4 ms·

> You can't make money this way Are you sure? What about something like this: 1. Buy art for $1M 2. Get your friends to bid up the price of the art by sellin

by ukoki 7y ago

> You can't make money this way Are you sure? What about something like this: 1. Buy art for $1M 2. Get your friends to bid up the price of the art by selling other works from the artist to each other at inflated valuations 3. Donate art to art gallery with a valuation of $10M 4. Deduct $10M donation from your taxes

humbledrone 7y ago
That's simply tax fraud.
chki 7y ago
I've seen this (exactly this, actually) line of reasoning regarding taxes and art before. While I think that it is somewhat relevant it's still not legal to do that, at least not where I live.
gok 7y ago
A) that's fraud B) you still need $10 million of income to deduct C) this isn't making money. You can't directly deduct a collectible or security you donate. You can give it away without realizing any capital gains however.
- loeg 7y ago
  (A) Yes. (B) Replace $10 mill with any figure up to 30% of your actual income. The figures are illustrative, not binding. (C) Consider not doing the fraud vs the fraud. If you and your buddy both do the fraud, you only expend the purchase price but deduct the higher price. As a result you have generated a deduction from thin air. As long as the higher price multiplied by your marginal tax rate is greater than the lower purchase price, you've made money. So at, say, a hypothetical 50% bracket, you need to inflate it by 100% to break even. At a 25% bracket, you'd need to inflate it by 300% to break even. It's a profit, but it's definitely fraud and seems pretty obvious. It's essentially a pump and dump scheme, but instead of selling the inflated asset, you donate it while it's still inflated and deduct the difference against income.
  - gok 7y ago
    Seems like you'd just take the $9M of profit and pay the gains rate on it and at least be on good terms with the IRS if not the FBI/SEC. :)
    - loeg 7y ago
      Yeah, the only reason to charity-wash it would be if you thought it was more likely to go uncaught. I suspect you'd be caught in either version of the fraud. :-)

by ukoki 7y ago

humbledrone 7y ago

That's simply tax fraud.

chki 7y ago

I've seen this (exactly this, actually) line of reasoning regarding taxes and art before. While I think that it is somewhat relevant it's still not legal to do that, at least not where I live.

gok 7y ago

A) that's fraud B) you still need $10 million of income to deduct C) this isn't making money. You can't directly deduct a collectible or security you donate. You can give it away without realizing any capital gains however.

loeg 7y ago
(A) Yes. (B) Replace $10 mill with any figure up to 30% of your actual income. The figures are illustrative, not binding. (C) Consider not doing the fraud vs the fraud. If you and your buddy both do the fraud, you only expend the purchase price but deduct the higher price. As a result you have generated a deduction from thin air. As long as the higher price multiplied by your marginal tax rate is greater than the lower purchase price, you've made money. So at, say, a hypothetical 50% bracket, you need to inflate it by 100% to break even. At a 25% bracket, you'd need to inflate it by 300% to break even. It's a profit, but it's definitely fraud and seems pretty obvious. It's essentially a pump and dump scheme, but instead of selling the inflated asset, you donate it while it's still inflated and deduct the difference against income.
- gok 7y ago
  Seems like you'd just take the $9M of profit and pay the gains rate on it and at least be on good terms with the IRS if not the FBI/SEC. :)
  - loeg 7y ago
    Yeah, the only reason to charity-wash it would be if you thought it was more likely to go uncaught. I suspect you'd be caught in either version of the fraud. :-)