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>a number of these people donated money years ago to avoid taxes This isn't how taxes work. If you donate money then you've only reduced your taxable principa

by tyrust 6y ago

>a number of these people donated money years ago to avoid taxes This isn't how taxes work. If you donate money then you've only reduced your taxable principal. You "avoid taxes" in the sense that it's as if you never made that money. You don't magically reduce your burden any further than that. People won't take your otherwise fine point seriously if you include this commonly made error.

andrepd 6y ago
Yes, now "donate" to a health charity which buys pharmaceuticals from a company you have stock in. Bam, tax rebate for investing in your company.
- tyrust 6y ago
  That doesn't sound legal.
- gamblor956 6y ago
  You have described what is called a "self-dealing" transaction in non-profit law (or more technically, an excess benefit or private inurement transaction). These transactions are subject to various tax penalties that apply both to the putative "donor"[1] and to the board members and officers of the non-profit that approved the transaction). Depending on the severity of the self-dealing, the IRS can even strip the non-profit of its 501c3 status or refer the matter to the DoJ for criminal charges. [1] Note that a 200% penalty rate can apply to uncorrected self-dealing transactions. For the board members and officers, an excise tax of 10% may apply, which the non-profit cannot pay on their behalf.
kemiller2002 6y ago
Except for the fact that they are at least partially in control of the fund either through a DAF or their own charity. You're right they can't spend it on anything they want, but they have the ability to direct in many specific instances with few exceptions. Often if it's their own foundation, to further almost any goal they want. So yeah, they get to not pay taxes on their money and at least spend it partially how they want.
- tyrust 6y ago
  A DAF is just donating to a charity with an extra step, so let's put that aside. They can't further "any" goal they want, it must be a charitable goal. Bill Gates can't take money from the B&M Foundation to buy himself a yacht. I don't really see what your point is. Anyone that donates money is avoiding taxes to spend money on something they want, where "something they want" is a charitable goal.
  - munk-a 6y ago
    By running a charity and notably donating to it those people can get clout though and further raise themselves in the eyes of their peers while not paying very much for it. Additionally they can get some other soft benefits from the charity like hosting events with money they paid no taxes on, or, if they're Trump, just buying things they want with their charity fraudulently.
    - tyrust 6y ago
      My original point was that a benefactor that stays within moral and written rules is not avoiding taxes, as kemiller2002 suggested. Breaking those rules is tangential to that point. It's a common mistake that bothers me because it often is used to dismiss (or even demonize) what is, in the majority of cases, an altruistic act.
      - kemiller2002 6y ago
        My point is that it's not necessarily an altruistic act. It's giving someone the choice of either paying the government or sheltering the money to be used within a limited set of circumstances at another time. Yes, in most cases they are putting in more money than they would pay in taxes, but they are maximizing their ability to influence a charitable instance at some point in time in the future. Also, you notice in that list it has their names? They could have made anonymous donations, but they didn't. They benefit from it, just not in a direct monetary sense. Cynical? Yes. True? In a number of cases also yes.
asdff 6y ago
Seems simple enough, but never is in reality. There's a reason why the POTUS and his family are banned from running charities in nyc.
okintheory 6y ago
It's more complicated than that, as far as I understand. If you shift your money into a foundation, under some constructions, you can retain a lot of control over how it's spent, while avoiding taxes. Later you can pass control (and hence effectively wealth) along to your kids, this time avoiding inheritance taxes.
- malandrew 6y ago
  But the kids still don't get that money. They only get control of a charity. It's not like they can buy a yacht.
  - orwin 6y ago
    but they get the connections with the charity. That's why any vaguely defined charity that organize "events" for donors should be under a lot of scrutiny. people should check if the charityPR and lobbying dpt is working for the charity, the founder, or both.
    - malandrew 6y ago
      I'm okay with scrutiny and oversight as you suggested to prevent fraud from related party transactions, but what's wrong with someone's children getting connections with the charity? One of the reasons I'm working hard and saving money is to provide my family with better opportunities than I had. To say I'm not allowed to better the lives of my family is to deprive me of rights and freedoms to do what I want with what I create.

by tyrust 6y ago

andrepd 6y ago

Yes, now "donate" to a health charity which buys pharmaceuticals from a company you have stock in. Bam, tax rebate for investing in your company.

tyrust 6y ago
That doesn't sound legal.
gamblor956 6y ago
You have described what is called a "self-dealing" transaction in non-profit law (or more technically, an excess benefit or private inurement transaction). These transactions are subject to various tax penalties that apply both to the putative "donor"[1] and to the board members and officers of the non-profit that approved the transaction). Depending on the severity of the self-dealing, the IRS can even strip the non-profit of its 501c3 status or refer the matter to the DoJ for criminal charges. [1] Note that a 200% penalty rate can apply to uncorrected self-dealing transactions. For the board members and officers, an excise tax of 10% may apply, which the non-profit cannot pay on their behalf.

kemiller2002 6y ago

Except for the fact that they are at least partially in control of the fund either through a DAF or their own charity. You're right they can't spend it on anything they want, but they have the ability to direct in many specific instances with few exceptions. Often if it's their own foundation, to further almost any goal they want. So yeah, they get to not pay taxes on their money and at least spend it partially how they want.

tyrust 6y ago
A DAF is just donating to a charity with an extra step, so let's put that aside. They can't further "any" goal they want, it must be a charitable goal. Bill Gates can't take money from the B&M Foundation to buy himself a yacht. I don't really see what your point is. Anyone that donates money is avoiding taxes to spend money on something they want, where "something they want" is a charitable goal.
- munk-a 6y ago
  By running a charity and notably donating to it those people can get clout though and further raise themselves in the eyes of their peers while not paying very much for it. Additionally they can get some other soft benefits from the charity like hosting events with money they paid no taxes on, or, if they're Trump, just buying things they want with their charity fraudulently.
  - tyrust 6y ago
    My original point was that a benefactor that stays within moral and written rules is not avoiding taxes, as kemiller2002 suggested. Breaking those rules is tangential to that point. It's a common mistake that bothers me because it often is used to dismiss (or even demonize) what is, in the majority of cases, an altruistic act.
    - kemiller2002 6y ago
      My point is that it's not necessarily an altruistic act. It's giving someone the choice of either paying the government or sheltering the money to be used within a limited set of circumstances at another time. Yes, in most cases they are putting in more money than they would pay in taxes, but they are maximizing their ability to influence a charitable instance at some point in time in the future. Also, you notice in that list it has their names? They could have made anonymous donations, but they didn't. They benefit from it, just not in a direct monetary sense. Cynical? Yes. True? In a number of cases also yes.

asdff 6y ago

Seems simple enough, but never is in reality. There's a reason why the POTUS and his family are banned from running charities in nyc.

okintheory 6y ago

It's more complicated than that, as far as I understand. If you shift your money into a foundation, under some constructions, you can retain a lot of control over how it's spent, while avoiding taxes. Later you can pass control (and hence effectively wealth) along to your kids, this time avoiding inheritance taxes.

malandrew 6y ago
But the kids still don't get that money. They only get control of a charity. It's not like they can buy a yacht.
- orwin 6y ago
  but they get the connections with the charity. That's why any vaguely defined charity that organize "events" for donors should be under a lot of scrutiny. people should check if the charityPR and lobbying dpt is working for the charity, the founder, or both.
  - malandrew 6y ago
    I'm okay with scrutiny and oversight as you suggested to prevent fraud from related party transactions, but what's wrong with someone's children getting connections with the charity? One of the reasons I'm working hard and saving money is to provide my family with better opportunities than I had. To say I'm not allowed to better the lives of my family is to deprive me of rights and freedoms to do what I want with what I create.