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I love tax law, honest to goodness, and the US's tax code is so fascinating. Regardless of the political/economic reasons why a tax law exists, so many of the r

I love tax law, honest to goodness, and the US's tax code is so fascinating. Regardless of the political/economic reasons why a tax law exists, so many of the rules are so oddly specific that upon reading them I find myself smiling trying to think of the situation that caused a specific law to be made. When I read these rules, I thought of a potentially amusing tax loophole with regards to the stolen property section: >Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner. There's another rule[0] on the books that says interest-free loans to friends and family can have tax implications, but if your friend/family _steals_ the money from you and repays it later that year, they could potentially get a short-term, interest-free loan without incurring the tax implications. I'd have to dig into the details to see if this would actually work out, but it's an entertaining thought exercise nonetheless. [0] https://www.law.cornell.edu/uscode/text/26/7872 https://www.law.cornell.edu/uscode/text/26/7872

heavenlyblue 6y ago
Wouldn’t your friends then end up in jail? Or is that the type of crime that is not prosecuted unless “charges are pressed”?
- calderarrow 6y ago
  If somehow the IRS found out that you and your buddies were doing this elaborate stealing-to-borrow plan, they could slap down tax evasion charges on you since that's definitely breaking the spirit of the law. But that's a pretty big if ;)
  - alien_ 6y ago
    Yeah, the way I read it this allows them to prosecute tax evasion in addition to theft for all property stolen in the previous years that wasn't declared to IRS as income from illegal activities. Is that a common practice?
    - vimax 6y ago
      It has been used several times against organized crime, most famously against Al Capone. You can't prove they did anything illegal to profit, but the IRS can audit them and prove they have not paid taxes on all their assets.
- deleted 6y ago
  [deleted]
- gh-throw 6y ago
  I’ve never known cops to investigate theft unless you basically hand them the culprit yourself. You just get your police report and hand it to insurance, if relevant. That’s their whole and entire role in the process. Even where there’s a 99% chance there’s, say, a gas station with video of the thief and their car (=license plate). They don’t even bother to check it out. You really do have to give them everything yourself to get them to maybe do anything.
  - therein 6y ago
    > Even where there’s a 99% chance there’s, say, a gas station with video of the thief and their car (=license plate). They don’t even bother to check it out. You really do have to give them everything yourself to get them to maybe do anything. You might as well have declared your location to be San Francisco Bay Area.
    - baumy 6y ago
      True in Seattle as well, and Portland too from what friends tell me but I don't have first hand knowledge of that one. Had my wallet stolen at a community rec center in the Northgate area (a few miles north of downtown Seattle for those unfamiliar). There was video of the thief taking it. I was able to find out from regulars his name + phone number + address, from which I found his facebook account with several public pictures of him that made it clear he was the same man from the security video. Also was able to find some public police reports of prior arrests of the same man on various counts of theft/larceny, although no convictions that I could find. Gave all of that information to the "detective" assigned to my case. Nothing ever came of it. As best I can tell, nobody did anything beyond write down some of the information I gave them.
      - 13of40 6y ago
        It's not even an urban thing. I used to live in Woodinville, across the lake from Seattle, which for the uninitiated is one of those vast suburban sprawls with a Starbucks and a Mongolian Grill in the middle. Someone broke into my car and stole my wife's purse, and we tried contacting the police for hours to file a report. Their office was closed in the middle of the day, the person who answered their phone wouldn't connect us to anyone, and we finally ended up following a cop car to a sandwich shop and flagging the driver down when he got out. Someone did eventually take it seriously when the thief stole thousands of dollars from a series of banks with my wife's checkbook. I guess cash is king.
bonyt 6y ago
> if your friend/family _steals_ the money from you and repays it later that year, they could potentially get a short-term, interest-free loan without incurring the tax implications If we want to close this loophole (if it's not closed elsewhere in the code) - I feel like the logical way to handle it would be to treat it as if they stole the imputed interest as well. I don't think § 7872 applies, but this would be in the spirit of that section to balance things out. So, you'd treat the transaction as though they stole the item plus the interest required to "borrow" it, and then only returned the item without returning the interest. They'd need to report the imputed interest as income (since they stole it!), and you could report it as a loss (since they stole it from you!).
- jerf 6y ago
  So... if hypothetically we ever went to negative interest rates, you could screw up somebody's taxes by stealing some item from them Jan 1st that doesn't depreciate, and returning it to them December 31st. Then report this action to the IRS, and the victim of the theft now owes the government because the negative interest you saved them by taking this asset off their hand and returning it to them December 31st is now income.
  - saalweachter 6y ago
    I mean, we talk occasionally about the "negative interest rate" of owning gold, ie, the cost of securing it against theft. And you provided that service for free!
    - StavrosK 6y ago
      ...by stealing it. I love the irony.
gher-shyu3i 6y ago
> on the books that says interest-free loans to friends and family can have tax implications, Simpler loophole: you gift it to them, then they gift it back at the end of the term. Or perhaps sue the IRS because Islam and Judaism prohibit lending money with interest, sounds like a case of discrimination (Christianity prohibits it as well, but basically no one follows nowadays).
- Judgmentality 6y ago
  You can't legally gift money above a certain value though without paying taxes on it. The situation depends a lot here, but if it were legal to just gift everybody money without interest nobody would ever have to deal with inheritance taxes.
  - birken 6y ago
    The lifetime gift exemption is more than $10 million dollars, so unless you are really doing a lot of gifting back and forth then you are unlikely to run into that.
    - adflux 6y ago
      Hahahah it's like 3500 euro's in Europe. cries in socialism
      - Vespasian 6y ago
        Not at all true in this generality. Germany allows a few 100k tax free every 10 years depending on the exact relationship. + "Usual" Christmas / birthday / marriage gifts etc which can be substantial
      - toomanybeersies 6y ago
        Given that most people will eagerly "gift" most money paid for services, is this a bad thing?
    - outside1234 6y ago
drdec 6y ago
I thought the dodge was going to be, steal something, say a car, return it on 12/31 and then re-steal it 1/1.
HideousKojima 6y ago
Reminds me of how the National Firearms Act registry and tax stamps only apply to law-abiding citizens. People with a criminal record cannot legally own firearms of any sort (let alone NFA items), and forcing them to register them would violate their 5th amendment rights against self-incrimination: https://en.wikipedia.org/wiki/Haynes_v._United_States https://en.wikipedia.org/wiki/Haynes_v._United_States
- jfrunyon 6y ago
  > People with a criminal record cannot legally own firearms of any sort That's not true at all... It depends on the crime, it depends on the state, and it depends on the firearm.
  - HideousKojima 6y ago
    Sorry, I should have specified felon rather than simply having a criminal record. Generally speaking any crime that carries a possible prison sentence over a year, though you're right that it can vary by state etc. And blackpowder guns and a few others aren't legally considered "firearms" by the ATF, so a felon can own them.
    - chiph 6y ago
      Which is why in The Dukes of Hazzard, Bo & Luke carried compound bows (with dynamite tied to the arrows!). Because they were moonshiners (a federal felony) they couldn't have guns.
rev_d 6y ago
I'm not sure I'd describe it as fascinating, so much as abusive. The really complicated and intricate bits are the web of Tax Treaties, Tax Treaty Protocols, Revenue Procedures, and memos that redefine how a foreign concept maps on to US tax code. All of this complexity (and the accounting cost that goes with it) is because the United States is the only developed country in the world that taxes nonresident citizens. You end up with so many situations where it's hundreds to thousands of dollars to compliantly report foreign income, even though the total tax owed is $0.
- dennis_jeeves 6y ago
  >I'm not sure I'd describe it as fascinating, so much as abusive. Agreed, most taxes are protection money masquerading as necessary evil that supposedly benefit the citizens.
  - __blockcipher__ 6y ago
    I've never understood how people view paying high taxes as a point of pride. Pay your taxes so violent men with guns don't throw you in a cage, sure. But to view it as a badge of honor when that money is half getting totally wasted and half very efficiently being used to kill people abroad...no, I'm not gonna applaud someone for pushing for more taxes.
    - MereInterest 6y ago
      Pay your taxes so that society can afford infrastructure that benefits everybody?
      - refurb 6y ago
        If it was being spent well I think a lot fewer people would complain. A small fraction is spent on infrastructure.
        giantg2 6y ago
Black101 6y ago
> I love tax law Why do they have a wash sale rule for stock sale losses but not for gains?
- refurb 6y ago
  Because people only do wash sales to capture losses offsetting gains?
  - sgerenser 6y ago
    Not true, if you’re in a low tax bracket stock gains can be tax free. It’s worth it to “tax gain harvest” by selling your stock once a year and immediately rebuying it. Unlike with a loss, the gain always counts and your basis gets reset to the new buy price.
    - refurb 6y ago
      Good point! No capital gains if your income is in the lowest bracket. Maybe this isn’t a major issue so the IRS hasn’t clamped down?
      - kortilla 6y ago
        Exactly, the IRS doesn’t care about clamping down on people in the lowest bracket.
treyfitty 6y ago
I don't see the specific term "steal." Which paragraph are you referring to?
- IncRnd 6y ago
  It is after "Sharing/gig economy" and before "Transporting school children". "Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year."
boogies 6y ago
> the rules are so oddly specific that upon reading them I find myself smiling trying to think of the situation that caused a specific law to be made I don’t think this is unique to taxes at all, I don’t have a Twitter account or really use it but there’s one account I check regularly: https://nitter.cc/crimeaday https://nitter.cc/crimeaday (random example https://nitter.cc/CrimeADay/status/1091488611269332993#m https://nitter.cc/CrimeADay/status/1091488611269332993#m).
Waterluvian 6y ago
If you love weird tax rules then you'll love weird sports rules and this Web series about them. https://youtu.be/8tonxd_9_lY https://youtu.be/8tonxd_9_lY
rcurry 6y ago
If you return the property you stole, can you deduct that as a loss? And if you steal the same property after declaring a loss are you then subject to “wash sales” rules? Asking for a friend...
baybal2 6y ago
> I love tax law, honest to goodness, and the US's tax code is so fascinating. And on the bad side, it is a very big barrier for a legit commerce, and foreign business entrants. You never know how many tax laws you break every day even if you run a lemonade stand.
prossercj 6y ago
> I find myself smiling trying to think of the situation that caused a specific law to be made. I feel this same way about two rules at my college that prohibited (1) building an igloo and sleeping in it, and (2) rappelling from the windows of residence halls.
franga2000 6y ago
My favourite tax rule (from Slovenia) is that tax-evasion isn't a tax-deductible expense

heavenlyblue 6y ago

Wouldn’t your friends then end up in jail? Or is that the type of crime that is not prosecuted unless “charges are pressed”?

calderarrow 6y ago
If somehow the IRS found out that you and your buddies were doing this elaborate stealing-to-borrow plan, they could slap down tax evasion charges on you since that's definitely breaking the spirit of the law. But that's a pretty big if ;)
- alien_ 6y ago
  Yeah, the way I read it this allows them to prosecute tax evasion in addition to theft for all property stolen in the previous years that wasn't declared to IRS as income from illegal activities. Is that a common practice?
  - vimax 6y ago
    It has been used several times against organized crime, most famously against Al Capone. You can't prove they did anything illegal to profit, but the IRS can audit them and prove they have not paid taxes on all their assets.
deleted 6y ago
[deleted]
gh-throw 6y ago
I’ve never known cops to investigate theft unless you basically hand them the culprit yourself. You just get your police report and hand it to insurance, if relevant. That’s their whole and entire role in the process. Even where there’s a 99% chance there’s, say, a gas station with video of the thief and their car (=license plate). They don’t even bother to check it out. You really do have to give them everything yourself to get them to maybe do anything.
- therein 6y ago
  > Even where there’s a 99% chance there’s, say, a gas station with video of the thief and their car (=license plate). They don’t even bother to check it out. You really do have to give them everything yourself to get them to maybe do anything. You might as well have declared your location to be San Francisco Bay Area.
  - baumy 6y ago
    True in Seattle as well, and Portland too from what friends tell me but I don't have first hand knowledge of that one. Had my wallet stolen at a community rec center in the Northgate area (a few miles north of downtown Seattle for those unfamiliar). There was video of the thief taking it. I was able to find out from regulars his name + phone number + address, from which I found his facebook account with several public pictures of him that made it clear he was the same man from the security video. Also was able to find some public police reports of prior arrests of the same man on various counts of theft/larceny, although no convictions that I could find. Gave all of that information to the "detective" assigned to my case. Nothing ever came of it. As best I can tell, nobody did anything beyond write down some of the information I gave them.
    - 13of40 6y ago
      It's not even an urban thing. I used to live in Woodinville, across the lake from Seattle, which for the uninitiated is one of those vast suburban sprawls with a Starbucks and a Mongolian Grill in the middle. Someone broke into my car and stole my wife's purse, and we tried contacting the police for hours to file a report. Their office was closed in the middle of the day, the person who answered their phone wouldn't connect us to anyone, and we finally ended up following a cop car to a sandwich shop and flagging the driver down when he got out. Someone did eventually take it seriously when the thief stole thousands of dollars from a series of banks with my wife's checkbook. I guess cash is king.

bonyt 6y ago

> if your friend/family _steals_ the money from you and repays it later that year, they could potentially get a short-term, interest-free loan without incurring the tax implications If we want to close this loophole (if it's not closed elsewhere in the code) - I feel like the logical way to handle it would be to treat it as if they stole the imputed interest as well. I don't think § 7872 applies, but this would be in the spirit of that section to balance things out. So, you'd treat the transaction as though they stole the item plus the interest required to "borrow" it, and then only returned the item without returning the interest. They'd need to report the imputed interest as income (since they stole it!), and you could report it as a loss (since they stole it from you!).

jerf 6y ago
So... if hypothetically we ever went to negative interest rates, you could screw up somebody's taxes by stealing some item from them Jan 1st that doesn't depreciate, and returning it to them December 31st. Then report this action to the IRS, and the victim of the theft now owes the government because the negative interest you saved them by taking this asset off their hand and returning it to them December 31st is now income.
- saalweachter 6y ago
  I mean, we talk occasionally about the "negative interest rate" of owning gold, ie, the cost of securing it against theft. And you provided that service for free!
  - StavrosK 6y ago
    ...by stealing it. I love the irony.

gher-shyu3i 6y ago

> on the books that says interest-free loans to friends and family can have tax implications, Simpler loophole: you gift it to them, then they gift it back at the end of the term. Or perhaps sue the IRS because Islam and Judaism prohibit lending money with interest, sounds like a case of discrimination (Christianity prohibits it as well, but basically no one follows nowadays).

Judgmentality 6y ago
You can't legally gift money above a certain value though without paying taxes on it. The situation depends a lot here, but if it were legal to just gift everybody money without interest nobody would ever have to deal with inheritance taxes.
- birken 6y ago
  The lifetime gift exemption is more than $10 million dollars, so unless you are really doing a lot of gifting back and forth then you are unlikely to run into that.
  - adflux 6y ago
    Hahahah it's like 3500 euro's in Europe. cries in socialism
    - Vespasian 6y ago
      Not at all true in this generality. Germany allows a few 100k tax free every 10 years depending on the exact relationship. + "Usual" Christmas / birthday / marriage gifts etc which can be substantial
    - toomanybeersies 6y ago
      Given that most people will eagerly "gift" most money paid for services, is this a bad thing?
  - outside1234 6y ago

drdec 6y ago

I thought the dodge was going to be, steal something, say a car, return it on 12/31 and then re-steal it 1/1.

HideousKojima 6y ago

Reminds me of how the National Firearms Act registry and tax stamps only apply to law-abiding citizens. People with a criminal record cannot legally own firearms of any sort (let alone NFA items), and forcing them to register them would violate their 5th amendment rights against self-incrimination: https://en.wikipedia.org/wiki/Haynes_v._United_States https://en.wikipedia.org/wiki/Haynes_v._United_States

jfrunyon 6y ago
> People with a criminal record cannot legally own firearms of any sort That's not true at all... It depends on the crime, it depends on the state, and it depends on the firearm.
- HideousKojima 6y ago
  Sorry, I should have specified felon rather than simply having a criminal record. Generally speaking any crime that carries a possible prison sentence over a year, though you're right that it can vary by state etc. And blackpowder guns and a few others aren't legally considered "firearms" by the ATF, so a felon can own them.
  - chiph 6y ago
    Which is why in The Dukes of Hazzard, Bo & Luke carried compound bows (with dynamite tied to the arrows!). Because they were moonshiners (a federal felony) they couldn't have guns.

rev_d 6y ago

I'm not sure I'd describe it as fascinating, so much as abusive. The really complicated and intricate bits are the web of Tax Treaties, Tax Treaty Protocols, Revenue Procedures, and memos that redefine how a foreign concept maps on to US tax code. All of this complexity (and the accounting cost that goes with it) is because the United States is the only developed country in the world that taxes nonresident citizens. You end up with so many situations where it's hundreds to thousands of dollars to compliantly report foreign income, even though the total tax owed is $0.

dennis_jeeves 6y ago
>I'm not sure I'd describe it as fascinating, so much as abusive. Agreed, most taxes are protection money masquerading as necessary evil that supposedly benefit the citizens.
- __blockcipher__ 6y ago
  I've never understood how people view paying high taxes as a point of pride. Pay your taxes so violent men with guns don't throw you in a cage, sure. But to view it as a badge of honor when that money is half getting totally wasted and half very efficiently being used to kill people abroad...no, I'm not gonna applaud someone for pushing for more taxes.
  - MereInterest 6y ago
    Pay your taxes so that society can afford infrastructure that benefits everybody?
    - refurb 6y ago
      If it was being spent well I think a lot fewer people would complain. A small fraction is spent on infrastructure.
      - giantg2 6y ago

Black101 6y ago

> I love tax law Why do they have a wash sale rule for stock sale losses but not for gains?

refurb 6y ago
Because people only do wash sales to capture losses offsetting gains?
- sgerenser 6y ago
  Not true, if you’re in a low tax bracket stock gains can be tax free. It’s worth it to “tax gain harvest” by selling your stock once a year and immediately rebuying it. Unlike with a loss, the gain always counts and your basis gets reset to the new buy price.
  - refurb 6y ago
    Good point! No capital gains if your income is in the lowest bracket. Maybe this isn’t a major issue so the IRS hasn’t clamped down?
    - kortilla 6y ago
      Exactly, the IRS doesn’t care about clamping down on people in the lowest bracket.

treyfitty 6y ago

I don't see the specific term "steal." Which paragraph are you referring to?

IncRnd 6y ago
It is after "Sharing/gig economy" and before "Transporting school children". "Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year."

boogies 6y ago

> the rules are so oddly specific that upon reading them I find myself smiling trying to think of the situation that caused a specific law to be made I don’t think this is unique to taxes at all, I don’t have a Twitter account or really use it but there’s one account I check regularly: https://nitter.cc/crimeaday https://nitter.cc/crimeaday (random example https://nitter.cc/CrimeADay/status/1091488611269332993#m https://nitter.cc/CrimeADay/status/1091488611269332993#m).

Waterluvian 6y ago

If you love weird tax rules then you'll love weird sports rules and this Web series about them. https://youtu.be/8tonxd_9_lY https://youtu.be/8tonxd_9_lY

rcurry 6y ago

If you return the property you stole, can you deduct that as a loss? And if you steal the same property after declaring a loss are you then subject to “wash sales” rules? Asking for a friend...

baybal2 6y ago

> I love tax law, honest to goodness, and the US's tax code is so fascinating. And on the bad side, it is a very big barrier for a legit commerce, and foreign business entrants. You never know how many tax laws you break every day even if you run a lemonade stand.

prossercj 6y ago

> I find myself smiling trying to think of the situation that caused a specific law to be made. I feel this same way about two rules at my college that prohibited (1) building an igloo and sleeping in it, and (2) rappelling from the windows of residence halls.

franga2000 6y ago

My favourite tax rule (from Slovenia) is that tax-evasion isn't a tax-deductible expense