comment has ever appeared here.
I was hoping it was somewhere inside the website, as it would be tedious to rewrite. But, if not, i will soldier on.
P.S.: Borched is a humorous slang term for vomited.
Well, thanks for trying. I moderate comments, so some comment disappearances come when I deny them (there is a lot of spam). But that is not the case here. I have had blogger freeze and lose posts. That may have been what happened.
Deletesigh
Delete"Mrs. Clinton's email saga laid bare for all of us to see the financial arrangements of prominent public figures" ... "In my view, rightly felt populist anger at that mess was her downfall."
ReplyDelete"Mr. Trump's financial arrangements lay bare for all of us to see the financial arrangements of the super-wealthy in this country" ... "The right response is equal populist anger, not at Mr. Trump" ... "but at the obscene tax code and crony capitalist system that produces this mess"
I got whiplash from that pivot. Maybe the distinction between the two is obvious to you, but I honestly don't see it.
Perhaps my mental "ears" are not working right. I did not get what Otto was trying to say. Now I don't get Kevin's point.
DeleteKevin please explain.
--E5
I think Kevin is saying that in Mrs Clinton's case the populist anger was right, but in Mr Trump's case the anger should be populist anger but not at Mr Trump. Is that because he's for some reason not culpable for his behaviour and Mrs Clinton is?
DeleteAs a lawyer, I have from time to time implemented corporate structures designed to minimize tax. Not on the scale of the Trump empire but big enough to involve tens of millions of dollars in assets.
ReplyDeleteI see that at least one of the aircraft is located off shore so it makes sense for it to be owned by a company domiciled where the aircraft is located.
If you think this is complicated, you probably should not look at how Apple manages to earn large profits in Ireland.
The cost of setting these structures up is not astronomical (probably not more than $10,000 per legal entity) and the cost to maintain the corporate status is not that high either (probably not more than $1,000 per year per entity) and those costs are insignificant compared to the costs of the airplanes involved. The cost to have the accountant calculate the depreciation etc and file the tax returns will be higher than the legal costs.
I really do not accept that because Trump's tax returns are complicated we should not try to tax him. I really do believe that a sales tax or a VAT tax targeting consumption will shift the tax burden from people like Trump to the middle class.
In Canada the implementation of a national 7% VAT (the GST / HST ) was DEEPLY unpopular with the populist right - and guess which political faction is in the ascendancy in the United States at the moment. If we say that final personal consumption in the United States is 70% of GDP and you wanted a VAT to collect 18% VAT to replace all existing Federal revenues then the VAT rate would be 18/70 = 26%. If you wanted to balance the budget without cutting spending you are probably looking at a rate over 30%. If you wanted to grant exemptions for food or rent to protect the poor then you are going to get to 35% pretty quickly.
I think that the reality of tax policy is that taxes need to be spread around and taken from lots of different people based on lots of different activities to minimize distortion and to minimize gaming the system. That is why we have payroll taxes, corporate taxes, personal income taxes, property taxes, sales taxes and capital gains taxes etc.
Well, if somebody with a huge income finds it easy to avoid paying income tax (current system) at least he will have to find some new dodge to avoid paying VAT if we switched to consumption tax. Ordinary folks are screwed already. They might still be screwed after the change. But at least somebody would have tried to make it better.
DeleteI'm not sure if I am persuaded but the claim seems to be that having the multiple different tax targets (payroll taxes, corporate taxes, personal income taxes, property taxes, sales taxes and capital gains taxes etc.) makes it easier for system-gamers to avoid paying tax entirely. And if some Scrooge has a huge income and accumulates it under his mattress, thereby avoiding consumption tax, that's no skin off anybody's nose. The Fed will simply adjust the money supply to compensate completely.
--E5
I live in the UK and I think you're seriously downplaying the huge negatives of a VAT.
ReplyDeleteGiven its nature, it requires many exceptions. Businesses for example, need to be exempt from VAT for supplies as only the end consumer product is taxed (to avoid double taxation), also, political pressure has led to the UK VAT having numerous exemptions and different rates for things like certain foods (not unhealthy foods though), children's clothes, energy etc.
The amount of evasion is large, too. Small online foreign sellers rarely pay VAT - that distorts the market.
All of this creates huge bureaucracy. Whereas income tax and NI (UK payroll tax) is relatively simple for employers to calculate and pay, VAT is an absolute nightmare with different rates, exemptions etc etc etc.
Also, I think you downplay the enormous distributional effects scrapping income taxes would have. Although billionaires like Trump may have insane tax structures to avoid tax, most of the top 1% simply does not avoid as much tax as you make out. The tax system is still very progressive with the average tax rates of the top 1% in the US being between 20 and 30 percent (depending on the study and source) and much more in other European countries.
Now of course you could argue for compensation for the losers in this switch to an all out consumption tax but this kind of compensation, as well as funding all other government activities would make the VAT really, really high. That's fine in theory, but it would just exacerbate the problems I've talked about in regards to evasion, giving smaller foreign firms a huge advantage in the marketplace over bigger firms as they have a greater incentive to evade VAT the higher the rate is.
It is not necessary to have different rates. Yes, you say, political pressure will always lead to messes, but it is not intrinsic to the system. One can have the same rate on everything, and insist that subsidies come on budget by giving people vouchers or checks. That's a lot better system actually as who is "deserving" is better targeted. If you exempt fish chips and beer because poor people buy them, rich people can learn to eat fish and chips and drink beer.
DeleteYes, but I think that if a rich person eats 1000 times as much fish and chips as a poor person does then he'll be dead before the year is out. I would not worry that an exemption for ordinary food might turn out to be a significant loophole. Presumably sugary drinks would not get the exemption so rich folks would not be dying off that way either.
Delete--E5
I was living in UK when VAT was introduced. I don't recall there being great angst about it and that was before computers made the calculations easy. But I would not be at all surprised if those with influence over legislators have, improperly, arranged special favours for themselves that make it obnoxious for everybody else.
DeleteI also recall that businesses were not at all exempt. They paid tax on the difference between their sales and purchases. i.e. tax on value added.
I would be all for VAT (and no income tax) if it could truly be set up without loopholes that allow the well heeled to avoid it. I would not hold my breath though. Some of them are very determined, as evidenced by the multiple-shell, russian doll, shenanigans. And people call me a liberal, whatever that is.
--E5
"I also recall that businesses were not at all exempt. They paid tax on the difference between their sales and purchases. i.e. tax on value added."
DeleteWith a value added tax, businesses pay the tax on supplies they purchase and collect tax on the goods and services they sell. They then remit to the government the difference between what they collected and what they paid. In theory, it is a tax on the ultimate consumer, not the businesses along the supply chain.
Got it now.
DeleteBusinesses are just filtering money to the government a little bit per link of the supply chain. It is only the final purchaser who, in effect, pays tax.
Perhaps there is some subtlety that I am still missing. It does not seem to be different, in net result, from just having the final purchaser send a percentage to the government. Not different except for all the accountancy (a non-productive activity) along the way.
--E5
In theory, the net result is the same. In practice, the advantage of collecting taxes in little bits along the supply chain is that the incentive to commit tax fraud are lower (for each entity along the chain). If the retailer sends all taxes to the government, the incentive to make a deal with the customer in which they share the avoided taxes would be quite substantial.
DeleteIt would be interesting to investigate whether the accounting machinery or the tax fraud have a higher drag on welfare.
My guess would be that, these days (computerised), the accounting machinery should be virtually for free. Most computers, after all, spend the bulk of their time twiddling their thumbs and doing Microsoft updates. VAT calculations must be just excluding a few microseconds
Deleteof thumb twiddling.
--E5
There is still substantial benefit in a VAT with no exemptions. NZ has one, and it makes life very easy - 15% on everything. Australia, conversely, has arguments about cakes v's biscuits, one of which attracts GST and one does not. When is a cake a cake, and when is it a biscuit. That sort of thing definitely creates jobs for accountants and lawyers.
DeleteI believe a better title for this piece would be "Hoist on his own petard".
ReplyDeleteI suppose we are stuck with FICA taxes, but surely we could migrate to a national sales tax, Pigou taxes, fossil fuel taxes and yes even import tariffs to fund the other $2 trillion of federal spending.
ReplyDeleteAnd I do not believe the world is so dangerous that we need to spend $1 trillion a year on DoD, DHS, VA, black budget and prorated debt service. Let's hire a McKinsey or Bain to design a $500 billion a year national security system. Maybe go back to citizen-soldiers (draft) or an American Foreign Legion. "National security" has become machine-politics-patronage.
So if we reduce "national security" to a reasonable level, we need a system to come up with $1.5 billion a year (keeping FICA).
Do we need a USDA, HUD, Labor Department, Education Department?
But every year, particularly around April, intelligent bloggers of all stripes agree a 25,000-page tax code is folly. And then next year we will all agree again.
We should live for soothing larger than ourselves, such a religion, patriotism, or the free enterprise system as defined and circumscribed by the ruling class and their minions.
Benjamin,
Delete"I suppose we are stuck with FICA taxes" ..... well, maybe not. Digging down to fundamentals ..... the purpose, I believe, is to allow disadvantaged people (e.g. elderly) a basic share of the products of the economy. It does not really matter how money is passed around in order to facilitate this. What matters is the sharing of stuff. Whether there are transfers of actual stuff from people who have it to people who don't, or there is transfer of money from those to have it to those who don't, the net result is the same more or less. Except that the more complicated the system the more that productivity is sapped by having people doing non-productive administration of payments or allocating of stuff. Witness the great expense of our medical system resulting from the non-productive work of the people required to administer payments and exclude those who have not paid. The important thing, as I see it, is hinted at in your last sentence. We are all in this thing, life on this planet, together. People doing useful stuff, people sharing useful stuff, this is the real economy. Community is a word that refers to it. But a rather reviled word in USA. COMMUNI----- are you an S&M man or T&Y? Personally I prefer "tea" and "why?". Why not?
--E5
Not exactly the same, but this case in NYT (link) is insightful of how these trusts, or "shell companies" help avoiding taxes, sometimes not in the legal way. The methods described, although not detailed enough, are quite amazing.
ReplyDeletehttp://www.nytimes.com/2016/11/30/magazine/how-to-hide-400-million.html?_r=0
Whether the structure in question was set up to avoid sales tax is speculative; however, as a tax lawyer with considerable experience in European tax matters, I can tell you this:
ReplyDeleteAdopting a "simple VAT" (really, VAT as implemented and operated is anything but "simple"), would simply exacerbate the specific problem Professor Cochrane thinks he has identified regarding the avoidance of sales tax. If he only understood how much effort Europeans go through to avoid VAT (at rates of up to 23 percent) on their purchases of planes and boats....
Really!
Anonymous,
Deleteyou mention "effort Europeans go through to avoid VAT". Could you elaborate?
In principle VAT is collected as the product passes out the factory gate. What mechanisms of avoidance have, unfortunately, come to exist?
--E5
When I was last in Europe, we leased a car for 2 months from the factory. Actually, a buy and then sell back was the arrangement. As we were foreigners, the sale was VAT exempt. Basically the car company (Peugeot I think) saved 20-odd% on a new car. Sure, it was second hand when resold, but only 2 months old.....I'd buy a car for 20% off that was only 2 months used.
DeleteThere is the BMW scheme where, as a foreigner, you buy a car for export and drive it around in Europe, as a vacation, before actually exporting it. And it is imported into US as a used car. I don't know the details but presumably this avoids some taxes at both ends.
DeleteIf it is deemed an export even if the car stays local, like yours (perhaps Peugeot), then that sounds to me like an improper distortion of the tax system. Is there an exemption from VAT for export? Does selling to a "foreigner" count as an export even though the car is kept local? I would think that is a misapplication of an export exemption.
In this age of globalisation it seems that, to work satisfactorily, tax rules should be arranged rationally between nations just as they should be arranged rationally within nations. Including deciding which administration receives how much of the revenue. To some extent VAT helps by spreading revenue collection throughout the manufacturing chain although in some cases, like vertically integrated huge corporate manufacturing, the accountancy chain is quite short.
A consumption tax, rationally, should be on consumption. However, in the case of durable stuff, like cars, when and where does the consumption occur? Instantly upon leaving the factory gate? Leaving a dealership lot? Or progressively throughout the useful life of the car and along all the roads it travels. This line of thinking would lead to a gasoline tax being preferable. But now there is anxiety about how to collect usage-proportional tax with electric cars. Should electricity cost more if it goes into a car? What about a car that is charged from its owner's solar panel ... how should road maintenance be paid for?
Here's me, in this time of winter solstice celebration, wishing for a magic wand that transforms human psyche to remove all our unwillingness to contribute what it takes to keep the basic stuff of our economy/society going.
--E5
"Drain the swamp, please, Mr. Trump"
ReplyDeleteDoes Mr. T believe that filling the swamp with alligators is equivalent to draining it?
Do we cross the swamp by walking on the alligators' backs?
(Sorry, had to say it. Not econ I'm afraid.)
--E5
You write, "There has been another drumbeat that Mr. Trump should sell or transfer his businesses to his children. This is ridiculous to anyone who pays taxes. If you actually sell a business you pay a huge capital gains tax, and if you transfer it you pay a huge gift tax."
ReplyDeleteYou are right about the huge gift tax, but wrong about the huge capital gains tax. As long as Trump invested the proceeds of any sale in Treasuries or diversified mutual funds, he could postpone recognition of that gain indefinitely per IRC §1043. So there's no reason he couldn't put all assets in a blind trust and instruct trustee to liquidate.
"Really, and I appeal to my friends on the left here:"
ReplyDeleteWhy are you appealing to the "left"? I consider myself, and most of my social and work friends, to be "left". They all think our tax regime is a farce. They'd love to see our tax code completely rewritten to be transparent and even-handed, even if it means they personally end up paying more.
You're conflating elected Democrats and Republicans with "left" and "right". The tax code is the way it is precisely because it was bought and paid for by special interests to be that way.
Same "anonymous" again: I think your point regarding complexity is misguided. Whether the tax code is complex, simple, or somewhere in between is irrelevant. What ACTUALLY matters is how the tax code impacts productivity, economic growth, and income distribution. Whining about complexity is exactly the sort of rhetoric I visit this blog to escape.
ReplyDeleteOf course, there's an awfully good case to be made that taxing consumption instead of income would result in greater productivity and economic growth. Given this, your VAT idea might actually be the right answer for the U.S. But if so, it will be due to the fact that our fastest growing companies will suddenly have a new incentive to invest in productive capital, not because a bunch of former tax attorneys will suddenly become Uber drivers and/or Trump will have fewer LLCs.
My first comment disappeared (it must have exceeded your character limit?), hence the weird "same anonymous again" intro. Anyway, I'm one of those evil, soon-to-be-Uber-driving tax attorneys. The deleted post offered a few basic observations on the Trump legal entity structure.
DeletePerhaps the fact that Fat Man and I both failed to offer valid tax input without exceeding the character limit illustrates your point.
"Whether the tax code is complex, simple, or somewhere in between is irrelevant."
DeleteIn a purely mathematical sense, yes, the complexity of a tax regime is irrelevant. Create a function, turn the crank, and out pops a number. In the real world, though, complexity begets evasion. If there are thousands of rules there are thousands of ways to evade/bend/circumvent them.
I work in tax and can promise you that "in the real world" complexity does NOT beget evasion. Self-reporting, large financial incentives to evade, and lax enforcement (or more accurately the perception of lax enforcement) is what begets evasion. There's nothing more to it than that.
DeleteNow in terms of "bending" and "circumventing" (what we tax guys call "avoidance," which differs significantly from "evasion") you may have more of a point. I suspect all it adds up to a hill of beans in the grand scheme of things though. When you stop and really think it through all simplification would mean is that folks like myself would be re-purposed to arguably more productive tasks. To offer a micro example of why I think this is pretty minor: at my company, the economic value created by the ability to expense a single large investment would easily exceed the entire tax department budget for decades to come. Thus complexity, at least for my company, is sort of beside the point compared the incentives created by the basic structure of the tax system.
"Fellow peasants, get out your pitchforks!"
ReplyDeleteI looked in the usual online sources. Can't get pitchforks any more. Not even from China. Not proper two-tined pitchforks at least. Only manure shovelling forks posing as pitchforks. Classic revolt is no longer possible.
--E5
Nor does anyone use shovels anymore to construct "shovel-ready" infrastructure.
DeleteJust for fun, I checked buying an aircraft and registering it in a DE LLC. But it's not a good idea, see here:
ReplyDeletehttp://aeromarinetaxpros.typepad.com/my_weblog/2012/08/registering-your-aircraft-in-a-delaware-llc-can-be-the-dumbest-thing-youve-ever-done-.html
because if you register the a/c in DE but use it in CA (or any state with a use-tax on vehicles), you can't avoid the sales tax. In fact, they'll slap a 50% penalty on the sales tax because it will appear as if you registered the a/c out of state simply to avoid the sales tax.
What might work is that you buy the a/c through an LLC in DE, and then lease it to yourself in CA. You'll have to pay Fed and CA income tax on the lease, but you should be able to deduct insurance and depreciation, I'd think.
Keep on soaring!
I was expecting you to say that you paid the sales tax in-kind by giving the IRS your engine.
ReplyDeleteWhenever I see income conflated with asset, I always think of Piketty and how easy he makes taxing sound. (And then I get insomnia.)