> Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases.
The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant tax advantage to people who hold assets till death, especially with the step-up basis. The way Canada handles it seems more reasonable to me:
> Capital property generally includes real estate, such as homes and cottages, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork, collections or jewelry. When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale. This is called a deemed disposition and may result in a capital gain or capital loss
-- https://www.canada.ca/en/revenue-agency/services/tax/individ...
In exchange, Canada does not have an inheritance tax. All taxation is resolved in the estate of the deceased person before the money or assets are passed on without further taxation.
Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes.
You also aren't going to be able to pay no taxes since you do need to realize some income to pay for mortgage/rent, food, transportation, etc. I guess if you had assets you could borrow against it would be possible to pay for these using the loan proceeds (which are not taxable).
Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas.
I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow suit given his budget was a bit below the retail price. That would just wait.
His response was he would rather go ahead and up the budget a few hundred dollars to get it right away. That projectors will surely get much better by next year, but that he, certainly, will not.
In other words: Gamble that (1) your investments appreciate, or (2) that you will find credit rates drop when convenient.
In 1 word: Gamble.
So, either you are rich and have spare money to gamble, which sure, might be beneficial against taxes. But you could also gamble against any other sector (stocks, housing, startups...)
Or, if you are not rich, just put it in the 401k (or eq).
I can't figure out the thought process of someone who finds this sensible. Maybe there isn't one.
One of the early adopters was https://en.wikipedia.org/wiki/B._C._Forbes the founder of Forbes.
He expensed lavish Gatsby style parties and everything.
I remember reading a biography of his that one way in 1920s he accomplished was by having bought some big mostly useless plot of land and technically his lavish parties were sales presentations to sell this land. Occasionally some of his acquintances would actually buy a parcel of mostly useless land in middle of nowhere thus the business use was actually maintained. Again, highly unlikely to fly today with IRS and even then there were tax lawsuits.
The issue is that it is impossibly hard to pull off without going into tax fraud territory.
Another interesting case of "Expense everything" were ABBAs stage dresses and suits. They were purposely flashily impractical to avoid falling afoul of Swedish tax laws.
That said tax authorities in most countries do allow some leeway for the small fish. Basically pragmatic tax authorities give you certain limits for certain expenses that you can expense.
So in my European country you can expense a certain amount of gas, travel, clothing, eating out, etc as a self-employed. Yes you should have receipts, but if you stay within limits, it is up to you how honest you want to be about that "business" lunch.
I remember it being it common in US too, someone takes you to lunch and you are supposed to mention their business and talk a few minutes about their business, then in their eyes it was a business expense.
However, the moment you start going over these limits you will face increased scrutiny and you are in for a bad time for claiming as business expense lunch with your friends at Dorsia.
Our government in my generation failed me and my kids, they are busy in fighting wars, manufacturing crises abroad, and doing other nefarious things.
Question: can I use the means in this article to avoid my last year's tax? What asset categories are available to invest to defer my taxes, where can I learn more?
The article only addresses a subset of economic activity. The larger portion of the adult population are wage earners or retirees, not business owners. For them, large investments in Traditional IRAs or 401k plans are most definitely not able to escape upon death the income taxes that were deferred.
This blogspam is advocating tax fraud.
Depreciation is permitted for business assets. In order to depreciate the lawnmower, you would need to claim it as a business expense. In order to claim a business expense, you also need to have some business income (net business losses are okay, but not having any income, or having only de minimis income, is a huge red flag). And importantly, you can't use the asset for personal use. Ever.
This type of tax fraud is the #1 cause of tax penalties. And because it's fraud, it also means the IRS has an unlimited time to audit and penalize you for it.
Rich people don't defer their U.S. taxes by buying depreciable property. They do so by buying investment property like stocks, and making charitable donations.
Be really careful when doing this. Make sure you have a great accountant - if you go more than a few years without turning a measurable profit, your risk of being audited apparently goes up. My accountant personally cautioned me about this since my business has been in an R&D phase for 5 years so we've been showing a small loss every year. The last thing you want is for the IRS to decide you've been cheating on your taxes.
Please consult a real tax lawyer before even following such advice...
Why? They have skin in the game such losing their license if they do something wrong and illegal...
Living tax free is easy enough for everyone except Americans.
Why? So my government has more missiles to blow up children? No thanks.