alt Hacker NewsWhat about the "default on the loan" backdoor? Would that work?
Let's say I sell you my business for $1 million. You give me a loan for $1,2 million. The money is transferred into my account. I pay 2% interest for 10 years and then I default on the loan. You do nothing to recover the money.
Tax free sale, no?
Replies
bombcar • today at 12:00 AM
In the USA this is taxed as if the loan was forgiven - so one side or the other pays the tax.
There are ways to abuse the bankruptcy laws, but they are difficult and time consuming and usually not worth it.
I had a few colleagues in the UK that tried this to avoid taxes. The tax services generally don't look too kindly on that sort of arrangements. Searching for "Loan charge" should surface quite a few distressed stories.