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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
September 19, 2011
In The Latest Installment posting on June 18, I wrote about the latest inflation figures as of that time, which showed an inflation rate of 3.6% for the 12-month period ending in May. I contended that it was comparable to a 3.6% tax increase.
It turns out that the inflation rate for that 12-month period was not a fluke, and the inflation numbers are continuing to edge upward. As shown by my chart here, the 12-month inflation rates have held or risen since then.
The new monthly numbers are even worse, however. The inflation rate for July, if it were to continue for 12 months, would be 6.2%. The rate for August, if it were to continue for 12 months, would be 4.9%.
So, the only reason why the rate for the latest 12-month period is as low as it is, is that it is reduced by the much-lower numbers of a year ago. Those much-lower numbers are no longer with us, so the annualized inflation rates are headed upward.
I wrote on June 18:
"As taxpayers, there’s one more way to fight inflation, for those who are considering selling any capital asset: sell it in an installment sale—particularly a collateralized installment sale—so that you can pay the tax many years from now in those much-depreciated dollars. That is one way to fight back, so that while inflation eats away at everything else, at least it will eat away at the money you pay in taxes, too.
"I prepared the accompanying chart [both the one I posted in June and the one here today] from the government’s statistics, because I think the chart clearly shows how serious the problem is. Every American should see it."
It’s even more serious now. Furthermore, if the government is going to promote inflation as a cheap way to reduce the burden of the federal debt (and to reduce the value of everything we own), it’s only fair that we respond by paying our taxes in later years when the money will be worth less than it is today.—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.