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Comment by dabernathy89 | Hacker News Reader

I don't think it's clear how this contradicts the comment you're replying to.

“However, crucially, when the money leaves the foundation it must go to an approved charity.”

They can spend money on expenses and those expenses can benefit you. Having family members work for and be generously paid by such an orientation is a common example. Anytime you control a cash flow you can benefit from that cash flow.

yes, but that income will be fully taxed by the recipient (at whatever their tax rate is). The recipient isn't getting it tax free.

Not fully taxed, you have the next level of legal tax avoidance in the gap between company and person.

The key to getting low single digit % tax burdens is adding in steps that allow you to add lots of % reductions and obfuscations because more overt methods tend to not be sustainable and in some jurisdictions (as in the UK) csn lead to the method being retrospectively classed as tax evasion and you end up paying the outstanding balance with interest.

You avoid both income and gift taxes and they don’t pay taxes on benefits like health insurance so it’s a significant tax savings over just handing out money. More importantly is the social benefits as working at a charity is seen more positively than living on a trust fund.

Paying all your family members $200k a year until the end of time has a much lower tax liability than taking a billion dollars of income in one year.

I agree, but its also less valuable (money today is worth more than money tomorrow). It's a tax management strategy, I just don't find it "evil" and find the arguments that taxes aren't paid to be a bit false (less taxes in the end, but not no taxes, so perhaps my phrasing of "fully taxed" is also a bit off, not fully taxed at the level of the giver). The only way to get around it would be to hurt charities in general (which perhaps the more socialist amongst us would have zero problem with, but I personally think would be bad for society).

> Anytime you control a cash flow you can benefit from that cash flow.

Interesting point. One wonders if, hypothetically, I had $1B to donate to a charity, what those charities might offer up (under the table?) to be a recipient of that money.

I know, crazy conspiracy thinking.

Usually that's enough to get your name on a wing of a hospital or twenty

It's not unreasonable for a family member to want to spend their days working at a charity, using the family funds and time for good. But then it gets spun as nepotism by haters.

Because it is nepotism. They're drawing a salary, not volunteering to "do good". Why were they qualified for that position? It's obviously because they're a family member.

So you want to ban family businesses? Grandma needs to interview for her job making perogies? The daughter needs to do a coding test to prove that she's qualified run the cashier over other candidates?

Is the company public or organization give charitable stats? If so that puts a different spin on things.

If you don’t want any strings, then don’t ask for a handout from the taxpayers.

> If you don’t want any strings, then don’t ask for a handout from the taxpayers.

Of course, being tax-exempt is the opposite of a handout from the taxpayers: it’s exemption by the taxtaker.

Earnings are taxed when you make them. You need to have made money to donate it. QED, you earn, get taxed, get a handout.

Who's talking about banning anything? Were you under the impression that nepotism is a crime?

if they got that job because they are family it's literally nepotism.

IT is nepotism, but I think people have the mistaken idea that nepotism is unethical in all situations. It isn't necessarily corrupt or illegal.

Any salary paid by the organization would be taxable income for the recipient, closing the loop.

Also, you dont need the pretext of non-profit to do this. There are plenty of ways to simply pay family a pre-tax salary and deduct the cost against your income.

You can do this with any corporation and dont need to do it through a charity.

The point is you can recuperate some money after donating it.

The optimal approach is roughly donating appreciated assets such as stock so you not only get to avoid paying taxes on the sale but also reduce your income taxes elsewhere by the full amount. Aka if a stock is nominally worth 10 million but you would only get 9 million after tax if you sell it you still get to deduct the full 10 million from income taxes. Which beats the obvious idea of using a corporation to directly pay them.

For the full tax implications you need to consider the benefits of avoiding income tax and gift/inheritance tax for the donors as well as the recipient receiving benefits tax free as well as a portion of their salary at much lower tax brackets plus the impact of payroll taxes.

(Not a tax professional and loopholes change over time.)

I also think expenses, even salaries don't really amount to that much of a tax avoidance when the sums are in the billions. Hotels every night of the year for your staff would still be under $1M per staff member.

I think (I don't know as i'm a UK citizen) that these are similar to trusts. It's fair to say that rich people avoid a lot of income tax when they fund these trusts, but the trusts themselves still then pay tax on income and expenditures. The main thing it allows is for wealth to remain in a family for longer periods of time with one big tax avoidance at the beginning (the recoup on income taxes)

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