Let’s say I’m a struggling, but very well off, businessman in the resort and hospitality industry. I have golf resorts around the world, but all of them are losing millions of dollars every year, such that it almost seems intentional. On the bright side, I don’t have to pay much (or anything) in taxes, since I’m losing money every year.
Why not run a profitable resort? Is the tax penalty for running a successful business really that much worse than the millions of dollars in losses?
How am I enriching myself here? Am I actually just laundering money? How does this stuff work?
**Edit:** Ok, this is making a lot more sense after just a few responses. Followup question, what kind of criminal charges might be brought against me, if it turns out I am actually lying about my business’s profitability and, my tax liability, and have been doing so for years?
In: Economics
I think we need to be clear that there is a difference between running an unprofitable business and making it LOOK like you are running an unprofitable business.
Does it make sense to intentionally run an unprofitable business? No. Does it make sense to make it LOOK like you run an unprofitable business? Oh yes, absolutely. The tax savings are tremendous. Now, its terribly immoral and unpatriotic, but…certain people…certainly have the capacity to run such a scheme.
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