The real estate exemption

The Times on Prince Jared’s awesome scam to avoid paying federal income tax:

Over the past decade, Jared Kushner’s family company has spent billions of dollars buying real estate. His personal stock investments have soared. His net worth has quintupled to almost $324 million.

And yet, for several years running, Mr. Kushner — President Trump’s son-in-law and a senior White House adviser — appears to have paid almost no federal income taxes, according to confidential financial documents reviewed by The New York Times.

How? Via deduction for “depreciation.”

But the losses were only on paper — Mr. Kushner and his company did not appear to actually lose any money. The losses were driven by depreciation, a tax benefit that lets real estate investors deduct a portion of the cost of their buildings from their taxable income every year.

Every year? No matter what? But real estate values are going up in most places, not down.

In theory, the depreciation provision is supposed to shield real estate developers from having their investments whittled away by wear and tear on their buildings.

Excuse me??

Why? Why do we do that? Most of us don’t get to deduct anything for “wear and tear” so why do real estate developers?

I suppose the short yet complete answer is lobbying.

The law assumes that buildings’ values decline every year when, in reality, they often gain value. Its enormous flexibility allows real estate investors to determine their own tax bills.

And then use the money they save on taxes to buy the presidency and destroy everything.

The White House last year championed a sweeping revision of the nation’s tax laws that expanded many of the benefits enjoyed by real estate investors, allowing them to reap even larger deductions.

“The Trump administration was in a position to clean up the tax code and promised to get rid of some of the complexity that certain taxpayers use to their advantage,” said Victor Fleischer, a tax law professor at the University of California, Irvine. “Instead, they doubled down on those provisions, particularly the ones they have familiarity with to benefit themselves.”

Of course they did. There’s probably a deduction for eating two scoops of ice cream.

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