How a Tax Break for Farmers Saves Big Firms Big Bucks
'NYT' sees it as example of how messy tax-code reform will be
By Kate Seamons, Newser Staff
Posted Jan 7, 2013 3:55 PM CST
A tax break that originally had things like cows in mind is being exploited by the likes of GE and BMW, reports the NYT.   (AP Photo/Charles Osgood)

(Newser) – Reforming the tax code will be a pitfall-studded affair, asserts the New York Times, which today offers up the tax break for "like-kind exchanges" as proof. This particular break was established nine decades ago as a way to help family farmers. It permitted them to sell land, equipment, or animals without paying capital gains taxes, so long as the money made was used to acquire new similar assets. But the break, which keeps at least $3 billion a year out of the Treasury's coffers, is now being used by art dealers and real estate developers—and companies ranging from Wells Fargo to GE, which may not just be using it, but abusing it.

Among the key stipulations of the tax break: Companies can only spend the money they receive from selling an asset on a replacement, and that money must be kept in an escrow account controlled solely a third party. But evidence used at a federal trial involving JPMorgan Chase shows that those companies may not abide by those rules. In fact, Volkswagen and BMW's American subsidiaries had so much control of their escrow funds they were able to use them as collateral when obtaining credit lines. Their ability to do so reveals what the Times calls "one of the greatest vulnerabilities of the United States tax system: it depends on voluntary compliance." Click to read the full piece.

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Showing 3 of 33 comments
ppaca
Jan 8, 2013 6:03 AM CST
This article ignores the fact that the 40% Estate Tax is the biggest cause of the family farm disappearing. Small farmers often cannot afford to pay that tax upon the death of their owners and must sell their farms. One must have money to buy those farms, so it is only the large, corporate farmers who can afford to do so. Thus the farm land is further concentrated into the large, corporate farms, eliminating the small, family owned farms. So it is the government itsef that is creating the demise of the family owned farm.
Libris_Fidelis
Jan 8, 2013 2:53 AM CST
Mega-money talks... honesty and integrity are shown the back door. Always has since commerce is allowed to infiltrate and sabotage our political system to exclude the electorate!
No-Left-Turn
Jan 7, 2013 8:01 PM CST
"one of the greatest vulnerabilities of the United States tax system: it depends on voluntary compliance." The greatest vulnerability is that the zillion pages of code have become so complicated that no one except well-heeled corporations understand the code including the IRS. A simplified tax system would reduce the burden on individuals and corporations by billions, and yet could net the Treasury more revenue. Like that will ever happen.