4 ms·

"when owners sell their teams, they have to pay back the taxes they avoided by using amortization"

a5seo 5y ago
Well that’s an inconvenient fact. So what the article should really say is “loophole allows team owners to delay paying tax until sale.” Snooze.
- gruez 5y ago
  Isn't this literally the same thing with the "jeff bezos isn't paying tax" story? He's not taxed, because the tax system doesn't tax on unrealized gains, and he'll eventually get taxed?
  - long_time_gone 5y ago
    Except for all the loopholes created to help people like Bezos to avoid "eventually getting taxed". Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), non-profits are a third, carried interest is a fourth.
    - gruez 5y ago
      >Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), You can't combine both. If you use one you lose the benefits of the other, see my sibling comment. >non-profits are a third Sure, moving your wealth to a nonprofit is tax free. But then what? If you want to spend it (on personal stuff, not curing the word of malaria or whatever), you still get taxed. >carried interest is a fourth I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers? >The logic was that the non-financial partner's "sweat equity" was also an investment, since it entailed the risk of loss if the exploration was unsuccessful
      - long_time_gone 5y ago
        ==I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers?== If you are saying that investment manager inventives should be taxed as "performance-based compensation for management services", then you are arguing for it to be taxed as regular income. This is how bonuses are taxed for everyone else.
  - queuebert 5y ago
    At the long-term capital gains rate, maybe. What would capture a lot of revenue from people like Bezos is to tax stock option gains, when realized, as regular income. Then companies couldn't shelter their CEOs from tax by paying them mostly in options rather than salary. And the CEO would still care about growing the company so that their after-tax gains are maximized.
    - gruez 5y ago
      >And the CEO would still care about growing the company so that their after-tax gains are maximized. but the strike price of such options have to be the market price (when they're granted). They can't give bezos options with $0.01 strike price when AMZN is trading at $3600[1]. In that sense, it already works like how you want it to work. [1] well they can, but they wouldn't be ISOs and would be taxed at regular tax rates.
  - sangnoir 5y ago
    The definition of "unrealized gains" needs to be tightened, IMO, especially when used as security against "loans", or any other instrument used by the stockholder to otherwise gain liquidity without technically realizing the gains. Which is to say, there are convoluted transactions that are in effect selling shares, but the IRS doesn't presently classify as such.
- long_time_gone 5y ago
  I hope you didn't fall asleep before reading the next two sentences: "But even if owners ultimately repay the taxes they skipped, deferring payment of those taxes for years, sometimes decades, essentially amounts to an interest-free loan from taxpayers. An owner could reap huge gains by investing that money." "If owners die while holding their stake, as many do, the tax savings may never be repaid. And their heirs can generally restart the amortization cycle anew." These are each clear loopholes. The first sentence is about how time value of money matters when talking about billions of dollars. The second sentence gives you an idea of why it was so "important" to weaken the Estate Tax in 2017.
  - sumobob2112 5y ago
    The first sounds like the government is encouraging investment in capital infrastructure leading to growth. This happens all the time and its a non-story. I cant speak to the tax burden on inheritance, I know debts and expenses are often paid out of an estate first however.
  - xur17 5y ago
    This would also allow the owners to realize this money as capital gains instead of income (lower tax rate), right?
    - long_time_gone 5y ago
      Yes, I also believe they wouldn't pay Social Security or Medicare taxes on it.
  - kristjansson 5y ago
    Ah, the best of all tax loopholes, _death_
    - jcheng 5y ago
      It really is a tax loophole though--for capital gains, the basis is reset upon transferring to your heirs. https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.peoplestaxpage.org/buy-borrow-die https://www.peoplestaxpage.org/buy-borrow-die
- sumobob2112 5y ago
  The article also goes on to state that the depreciation has a finite time limit. The actual headline: "Government providing depreciation that amounts to an interest free loan to billionaires in exchange for investing in capital assets" doesn't fit with the sensationalist nature of the piece
- Havoc 5y ago
  Propublica seems to love these sort of articles.
- deleted 5y ago
  [deleted]

Well that’s an inconvenient fact. So what the article should really say is “loophole allows team owners to delay paying tax until sale.” Snooze.

gruez 5y ago
Isn't this literally the same thing with the "jeff bezos isn't paying tax" story? He's not taxed, because the tax system doesn't tax on unrealized gains, and he'll eventually get taxed?
- long_time_gone 5y ago
  Except for all the loopholes created to help people like Bezos to avoid "eventually getting taxed". Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), non-profits are a third, carried interest is a fourth.
  - gruez 5y ago
    >Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), You can't combine both. If you use one you lose the benefits of the other, see my sibling comment. >non-profits are a third Sure, moving your wealth to a nonprofit is tax free. But then what? If you want to spend it (on personal stuff, not curing the word of malaria or whatever), you still get taxed. >carried interest is a fourth I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers? >The logic was that the non-financial partner's "sweat equity" was also an investment, since it entailed the risk of loss if the exploration was unsuccessful
    - long_time_gone 5y ago
      ==I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers?== If you are saying that investment manager inventives should be taxed as "performance-based compensation for management services", then you are arguing for it to be taxed as regular income. This is how bonuses are taxed for everyone else.
- queuebert 5y ago
  At the long-term capital gains rate, maybe. What would capture a lot of revenue from people like Bezos is to tax stock option gains, when realized, as regular income. Then companies couldn't shelter their CEOs from tax by paying them mostly in options rather than salary. And the CEO would still care about growing the company so that their after-tax gains are maximized.
  - gruez 5y ago
    >And the CEO would still care about growing the company so that their after-tax gains are maximized. but the strike price of such options have to be the market price (when they're granted). They can't give bezos options with $0.01 strike price when AMZN is trading at $3600[1]. In that sense, it already works like how you want it to work. [1] well they can, but they wouldn't be ISOs and would be taxed at regular tax rates.
- sangnoir 5y ago
  The definition of "unrealized gains" needs to be tightened, IMO, especially when used as security against "loans", or any other instrument used by the stockholder to otherwise gain liquidity without technically realizing the gains. Which is to say, there are convoluted transactions that are in effect selling shares, but the IRS doesn't presently classify as such.
long_time_gone 5y ago
I hope you didn't fall asleep before reading the next two sentences: "But even if owners ultimately repay the taxes they skipped, deferring payment of those taxes for years, sometimes decades, essentially amounts to an interest-free loan from taxpayers. An owner could reap huge gains by investing that money." "If owners die while holding their stake, as many do, the tax savings may never be repaid. And their heirs can generally restart the amortization cycle anew." These are each clear loopholes. The first sentence is about how time value of money matters when talking about billions of dollars. The second sentence gives you an idea of why it was so "important" to weaken the Estate Tax in 2017.
- sumobob2112 5y ago
  The first sounds like the government is encouraging investment in capital infrastructure leading to growth. This happens all the time and its a non-story. I cant speak to the tax burden on inheritance, I know debts and expenses are often paid out of an estate first however.
- xur17 5y ago
  This would also allow the owners to realize this money as capital gains instead of income (lower tax rate), right?
  - long_time_gone 5y ago
    Yes, I also believe they wouldn't pay Social Security or Medicare taxes on it.
- kristjansson 5y ago
  Ah, the best of all tax loopholes, _death_
  - jcheng 5y ago
    It really is a tax loophole though--for capital gains, the basis is reset upon transferring to your heirs. https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.peoplestaxpage.org/buy-borrow-die https://www.peoplestaxpage.org/buy-borrow-die
sumobob2112 5y ago
The article also goes on to state that the depreciation has a finite time limit. The actual headline: "Government providing depreciation that amounts to an interest free loan to billionaires in exchange for investing in capital assets" doesn't fit with the sensationalist nature of the piece
Havoc 5y ago
Propublica seems to love these sort of articles.
deleted 5y ago
[deleted]