Posted by Mike (WA) on April 04, 2012 at 08:41:48 from (69.10.196.49):
In Reply to: Re: Cash sale posted by Nathan (SD) on April 04, 2012 at 07:41:21:
Most legal ethics rules do not require a lawyer to advise the client to take the "legal" path- if he proposes to do something illegal, we are supposed to tell him of the possible consequences, and nothing prevents us from giving him our opinion of the chance of getting caught.
In this case, he would have no tax liability if selling for less than he paid for it, and no depreciation recapture if he never depreciated it in the first place. His possible jeopardy comes if YOU get audited, and auditor then investigates him, to see if he reported the sale properly on his income tax. At that point, his situation unravels, and he's in some trouble. He's wise not to leave a paper trail, at this point.
There are lots of transactions that are "under the radar" these days. Most often, the guy will have some stuff on the up and up, but not everything goes on the books, and equipment is bought and flipped for a profit, without any records. Very hard for IRS to catch up to that- they don't have anything to work with.
What I don't know is how often IRS "cross checks" the other side of a transaction- I suspect not very often, unless they are discovering that the guy they are auditing is a crook, then they'll begin to suspect every transaction.
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