Quick comment on a widely used USA tax break

Trump was widely criticised recently for not having paid taxes for a number of years. Lots of well off Americans quite legally avoid paying large amounts of taxes.

Here’s an example of how you can appear to be generous and at the same time organise for yourself a hefty tax break. Lets say I buy a little known Picasso painting at a knock down price of $10 Mil which I then donate to my old ivy league university. For insurance and other reasons the university gets an expert opinion on the value of the painting which will almost certainly be more than the $10 Mil I paid since there has been publicity and interest raised as a consequence of my generous donation. Lets say the certified valuation is $12Mil.

After a respectable period which may be as short as a few weeks the university  enters into a contract with me to hold the painting in safe keeping on their behalf and on my death to have it returned to them. So now the Picasso hangs in my lounge so I and my friends can enjoy it for the rest of my years on this earth.

Oh! The tax deal? Well,  gifts to universities are tax deductible in USA, so the $12 Mil can be written off against my income tax for as long as it takes. To keep the maths simple, if my tax liability is $1Mil pa every year for the next 12 years, I will pay no tax in all those years.

Trump had an old business loss (treated the same as gifts to universities) of about $900 Mil and that takes a long time use up, hence he legally was entitled to pay no tax until all these losses (and other tax breaks) were exhausted.

Taking advantage of such tax breaks ensures that those with lots of money will accumulate more and not worry unduly about their tax liabilities.

About tryingtobefair

More than a little interested in how we can all make the community we live in a better place. "The world has enough for everyone's need, but not enough for everyone's greed" Gandhi. Let's all learn what's enough.
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