4 ms·

> No one's guaranteed to make money on every asset. There's a difference between "I have lost money on this thing" and "I owe more because I sold this thing".

> No one's guaranteed to make money on every asset. There's a difference between "I have lost money on this thing" and "I owe more because I sold this thing". By a house (debt-free) for $100, and, say, tax of $1. Something happens for a decade, so it's worth $1000, tax of $10 per year for 10 years; $90 is deferred. Later, thing un-happens and more, now house is worth $60, with $90 in deferred tax, so if you sell it... you end up owing $30, for a net loss of $70, instead of the $50 in loss on the asset? ...or is there something I'm getting really, really wrong? Seems simpler (and safer) to say property tax doesn't change (instead of accumulating interest-free debt), and profit from selling is capital gains, but I know jack shit about this stuff and am willing to be wrong.

mlyle 7y ago
> By a house (debt-free) for $100, and, say, tax of $1. Something happens for a decade, so it's worth $1000, tax of $10 per year for 10 years; $90 is deferred. Later, thing un-happens and more, now house is worth $60, with $90 in deferred tax, so if you sell it... you end up owing $30, for a net loss of $70, instead of the $50 in loss on the asset? Takes a long time to get to these situations without crazy valuation swings (+900%, then -94%?) and under 2%-ish tax rates. That would be a net loss of $130, too. > ...or is there something I'm getting really, really wrong? Pretty much. In most property tax regimes, it's the parcel itself that has the tax owed, and the assessor doesn't/can't go after past owners. Most mortgages are recourse-free, too-- it may be bad for your credit to not pay, but they take the property and don't come after your other assets. There's a societal benefit, here, too, BTW. If you have a property that's worth $10M to others, but you employ it for a use that's worth $100k to you... accruing tax on the $10M encourages you to make a transaction that will leave the property better employed.

mlyle 7y ago

> By a house (debt-free) for $100, and, say, tax of $1. Something happens for a decade, so it's worth $1000, tax of $10 per year for 10 years; $90 is deferred. Later, thing un-happens and more, now house is worth $60, with $90 in deferred tax, so if you sell it... you end up owing $30, for a net loss of $70, instead of the $50 in loss on the asset? Takes a long time to get to these situations without crazy valuation swings (+900%, then -94%?) and under 2%-ish tax rates. That would be a net loss of $130, too. > ...or is there something I'm getting really, really wrong? Pretty much. In most property tax regimes, it's the parcel itself that has the tax owed, and the assessor doesn't/can't go after past owners. Most mortgages are recourse-free, too-- it may be bad for your credit to not pay, but they take the property and don't come after your other assets. There's a societal benefit, here, too, BTW. If you have a property that's worth $10M to others, but you employ it for a use that's worth $100k to you... accruing tax on the $10M encourages you to make a transaction that will leave the property better employed.