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Comment by darawk | Hacker News Reader

Man I am so glad someone is saying this. This was exactly my reaction to this article. ProPublica normally does relatively good work in my experience, but this piece just basically boiled down to: Did you know that you don't have to pay capital gains tax until you sell? And rich people often don't sell for a long time?

I mean, it's a useful facet of our tax regime to understand. And it's an important part of how rich people end up paying a much lower tax rate than others. But the idea that this is some nefarious scheme that they've uncovered by stealing Jeff Bezos's tax returns is....just completely ridiculous. Anyone who understood the US tax system even a little bit should have known that this was exactly what was happening.

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Kinda - although CGT is at a much lower rate than employment income, and you can write all sorts of expenses off against it. I mean, I had to go to Mauritius for a week to sell those stocks, and the entertainment bill was huge. Oh and look no tax.

Oh and you can write off unrealised losses against realised gains.

"and the entertainment bill was huge"

Is that how it works though, 'even' in the US (where in my understanding there are a lot more options for deductions than in the European tax systems I have experience with)? Can you just deduct any expense that you can somehow however far fetched are connected to your investments? Usually once you start looking into the details, it turns out that it's not so outlandish as people (in the camp of the Pro Repulica piece, i.e. the 'tax others more' crowd) try to make it seem.

Entertainment was a poor choice on my part - it’s the hardest expense to justify, if you’re audited, but in the U.K. at least, you can write an awful lot off against costs of acquisition and disposal. For example, you can claim the mortgage interest on your primary domestic property as an allowable expense, as you can argue that you took the mortgage in order to finance your capital activities.

> Kinda - although CGT is at a much lower rate than employment income, and you can write all sorts of expenses off against it.

Ya, definitely. Although Biden's tax proposals may change that. If ProPublica wanted to put out a piece arguing for a higher capital gains rate, i'd be totally fine with that, but that isn't what they did.

> Oh and you can write off unrealised losses against realised gains

I don't think that's true, at least not in the US. Do you have a citation for that?

To be fair, it’s not directly true, but it’s commonly done. You just start an offshore trust, sell the loss to them, by which means you realise it (even though you’ve just moved where it sits in your network of entities), and you can then write it down.

This definitely sits in “evasion” rather than “avoidance”, but it’s such a common practice that accountants recommend it like it’s just another normal service they offer.

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