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EmperorArthur t1_j1gwawb wrote

Reply to comment by Taysir385 in IRS delays rule change for people who get paid on Venmo, Etsy, Airbnb and other apps by TerpFlacco

Umm, let's change things around a little, and you'll see why what you said is insane.

Say I set up an LLC. It's whole purpose is to own q TV for me.

Now that LLC then immediately goes into debt. I loan it $500 in cash. It then uses that money to purchase the TV I want for $500. So, far were still good at net $0 for the company.

Five years pass, and I don't do anything else with that LLC. Depreciation means that the Company's balance sheet is technically negative. Depending on what carryover loss rules are, the company might still be able to sell the TV and still not pay any taxes.

If anything I described is illegal I'd love to hear it. My guess would be loaning my own company money, but that sort of thing seems to happen all the time.

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Taysir385 t1_j1h6sgy wrote

> If anything I described is illegal I'd love to hear it.

Strictly, there are limits on how much and how often you can claim a loss or zero for a tax year sequentially, but that’s not picking.

The difference here is in how the item is categorized at its purchase. Although corporations, including LLCs, are legally considered individuals, the law and the tax code recognize that a person who exists only as a legal non corporeal entity doesn’t do things like watch TV for fun, and that assets purchased by an LLC are therefore generally treated as stock or tools or money making equipment and not as discretionary spending.

You could, as an individual, purchase this TV specifically as an asset, and then deprecate its value over time and modify the taxes due thereby. You would technically be required to quantify the Monterrey value extracted via use, but it’s hard to put a cash value on you watching a show (it’s much easier for something like a car, where value and deprecation are given very specific values.) Ypu would still have some restrictions though, as you’re only acting as one legal entity. Making an LLC does get around this, as would having a roommate (or even a child who files taxes) do the same thing.

You’re treating this situation as though it’s the same, but it’s not because that tax code is literally different for this specific example you’re using. Which is crazy, I’ll grant your but there it is. The garage sale guy though did not set up an LLC, so your theoretical situation does not apply to him. Not did he (presumably) file taxes with an itemized deduction and deduct against business costs, and so he owes taxes on those sales. It’s possible that he would have less of a tax burden if he did file itemized, but even if that’s that case he would still owe taxes on those sales (it’s just that the amount of those taxes would potentially be offset by prior costs).

But you shouldn’t take any advice about taxes on the internet at face value. If you have questions about taxes, you should always consult a licensed tax specialist.

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