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From: ajf@pyuxa.UUCP (A Figura)
Newsgroups: net.taxes,net.singles
Subject: Re: marriage penalty
Message-ID: <1137@pyuxa.UUCP>
Date: Wed, 20-Feb-85 16:12:45 EST
Article-I.D.: pyuxa.1137
Posted: Wed Feb 20 16:12:45 1985
Date-Received: Fri, 22-Feb-85 20:36:24 EST
Organization: Bell Communications Research, Piscataway N.J.
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Xref: watmath net.taxes:697 net.singles:5914

>John Purbrick writes:
>	The couple who got divorced each year ended up losing their case; there
> is a law that any transaction clearly intended primarily to reduce taxes is 
> necessarily invalid.

WHAT? Surely you jest about this "law"!  E.g., I currently rent a very nice
apartment, in a vary nice complex, for a reasonable amount of $. I like my
apartment, and I don't, in general, like to move. However, my current situation
(a single, "upwardly-mobile",  young professional) results in my paying
mucho-kilobucks in income tax each year.  Thus, my calcualtions have shown
me that I can no longer afford to ignore the tax breaks that home ownership
provides. So I've decided to buy a townhouse.

Now, in my case, I don't need a bigger or better home; I don't necessarily
want to move; I don't necessarily want the hassles, maintenance, etc.
involved with a house. I only want to save on my taxes. Thus, in my case,
it is obvious what my "clear and primary intention" is for buying a townhouse.

Are you telling me that because of this, the IRS will nullify my purchase
or (worse) disallow my deductions? I can see some transactions (like an
annual divorce) being a little questionable and probably invalid (and justly
so). But nullifying ANY transaction that's primarily intended to reduce taxes?
Not even the IRS could be that arbitrary? :-)

And what about my IRA? I don't necessarily like the idea of putting away $2000
each year where I can't access it, even in case of emergency (except at a great
penalty). Even if it is a "retirment" account, I'd much rather have the money
be a little more available in case I really needed it.  But, because of the
tax break it provides, I still have an IRA account. Thus, my annual transaction
to add to my IRA is clearly intended primarily to reduce my taxes. Does
that make my IRA tax deduction invalid?

If there is such a "law", then a lot of people are in for a nasty surprise
from the IRS, including:
	- people (like me) who buy a house and take deductions on it
	- people (like me) who open IRA or Keogh accounts
	- people (like me) who buy (tax-free) municipal bonds
	- investors who take a voluntary capital loss to reduce taxes
	- people who have almost any other kind of tax shelter
	- businesses which claim ACRS deductions or investment tax credits
	- single-income couples who got married solely to take the additional
	   $1000 personal exemption for the non-working spouse ;-)
	- etc.

If there is such a law, I think I'm in big trouble!  And, I think a good
number of other USENETters are in the same boat! I wonder if there are
any federal prisons with a link to the NET, so we can all keep in touch
after we get locked up for tax evasion? :-)