Here’s Where the Bodies Are Buried.
Between 1983 and 1985, mobster Whitey Bulger whacked three people and buried them under the dirt-floor basement of a house in Boston’s working-class “Southie” neighborhood. Bulger, an FBI informant who inspired Jack Nicholson’s character in The Departed, vanished after his handler tipped him off that he was looking down the business end of an indictment. Sixteen years later, acting on a tip from a former Miss Iceland, the Feds found him in California. They hauled him back to Boston, convicted him of 11 murders, and shipped him off to prison where (of course) he got whacked himself.
Now that house, nicknamed “the Haunty,” is under contract to be sold. (If knowing that a bunch of hardened killers call it “the Haunty” doesn’t make you drool, what will?) It’s not much to look at — a nondescript two-story row house, built in 1885, with 1,975 square feet on a 5,000-square-foot lot. But Southie isn’t the same old Southie anymore — the Boston Globe calls it one of “the city’s hottest neighborhoods” — and the buyer should be able to replace it with four bougie townhouses. You know the drill — hot tubs, granite countertops, the works.
The current owner dropped $120,000 for it back in 1985. While we don’t know today’s sale amount, the most recent asking price was $3.395 million. That sort of gain generally means a nice score for a different crew of Feds at the IRS. Naturally, that got us wondering, what could our sellers do to avoid that hit?
The easiest way to escape tax on that sort of gain is to hold your property until death. At that point, your heirs get what’s called a “stepped-up basis” equal to the property’s fair market value as of the date of the deceased owner’s death. Good news: those rules apply whether you die of natural causes, you’re shot in the back of the head (like Bulger victims Arthur “Buckey” Barrett and John McIntyre), or you’re strangled (like third victim Deborah Hussey). This works with any sort of appreciated property, not just your house.
Fortunately, though, there are lots of ways to defer or eliminate the tax selling your house, while you’re still alive to enjoy your gains. When you sell your primary residence, you can exclude up to $250,000 from your income ($500,000 for joint filers). You can roll your gain into a qualified opportunity fund to delay it until 2026. Or you can use advanced strategies like a charitable remainder trust, a pooled income fund, or coupling an installment sale with a monetizing loan.
The Haunty seller isn’t the only one facing tax problems. When Feds finally busted Bulger at his apartment in Santa Monica, they found over $800,000 in cash. No one would believe he paid tax while he was on the lam, which means the IRS is going to want their taste. Illegal income is taxable just like if you went legit. More good news: you can deduct the costs of running most illegal businesses. So, when Whitey buys a shovel to bury the bodies, he can deduct the business-use portion. The Tax Cuts and Jobs Act of 2017 even lets him claim 100% bonus depreciation!
We’ve worked with clients who make their money all sorts of ways (although none of them have ever made the Most Wanted list). When it comes to paying less tax, we know where the bodies are buried. Call us when you’re ready to pay less, and remember, we’re here for the rest of your gang, too!
Thursday, December 12, 2019
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