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That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that coul
by fractionalhare 6y ago
That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that could conceivably appreciate, such that their income artificially represents a loss. Then all of a sudden, whatever they spent money on becomes extremely profitable in their mid 30s.
Someone doing that will normally do it within the confines of an LLC by convention (because it almost always implies a business). But you could do it with investing, too. In either case you need not be a megacorp.
There are also income tax offsets for education, provided your tax bracket isn't too high.
- ysavir 6y ago> That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that could conceivably appreciate, such that their income artificially represents a loss. Then all of a sudden, whatever they spent money on becomes extremely profitable in their mid 30s. Like someone getting a $150k student loan to go to college and/or post-college education?
- Schiendelman 6y agoA loan isn’t a loss. A business can’t deduct that either.
- bradleyjg 6y agoIt can deduct the interest. It can also get an R&D credit+ for how it spent the proceeds of the loan. +Depending on a lot of details
- Schiendelman 6y agoYeah, and if an individual creates a sole proprietorship they could probably hire an instructor and deduct that R&D.
- ysavir 6y agoOf course not. The $155k tuition is the loss. The $150k loan is just a sudden influx of money used to compensate for the investment losses, the same as a company receiving investment funding.
- Schiendelman 6y agoIt's not a loss - it's training. If the individual created a sole proprietorship it might be deductible, too.
- fractionalhare 6y agoNo, because that's a loan rather than an R&D expenditure from income. I guess that probably sounds flippant, but the mechanics are different. If a business received a loan, the tax prospects wouldn't be as favorable as expenditure either.
- deleted 6y ago[deleted]
- clairity 6y agoloans are different for corporations due to the interest being deductible (colloquially called 'tax shields'). along with the carryforward provision, that can so valuable that it's the principal reason why a given company is bought. personal loans have no such leeway and value.
- gamblor956 6y agoThe interest on personal loans is also deductible, if used for (a) education, (b) buying a residence, or (c) for business activities of the individual.
- clairity 6y agosure, there are a few exceptions, but carveouts result in distortions that lead to unintended consequences, as we see in all of those instances (e.g., higher economic rents). for greater fairness and more efficiency in markets, we should reduce carveouts for both corporations and individuals, not try to justify the ones we have.
- bradleyjg 6y ago> (a) education, (b) buying a residence Only up to some low limit. Netflix can deduct unlimited interest.
- gamblor956 6y agoNo, it can't. Business interest deduction is limited to 30% of taxable income...
- sokoloff 6y agoIf you do that by investing, it does work the same way. You can roll forward capital losses indefinitely and offset them against future capital gains, something which investors in 2000 and 2008 became well-acquainted with. The difference is few people start with financing that allows them to amass large investable sums without showing a cash income early in life. That’s because companies can raise VC and sell equity while we (rightly, of course) banned the equivalent practice for people.