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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 19, 2010
The situation: As a congressman, and especially because of my committee assignments, I see just about everything that people try, in an effort to avoid or minimize tax. Sometimes because of promoters who sell transaction packages, and sometimes because of under-informed tax advisers, this or that tax-avoidance strategy will be foisted on well-meaning taxpayers as the cure-all in every situation. Over and over, from what I hear, promoters tell people, "Sign these forms and follow these instructions, and you can defer/avoid/minimize tax." The promoters give the impression that the tax outcome is just a matter of using the "right" forms, which, no coincidence, the promoters can sell.
The promoters typically attach a trade name to their forms. They publicize that tradename as though reality and intention don’t matter, and as though tax outcomes were only a matter of labels. They advertise that trade name until eventually the IRS works its laborious way to them and exposes the subterfuge for what it is.
Then, when that happens, it’s not unusual for the promoters to adopt a new trade name, change this or that little feature of the forms, and then start all over with a re-named strategy that, once again, purports to be the formulaic solution for every taxpayer. Again, they will run ahead of the IRS for a while.
It’s entirely appropriate for taxpayers to minimize their tax cost within the bounds of the law. Believe it or not, I’m actually in favor of letting everyone minimize their taxes, as long as they play by the rules. When they mess up, though, it’s unpleasant for them and unpleasant for me, when I have to hear them complain that they were misled. Can you do anything to help to caution people to stay away from promoters’ formulaic tax schemes?—Congressman
Editor's Comment: Much trouble has resulted for many taxpayers who have been told, "Just sign this," to reduce their taxes. Often the resulting trouble for the taxpayers occurs when the IRS audits them, but probably the greater problem is the mess that is made of how the taxpayers conduct their daily business and receive their income.
Much of the problem is caused by promoters who seem to believe that one size fits all, when, really, that’s hardly ever accurate. Just as every person is unique, every person’s business situation is unique, and every business transaction should be uniquely fitted to that person and that business situation. Only in that way can the best outcome for both business and tax purposes be envisioned, let alone achieved.
If I can achieve nothing more than help people to learn to stay away from tax-strategy promoters and to turn, instead, to constructing real business transactions with real opposite parties with real business benefit for the particular situation quite apart from the tax effect, then I will have the great sense of satisfaction that comes with a job well done—and the taxpayers will have the best prospect of achieving the greatest tax efficiency, as well.
Remember this good advice: one size fits one.—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.