Legal Front Running

I posted this as a reply to an older topic so I thought I'd give you all a chance to see what is going on my my state. I'm disgusted. Here is a scam you can put your money on - go buy those hedge funds. Front Run Federal Funds 1. Buy a piece of property - say a 4 family run down building for $200,000 assessed at around $200,000. 2. Transfer it to an LLC for say 2 million (no money changed hands of course) - say a hedge fund owns the LLC - same person who bought the property owns the LLC 3. No capital gains are paid because no money changed hands 4. The government needs the property for a Transit project. Think someone tipped them off. 5. The government pays the price that the LLC said it paid for it. 6. Part of the project is bonded by the state and the LLC bought the bonds 7. The LLC gets the inflated price "just compensation" (some of which is kicked back to the politicians who authorize the payments) and the rest pocketed by the hedge fund. 8. The LLC gets all its money back that it invested, created money that didn't exist, and gets paid back on the bonds too at the expense of the taxpayer and gets the inflated price of the property. 9. No capital gains again - because the sale price was the same as recorded by the LLC - so no gain. Tell me - how did Aetna get over 5 million dollars for 1.5 acres of undeveloped land in Hartford, Ct. - this is the tip of the Iceberg. One property was sold by a city (oh might as well blow the Whistle - New Britain) in Connecticut for $200,000 and the city bought it back 18 months later for a federal grant project for 1.6 million and recorded the transaction in another town (Bloomfield) so that it would not appear in the newspaper. There are over 40 properties that we have found where the purchase price for the LLC is millions above assessed values chasing 500+ million for a federal transit project. THIS IS ECONOMIC TERRORISM AND INVOLVES PEOPLE OUT OF MONSEY NY AND BROOKLYN NY Its over folks until this stuff is stopped. This is not capitalism - its out and out fraud. Mary Anne

I think this kind game has been going on for quite some time and during the RE bubble times.

2. Transfer it to an LLC for say 2 million (no money changed hands of course) - say a hedge fund owns the LLC - same person who bought the property owns the LLC
3. No capital gains are paid because no money changed hands
...
9. No capital gains again - because the sale price was the same as recorded by the LLC - so no gain.

I don't know where you get your "information," but what is described is not legally possible.

If a sale took place at any price higher than $200K then regardless of the consideration -- all cash, part cash/part note, all note -- a taxable gain was realized by the individual in the amount of the sale price minus $200K. Liability for capital gains tax isn't contingent on "money" changing hands.

If a sale took place to the LLC at the original $200K price then the full $1.8M gain is taxable to the LLC. Which, of course, flows right back to original owner's return. Which accomplishes absolutely nothing.

A sale must have taken place because the LLC can't sell what it doesn't own.

One entity or the other (or both together on their respective shares) is/are liable for taxes on the $1.8M gain. Since any LLC gain flows to the individual's return, the bottom line is the individual is entirely responsible for the tax on the gain.

Anything else is tin-foil hat conspiracy bunk based on a lack of understanding of what constitutes a sale and/or taxable events and/or the tax treatment of LLCs and/or willful ignorance of all of those things in the interest of concocting rubbish.

Do corrupt people profit from inside information gotten from corrupt politicians? No doubt. But it's got nothing to do with legitimate tax accounting.

Do corrupt people profit from outright tax fraud? No doubt. But that exposes you to many years of time as a guest of the federal Bureau of Prisons and very large fines and restitution. And again, it's got nothing to do with legitimate tax accounting.

Wrong thread...

Edited by ..., 29 July 2011 - 12:18 PM.