No, not a pretty sight:
First, there’s depreciation. Cars, say, lose value, and it makes sense to set those real losses against tax. Buildings, though, generally appreciate in value—yet such is the power of the real-estate lobby that you still get the depreciation deduction, which is based on a formula.
No, buildings do generally depreciate. Land might not, location may not, but buildings do.
If this were not so then no one would ever knock down on old office tower to build a new one, would they?
As if that weren’t enough cream for the real-estate moguls, the sector is fueled by borrowing—and you can set the interest expenses against your income.
How remarkable. Costs are treated as costs.
And this brings us to yet another avenue to tax-free living for real-estate moguls. These deductions can travel. If you are an active real-estate professional—that is, in part, if you spend at least half of your work time in real-estate activities—then you’re allowed to assemble all your losses and deductions, magpie-like, wherever and however you suffered them, whether it’s from Trump Tower or a Scottish golf course, and throw them all into one big pot. (When Trump was asked whether he was active in real estate, for tax purposes, he responded: “I don’t know how I am categorized, but I spend a lot of time on real estate … even during the campaign.”) You then stir in your federal income and hope those losses will offset it all, like one of those science experiments where you pour one liquid into another, brightly colored liquid to make it all go clear. With enough deductions, a real-estate mogul like Trump can zero out his federal income-tax bill.
If you don’t have a net income you don’t pay income taxes.
Naturally, this being Shaxson, this is all a scandal.