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"‘Our main priority is to highlight the large number of empty buildings in London and to try to ensure they don’t go to waste when there are so many homeless people,’ Jed Miller, one of the anarchists who appeared in court to argue against the eviction, told journalists in January 2017.

These offshore companies which own so many empty buildings in London are using them to minimise their tax liability."

It reminds me of how some think that the rich can donate and earn a net gain though the reduction in tax.

This is actually true?

  • It's possible to make money with a real estate investment even if there is no tax benefit, and on fact even if there is a tax burden. But that's not the claim in the quote, which only says they're minimizing tax, not that they're eliminating it altogether, much less that they're making money on the deal. – phoog Jun 7 at 7:34
  • I've never understood this idea that it's profitable to hold onto a tangible asset for the sole purpose of reducing taxation. It would seem to me that the asset is much more valuable either for usage or sale. The only guess I'd have is holding it for future appreciation while getting the tax benefit rather than doing it solely for the tax benefit. – Bob Baerker Jun 7 at 11:27
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When a company buys property, can it reduce tax to the point of achieving a net gain?

That makes no sense. It would indicate reducing the tax MORE than you have to pay (hence net gain).

This is not the goal. The goal is that INSTEAD of paying taxes, you get property. Even without net gain - this will possibly appreciate (investment) or generate revenue while the tax is always lost and definitely you do not get revenue on taxes paid.

There is no need for a net gain - the goal is to MINIMIZE THE LOSS.

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The arguments quoted in the question have always seemed to me silly beyond belief.

Fundamentally - there is no way to make money by throwing away money and using the tax system to get more money than you threw away.

To give a numerical example: if the taxpayer buys something for $1,000 - the absolutely best case scenario is that the tax system in which he operates allows a complete, 100% tax credit for the cost of purchase against tax liability with respect to income earned by that taxpayer during the same tax period. Again - credit, not deduction. And even in that best case scenario, the taxpayer just gets the $1,000 back from the tax authorities - not a net "gain".

In other cases, the best case scenario is that the taxpayer gets a 100% complete deduction for the cost of purchase against tax liability with respect to income earned by that taxpayer during the same tax period. So, assuming the effective tax rate for that period is 40%, the taxpayer gets back $400, and is still out of pocket $600. Definitely not a "gain".

And in most cases (and definitely with real estate, AFAIK), the taxpayer only gets to depreciate/amortize the cost of purchase over a number of years using a particular depreciation method provided by applicable tax law. So if the law provides, for example, for a 20% annual depreciation deduction and the same 40% tax rate is in effect, the tax benefit to the taxpayer is only $80; so out of pocket this time is $920. And to make matters worse - in many real estate tax depreciation systems, the taxpayer has to carve out the portion of the $1,000 purchase price attributable to the land underlying the structure, and that portion is not amortizable/depreciable. So the effective tax benefit is even (far) less than $80.

I would be more than happy to be educated on how someone can spend $1,000 and immediately get back $1,001 from the tax authorities. I know quite a few people who'll jump at the opportunity to do just that...

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