Wednesday, July 9, 2014

NYC Real Estate: The New Swiss Bank Account

Blind trusts. Tax shelters. Offshore bank accounts. Shell corporations. 

They are "barely legal."

These vehicles are ways for wealthy people to hide their money from government tax collectors, a bright shiny line between what is legal and illegal in the world of tax avoidance. 

Rich folks hire an array of accountants and lawyers to find such schemes, even traveling the world to find places where they can deposit their cash tax-free. The amount of time and money rich people will spend to evade taxes is incredible but, they figure, it's a bargain compared to what they would otherwise have to pay to the G. And they're always on the look-out for the next opportunity to avoid taxes.

For decades, wealthy people from around the world parked their dough in Swiss or Cayman Islands bank accounts. They would also create dummy corporations to "invest" their cash in and then take a tax write-off. Remember Mitt Romney when he ran for president in 2012? He had all sorts of money invested in offshore accounts and shell corps that he refused to release his tax returns -- something that helped cost him the nation's highest office.

But some tax shelters are not so hard to find. In fact, in one place, they are literally in the air. 

Here in NYC, real estate has become a very popular way for wealthy foreigners looking to avoid paying tax. They will buy expensive real estate in order to offload their money and pay less in taxes at home. Eventually, of course, they plan to sell the real estate at a big profit but, in the meantime, they are converting their money into real estate and not paying a dime in tax to their home governments.

This is, needless to say, sleazy, and it's one of the reasons why the NYC real estate market is so insane. Some have proposed laws to crackdown on this but, in the meantime, we are living in one of the world's biggest tax shelters -- and making real shelter even more difficult to afford.

1 comment:

  1. Manhattan luxury apartments are the old London or Singapore luxury condominiums were the new swiss bank accounts.
    I spent 2 years living in a luxury high-rise in Singapore that was largely empty and mostly owned by Indonesians who would prefer you not ask where the millions came from.This type of thing has gone on in other real estate markets for decades.
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