paintings

Be careful what you wish for is an old adage that might very well apply to the Republicans who want to retake the house this November. The big domestic issues are jobs and deficit spending and I am not sure they have a plan. The jobs one will be the easiest to explain as they will say just make things more favorable for small business and that will likely work but it will take some time. They are not going to increase taxes so if they want to tackle the deficit they will have to reduce spending which means cut benefits. To make any kind of dent in the problem they will have to do more than not renew unemployment checks. They will not want to cut defense during war so they will have to go after the big items like social security and Medicare. The only way to avoid cuts is to have enough growth to cover the debt and that is possible and could very well happen if and when small business feels comfortable in expanding.



New subject to prove that I am interest other than politics



Starting back some 30 plus years ago it became common for expensive paintings to be auctioned off to bidders who were unidentified and the purchase was made over the telephone by a third party. These paintings often sell for more than 50 million dollars. I have always been suspicious when I see these mysterious sales as I believe they could be tax scams. If I purchase a painting for 5 million and sell it a year and a day later I have a long term capital gain and pay 15% tax on the 45 million or 6.7 million. If I am rich I am in the 45% tax bracket when you count federal and state taxes so I gave the painting to a museum I could deduct it as a charitable contribution and save 45% of 50 million or 22 million in taxes. Now I would not do that if my only concern was saving taxes but if I had a partner working with me, I could set up the following scheme. My partner buys a painting for 5 million at the same time that I buy mine and a year and day later he sells his to an unknown buyer for 50 million just as I did. Now here is the scheme. I bought his and he bought mine. Now let us see where we stand. I paid him 50 million for a painting he bought for 5 million and he paid me 50 million for a painting I bought for 5 million. At this point we are both out 5 million. We each donate our respective paintings to the museum and we both take a 50 million dollar charitable deduction which saves us 22 million in taxes. This is a nice return our 5 million investment. There is a limit of 50% of adjusted gross income on charitable contributions so each of us would have to have an AGI of at least 100 million but the people that would do this have billions so that would not be a problem. As far as establishing the value of the gift the general rule is the value is what a willing buyer will pay a willing seller and we clearly established that at the