Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Can you provide some more details about what you're talking about here? Just curious. . .
Certainly. How about claiming to operate a business that you know will never make a profit for the sole purpose of lowering your overall tax burden on income from other sources. In other words, what the IRS would classify as a hobby instead of a business.
Certainly. How about claiming to operate a business that you know will never make a profit for the sole purpose of lowering your overall tax burden on income from other sources. In other words, what the IRS would classify as a hobby instead of a business.
As long as you show you attempt to make a profit it is fine.
I will never show a profit.....but, when I spend $100,000 on supplies and buy $500,000 well rigs....the IRS does not care.
Certainly. How about claiming to operate a business that you know will never make a profit for the sole purpose of lowering your overall tax burden on income from other sources. In other words, what the IRS would classify as a hobby instead of a business.
And if it is a hobby, the losses will be disallowed, and wouldn't lower your overall tax burden. However, that isn't a tax shelter, it's a hobby. You referenced "numerous morally questionable tax shelters" and something about "instances where it appears that the corporate veil is easily pierced" in the context of those tax shelters. What are you talking about?
As long as you show you attempt to make a profit it is fine.
I will never show a profit.....but, when I spend $100,000 on supplies and buy $500,000 well rigs....the IRS does not care.
The system is based on keeping the money moving.
Well, not to sound too blunt, but if you never intend to make a profit, why are you still in business, and more appropriately, why are the remaining taxpayers being made to pay for it?
If your business losses were limited to your business, I wouldn't have an issue, but if they are used to offset your personal income from other sources for no other purpose than you paying a lower tax year after year, it seems like fraud to me. That's why the IRS wants to see a profit in 3 of the 5 years.
If your business goes bankrupt, do all of your personal assets get distributed to your creditors?
And if it is a hobby, the losses will be disallowed, and wouldn't lower your overall tax burden. However, that isn't a tax shelter, it's a hobby. You referenced "numerous morally questionable tax shelters" and something about "instances where it appears that the corporate veil is easily pierced" in the context of those tax shelters. What are you talking about?
I thought that was quite clear, and I'm not sure how to break it down any further for you.
I thought that was quite clear, and I'm not sure how to break it down any further for you.
I'm not sure what is causing our lack of communication, but I'll try again.
I asked you for some more details about the following:
Quote:
I would be happy to see the tax code simplified to do away with the numerous morally questionable tax shelters, particularly in instances where it appears that the corporate veil is easily pierced.
And you responded with:
Quote:
Certainly. How about claiming to operate a business that you know will never make a profit for the sole purpose of lowering your overall tax burden on income from other sources. In other words, what the IRS would classify as a hobby instead of a business.
In the previous sentence, you wrote that an unprofitable hobby could lower the overall tax burden on income from other sources. That is not correct, and I responded that hobby looses are disallowed, and not deductible, your statement to the contrary notwithstanding.
However, your statement about hobby losses doesn't address your claim of "numerous morally questionable tax shelters" nor does it address what that has to do with "instances where it appears that the corporate veil is easily pierced."
So I guess I need to be more specific.
1) Please provide some examples of "morally questionable tax shelters" (hobby activities operating at a loss isn't one). Since they are numerous, as you claim, this should be easy to do.
2) Please explain what "numerous morally questionable tax shelters" has to do with "instances where it appears that the corporate veil is easily pierced."
I'm not sure what is causing our lack of communication, but I'll try again.
I asked you for some more details about the following:
And you responded with:
In the previous sentence, you wrote that an unprofitable hobby could lower the overall tax burden on income from other sources. That is not correct, and I responded that hobby looses are disallowed, and not deductible, your statement to the contrary notwithstanding.
However, your statement about hobby losses doesn't address your claim of "numerous morally questionable tax shelters" nor does it address what that has to do with "instances where it appears that the corporate veil is easily pierced."
So I guess I need to be more specific.
1) Please provide some examples of "morally questionable tax shelters" (hobby activities operating at a loss isn't one). Since they are numerous, as you claim, this should be easy to do.
2) Please explain what "numerous morally questionable tax shelters" has to do with "instances where it appears that the corporate veil is easily pierced."
Let me know if I have been unclear.
That isn't what I wrote. I said that an unprofitable business could lower your overall tax burden, and should instead be classified as a hobby.
Morally questionable tax shelters:
-Operating a business under the premise that it will never make a profit in order to reduce your personal income tax burden.
-Writing off personal expenses by calling them business expenses when the business doesn't (or shouldn't) qualify as one.
Piercing the veil: Comingling business and personal funds, personal use of corporate or LLC assets, undercapitalization to the point where a business cannot make a profit, etc.
Do you have anything to add to the discussion or is this just going to be a question and answer session? What's your opinion on the current system of loopholes that allows the poster I was debating to continue knowingly losing money and passing the cost of his failed business on to the rest of us?
There is (or was) an IRS statistic that for every $1 the IRS spent on enforcement, they got back $X from investigating and catching all manners of fraudulent returns. The number was pretty high in favor of hiring additional IRS agents to audit tax returns, although I would imagine at some point the number would level out and then decline. I wish I still knew where to find that.
It's interesting to see attitudes regarding tax fraud. Everybody wants the services that our society is used to having, yet so many want 'someone else' to foot the bill. I would be happy to see the tax code simplified to do away with the numerous morally questionable tax shelters, particularly in instances where it appears that the corporate veil is easily pierced.
I'd be more than happy to give up 1/3 to 2/3 of these "services" in exchange for less taxes.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I am well read on taxes and so is my tax lady, she got skills. 
