voyageur77

voyageur77 t1_j8v1aae wrote

A private foundation cannot own more than 20% of a company, so no, you can't pass control over the board of a business to your kids this way. And there is no tax advantage to Coca Cola paying farmers through a charity. They could pay directly and deduct it as a business expense anyway. What tax do you think this is cheating on?

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voyageur77 t1_j8un919 wrote

You aren't explaining the "basics", all of your info is completely wrong. That's why I stopped responding to you, but I guess I can do one more.

You say that putting a business into an entity avoids estate tax: wrong, the value of the entity is still subject to estate tax. You say transferring "control" of the entity instead of giving the business at death doesn't count as inheritance and avoids tax: wrong, you would just owe gift tax instead of estate tax at the exact same tax rate, AND lose the step-up in tax basis from inheritance. (By the way, inheritance tax is not the same thing as estate tax, you seem to be mixing them up). You think Musk gets to write off donating $2 billion of stock to his foundation: wrong, the deduction for giving stock to your foundation is limited to 30% of AGI, and his AGI is not that much. You say the foundation can spend its money to increase the value of Tesla: wrong, it is illegal for a foundation to promote a for-profit business instead of charitable purposes. You say the foundation then spends its money on lobbying: wrong, it is illegal for a foundation to do a significant amount of lobbying, and any lobbying expenses have such a high penalty that basically nobody does it.

These are all actual IRS rules that exist. You have no sources for what you're saying because it doesn't exist in the real world. Where did you hear this stuff anyway, it has to be either Reddit comments or TikTok?

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voyageur77 t1_j8tuh1e wrote

How does that avoid any taxes? The director has to pay taxes on the rent received from the non-profit, while the non-profit has no use for deducting rent expenses.

Non profits are not allowed to own whatever investments they want and do whatever they want with the money, look up Unrelated Business Taxable Income for example. A charity that is controlled by some rich guy will only qualify as a private foundation instead of a public charity. It is then not allowed to own a large amount of stock, and not allowed to pay high salaries or rent to the family members. It must operate exclusively for charitable purposes, it cannot act to favor the family's business. All the income and spending goes on Form 990 for the IRS to see.

The IRS isn't dumb. The scams you're describing are tax fraud and they will get you audited. There are hundreds of pages of IRS rules against this kind of stuff.

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