In some localities (mine included) you can spend your $20,000 on new furniture (or any personal property) and then continue to pay yearly personal property taxes on it.
Huh?
It’s just like paying real estate taxes but instead of “real property” the taxes are assessed on everything that you own. So instead of being taxed doubly (or more) on the income, you are taxed perpetually on the value of the items that you purchased with the income.
You are mistaken in that I have never argued this with anyone in great debates or anywhere else.
I’m not sure DrDeth was talking about you, but I coukd be mistaken.
Where do you live that there is a tax on personal property? I’m not talking about real estate but furniture?
I live in Oklahoma but we’re not the only state that does it. See here: http://taxfoundation.org/article/states-moving-away-taxes-tangible-personal-property
When I lived in Connecticut our cars were taxed as personal property every year (and yes, we paid sales tax on them when we bought them).
I’m not sure this specific question has been answered among all the tangents about corporate taxes and inheritance taxes, and it’s the info that LynnM was looking for in the OP.
LynnM, if you take $100k from your savings, money which you’ve already paid income tax on, and invest it in a mutual fund, then your cost basis for those shares of the fund is $100k and you get to subtract that from the sales price when you report your income.
However, if one year you sell just a portion of those mutual fund shares, then you just get to subtract a portion of the $100k that you initially invested.
Let’s say that the mutual fund that you paid $100k for has gone up in value to $150k, and one year you sell one-fifth of it. That year, on your tax forms, you report the $30k for the sales price, but get to subtract the cost basis of $20k that you paid for it, resulting in a net taxable income of $10k. What’s happening is that each share of the stock is treated separately - those shares that you sold for $30k are the shares that you paid $20k for in the past.
You don’t get to subtract out the whole $100k right from the start - it’s apportioned out to the amount of shares that you have, and you get to subtract the purchase price for however many shares you sell.
I was talking about** jtgain,** and others. It’s a common incorrect meme.
A timely (for this thread) ruling from the Supreme Court on one aspect of double taxation. The court ruled that one aspect of Maryland income tax law is unconstitutional, because it does not provide a full tax credit to residents for income tax paid outside the state. This particular form of double taxation violated the Commerce Clause, because it impermissibly interfered with business across state lines.
While we’re fixing these kinds of misconceptions, let’s point out that black people are more of a brown color, while white people range from pink to tan, unless they’ve been out in the sun for too long, in which case they’re red. Restrooms are not used for resting. You drive on parkways and park on driveways. Also, green paint doesn’t exist because it’s just a combination of yellow and blue.
http://www.straightdope.com/columns/read/410/why-do-we-drive-on-the-parkway-and-park-on-the-driveway
:p:D:p:D
Huh?
The corporation pays taxes, and then pays out dividends, as income, on which the individual receiving is taxed.
However, if the US system is like the Canadian system (or more likely is more generous) The sum of corporate taxes and personal income tax on dividend income was such that for “personal service” corporations (I.e. Joe’s Consulting Inc. fronts for Joe) the total tax paid worked out to be pretty much the same. As an accountant explained to me, the question was whether the liability protection etc. was worth the paperwork of maintaining and reporting for the corporation.
then of course, the government will do various tricks to help push investment in the right direction, thus giving an even better break to dividends sometimes.