RangerDave wrote:
Scenario: [snip] Replacing land with.... Art.
Question 1: If I sell the Art in Year 10 for $500k in cash, what amount, if any, do you think I should pay taxes on? What amount, if any, should the purchaser pay taxes on? What is the basis for your answer?
The only tax that should be levied is sales tax, and should be on the sale price. No tax on your income should be levied, because taxing income is deleterious to motivation.
RD wrote:
Question 2: If I trade the Art in Year 10 for some other tangible asset with a fair market value of $500k, what amount, if any, do you think I should pay taxes on? What amount, if any, should the counterparty to the trade (i.e. the recipient of the land) pay taxes on? In each case, what is the basis for your answer?
The exchange is a two-part sale, and should have a sales tax levied on the total value of the exchange.
RD wrote:
Question 3: If I hire someone as an employee in Year 10 and compensate them by deeding the Art to them rather than paying a cash salary, what amount, if any, do you think I should pay taxes on? What amount, if any, do you think the employee should pay taxes on? In each case, what is the basis for your answer?
Not sure I fully get what you mean by this question, but no tax should be levied on income. Instead, this should be viewed as a barter, as above, and sales tax should be levied on the total transaction amount.
I should note that I am not determining who is responsible for the sales tax: buyer, seller, or a mix. I'd leave that to others.