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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Travis_Bickle who wrote (159316)	10/24/2008 3:13:13 PM
From: GraceZ	Read Replies (1) \| Respond to of 306849

What is funny about your statements about using the S corp to avoid FICA is that you say people can't do it, yet all evidence is to the contrary. It's like that old joke about how theoretically bumble bees can't fly. They do fly and people do use the LLC and S corp to avoid FICA. Maybe, like me, you resent the fact that this loophole exists and that people abuse it, but denying that it exists isn't a reasonable assessment (nor worth quoting in the "tax notes"). Also, one has to expect that the number of people trying to use it, if FICA was extended to include 100% of income, would rise sharply. There is a reason, a valid legal reason it exists, until you understand that you can't possible understand why it isn't as easy to legislate away nor is it particularly easy to enforce the current restrictions to remove the abuse. You as much admitted that in your statement regarding how much you disliked cases concerning it. Basically FICA is insurance designed to cover one's ability to work. It makes no sense for it to cover passive income. To argue all income from a closely held corp is active wage income would be false. What about someone who buys a franchise and chooses to hire someone to manage it? How about a retired widow who inherits her husband's share of a biz? How about a set of siblings who own a family biz, where only one of them runs the business and the others are simply passive owners? I could go on with my examples, but there is a good reason that one is able to separate out active from passive income from the same business entity. To think that the IRS can determine easily how much is active and how much is passive without some sort of arbitrary and difficult to enforce rule, is naive. BTW it is a general rule that when someone has to fall back on ad hominem attacks, calling someone crazy for example, it is a very good sign they have lost whatever argument they are debating, they are trying to deflect attention away from being caught writing something stupid. So it is also true when they fall back on their own alleged expertise, their credentials. If you can't back up the credentials with a coherent argument what possible good are they? Better to hide the fact that you are supposed to be the expert because anyone out there who knows the subject knows you are fudging it.