Defrauding the Government with Deflated Appraisals?
As some of my regular readers may know, I contribute articles on a monthly basis to RealtyTimes.com, a leading real estate industry web site that over the last few years has become one of the real estate industry’s most informative and timely sources of news and information.
Here’s a preview of my latest article:
In high-rent districts, where property taxes are in the nose-bleed section, some buyers and sellers are giving themselves a much needed tax break. To cut capital gains taxes and trim property taxes, buyers simply pay a portion of the purchase price in cash, off the books.
Buy a million dollar house for $750,000, slip the seller $250,000 cash under the table, and instead of paying property taxes on a million dollar property, you pay property taxes on a $750,000 property, and the seller gets to pocket $250,000 in profits tax-free!
Similar tactics are commonly used in new construction. A homeowner may hire a builder to build a $400,000 house with $75,000 in extras and pay for the extras in cash, to lower the value of the property on paper.
To buyers and sellers, such deals are savvy financial transactions. After all, doesn’t the government pocket enough of your hard-earned cash through income taxes, sales taxes, and a host of other taxes? Should homeowners be penalized whenever housing values skyrocket? Do the costs of schools and government operations rise that much to justify the hike in taxes? These are valid questions, but until they get sorted out and the government revises the tax code, any grass roots efforts to avoid taxes are a form of tax evasion, collectively defrauding the government out of billions in tax revenue every year.
I’m no advocate for higher taxes, and I hate to see…
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