Tag Archives: Guadalajara

A Big New Tax Break?

A big omnibus spending bill went through Congress in 2015, just before the end of the year. It was reported to be in excess of 2000 pages in length. I do not believe that it was physically possible for any of the Congress critters to actually read it in the time available.

A report came from Russia that this bill contained an unbelievably generous provision. I do not know how the Russians got a copy of this bill, or how they divided it up so that multiple people could each read a certain number of pages. The generous provision related to the sale of real estate by non-residents.

Let me explain how real estate sales by non-residents are handled. If there is a capital gain the government wants to tax this gain. They do not want to have to chase the vendor to Timbuktu for the money so they grab it during the sales. The notary or lawyer who is handling and registering the sale sends a fraction of the proceeds to the treasury and issues a statement to the vendor showing the proceeds and the tax withheld. The fraction is chosen, in this case by the IRS, to make sure that there will be a refund.

The vendor fills out a tax form, in the case of an individual a 1040 NR, and reports the sale, the cost base, the cost of improvements, the real estate commission, and all other related costs. He or she asks for a refund. The Canadian procedure is similar, but the vendor has to file two returns asking for refunds. As always, the IRS and Revenue Canada have similar intentions but express them in slightly different ways.

The claim made by the Russian observer is that this process is to change so that these sales will no longer be taxable. They stated that this was a gift to the Saudis for backing the present president. This does not make sense, since the current president seems to be backing Iran instead. In fact his most trusted assistant is an Iranian citizen and her parents still live in Iran. The former Secretary of State similarly had an Iranian as her closest adviser.

On further investigation this is not quite correct. There has been a rule for the last 35 years that adds an additional tax on real estate sales by foreigners or foreign companies. Some purchases were made by corporations that were set up especially for this purpose and placed the foreign owners in minority positions.

The reason for this new provision is to encourage foreign ownership of US real estate to keep the bubble growing.

If you are a non-resident thinking of selling US real estate this year at a profit, please look into this.

I am on the IRS mailing list and I am very interested in following up any action that they take on this. I will be reading their email much more closely than in the past, just to see if they are really going to do this.

Asset Seizures

Many governments are desperate for cash. The asset seizures are examples of what governments will do when they need cash. Do not expect the IRS to miss this fact. I am posting this to make sure that you understand just how much they want your money.

Several cynics have said that there is no reason to go into politics unless you want to spend other people’s money. There are far too many politicians who act on this viewpoint. They do not consider taxpayer funds as being real money. The final result is, as you might expect, that many if not most government bodies spend far more money than they can obtain by legal means. The amounts involved are much larger than the average person can comprehend and this results in even more spending.

Many years ago I heard a story about a fellow who was a bit of a spendthrift. Someone asked him why he did not live within his means and he replied that he was having difficulty living within his means PLUS his credit. He was the archetype of many government bodies.
This has resulted in borrowing ridiculous amounts of money, in many cases far more than can ever be repaid.

It is not only federal and state governments who have done this. Unconfirmed reports say that several cities are still paying interest on bonds that were sold to raise money to build sports stadiums that have already been demolished. It is hard to see that cities have any business building sports stadiums in the first place. The team managements convinced the city fathers that a new sports stadium would make the city appear to be big-league, and that the team should get a tax break as well. This lasts until the team manages to sucker in another group of city fathers. Then they move and the stadium becomes a white elephant.

The state and federal governments have borrowed as much as they can and now they have decided to take over the business that the mafia have lost recently. They are going into theft in a big way. According to the Washington Post the amount stolen using various asset forfeiture schemes is more than the amount stolen in burglaries by a margin of 4.5 billion to 3.9 billion. These forfeitures are illegal under the 4th, 5th, 6th, and 7th amendments to the US Constitution.

This is often stated as being a part of the War on Drugs. The Departments of Homeland Security and Justice have provided training and financial support to train police officers in how to engage in the practice of “highway interdiction.” This involves using minor infractions as excuses to stop citizens, request warrantless searches, and seize cash.

These remind me of something that happened in the 1950s. There were many speed traps set up on the highway that went from the northeast to Florida. A magazine, possibly Popular Mechanics, published a big article describing every one of these. They told drivers where to slow down so that they would not get a speeding ticket for disobeying a speed limit sign that was hidden behind a shrub or something similar.

Attempts are now being made to nationalize retirement accounts. A new type of retirement account called MyRA has been announced which consists almost entirely of lending money to the federal government, although they said that it was simply to buy government bonds.
FATCA’s purpose is to keep track of any funds that US taxpayers manage to get outside of the US. The net result has been that many financial companies all over the world have closed out all accounts owned by US taxpayers and refused to open new ones for them.

Several months ago James Dale Davidson, who is an international investor among other things, reported that he had tried to wire money, probably a couple million, from his bank to make an offshore investment. He had made many similar international investments in the past, but this time his banker told him that he, the banker, would go to jail if he allowed Davidson to make this investment. Apparently someone in the Treasury Department thought that if he wired this money offshore he might not be wiring it back. The fact that Davidson had paid US income tax on offshore investments many times in the past was not enough to outweigh the fear that he might not bring this one back.

There are several big problems associated with “highway interdiction.” One of the most important it that it destroys trust in police. The basic idea behind police activities is that the citizens will notify the police when they see a crime being committed. Someone who has been robbed by a police officer is much less likely to do this.

One important step that you should take is to never ever give an officer permission to search anything on your person or in your car,

An international body has suggested that all governments should levy a one-time-only 10 % wealth tax to get money to keep their spendthrift ways going. If this actually happens it will not be one time only. It will be announced that way but then it will be repeated a few more times.

It is difficult to see how voters can rein in the big spenders in legislatures. The only method that I know of is to follow the advice of Martin Luther King. A group of black people came to him and said that they were now registered as voters but they had to choose between two white segregationist candidates. He told them to vote against the incumbent. This worked so well that there are probably only a few people under the age of 60 who have ever seen the name of a white segregationist candidate on a ballot.

I would like to suggest that you consider following this procedure next year.