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From: nbb@packet.UUCP
Newsgroups: net.taxes
Subject: Houses, Death and Taxes
Message-ID: <349@packet.UUCP>
Date: Fri, 11-Nov-83 16:40:08 EST
Article-I.D.: packet.349
Posted: Fri Nov 11 16:40:08 1983
Date-Received: Sat, 19-Nov-83 03:47:57 EST
Organization: PacketCable,Inc. Cupertino, CA.
Lines: 35

Here is a question for all you tax experts.  I hope it will stimulate
some good discussion here in net.taxes - so send all your replys here
to net.taxes. 

Suppose I buy a house for rental income, each year for five years.  At
the end of 5 years, I refinance the first house, and get all (or 95%)
of my equity out of it, and live for the next year on that borrowed
money.  Of course, I will need to raise the rent to cover the higher
monthly debt service, but inflation will make that easy.  The next
year, I do the same thing with the second house.  I borrow out all my
equity, (borrowings are tax free) and live off it for a year.  I keep
doing this for the rest of my life, each year borrowing off all the
equity in the house which has gone the longest since last (re)financed 
and living off it for a year.  At the end of 50 years, when I die, I
own 5 houses, now priced many times their original cost (assuming an
essentially constant rate of inflation) each of which is mortgaged to
the hilt.  I have managed to live comfortably off of capital gains on
which I have NEVER PAID ANY TAXES.  When I die, won't somebody (my
estate or my children or ...) owe a whopping capital gains tax to the
IRS? 

I suppose it makes a difference whether my houses are sold, and
whether or not I leave them to my children, or maybe I could just let
the banks foreclose on them.  I really don't know what
would/should/could be done, but I don't want my heirs burdened with a
tax bill, and I know the IRS has ways of getting tax money out of
those who should not rightly have to pay it.

Believe it or not, this scheme is exactly what is proposed in the
famous "Robert Allen Nothing Down" (R.A.N.D.) Seminars!  All across
the USA, thousands of people shell out $445 dollars to attend a two
day seminar to hear this idea, and how to buy houses with little or
nothing down - then they go out and try it!  Is it possible that all
these people are headed for a big disaster? Or mayber their children
are all going to be the big losers???   PLEASE REPLY TO net.taxes !!!