Well, there is legal tax fraud...and illegal tax fraud. That's why number$ guys make such a good living and we bust our arses to pay our share of taxes.

True, true...I gotta get me some "loopholes"!

Send me some when you find them for the average arse-buster who doesn't own a cash rich corporation :D

No laws have been broken or blurred. The taxes will be paid so no tax laws are broken.
He is selling the building to his corp. Simply moving business profits.
He will, as said, pay capital gains on the property but avoid paying taxes on the profit needed to buy the building. It will be amortized over probably seven to ten years. The corp will take the depreciation deduction.

Not much differnt than leasing your building from yourself if you have a business.

Very smart business and personal move.

In my simple mind, I used to be incorporated and was a sole practictioner. I buy a laptop for $500 and sell it to my corporation for $2,000, I now have for tax purposes a $1,500 additional expense that I can write off against income? Nothing in the IRS code says you have to be a frugal buyer for your corporation. Now if I bought it for $500 and sold to the corporation for $2 Million, that would be another story. At least that's how I see it.

I can't see how this avoids any tax at all. If his corporation has made a $500,000 profit
this financial year then they will still pay tax at the corporate rate on that, regardless of
any capital expenditure.

They ought to be able to depreciate the buildings over time but that does not solve any
near term tax liability.

Intentionally overpaying for an asset and then writing down the value of that asset would
have to be fraud, especially in a non-arms length transaction.

Here in Australia (I think, IANAL) a capital loss can only offset a capital gain, they can't
be applied against normal operating income, at least on a personal level.

andy

Not a tax guy but here is my guess.

He receives $500K from the company on which he pays the lower capital gains tax rate instead of the higher income tax rate due if he simply paid himself $500K salary. The company's income tax is slightly decreased due to depreciating the $500K building. So basically he extracts $500K from the company with favorable tax treatment. Later the company can sell the building for $100K and the $400K loss hits the income statement, offsetting operating income and thus reducing the company's income tax. For a company, I think gains and losses on selling property are netted against operating income, there is not the distinction between "ordinary income" and "capital gains" that individuals have. It is not kosher since the transaction has no business purpose, but he figures he'll get away with it. That's my guess.

It is only illegal if you get caught. Off setting taxes is a normal part of business. Doing "obvious" stuff like this is not. Since this is huge and very different than "normal" for the busines, I expect it will trigger an audit.