buisness robot

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
Farmer Giles

buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 7:13 pm

so what written laws stop anyone from simply placing all their W2 income on a schedule C for maximum deductions (while enjoying the standards as well)

AND

what stops me from creating a "legal robot" whose business is to serve my estate by expensing everything down to zero for tax purpose? I charge ("fund") the robot; it works for me and all its costs are deductible as business purpose; the 'robot' has a profit/loss motive (only losses of course) and distributes its losses (negative returns) to me for later deduction.

As the robot is funded it issues "worthless securities" in exchange, which I use to "pay" the robot.

now dont laugh or put down please, I'm requesting a logical answer based on knowable codified law as to why this will or will not work legally.

Im going to posit that most every tax is somehow, somewhere, actually deductible or removable. tax laws are not for "collecting funds" so much as directing economic decisions.

bmielke

Re: buisness robot

Postby bmielke » Tue Mar 09, 2010 7:36 pm

Wha???

That has to be illegal, To start off I think your worthless securities would be securities fraud, from there, it would have to be tax fraud, because this "Robot" is running a business that doesn't exsist.

For instance, you cannot claim a home business that makes no money and does nothing just to deduct all expenses. I am not a tax law expert, but any tax fraud list starts off with that example.

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Re: buisness robot

Postby Arthur Rubin » Tue Mar 09, 2010 8:04 pm

Farmer Giles wrote:what stops me from creating a "legal robot" whose business is to serve my estate by expensing everything down to zero for tax purpose? I charge ("fund") the robot; it works for me and all its costs are deductible as business purpose; the 'robot' has a profit/loss motive (only losses of course) and distributes its losses (negative returns) to me for later deduction.
This no sense makes. If the "robot" were a legal entity, it would be considered to be "you" for tax purposes, so it's deductions would only be allowable to you if allowed in the absence of the "robot".

I'll have to research the specific provisions that cover the first one, but, even if it could be done, I don't see the benefit. Your employer would have to withhold both shares of the social security tax (that's one provision of the tax law) and you would have to pay self-employment taxes. It doesn't seem worthwhile to take otherwise unavailable deductions.
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Re: buisness robot

Postby Arthur Rubin » Tue Mar 09, 2010 8:10 pm

Farmer Giles wrote:so what written laws stop anyone from simply placing all their W2 income on a schedule C for maximum deductions (while enjoying the standards as well)
26 USC 1402(c)(2)
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Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 8:14 pm

CaptainKickback wrote:

So, W-2 income always stays W-2 income and 1099 income will always remain 1099 income.


well there is a space on the schedule C for "statutory employee", so there are some exceptions anyway for certain recipients of W2 informations. Its true Im not going to claim expenses that arent mine; i wouldnt even have any corresponding receipts to justify that. but i wonder what law actually stops anyone from claiming a W2 as income. It's useful because of whatever business deductions would then be available (and people do manage to include a lot of personally useful stuff as legitimate deductions for the activity), ON TOP of the 'standard deduction'. If I itemize my expenses as an employee i lose the standard, which is the point of this exercise.

It might work out better overall even if Ive got to pay 15% FICA on the very reduced gross. In fact this item is already lost, in the with-holding system. I might have even overpaid!

Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 8:17 pm

Arthur Rubin wrote: If the "robot" were a legal entity, it would be considered to be "you" for tax purposes, so it's deductions would only be allowable to you if allowed in the absence of the "robot".


a legal entity like a corporation may have business expenses that for personal uses would not be deductible. I cant neccesarily deduct my McDonalds bill but McDonalds can, its an expense to provide all that food and service.


btw- the IRS or i should say the US Code has a section on the nontaxibility of "worthless securities", which is where I found the term. its like "internal credits"- when we give up some property and recieve a bond in exchange, redeemable for the property, like bearer shares or trust certificates. but the courts have ruled they have no inherent value on the market so for tax purpose its a "zero"

Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 8:30 pm

Arthur Rubin wrote:
Farmer Giles wrote:so what written laws stop anyone from simply placing all their W2 income on a schedule C for maximum deductions (while enjoying the standards as well)
26 USC 1402(c)(2)


heres my first question on that:

http://www.law.cornell.edu/uscode/26/us ... -000-.html

(c) Trade or business
The term “trade or business”, when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses),


which is

http://www.law.cornell.edu/uscode/uscod ... -000-.html

but in this case we arent talking about the selfemployment schedule, we are talking about the business schedule. so as im seeing this, the limitation here is to claiming business deductions on the SE form as an employee...although the linked law provides some exceptions to that ruleas well, which i'll check out later.

Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 8:40 pm

ok thanks for the input all, I think I see the flaw in my first proposition. Other than certain exceptions, the fact that someone is being treated as an employee and receiving a W2 precludes the use of the schedule C business form, except where there in no social security involved. So in other words, the hook is social security. thats what locks us into an "employee" status.
Last edited by Farmer Giles on Tue Mar 09, 2010 9:25 pm, edited 1 time in total.

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Re: buisness robot

Postby BBFlatt » Tue Mar 09, 2010 8:48 pm

While you're looking things up, you may want to take a gander at 26 USC Section 262 ("...no deduction shall be allowed for personal, living, or family expenses...") and 26 USC section 183 ("...if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed...").
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Re: buisness robot

Postby Pottapaug1938 » Tue Mar 09, 2010 9:09 pm

Farmer Giles wrote:ok thanks for the input all, I think I see the flaw in my first proposition. Other than certain exceptions, the fact that someone is being treated as an employee and receiving a W2 precludes the use of the schedule C business for, except where there in no social security involved. So in other words, the hook is social security. thats what locks us into an "employee" status.


The fundamental flaw in your postions is that you seem to be falling into the trap of taking one snippet of the law and interpreting it out of context. Whether you are an employee or not has nothing to do with whether or not you are in the Social Security system. Check out Dan Evans' Tax Protestor FAQ; you will find the answers to this and many other questions there. It will be well worth your time to read the entire thing (and you'll get more than a few laughs at the absurd reasons that many people devise to avoid paying taxes).
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Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 9:31 pm

BBFlatt wrote:While you're looking things up, you may want to take a gander at 26 USC Section 262 ("...no deduction shall be allowed for personal, living, or family expenses...") and 26 USC section 183 ("...if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed...").


companies lose money all the time, or break even. doesnt profit include "gains/losses"? the requirement stated on schedule C is that the entity operate for "business purpose"

(apparently my "business robot" is spelled wrong...)

the rich, or the clever, manage to generate all sorts of advantageous losses. has anything changed to where it no longer helps to appear to lose money, so those fiscal losses can be distributed the same as any gain would? im in great shape if all my "gains" are balanced out by "losses" as well.

Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 9:35 pm

Pottapaug1938 wrote:

The fundamental flaw in your postions is that you seem to be falling into the trap of taking one snippet of the law and interpreting it out of context. Whether you are an employee or not has nothing to do with whether or not you are in the Social Security system. Check out Dan Evans' Tax Protestor FAQ; you will find the answers to this and many other questions there. It will be well worth your time to read the entire thing (and you'll get more than a few laughs at the absurd reasons that many people devise to avoid paying taxes).


i know about the FAQ ... obviously one doesnt care to pick up any loser arguements. not that i want to "win", either, rather to know whats real and everything i never learned in school.

anyway, whether im an employee for social security purpose seems to control my access to "business expenses", since all the statutory exceptions in the posted law cover "employees" who arent generating any with holding.

bmielke

Re: buisness robot

Postby bmielke » Tue Mar 09, 2010 10:09 pm

Farmer Giles wrote:
BBFlatt wrote:While you're looking things up, you may want to take a gander at 26 USC Section 262 ("...no deduction shall be allowed for personal, living, or family expenses...") and 26 USC section 183 ("...if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed...").


companies lose money all the time, or break even. doesnt profit include "gains/losses"? the requirement stated on schedule C is that the entity operate for "business purpose"

(apparently my "business robot" is spelled wrong...)

the rich, or the clever, manage to generate all sorts of advantageous losses. has anything changed to where it no longer helps to appear to lose money, so those fiscal losses can be distributed the same as any gain would? im in great shape if all my "gains" are balanced out by "losses" as well.


The key is while they lose money or break even they are attempting to make a profit. If you have a company that doesn't do anything, literally nothing and try to deduct living expenses it's fraud.

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Re: buisness robot

Postby Judge Roy Bean » Tue Mar 09, 2010 10:28 pm

IMHO, this is where many small businesses - especially sole proprietorships - start going off the rails because they start blending business issues with their own personal and family economic situations. When financial problems are causing extraordinary stress, some of them resort to gaming the system in the hopes that they'll get through whatever temporary(?) issue it is and go back and fix it before Uncle Sam gets intrusive. You see this in personal bankruptcy cases all the time. An attempt at a business without any real business experience results in a mountain of debt and some dumb (clever?) way of accounting for things that doesn't pass the smell test.

But the IRS and other regulatory agencies have resources and tools to find out if your business activity is legitimate and although you may be able to get away with something for a year (or even more :roll: ), eventually things will get ugly.
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Farmer Giles

Re: buisness robot

Postby Farmer Giles » Tue Mar 09, 2010 11:48 pm

CaptainKickback wrote:Seems to me, Farmer Giles moved from a strawman argument to a tinman argument, and we all know that "Oz never did give nothing to the tinman, that didn't, didn't already have."



thats pretty funny. what can this tinman be made to do...hes a useful friend with a big AXE. and he doesnt need much but a squeak of oil now and again...

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Re: buisness robot

Postby Joe Dirt » Wed Mar 10, 2010 1:12 am

My business robot reminded me of this list:

Ad hominem
An ad hominem argument is any that attempts to counter another’s claims or conclusions by attacking the person, rather than addressing the argument itself. True believers will often commit this fallacy by countering the arguments of skeptics by stating that skeptics are closed minded. Skeptics, on the other hand, may fall into the trap of dismissing the claims of UFO believers, for example, by stating that people who believe in UFO’s are crazy or stupid.

]Ad ignorantiam
The argument from ignorance basically states that a specific belief is true because we don’t know that it isn’t true. Defenders of extrasensory perception, for example, will often overemphasize how much we do not know about the human brain. UFO proponents will often argue that an object sighted in the sky is unknown, and therefore it is an alien spacecraft.

Argument from authority
Stating that a claim is true because a person or group of perceived authority says it is true. Often this argument is implied by emphasizing the many years of experience, or the formal degrees held by the individual making a specific claim. It is reasonable to give more credence to the claims of those with the proper background, education, and credentials, or to be suspicious of the claims of someone making authoritative statements in an area for which they cannot demonstrate expertise. But the truth of a claim should ultimately rest on logic and evidence, not the authority of the person promoting it.

Argument from final Consequences
Such arguments (also called teleological) are based on a reversal of cause and effect, because they argue that something is caused by the ultimate effect that it has, or purpose that is serves. For example: God must exist, because otherwise life would have no meaning.

Argument from Personal Incredulity
I cannot explain or understand this, therefore it cannot be true. Creationists are fond of arguing that they cannot imagine the complexity of life resulting from blind evolution, but that does not mean life did not evolve.

Confusing association with causation
This is similar to the post-hoc fallacy in that it assumes cause and effect for two variables simply because they are correlated, although the relationship here is not strictly that of one variable following the other in time. This fallacy is often used to give a statistical correlation a causal interpretation. For example, during the 1990’s both religious attendance and illegal drug use have been on the rise. It would be a fallacy to conclude that therefore, religious attendance causes illegal drug use. It is also possible that drug use leads to an increase in religious attendance, or that both drug use and religious attendance are increased by a third variable, such as an increase in societal unrest. It is also possible that both variables are independent of one another, and it is mere coincidence that they are both increasing at the same time. A corollary to this is the invocation of this logical fallacy to argue that an association does not represent causation, rather it is more accurate to say that correlation does not necessarily mean causation, but it can. Also, multiple independent correlations can point reliably to a causation, and is a reasonable line of argument.

Confusing currently unexplained with unexplainable
Because we do not currently have an adequate explanation for a phenomenon does not mean that it is forever unexplainable, or that it therefore defies the laws of nature or requires a paranormal explanation. An example of this is the “God of the Gapsâ” strategy of creationists that whatever we cannot currently explain is unexplainable and was therefore an act of god.

False Continuum
The idea that because there is no definitive demarcation line between two extremes, that the distinction between the extremes is not real or meaningful: There is a fuzzy line between cults and religion, therefore they are really the same thing.

False Dichotomy
Arbitrarily reducing a set of many possibilities to only two. For example, evolution is not possible, therefore we must have been created (assumes these are the only two possibilities). This fallacy can also be used to oversimplify a continuum of variation to two black and white choices. For example, science and pseudoscience are not two discrete entities, but rather the methods and claims of all those who attempt to explain reality fall along a continuum from one extreme to the other.

Inconsistency
Applying criteria or rules to one belief, claim, argument, or position but not to others. For example, some consumer advocates argue that we need stronger regulation of prescription drugs to ensure their safety and effectiveness, but at the same time argue that medicinal herbs should be sold with no regulation for either safety or effectiveness.

Non-Sequitur
In Latin this term translates to “doesn’t follow”. This refers to an argument in which the conclusion does not necessarily follow from the premises. In other words, a logical connection is implied where none exists.

Post-hoc ergo propter hoc
This fallacy follows the basic format of: A preceded B, therefore A caused B, and therefore assumes cause and effect for two events just because they are temporally related (the latin translates to “after this, therefore because of this”).

Reductio ad absurdum
In formal logic, the reductio ad absurdum is a legitimate argument. It follows the form that if the premises are assumed to be true it necessarily leads to an absurd (false) conclusion and therefore one or more premises must be false. The term is now often used to refer to the abuse of this style of argument, by stretching the logic in order to force an absurd conclusion. For example a UFO enthusiast once argued that if I am skeptical about the existence of alien visitors, I must also be skeptical of the existence of the Great Wall of China, since I have not personally seen either. This is a false reductio ad absurdum because he is ignoring evidence other than personal eyewitness evidence, and also logical inference. In short, being skeptical of UFO’s does not require rejecting the existence of the Great Wall.

Slippery Slope
This logical fallacy is the argument that a position is not consistent or tenable because accepting the position means that the extreme of the position must also be accepted. But moderate positions do not necessarily lead down the slippery slope to the extreme.

Special pleading, or ad-hoc reasoning
This is a subtle fallacy which is often difficult to recognize. In essence, it is the arbitrary introduction of new elements into an argument in order to fix them so that they appear valid. A good example of this is the ad-hoc dismissal of negative test results. For example, one might point out that ESP has never been demonstrated under adequate test conditions, therefore ESP is not a genuine phenomenon. Defenders of ESP have attempted to counter this argument by introducing the arbitrary premise that ESP does not work in the presence of skeptics. This fallacy is often taken to ridiculous extremes, and more and more bizarre ad hoc elements are added to explain experimental failures or logical inconsistencies.

Straw Man
Arguing against a position which you create specifically to be easy to argue against, rather than the position actually held by those who oppose your point of view.

Tautology
tautology is an argument that utilizes circular reasoning, which means that the conclusion is also its own premise. The structure of such arguments is A=B therefore A=B, although the premise and conclusion might be formulated differently so it is not immediately apparent as such. For example, saying that therapeutic touch works because it manipulates the life force is a tautology because the definition of therapeutic touch is the alleged manipulation (without touching) of the life force.

The Moving Goalpost
A method of denial arbitrarily moving the criteria for “proof” or acceptance out of range of whatever evidence currently exists.

Tu quoque
Literally, you too. This is an attempt to justify wrong action because someone else also does it. “My evidence may be invalid, but so is yours.”

Unstated Major Premise
This fallacy occurs when one makes an argument which assumes a premise which is not explicitly stated. For example, arguing that we should label food products with their cholesterol content because Americans have high cholesterol assumes that: 1) cholesterol in food causes high serum cholesterol; 2) labeling will reduce consumption of cholesterol; and 3) that having a high serum cholesterol is unhealthy. This fallacy is also sometimes called begging the question.
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Re: buisness robot

Postby Judge Roy Bean » Wed Mar 10, 2010 1:24 am

"Post-hoc ergo propter hoc"


Or as we have come to know it, Van Peltism.
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Re: buisness robot

Postby Joe Dirt » Wed Mar 10, 2010 1:30 am

Your Honor,

Wouldn't the ref to VanSFBPelt be more appropriately "Post-hoc ergo procto hoc"?
If you lend someone $20 and never see that person again, it was probably a wise investment.

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Re: buisness robot

Postby Judge Roy Bean » Wed Mar 10, 2010 5:36 pm

Joe Dirt wrote:Your Honor,

Wouldn't the ref to VanSFBPelt be more appropriately "Post-hoc ergo procto hoc"?


Hmmmm . . . A occurs before B, ergo something flies out of Van Pelt's, ah, er . . . never mind. :wink:
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Re: buisness robot

Postby Parvati » Wed Mar 10, 2010 8:10 pm

Joe Dirt wrote:Wouldn't the ref to VanSFBPelt be more appropriately "Post-hoc ergo procto hoc"?


:lol: Hah! Brill.
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