5 ms·

Have you not seen the reporting at Pro Publica? Manipulating a finacial instrument to avoid taxes strikes me as a prime example of a tax haven.

by _8t4p 5y ago

trident5000 5y ago
Except you just get taxed up front with a roth. You still get taxed. You are at no greater advantage in growing your money after tax unless the tax code changes. (tax code change risk is the only reason people go with a roth). It just provides certainty.
KODeKarnage 5y ago
A tax haven is a nation with low to no taxes, where foreigners can operate for tax purposes. The term you are looking for, and almost had, was "tax avoidance". Tax avoidance is perfectly legal. It is tax evasion that is illegal.
- Retric 5y ago
  Investing your Roth IRA in a company your the CEO of like Peter Thiel did is illegal, making this tax evasion. As to why it’s illegal, selling an arbitrary number of shares in your private company to yourself for 1$ then buying it back from yourself at say 1 billion dollars is normally legal. So, without such limits everyone could move unlimited money into a Roth IRA.
  - vmception 5y ago
    The IRS enforces that portion of the US Code, and they say its “executive && >10% owner”, not OR. Both conditions must be satisfied. and the penalties are also clear, up to 100% penalty of the value of the transaction if it isnt unwound Thiel could have paid that $2,000 and not unwound the transaction It is not possible for the court to hear any other perspective
    - Retric 5y ago
      The penalty being low doesn’t prevent this from being fraudulent. Second, the transaction doesn’t need to be unwound for the funds not to be in the Roth IRA. The timing of his “investment” is also off, he put the funds in after a seed round. Therefore those shares where worth far more than the annual Roth IRA contribution limit.
      - vmception 5y ago
        To you the words “illegal” “tax evasion” and “fraudulent” all may be synonyms, to me they are not. The consequences are the only thing I care about, and there is no authority that could view those words as synonyms. The IRS nor any other part of the executive branch could view it as tax evasion or fraud, the courts could not either, and Congress made this product out of their own desperation. As Congress is still desperate for short term revenues its unlikely they would alter the Roth product. You can sell shares at arbitrary discounts especially when there are not liquid markets. If stock options are more necessary to circumvent accounting then in the money options can be used as well, with the Roth purchasing the stock options instead of earning it and getting more money in future years to purchase the in the money stock.
        Retric 5y ago
        If the government wanted an unlimited Roth IRA cap they wouldn’t have added a Roth IRA cap. The fact they added a cap shows clear intent, which is definitely how the courts view such forms of Tax Evasion. Now the government doesn’t go after the vast majority of criminals be that the IRS, FBI, or your local cops. However, that has no impact on what is or isn’t breaking the law as written. As such this was clearly tax evasion because it’s illegally reducing taxes he would owe and it’s fraudulent activity because it’s falsifying financial records for personal benefit. Hell was likely also wire fraud depending on how he submitted tax documents, not that such charges are normally tacked on to such cases but they still apply.
        vmception 5y ago
tbihl 5y ago
The entire purpose of the financial instrument is to avoid taxes.
- TracePearson 5y ago
  No its not, it's to encourage certain behaviors. In this case saving for retirement by using already taxed income instead of paying those taxes when you retire. You can read the article I linked to below to see how it was abused in this instance.
  - vmception 5y ago
    Periodically Congress was literally desperate for cash and encouraged people to pay taxes up front in exchange for not paying ever again I just don’t see how another perspective can be reached with the same information
  - toast0 5y ago
    This sort of fits into the encouraged behaviors though: Put aside some money for the future. Invest the money into company stocks, generally. (Hopefully) having made good investments, have more money in retirement. Retire and have some tax free money. Most investments don't apprechiate quite so much, of course, but there were no rules on investment returns, only about contributions (and restrictions on self-dealing which may very well apply)
  - refurb 5y ago
    By “abused” you mean “followed all regulations but ended up benefiting in ways I don’t like”?
pmorici 5y ago
How exactly was it 'manipulated'?
- TracePearson 5y ago
  https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...
  - pmorici 5y ago
    Yes, I’ve read that article. It essentially boils down to the author insinuating that all wealth must be the product of some nefarious scheme and that these people who simply followed the law some how did something wrong. Very biased reporting in my view. I found the article inspiring. How many people would have the foresight to do what he did and delay gratification by locking up that kind of wealth until the age of 59.

Have you not seen the reporting at Pro Publica? Manipulating a finacial instrument to avoid taxes strikes me as a prime example of a tax haven.

by _8t4p 5y ago

Have you not seen the reporting at Pro Publica? Manipulating a finacial instrument to avoid taxes strikes me as a prime example of a tax haven.

trident5000 5y ago

Except you just get taxed up front with a roth. You still get taxed. You are at no greater advantage in growing your money after tax unless the tax code changes. (tax code change risk is the only reason people go with a roth). It just provides certainty.

KODeKarnage 5y ago

A tax haven is a nation with low to no taxes, where foreigners can operate for tax purposes. The term you are looking for, and almost had, was "tax avoidance". Tax avoidance is perfectly legal. It is tax evasion that is illegal.

Retric 5y ago
Investing your Roth IRA in a company your the CEO of like Peter Thiel did is illegal, making this tax evasion. As to why it’s illegal, selling an arbitrary number of shares in your private company to yourself for 1$ then buying it back from yourself at say 1 billion dollars is normally legal. So, without such limits everyone could move unlimited money into a Roth IRA.
- vmception 5y ago
  The IRS enforces that portion of the US Code, and they say its “executive && >10% owner”, not OR. Both conditions must be satisfied. and the penalties are also clear, up to 100% penalty of the value of the transaction if it isnt unwound Thiel could have paid that $2,000 and not unwound the transaction It is not possible for the court to hear any other perspective
  - Retric 5y ago
    The penalty being low doesn’t prevent this from being fraudulent. Second, the transaction doesn’t need to be unwound for the funds not to be in the Roth IRA. The timing of his “investment” is also off, he put the funds in after a seed round. Therefore those shares where worth far more than the annual Roth IRA contribution limit.
    - vmception 5y ago
      To you the words “illegal” “tax evasion” and “fraudulent” all may be synonyms, to me they are not. The consequences are the only thing I care about, and there is no authority that could view those words as synonyms. The IRS nor any other part of the executive branch could view it as tax evasion or fraud, the courts could not either, and Congress made this product out of their own desperation. As Congress is still desperate for short term revenues its unlikely they would alter the Roth product. You can sell shares at arbitrary discounts especially when there are not liquid markets. If stock options are more necessary to circumvent accounting then in the money options can be used as well, with the Roth purchasing the stock options instead of earning it and getting more money in future years to purchase the in the money stock.
      - Retric 5y ago
        If the government wanted an unlimited Roth IRA cap they wouldn’t have added a Roth IRA cap. The fact they added a cap shows clear intent, which is definitely how the courts view such forms of Tax Evasion. Now the government doesn’t go after the vast majority of criminals be that the IRS, FBI, or your local cops. However, that has no impact on what is or isn’t breaking the law as written. As such this was clearly tax evasion because it’s illegally reducing taxes he would owe and it’s fraudulent activity because it’s falsifying financial records for personal benefit. Hell was likely also wire fraud depending on how he submitted tax documents, not that such charges are normally tacked on to such cases but they still apply.
        vmception 5y ago

tbihl 5y ago

The entire purpose of the financial instrument is to avoid taxes.

TracePearson 5y ago
No its not, it's to encourage certain behaviors. In this case saving for retirement by using already taxed income instead of paying those taxes when you retire. You can read the article I linked to below to see how it was abused in this instance.
- vmception 5y ago
  Periodically Congress was literally desperate for cash and encouraged people to pay taxes up front in exchange for not paying ever again I just don’t see how another perspective can be reached with the same information
- toast0 5y ago
  This sort of fits into the encouraged behaviors though: Put aside some money for the future. Invest the money into company stocks, generally. (Hopefully) having made good investments, have more money in retirement. Retire and have some tax free money. Most investments don't apprechiate quite so much, of course, but there were no rules on investment returns, only about contributions (and restrictions on self-dealing which may very well apply)
- refurb 5y ago
  By “abused” you mean “followed all regulations but ended up benefiting in ways I don’t like”?

pmorici 5y ago

How exactly was it 'manipulated'?

TracePearson 5y ago
https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank https://www.propublica.org/article/lord-of-the-roths-how-tec...
- pmorici 5y ago
  Yes, I’ve read that article. It essentially boils down to the author insinuating that all wealth must be the product of some nefarious scheme and that these people who simply followed the law some how did something wrong. Very biased reporting in my view. I found the article inspiring. How many people would have the foresight to do what he did and delay gratification by locking up that kind of wealth until the age of 59.