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176. Does an Installment Sale Defer the Tax on Recapture of Accelerated Depreciation? No. Can the Tax on Recapture of Accelerated Depreciation Nevertheless Be Deferred When an Installment Sale Occurs? Yes.
162. Transfer a Family Business to the Next Generation During the Parent's Lifetime, Retain an Asset for Income, Give the Transferee a Stepped-up Basis, Defer the Gain on Sale, Support the Parent with Deductible Rent, and Finance the Transaction, Too
May 30, 2011
On Chris Wallace’s "Fox News Sunday" show on May 29, Chris Wallace interviewed two members of Congress about their differing approaches to dealing with the federal deficit. One of them, Rep. E______, whose name I’ll withhold here to spare the person’s embarrassment, argued in favor of raising taxes (raising tax rates on income of the "wealthy", raising the estate tax, and taxing capital gains as ordinary income) on the ground that the wealthy "haven’t put that money [money they haven’t paid in taxes] back into the economy". Rep. E______ argued that the way to put that money back into the economy is to use taxes to take the money from them.
Where does Rep. E______ think that money is now? Under a mattress? Stacked in thousand-dollar bills on the coffee table? Buried in a five-gallon can in the back yard?
It should be obvious to any sentient person that money that isn’t paid in taxes is put to work in the economy as either spending or investment. Rep. E______’s argument reflects a reactionary, ideological doctrine—not thought—that the only money that accomplishes anything is the money that government takes, controls and spends. It holds that private spending is waste, but government spending is inherently beneficial. From that opinion follows the quite inevitable conclusion: taxes should be as high as possible (as should government spending, of course).
This reactionary, ideological doctrine depends upon denial of another clear truth: that the velocity of money is greater in private hands than it is in the government’s hands. Another way to say that is that money "turns over" much more slowly as it goes through the government’s collection, appropriation and bureaucratic processes than it does in private hands, with private decision-making. Therefore, money spent by the government is generally less beneficial to the economy than is money that is spent privately—a conclusion that is demonstrable without even getting to the question of whether allocation of that spending is accomplished more efficiently through the market than it is through government decree.
When S.Crow Collateral Corp. enables tax deferral through a collateralized installment sale, we are directly helping more money to be put to work in the private sector, for greater economic growth and more efficient allocation of money—money that isn’t hidden, stacked or buried. When we help you to defer your taxes, we help you to put your money to greater use, for you and for the economy as well.
If all of us could have a button on which we could click to express our "like" or "dislike" of statements made by politicians on television, and if the results would immediately show for everyone to see, maybe the amount of political silliness would decline. One would hope so, anyway.—Stan Crow
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The Latest Installment addresses situations, questions and issues which are brought to us in the course of the consideration, negotiation or execution of transactions. We don't use the real names of parties to transactions, and we may edit the statement of the question to try to tell the story better. Please feel free to comment, or to take issue, or to raise your own question or situation. If you do the latter, please do not relate any confidential information.
The Latest Installment blog is edited by Stanley D. Crow, who is president of S.Crow Collateral Corp.