Bailout / Stimulus Discussion (Hints Missed & Shartz Fired)

Yang :hugs:

https://twitter.com/NawazCrypto/status/1243572674930053126?s=20

@Riverman (or maybe @bobman0330) , can you help me understand something? I see language characterizing depreciation as an “only-on-paper” loss, with the implication that there’s something inherently wrong with allowing taxable income/losses to incorporate depreciation.

But if you look at non-real estate assets, deducting depreciation for tax purposes is obviously fine, even though you could characterize that depreciation as “only-on-paper” in the same way. So what’s the difference?

If the argument is that the real estate assets aren’t really losing value, that doesn’t seem like a huge deal, since (presumably) when the owner sells the asset, their gain will be based on the depreciated basis rather than the original cost.

I’m confident that real estate owners get favorable treatment in the tax code, I’m just don’t understand exactly what that favorable treatment is.

(Note that I’m not asking about allowing real estate losses to offset other income. Just how those real estate losses are calculated.)

Narrator: he did not sign it

It wouldn’t matter it has way more than enough to get past a veto.

1 Like

This just means corporations will get the $1200 on top of everything else they’re getting

1 Like

Yes but imagine if Trump went on Twitter to say I HEREBYE DECLARE THIS BILL VETOED

2 Likes

There’s a few things going on:

  • The excess business loss provision isn’t just for real estate. Interestingly, I had a big project at the end of last year where a founder was selling an S corp and was going to pay out ~10% of the purchase price as comp, generating a huge ordinary (and genuine) deduction. However, that would then flow through to the shareholders, reduce basis of the S corp stock (and increase cap gain from the sale), but then get suspended at the individual level for a year. Then reappear next year as a useless NOL when the founder has retired to a beach and doesn’t have any income. So we figured out how to keep the deduction of the S corp return, and now they are calling back wanting to reverse the planning somehow…

  • Anyways, it’s not just real estate, but real estate has special treatment under the passive-activity rules, so many of the deductions that are most upsetting to people who get upset about such things are real estate related.

  • But more importantly, real estate depreciation is harder to justify than personal property depreciation. One, as you note, buildings hold their value or appreciate a lot of the time. And the fact that gain is computed from the depreciated basis is not close to a complete offset for two reasons. First, paying tax on real estate gain is fairly easy to avoid via like-kind exchanges, roll-up transactions, etc. And if you die holding greatly appreciated real estate, the gain disappears. Moreover, even if you do recognize the gain, the recapture is taxed at 25% even though the deduction is at ordinary income rates. So there’s a permanent rate arbitrage.

  • Excess business loss in general is a dumb provision. It just suspends the loss for a year, so the impact is normally just a minor timing difference. I suspect, but haven’t really thought about too hard, that it was a budgeting trick as much as anything.

1 Like

This is all well and good, but I’m sure you can imagine what would happen to rents if we did away with real estate depreciation.

Those “paper” losses keep many small landlords in business.

Lets be clear, there is no proposal to do away with real estate depreciation, the actual policy change deals with a 500,000 dollar annual cap on applying the deduction against non business income. This is not a matter of proper accounting for midsize real estate firms, it’s a pure handout to the top 1% to help them shelter more capital gains.

3 Likes

I heard the bill will extend unemployment to gig workers and self employed who claimed Schedule C income, $600 + half of state max. This is huge for me and I thought I was stone dead to get it.

2 Likes

Same. I’m still not convinced I’ll get anything though

Any link on details on this? I’m really unsure how this might work for a poker pro, or if there’s a chance in hell it will. I mean, no way I could apply for state unemployment as far as I know. I file self-employed on a schedule C. If/when the online games dry up, this may be something I have to look into. They’re already way tougher than they were a few days ago. Hoping the weekend makes a difference, but with everyone at home I’m not sure it will.

I would suspect that most of the burden of reducing the tax benefits of depreciation would be borne by property owners via a decline in capital values. Moreover, if small businesses are reliant on tax subsidies, they need to go out of business. My tax dollars shouldn’t be subsidizing your tenements–turn the keys over to a real landlord who can balance the books!

These fuckers.

https://twitter.com/matthewstoller/status/1243626367092219905?s=20

2 Likes

Depends on if Congress members bought United stock before giving them billions with no conditions. In that case, is it Congress that are morons or the people that will vote them right back in next time?

2 Likes
1 Like

California governon Newsom announces moratorium on evictions effective immediately. Those who take advantage will still need to pay their missed rents “in a timely manner” after moratorium ends.

1 Like

They aren’t morons…

1 Like

Well how else can you explain the pattern where these Congress members who receive lavish donations from the super rich keep enacting legislation that makes life better for the super rich and worse for everyone else?

2 Likes