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Thread: lease purchase??

  1. #1
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    lease purchase??

    There is a property I am interested in purchasing. It has some structural problems and there are some environmental concerns (asbestos removal required). It is a commercial property.

    Can't I lease it for 1 year with an option to buy, have the structural work, asbestos removal, and remodeling done in that year, and write it all off in the first year as a tenant finish on a short term lease, and then go back next year, execute the "buy" option, then depreciate the property over 39 years?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  2. #2
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    wouldn't work in theory. You pretty much are agreeing to buy so the sale is treated as a sale and not a lease. The "option to buy" is just a smoke screen you are using to avoid taxes and won't fly. The same works for leased equipment.

  3. #3
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    Quote Originally Posted by Steeeeve View Post
    wouldn't work in theory. You pretty much are agreeing to buy so the sale is treated as a sale and not a lease. The "option to buy" is just a smoke screen you are using to avoid taxes and won't fly. The same works for leased equipment.
    First, I recognize that I am heading towards that thin grey line between whats legal and what you can maybe get away with here

    What if I JUST leased for a year, then I could write off improvements as a tenant finish, right??

    THEN, have another party (which I may or may not own...I do but they would never, ever, possibly be able to prove it) purchase an option to buy from the current owner?

    THEN have this other party lease it to me.

    Then, could I not hypothetically (this is all, of course, hypothetical) write off the improvements made during the term of my lease as a tenant finish, then after that year is up and the other party purchases it, write off my lease payments to them?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  4. #4
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    How would they not know you owned that company? Giving capital under the table to someone else? That is jail time if you get caught and if you want to risk it...by all means. You'd be better off with option number 1 and then just seeing if they let it slide...if they take you to court you just gotta pay and claim you "didn't know" but atleast you aren't jailed for fraud.

  5. #5
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    Quote Originally Posted by Steeeeve View Post
    How would they not know you owned that company? Giving capital under the table to someone else? That is jail time if you get caught and if you want to risk it...by all means. You'd be better off with option number 1 and then just seeing if they let it slide...if they take you to court you just gotta pay and claim you "didn't know" but at least you aren't jailed for fraud.

    There are beautiful countries all over the world that are fairly laizze faire when it comes to businesses. You can register a corporation wihtout listing shareholders or officers. Then you just have to register as a corporation doing business in the US, and whatever state you want to play in, and you are good to go.

    You have to be careful, though, becuase many places will allow you to keep the names of officers anonymous, but they DO have them on file and will provide them to authorities. The only really good ones are the ones that you don't have to list officers at all. If they don't know, they can't tell.

    I think I will go option one, and make the option to buy a handshake deal, then play the "I didn't know" and pay the taxes if I get caught. The person on the other side knows me well enough to know that if we do a handshake deal and he fails to perform, there will be extreme consequences.

    Personally, I have found that if you pull stuff liek that and get audited, you can generally push it to arbitration and settle for about half what you woudl have had to pay to begin with, so it is still a winning combination.

    Then again, as always, since they do next to no audits anyway, putting the tricky dicky on them is always a fairly safe bet.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  6. #6
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    Also, somebody pointed out to me today that since the location is actually 2 seperate buildings with seperate addresses, we can list one building and "all related buildings" on the lease, making it the address that would show up shoud the lease ever be brought into question...then list the second address and "all related buildings" on the sale.

    Obviously would not withstand real scrutiny, but would probably be good enough for the cursory inspection the IRS would give such a thing.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  7. #7
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    Quote Originally Posted by daewoo View Post
    There are beautiful countries all over the world that are fairly laizze faire when it comes to businesses. You can register a corporation wihtout listing shareholders or officers. Then you just have to register as a corporation doing business in the US, and whatever state you want to play in, and you are good to go.

    You have to be careful, though, becuase many places will allow you to keep the names of officers anonymous, but they DO have them on file and will provide them to authorities. The only really good ones are the ones that you don't have to list officers at all. If they don't know, they can't tell.

    I think I will go option one, and make the option to buy a handshake deal, then play the "I didn't know" and pay the taxes if I get caught. The person on the other side knows me well enough to know that if we do a handshake deal and he fails to perform, there will be extreme consequences.

    Personally, I have found that if you pull stuff liek that and get audited, you can generally push it to arbitration and settle for about half what you woudl have had to pay to begin with, so it is still a winning combination.

    Then again, as always, since they do next to no audits anyway, putting the tricky dicky on them is always a fairly safe bet.
    The second one would be fraud without a doubt Unless you are a fan on Enrons, that kinda thinking is probably not good. We actualy have pretty good auditing procedures here and are even better after SOX (no matter what companies think). Too bad we don't do IFRS like Europe...you could pull all sorts of stuff and get away with it .

    You would be making lease payments to a person...this person then sells it to an international company with no stock holders (bringing up red flags right away) and then you make lease payments to a company you own off the books. Now you have to access this money some how and if you get audited due to the red flag brought up by leasing to an unknown owned company you will probably get caught.

    You can't complain about the tax code anymore The more you try to screw it over the more complicated it gets.

  8. #8
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    Quote Originally Posted by Steeeeve View Post
    The second one would be fraud without a doubt Unless you are a fan on Enrons, that kinda thinking is probably not good. We actualy have pretty good auditing procedures here and are even better after SOX (no matter what companies think). Too bad we don't do IFRS like Europe...you could pull all sorts of stuff and get away with it .

    You would be making lease payments to a person...this person then sells it to an international company with no stock holders (bringing up red flags right away) and then you make lease payments to a company you own off the books. Now you have to access this money some how and if you get audited due to the red flag brought up by leasing to an unknown owned company you will probably get caught.

    You can't complain about the tax code anymore The more you try to screw it over the more complicated it gets.
    Accessing the money is simple. Debit card in a ficticous name. I LOVE S American banks.

    I really don't complain about the tax laws. The more they complicate them, the more gaping holes they leave open. If we had a nice, simple tax code, I would be screwed.

    I used to have a friend (passed on last year) who was retired from the IRS. He did audits and got bumped up the chain of command several levels during his career. He used to tell me what I could get away with and what I couldn't. He alwasy claimed that since I had a history of fighting audits (going ot arbitration) I could probably get away with more, becuase the fine folks at the IRS know that when they find something, I will protest until we are in arbitration, then in arbitration I will get all fees and penalties waived (unless I do somethign REALLY stupid) and then theyw ill cut the amount I actually have to pay in half, and that if we were just talking questionable deductions, it simply was not worth it for the IRS, because by the time the fees and penalties were removed, and the amount due adjusted, it cost them more to collect than they made.

    That kind of thing makes me feel kind of sorry for the IRS folks. They try to catch the cheaters, and when they do they loose money? Thats a bum system if ever there was one.

    You are probably tracing my IP, huh, steeeve?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  9. #9
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    Accessing the money is simple. Debit card in a ficticous name. I LOVE S American banks.

    I really don't complain about the tax laws. The more they complicate them, the more gaping holes they leave open. If we had a nice, simple tax code, I would be screwed.
    I disagree....you can't have a simple tax code because people will compliain and in many cases can be unfair. Just look at a partnership. What do you do if a partner liquidates his share in the partnership? How do you recognize gains? What about the liabiliteis of the company? What about if he liquidates and gets property? Too many scenarios to make it easy

    I used to have a friend (passed on last year) who was retired from the IRS. He did audits and got bumped up the chain of command several levels during his career. He used to tell me what I could get away with and what I couldn't. He alwasy claimed that since I had a history of fighting audits (going ot arbitration) I could probably get away with more, becuase the fine folks at the IRS know that when they find something, I will protest until we are in arbitration, then in arbitration I will get all fees and penalties waived (unless I do somethign REALLY stupid) and then theyw ill cut the amount I actually have to pay in half, and that if we were just talking questionable deductions, it simply was not worth it for the IRS, because by the time the fees and penalties were removed, and the amount due adjusted, it cost them more to collect than they made.
    Yeah, I got a lot of friends in the tax business. One is always claiming the IRS is stupid....but they really get the short end of the stick since people always try to screw the IRS over and they are just better off in arbitration most of the time and settling for pennies on the dollar. I am kinda big on honest practices so I get annoyed people try to pull "questionable" tactics...perhaps it is a good thing I am an accountant .

    That kind of thing makes me feel kind of sorry for the IRS folks. They try to catch the cheaters, and when they do they loose money? Thats a bum system if ever there was one.

    You are probably tracing my IP, huh, steeeve?
    HAHA, if I were in the act of doing my job I would technically have to turn you in or I could get my CPA taken away....but no one would do that as this is just a forum on my off time and I don't care that much I doubt you are dealing with enough money to really bug the IRS. In auditing a million dollar misstatement can be "immatieral" at a big enough company. I always wonder if it is so "immaterial" then why don't they mind giving me a million

  10. #10
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    Quote Originally Posted by Steeeeve View Post
    Yeah, I got a lot of friends in the tax business. One is always claiming the IRS is stupid....but they really get the short end of the stick since people always try to screw the IRS over and they are just better off in arbitration most of the time and settling for pennies on the dollar. I am kinda big on honest practices so I get annoyed people try to pull "questionable" tactics...perhaps it is a good thing I am an accountant .
    Honestly, if I did not feel like the government was just throwing all that money down a black hole, I MIGHT be a little less creative on my tax returns. As is, I have trouble justifying making certain that they have every dollar to waste that is coming to them.

    HAHA, if I were in the act of doing my job I would technically have to turn you in or I could get my CPA taken away....but no one would do that as this is just a forum on my off time and I don't care that much I doubt you are dealing with enough money to really bug the IRS. In auditing a million dollar misstatement can be "immatieral" at a big enough company. I always wonder if it is so "immaterial" then why don't they mind giving me a million
    No, probably not enough to matter to them, enough to matter to me though

    This may all be a moot point, depending on how the asbestos survey comes out. I miss the good old days when you could just hire a bunch of illegals to go in there and remove the asbestos. Now it is guys in marshmellow suits, and they do NOT come cheap.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  11. #11
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    Honestly, if I did not feel like the government was just throwing all that money down a black hole, I MIGHT be a little less creative on my tax returns. As is, I have trouble justifying making certain that they have every dollar to waste that is coming to them.
    the policy makers don't listen to the IRS often

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