patrick.net

EBGuy Says:

> @DinOr, you’ll like this one. At socketsite there is a
> commercial landlord who wants to get out of the business.
> The plan is to 1031 exchange into SFH rentals, then live
> in each serially for two years to claim The Exemption.
> Nice way to avoid cap. gains and CA taxes…

This will work and is completely legal (if he actually lives in each property for two years), but it will probably not save him much money (even if home prices stay constant). If he had a $3mm commercial property and bought 6 $500K homes he would have a huge amount of negative cash flow over the next 12 years.

I know of about a dozen families that have sold rental homes telling the IRS that they lived in them to get the $500K tax free, but I only know one family that “actually” lived in the rental for two years (and I did have one friend who got to “rent” a big home in Atherton from his parents for 18 months since they wanted to keep their home (where my friend grew up) in West Menlo as a rental and sell a crappy rental home in Redwood City doing a 1031 exchange to buy the Atherton home).

This will work and is completely legal (if he actually lives in each property for two years), but it will probably not save him much money (even if home prices stay constant).

Perhaps people just HATE tax so much they will pay anyone but the IRS.

But why won't they support Ron Paul?

Believe it or not, I believe the capital gains tax is one of the fairest taxes if you must have taxes.

Possibly. But one thing to consider is that it becomes an inflation tax if applied to an owner occupied home (I am assuming you mean the tax itself, not the 20% rule). If one must relocate and thus sell his $250k home and purchase another $250k home, it would be unfair to hit him with a cap gain tax just because he only paid $180k for the original home 7 years ago. He stilll must buy at today's prices, thus no real gain.

but you still need to pay the depreciation recapture.

I believe the plan was:
1. "1031" 5 smaller rentals into one big rental
2. Rent out the big house for two years
3 Boot the tenants and move in. (This will trigger the recoup dep.)

Perhaps people just HATE tax so much they will pay anyone but the IRS.

But why won’t they support Ron Paul?

Because people don't want to pay tax, but they want to benefit from other peoples taxes. Ron Paul would lower taxes and corporate/personal welfare.

Administrator Says:
One more bit on medical costs (should I start a medical cost blog?)

A medical costs blog sounds like a good idea.

However, one thing I was thinking of requesting from you was a place where we can collect quotes and predictions (with dates) from L. Yun and LAY, maybe even Kudlow and Cramer.

For now, just a tabular chronological form would be sufficient. Later on, you can use them to annotate a graph of the market to show exactly how misleading their statements were.

Idea for what to do with the $800 Bush sends you this spring:

BUY 1 GOLD EAGLE.

What if everyone in the USA did just that???

Unfortunately by that time you will probably need to keep in a few hundred more USD.

These cap gains games really PO me personally. I actuall lived in my SJ home for 25 years, then got stuck paying cap gains on the amount over $250K because I'm one of those dirty disgusting single people. Whereas a married couple could "play the game" in 2 years and skate tax free up to $500K.

keep = kick

Peter P Says:
January 18th, 2008 at 3:48 pm
"We do not charge sales tax to many essential items (like food and rent) anyway. I do not know how it is a burden on the poor."

Not true, that is the case in CA, many states charge sales tax on everything. There's also no way you can tell me that sales tax amounts to a higher percentage of a poor person's income. Who cares about your point that it isn't charged on food? If a poor person buys a laptop for school they have to pay the same as I would. Rich people don't spend 100% of their incomes, that's why they're rich, you're confusing rich people with the pretend to be rich people.

ex-sunnyvale-renter Says:
Now, USA is like old USSR - only worse

Absolutely wrong. I was there in '74 and '86. It was _nothing_ like the USA. Don't be ridiculous.

DennisN Says:
January 18th, 2008 at 4:20 pm
"These cap gains games really PO me personally. I actuall lived in my SJ home for 25 years, then got stuck paying cap gains on the amount over $250K because I’m one of those dirty disgusting single people. Whereas a married couple could “play the game” in 2 years and skate tax free up to $500K."

Why can't you count your blessings that it wasn't another time when you would have paid on the entire gain at the income rates? You didn't have to split the gain with anyone so you really didn't get shafted. In reality you came out ahead of someone who does have a wife.

I did have one friend who got to “rent” a big home in Atherton from his parents for 18 months

Sounds like they may be flirting wth "Vacation Home Rules."

I know of about a dozen families that have sold rental homes telling the IRS that they lived in them to get the $500K tax free

Depressing. Woudn't they also have to not declare the rental income they recieved while they "lived" in the home, for that scam to add up?

Paul if you really feel that strongly, take a credit card and buy the coin now.

ex-sunnyvale-renter Says:
the best way to cure the problems in Hunters Point would be to fence it off, and drop in tons of guns and ammo. Give them 6 months. You might get 5 people left lol.

And oddly enough, that would also be the best way to deal with ignorant white-supremacist shitheads. Funny how that works out, lol.

How much do you need to quit your job if you are single and live as you wish (though frugally) for 10-15 years? I don't see any point for a man to live beyond his fertile age.

PermaRenter Says:
Wall street is disappointed with size of president’s stimulus package

Laura says the same thing too.

>> Laura says the same thing too.

Funny, I did not think of this angle. Is it related to drinking habit?

Guys,

Tell me why you got married. Were you coerced? Were you feeling hopeless? Or were you the one driving the whole deal?

EB, the cap rates are so low on anything he would exchange it for that it still doesn't make sense. I can't find a property that will earn more than 5% (cap rate is the income stream on the house excluding financing). He has to screw around and risk actually losing money for 5 years verses just paying the tax and being done with it.

got stuck paying cap gains on the amount over $250K because I’m one of those dirty disgusting single people.

Well DennisN, maybe you could have "gamed the system" by marrying one of those Russian mail order brides just prior to closing. Possibly from one of those companies that advertised Russian Brides on this blog.

Rich people don’t spend 100% of their incomes, that’s why they’re rich, you’re confusing rich people with the pretend to be rich people.

Rich people (those who 1031 into new jets every 5 years) are not the same as high-income people (those who pay high fees for charter jets).

Rich people enjoy life AND make money out of it. (e.g. fully "depreciating" a jet in 5 years AND getting more money from the sale than the original purchase price.)

High-income people are "professionals" who must catch up. They pay dearly for their high lives and many of them are near bankruptcy.

If he had a $3mm commercial property and bought 6 $500K homes he would have a huge amount of negative cash flow over the next 12 years.
Why is that? Shouldn't rents be able to cover taxes and upkeep? About the only negative I could see to the plan would be signifcant depreciation over that time period (which, even now, seems unlikely).

@ Headset
Well, the only way to totally avoid depreciation recapture is death; your heirs will thank you :-) Just ask FAB (assuming he outlives his parents)!

Didn't even need to marry anyone, just add someone you trust to the title as a tenant in common. No one would have questioned it.

Idea for what to do with the $800 Bush sends you this spring:

BUY 1 GOLD EAGLE.

Sorry, $800 will not buy you one ounce of gold.

even on those jobs now I realize, I could have saved money.

In the early nineties, I was paid $822 per month as a stipend in grad school.

I managed to save about $200 of that every month by sharing an apartment with other grad students, cooking my own meals and walking everywhere.

Tell me why you got married

Because she can cook. Everything else is available when your single. Even classy women will sleep with you before they will make you a home cooked meal.

Why can’t you count your blessings
Hey, what fun is life if you can't bitch and moan?

The point is that it's unfair to tax someone based on their sexual parnership arrangement. I'm not FOR gay marriage - I think the government should butt-out of heterosexual marriage. Leave it to be between the couple and their religious organization.

Really the "fairness" issue which taxes differently long-term vs. short-term cap gains is that it's a crude attempt to make up for inflation.

Say you have money in the bank at 5%, but inflation is 4%. It's blatently unfair to tax the whole 5%. You should only be taxed at the amount ABOVE the inflation rate, as the amount of interest below the inflation rate is NOT really "income".

The government tax-tables should include an inflation percentage, so you would only pay "income tax" on amounts in accounts above the inflation rate. This would go for demand accounts, mutual funds, stocks, etc. If you held an asset for X years, then you could track inflation over the years and make an accounting thereby.

Since I lived in my SJ home from 1981-2006, and say inflation rose 150% during that time period, it would be more fair to raise my original purchase price by 150% before subtracting it from the sale price to get a "capital gains" amount subject to taxation.

Peter, you're garnishing a bad point with some truthes. On any depreciation schedule of an asset if the book value is exceeded on the sale it is a gain. If the jet is in a business, the depreciation, yes is deductible, but obviously buying a jet for a business has a pretty good effect on the economy. The jet is also subject to property tax, and jets actually hold their value pretty well.

High income people have to catch up because many times they are idiots. Rather than focussin on amassing true wealth, they want to show it off. It amazes me how many people are out there that earn many times what I earned at my best jobs who are broke.

Did you see this movie "Mad Money"?

http://www.madmoneymovie.com/

Steal your way out of debt? This will make you 'Mad'
By GARY THOMPSON
Philadelphia Daily News

thompsg@phillynews.com 215-854-5992

In "Mad Money," Diane Keaton plays a suburbanite who turns to crime when she discovers she's $280,000 in debt.
She drives a Land Rover, her husband drives a Lexus, they live in a house that's worth probably $2 million and is well-stocked with posh furnishings.

Now it's true that we don't know how much of this stuff is paid for, but it's strange that Keaton and her downsized husband (Ted Danson) move directly past belt-tightening to outright theft as a means of achieving solvency.

Stranger still that director Callie Khouri tries to position Keaton as some kind of populist hero, sticking it to The Man and to a system that asks more and more of working folk while giving them less and less in terms of benefits, salary and security.

It's health insurance that Keaton's character is seeking when she takes a job at a federal reserve, where federal workers take worn-out currency and burn it.

Keaton (along with fed-reserve colleagues Queen Latifah and Katie Holmes) devises a scheme to steal small parcels of wrinkled cash, due to be shredded, so that over time a great fortune is accumulated.

"Mad Money" is a politicized attempt to make a comedy out of the middle-class squeeze - much as Jim Carrey's "Fun With Dick and Jane" remake tried to do a few years ago.

Because she can cook.
That's not a good enough reason for me. We have different criteria. I for one am rarely turned out by classy women. I like the wild, unruly (but pretty) ones, women with higher-than-average T.

Dennis, gay partners would not pay any extra penalty if they each own half the house. And yes, when you have nothing better to do, go out and bitch about someting, I'm all for it. Hell, I'll even march in some anti tax march right along side with you if you catch me on the right day.

I managed to save about $200 of that every month by sharing an apartment with other grad students, cooking my own meals and walking everywhere.

SP, I'll bet you had a great time, too. At that stage in life, you don't need money to have fun.

Indeed, those were good times. I bet army life was like that, too.

On any depreciation schedule of an asset if the book value is exceeded on the sale it is a gain.

What if it is 1031'ed into another asset?

The inflation tax you mention is something I agree with you on. Let's start our petitioning. At least that is tax on passive income so we don't pay FICA on it. The system does have a design to it. The CA tax return is really creative I think, there are some federal deductions that you have to "adjust" back into you income. I do have to admire the creativity.

My ideal arrangement (for when I lack sufficient funds):

A woman in her 20's, submissive, good cook, thorough cleaner. She lives in a small shack nearby. Comes to cook my meal every night. Clean once a week. Once a month, I give her some joy that she passionately desires. She doesn't talk. She disappears when I don't need her. She secretly resents the women I bring in but still considers her position with the best she can ever get and her duty to serve me, because I am the man, her lord.

It is temporarily sheltered until the final judgment day! You have to pay the piper sooner or later. It has to be a similar asset which is why 1031s are stupid for the most part, unless you just want a different colored jet, or a different house. I don't even know if it applies to jets I'm just talking out of my ass.

>> A woman in her 20’s, submissive, good cook, thorough cleaner. She lives in a small shack nearby. Comes to cook my meal every night. Clean once a week. Once a month, I give her some joy that she passionately desires. She doesn’t talk. She disappears when I don’t need her. She secretly resents the women I bring in but still considers her position with the best she can ever get and her duty to serve me, because I am the man, her lord.

You can get a Thai woman ... have you visited Thailand?

It is temporarily sheltered until the final judgment day! You have to pay the piper sooner or later.

Why would a rich guy ever NOT need a jet? :)

Quoting this website:

https://www.1031cpas.com/aircraft_exchanges.htm

Aircraft are generally like-kind to any other aircraft under the General Asset Classes or the Standard Industrial Classification (SIC) guidelines.

Not tax advice