Loan interest and tax deduction

[eleaza]

I was testing what klasanov and I was debating about whether privatizing real estate through political election is overpowered or not, in the process I discovered that my pure real estate corporation paid no tax at all. Apparently all the loan interest accumulated throughout the years is tax deductible, and as long as I have loans, I don't have to pay any tax, even if my corporate make hundreds of millions a year through rent income. So the overpowered real estate has more to do with "tax evasion" than easy election.

[klasanov]

this explains why i make so much money with real estate since i leverage it through loans.

a lot.

even for politics.

[klasanov]

Have noticed this also.

My real estate company makes 6-7m per month. Has always turned a profit. Yet its accumulated losses for tax deduction is 10m or so.

It has loans

[WilliamMGary]

I was testing what klasanov and I was debating about whether privatizing real estate through political election is overpowered or not, in the process I discovered that my pure real estate corporation paid no tax at all. Apparently all the loan interest accumulated throughout the years is tax deductible, and as long as I have loans, I don't have to pay any tax, even if my corporate make hundreds of millions a year through rent income. So the overpowered real estate has more to do with "tax evasion" than easy election.

If I remember correctly taxes should be calculated based on operating profit not net profit correct David? I believe we discussed this in another post.

[klasanov]

That should be the case otherwise people would get messed on some one-time things

[klasanov]

I mean if my stocks appreciate and i grt taxed based on that but dont have cash to pay that can be bad

[WilliamMGary]

I mean if my stocks appreciate and i grt taxed based on that but dont have cash to pay that can be bad

The tax system should be based on your company's operating profit.


Speaking of which though, what happens if you make a profit of $400 million on stocks and sell it is this "Gain" taxable?

[eleaza]

I mean if my stocks appreciate and i grt taxed based on that but dont have cash to pay that can be bad

The tax system should be based on your company's operating profit.


Speaking of which though, what happens if you make a profit of $400 million on stocks and sell it is this "Gain" taxable?

Do you mean in the game, or in real world?

In current game I believe capital gain is not being taxed at all. Whether it's realized or not.

In the real world, capital gain tax (CGT, not just stocks gains, property gains and other capital gains included) differs with different countries, some don't have any, some are very strict, but for the most part it's taxed separately than other taxes and with different tax rate. Even differs between individual CGT and corporation CGT. CGT is also highly divided and debated in political arena, one hot topic of current 2016 US presidential election. Republicans favor lowering CGT, even completely removing it, and Democrats favor increasing it.

It might be interesting to implement a form of CGT in the game as a slider even a political party "preference" where mayors have to follow within a "party guideline" once elected.

[WilliamMGary]

I mean if my stocks appreciate and i grt taxed based on that but dont have cash to pay that can be bad

The tax system should be based on your company's operating profit.


Speaking of which though, what happens if you make a profit of $400 million on stocks and sell it is this "Gain" taxable?

Do you mean in the game, or in real world?

In current game I believe capital gain is not being taxed at all. Whether it's realized or not.

In the real world, capital gain tax (CGT, not just stocks gains, property gains and other capital gains included) differs with different countries, some don't have any, some are very strict, but for the most part it's taxed separately than other taxes and with different tax rate. Even differs between individual CGT and corporation CGT. CGT is also highly divided and debated in political arena, one hot topic of current 2016 US presidential election. Republicans favor lowering CGT, even completely removing it, and Democrats favor increasing it.

It might be interesting to implement a form of CGT in the game as a slider even a political party "preference" where mayors have to follow within a "party guideline" once elected.

The only way I can see capital gains being taxed is if there's a line item within the operating income of the income statement that accounts for stock sells and if its a gain (postie) that would be added to operating profits and if its a lost then it will affect the operating profit. The only way a company could avoid being taxed on substantial gains is to hold the stock and not sell or to sell smaller % of the capitalized stock.

If investments are not being taxed then stock focused companies will have even more of an advantage and the citizens as well as the government will be loosing out on billions of dollars. This needs to be addressed and accounted for.

[eleaza]

The only way I can see capital gains being taxed is if there's a line item within the operating income of the income statement that accounts for stock sells and if its a gain (postie) that would be added to operating profits and if its a lost then it will affect the operating profit. The only way a company could avoid being taxed on substantial gains is to hold the stock and not sell or to sell smaller % of the capitalized stock.

I remember this is something has to do with accounting principle, capital gain is very different from operating income, it's a change of value, and whether it's occasional or regular operations, and by what principles use affect which items will be accounted for. Sometimes things will go extra weird when multiple companies held each other, or through other holding companies' equities. That would cause a huge headache. And capital gain actually include capital losses as well, when selling a stock, it might not be a gain, but could be a loss, and they need to be aggregated through consolidated financial reports. That's something I don't fully understand.

If investments are not being taxed then stock focused companies will have even more of an advantage and the citizens as well as the government will be loosing out on billions of dollars. This needs to be addressed and accounted for.

What you described here is just one point of view in the political debate, more towards current USA Democrats view. On the other hand, another point of view, like those from USA Republicans treat "capital gain", not as "profit", but a flow in the financial system's reservoir. The capital accumulated should be reused into making more capital, these capital is meant to create and facilitate other businesses to flourish, and act as a shock absorber. Since not every investment is a gain, a lot of time it's pure loss, and new enterprises have huge risk, and definitely make big losses most of the time. Hence if we take out the "capital gain" and distributed to everyone's benefit through taxes, instead of reinvesting back into capital market with the same amount, it might strangle businesses, market shrinking, higher unemployments, even the whole economy recession, etc.

Decrease or even total abolishment of capital gain tax is a very tradition "capitalist" point of view, while increasing capital gain tax is actually more associated with socialist ideology.