# Tax Takers vs Tax Payers **URL:** \ **Category:** Great Debates\ **Created:** [March 2, 2012, 9:01am UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530 "2012-03-02T09:01:24Z")\ **Posts on this page:** 20\ **Page:** 9
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [March 12, 2012, 10:26pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/161 "2012-03-12T22:26:11Z")
> [@Damuri\_Ajashi](#): > > Let me try it this way: > > The New York Yankees was purchased with $8.8 million dollars. Who knows if that money has ever been taxed or at what rate. > > When George Steinbrenner died, the New york Yankees was worth over a billion dollars. That passed to his heirs tax free, the difference between the purchase price and the value at George Steinbrenner’s death was not taxed. Uh, I think you are forgetting that the Yankees have made money since 1973. This income has been taxed over the years, and the cost basis has increased. Therefore, difference is not value at death to purchase price but instead to cost basis at death. Also, this assumes that the only dollars ever injected into the Yankees was the original $8.8MM. This is likely not true particularly in more recent years when the YES network has been the primary cash flow generator as a separate entity (with somewhat differing ownership) from the Yankees. ---
**Author:** ![Norse](https://avatars.discourse-cdn.com/v4/letter/n/a9adbd/32.png) [@Norse](https://boards.straightdope.com/u/Norse)\ **Post date:** [March 13, 2012, 10:04am UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/162 "2012-03-13T10:04:21Z")
> [@magellan01](#): > > what should we do about the people who simply have kids with no forethought, or care, of who is going to pay for them? I suggested one thing. You? This may be kinda shocking news, but: Support programs for poor kids aren’t for the parents. They are for the kids. To (try to) prevent them from falling even lower into the poverty pit, but rather enable them to get an education and become productive citizens who pay taxes. In a liberal society, this isn’t charity, it’s an investment. Admittedly, the payback is uncertain, but all investments carry a certain risk of zero ROI. Withhold that “unfair” support “for the parents”, and you’ll consolidate a class of unproductive jobless incompetents. Provide support, and those children conceived with or without forethought may have a decent chance to rise from poverty and contribute to society. But I guess that this, for some people, is “unfair” because _they’re_ able to pay their own bills and provide adequate nutrition and schooling for _their_ pwecious wittle ones… ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [March 13, 2012, 3:31pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/163 "2012-03-13T15:31:07Z")
> [@magellan01](#): > > Well, I’m pro-choice. Not that it matters. We both believe there should be a safety net. But I just don’t understand the position that there should be the expectation that people can have as many kids as they want and not be responsible for clothing and feeding them. I’m well aware of what happens to kids who have nothing and have done work for one of the charities that helps them. > > But you’re ignoring my question: what should we do about the people who simply have kids with no forethought, or care, of who is going to pay for them? I suggested one thing. You? What did you suggest again? I could be convinced to give free birth control pills to welfare recipients (or norplant or something like that if they are too irresponsible to take a daily pill). > [@LonghornDave](#): > > Uh, I think you are forgetting that the Yankees have made money since 1973. This income has been taxed over the years, and the cost basis has increased. Therefore, difference is not value at death to purchase price but instead to cost basis at death. Earning taxable income doesn’t increase your basis (well, cash has basis but the value of the yankees isn’t based on some mountain of cash they are sitting on). > [@](#): > > Also, this assumes that the only dollars ever injected into the Yankees was the original $8.8MM. This is likely not true particularly in more recent years when the YES network has been the primary cash flow generator as a separate entity (with somewhat differing ownership) from the Yankees. I think that George Steinbrenner probably had some basis from when he bought out his partners but dollars injected into the Yankees does not necessarily create basis. Buying a ticket to a yankees game on which the yankees pays taxes does not create basis any more than Avis gets basis when they rent out a car. Avis also wouldn’t get basis if they got paid millions of dollars for putting an advertisement for the iphone on their dashboards even if Steve Jobs owned Avis. > [@Norse](#): > > This may be kinda shocking news, but: Support programs for poor kids aren’t for the parents. Well then the solution is obviously to take away their kids, raise them ina creche and sterilize the parents until they start paying taxes ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [March 13, 2012, 6:02pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/164 "2012-03-13T18:02:56Z")
> [@Damuri\_Ajashi](#): > > Earning taxable income doesn’t increase your basis (well, cash has basis but the value of the yankees isn’t based on some mountain of cash they are sitting on). Earning income does increase your basis. The Yankees are a limited partnership and the partner’s share of the income increases the basis. See the [IRS link](http://www.irs.gov/instructions/i1065sk1/ch01.html#d0e163) on the subject (#4 in basis worksheet). I have no idea what you are talking about in your parenthesis as I never said anything about cash. > [@Damuri\_Ajashi](#): > > I think that George Steinbrenner probably had some basis from when he bought out his partners but dollars injected into the Yankees does not necessarily create basis. Buying a ticket to a yankees game on which the yankees pays taxes does not create basis any more than Avis gets basis when they rent out a car. Avis also wouldn’t get basis if they got paid millions of dollars for putting an advertisement for the iphone on their dashboards even if Steve Jobs owned Avis. Again, I have no idea what you are talking about here. You seem somehow confused that I think that earning revenue increases basis. I have no idea why you think I think this. Maybe you are confusing the language I used about injecting dollars to be about cash flow generated by the company. I am actually talking about capital contributions from the partners (Steinbrenner). I am saying Steinbrenners maybe earning money from their hugely profitable YES Network and using it to make capital contributions to subsidize the Yankees. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [March 13, 2012, 7:54pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/165 "2012-03-13T19:54:13Z")
> [@LonghornDave](#): > > Earning income does increase your basis. The Yankees are a limited partnership and the partner’s share of the income increases the basis. See the [IRS link](http://www.irs.gov/instructions/i1065sk1/ch01.html#d0e163) on the subject (#4 in basis worksheet). > > I have no idea what you are talking about in your parenthesis as I never said anything about cash. > … > Again, I have no idea what you are talking about here. You seem somehow confused that I think that earning revenue increases basis. I have no idea why you think I think this. Maybe you are confusing the language I used about injecting dollars to be about cash flow generated by the company. I am actually talking about capital contributions from the partners (Steinbrenner). I am saying Steinbrenners maybe earning money from their hugely profitable YES Network and using it to make capital contributions to subsidize the Yankees. Oh, OK I see what you are saying. I thought you were saying something nonsensical. Yes basis get adjusted but a couple of things. First I think Steinbrenner owned the Yankees outright when he died, I don’t think he had any partners. Second, even if it was a partnership, you reduce basis by distributions and I don’t think are a lot of capital investments so any taxable income gets distributed out to the aprtners every year. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [March 13, 2012, 8:56pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/166 "2012-03-13T20:56:11Z")
> [@Damuri\_Ajashi](#): > > Oh, OK I see what you are saying. I thought you were saying something nonsensical. > > Yes basis get adjusted but a couple of things. First I think Steinbrenner owned the Yankees outright when he died, I don’t think he had any partners. > Second, even if it was a partnership, you reduce basis by distributions and I don’t think are a lot of capital investments so any taxable income gets distributed out to the aprtners every year. His family did own it outright, but it was still structured as a partnership. Perhaps you don’t know this, but a partnership can have only one owner. Also, not a chance that all taxable income was getting distributed. In fact, the likelihood is that the only distibutions that were being made were simply to cover Steinbrenner’s tax obligations. That’s a fairly common thing for pass through entities like this. He probably paid himself a salary and then didn’t really take any additional money out through any regular distributions. All distributions likely just went straight to the U.S. Treasury (plus whatever New York taxes he had) to cover his taxes. Finally, and I realize I have now made this into a big hijack, but there was at least one humongous capital investment you forgot; the Yankees paid for approximately half of the $1.5 billion new stadium. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [March 14, 2012, 5:24am UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/167 "2012-03-14T05:24:31Z")
> [@LonghornDave](#): > > His family did own it outright, but it was still structured as a partnership. Perhaps you don’t know this, but a partnership can have only one owner. Yeah but then for tax purposes its not a partnership and you don’t use partnership accounting. > [@](#): > > Also, not a chance that all taxable income was getting distributed. In fact, the likelihood is that the only distibutions that were being made were simply to cover Steinbrenner’s tax obligations. That’s a fairly common thing for pass through entities like this. He probably paid himself a salary and then didn’t really take any additional money out through any regular distributions. All distributions likely just went straight to the U.S. Treasury (plus whatever New York taxes he had) to cover his taxes. > > Finally, and I realize I have now made this into a big hijack, but there was at least one humongous capital investment you forgot; the Yankees paid for approximately half of the $1.5 billion new stadium. Yeah sorry for the hijack. There is no point in keeping money in a pass through entity unless you need it for something. There is no consequence to taking it out. In the ordinary course, everything is either a deductible expense or it gets taken out. Maybe we just meal with different worlds but I don’t know anyone who keeps money in if they don’t have to, even if they put the money back in later. Yankee stadium was largely built with municipal financing. “The Yankees have received a total of $1.2 billion in tax-exempt bonds and $136 million in taxable bonds” [http://www.usatoday.com/sports/baseball/2009-04-02-baseball-palaces\_N.htm](http://www.usatoday.com/sports/baseball/2009-04-02-baseball-palaces_N.htm) In any event, there is a lot of untaxed value in the yankees that did not get taxed when Steinbrenner died. The million dollar value is not based on assets for which the owners get basis. ---
**Author:** ![ABraut](https://avatars.discourse-cdn.com/v4/letter/a/258eb7/32.png) [@ABraut](https://boards.straightdope.com/u/ABraut)\ **Post date:** [March 14, 2012, 2:15pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/168 "2012-03-14T14:15:37Z")
> [@Damuri\_Ajashi](#): > > Yeah but then for tax purposes its not a partnership and you don’t use partnership accounting. If it is an LLP, it’s an LLP and is treated as such by tax laws. > [@Damuri\_Ajashi](#): > > Yankee stadium was largely built with municipal financing. You forgot the [next sentence](http://www.usatoday.com/sports/baseball/2009-04-02-baseball-palaces_N.htm): > [@](#): > > “We’ve used tax-exempt financing, but we’re paying for each and every cent of this stadium,” Levine says. “It’s important to note the city owns this stadium. We have a long-term lease. We basically got a low borrowing rate; that was the advantage of going this route.” > [@Damuri\_Ajashi](#): > > In any event, there is a lot of untaxed value in the yankees that did not get taxed when Steinbrenner died. The million dollar value is not based on assets for which the owners get basis. The Yankees don’t own the stadium. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [March 14, 2012, 8:01pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/169 "2012-03-14T20:01:07Z")
> [@ABraut](#): > > If it is an LLP, it’s an LLP and is treated as such by tax laws. What the fuck are you talking about? A single member LLP is not treated as a partnership, its most likely treated as a sole proprietorship. [http://www.irs.gov/businesses/small/article/0,,id=158625,00.html](http://www.irs.gov/businesses/small/article/0,,id=158625,00.html) Your Yankees references aren’t making any sense to me. ---
**Author:** ![ABraut](https://avatars.discourse-cdn.com/v4/letter/a/258eb7/32.png) [@ABraut](https://boards.straightdope.com/u/ABraut)\ **Post date:** [March 14, 2012, 11:59pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/170 "2012-03-14T23:59:42Z")
> [@Damuri\_Ajashi](#): > > What the fuck are you talking about? A single member LLP is not treated as a partnership, its most likely treated as a sole proprietorship. I don’t know what type of corporation New York Yankees Inc. is incorporated as, but I do know that changing a corporation’s type is not automatic. LLC/LLP are both “pass-through entities.” That’s the important part, to the IRS, so it really doesn’t matter. I’m no expert on incorporation and tax laws, but I have been through the incorporation process. I was the president of a corporation. I’m not clueless. What’s your experience? > [@Damuri\_Ajashi](#): > > Your Yankees references aren’t making any sense to me. Obviously, and neither do your sources. ---
**Author:** ![Stelios](https://avatars.discourse-cdn.com/v4/letter/s/8dc957/32.png) [@Stelios](https://boards.straightdope.com/u/Stelios)\ **Post date:** [March 15, 2012, 12:44pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/171 "2012-03-15T12:44:05Z")
> [@magellan01](#): > > But you’re ignoring my question: what should we do about the people who simply have kids with no forethought, or care, of who is going to pay for them? I suggested one thing. You? What _can_ we do about them? In the absence of a forced sterilization/abortion program, people are going to have as many kids as they want. We could cut off welfare, but I don’t see how that will hurt anyone except the kid? You could argue that, by restricting welfare, we remove the incentive to have more kids, but what about those kids who are born anyway? What would happen to them? It’s a bad situation, but it seems to me like we’re doing the most responsible thing already. All the alternatives are worse. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [March 15, 2012, 1:42pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/172 "2012-03-15T13:42:42Z")
The whole Yankees discussion is rather far afield from the simple point I was bringing up. Which is that there is at least one provision of the tax law for which income isn’t taxed at all. And that is capital gains on assets passed at death for which the basis receives a step-up. The only reason I bring this up is that it points out yet another situation for which “fairness” is not at all clear. Example: My father owns 100 shares of a gold-based fund (using gold just so that there can be no argument about corporate taxes, dividends, etc.). He bought the shares at $10 per share. They are now worth $100 per share. If he sold today, he would owe capital gains taxes on $9,000. However, if he dies today they pass to me (his only son, let’s say). Now they will receive a step-up in basis and if I sell them tomorrow I pay no capital gains taxes. Is this fair? ---
**Author:** ![ABraut](https://avatars.discourse-cdn.com/v4/letter/a/258eb7/32.png) [@ABraut](https://boards.straightdope.com/u/ABraut)\ **Post date:** [March 15, 2012, 4:41pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/173 "2012-03-15T16:41:59Z")
Don’t worry. Starting next year, the IRS will confiscate 55% of all inheritance over $1 million. People will be, once again, forced to sell off their inheritance to buy some of their inheritance back from the government. ---
**Author:** ![Norse](https://avatars.discourse-cdn.com/v4/letter/n/a9adbd/32.png) [@Norse](https://boards.straightdope.com/u/Norse)\ **Post date:** [March 15, 2012, 5:18pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/174 "2012-03-15T17:18:15Z")
Cite? ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [March 15, 2012, 5:20pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/175 "2012-03-15T17:20:47Z")
> [@ABraut](#): > > Don’t worry. Starting next year, the IRS will confiscate 55% of all inheritance over $1 million. People will be, once again, forced to sell off their inheritance to buy some of their inheritance back from the government. Well, that’s where I go a bit outside the current “center” in that I have absolutely no problem with that. I wouldn’t be opposed to it being at even higher rate (although preferably with a higher exempted amount). I see very little benefit to society in allowing dynastic transfers of wealth. Me and Adam Smith have that in common, I guess. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 15, 2012, 5:32pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/176 "2012-03-15T17:32:41Z")
> [@Stelios](#): > > What _can_ we do about them? In the absence of a forced sterilization/abortion program, people are going to have as many kids as they want. We could cut off welfare, but I don’t see how that will hurt anyone except the kid? You could argue that, by restricting welfare, we remove the incentive to have more kids, but what about those kids who are born anyway? What would happen to them? It’s a bad situation, but it seems to me like we’re doing the most responsible thing already. All the alternatives are worse. He who ignores history, etc. Throughout history the immediate benefit of having kids has been negative. Yet people kept having them - lots of them. (Think of London in the beginning of the 19th century.) When did families stop having lots of kids? Paradoxically, when they could afford them. So, if you want to stop poor people from having kids, and actually don’t believe in government getting directly involved, all you have to do is get poor women the chance to have a decent job and some hope for the future. Rather simple, really. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [March 15, 2012, 5:34pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/177 "2012-03-15T17:34:22Z")
> [@ABraut](#): > > I don’t know what type of corporation New York Yankees Inc. is incorporated as, but I do know that changing a corporation’s type is not automatic. LLC/LLP are both “pass-through entities.” That’s the important part, to the IRS, so it really doesn’t matter. I’m no expert on incorporation and tax laws, but I have been through the incorporation process. I was the president of a corporation. I’m not clueless. > What’s your experience? I’m a tax lawyer, I’m on the board of directors of a few organizations, I am a partner in a partnership and my wife has a sole proprietorship. You may not be clueless but a little bit of knowledge can be a dangerous thing. > [@](#): > > Obviously, > and neither do your sources. My sources have been USA Today and the IRS. ---
**Author:** ![ABraut](https://avatars.discourse-cdn.com/v4/letter/a/258eb7/32.png) [@ABraut](https://boards.straightdope.com/u/ABraut)\ **Post date:** [March 15, 2012, 5:41pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/178 "2012-03-15T17:41:16Z")
[Federal Estate Tax Schedule](http://wills.about.com/od/understandingestatetaxes/a/overviewfed.htm) Contrary to popular belief, Steinbrenners’ heirs are still on the hook for [unrealized capital gains](http://wills.about.com/od/understandingestatetaxes/qt/carryoverbasis.htm), too. ---
**Author:** ![ABraut](https://avatars.discourse-cdn.com/v4/letter/a/258eb7/32.png) [@ABraut](https://boards.straightdope.com/u/ABraut)\ **Post date:** [March 15, 2012, 5:52pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/179 "2012-03-15T17:52:54Z")
> [@Damuri\_Ajashi](#): > > My sources have been USA Today and the IRS. That’s right. You referenced a USA Today article that said that the Yankees **don’t** own the stadium as proof that the Yankees own the stadium and an IRS article on LLCs that **says nothing about LLPs** as proof that (I have no idea what irrelevant point you were trying to prove about LLPs) All you’ve proven is that you don’t understand your own sources. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [March 15, 2012, 5:54pm UTC](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530/180 "2012-03-15T17:54:28Z")
Right, but that’s just because he died in 2010 and when was no estate tax whatsoever. If he died in 2009 or 2011 they would have received a basis step-up (although this particular situations is far more complicated, no doubt) and had to pay estate taxes on the amount over the exemption. [Previous page](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530.md?page=8) [Next page](https://boards.straightdope.com/t/tax-takers-vs-tax-payers/614530.md?page=10)