@ThePainefulTruth Said
Yeah, except not to yourself for the purposes of avoiding the tax. We have laws like that right now all over the place which any 7 figure lawyer can find.
And tell your compatriot sanding next to you there that LLC would operate slightly different under the FairTax for reasons such as this. Duh.
So, what % of a company would you be able to own and still rent from it? Suppose I buy a share of a publicly traded REIT that owns a bunch of apartment buildings. Would I have to look up which buildings they own and avoid living in any of them? The government doesn't even have to know who owns an LLC. And you're not renting it to yourself. The LLC is renting it to you. The LLC is a separate entity. Hey, replace it with a C corp if you want, same difference. Maybe a large family has 20 family members and they each own 5% of an LLC that rents the house to one of them for $1/mo. Maybe there's 100 family members who do it. Where do YOU draw the line? This is clearly a major loophole that you can't just explain away by proposing some "no relationship" rule. Nobody is allowed to rent any property from any company they have an ownership interest in? Are you kidding? Bunches of companies ALREADY do this as a tax avoidance scheme! A company, say Wal-Mart, owns a subsidiary, say Wal-Mart Real Estate, which owns the land and buildings where Wal-Mart stores are located. These properties are held in Real Estate Investment Trusts, which avoid taxes as long as they pay out 90% of their earnings to shareholders. In high tax states, the store pays "rent" to Wal-Mart Real Estate, which is a deduction on their taxable income in that state. The Real Estate company then pays a dividend to the parent company and escapes the state tax. According to you, that would be fraud, but you know what? It isn't.
And with a system where you have to pay tax on a new house but not on a used house why would anyone buy a new house? Say I could buy a new house for $130,000 (tax included) or an equivalent used house for $100,000 why would I ever choose the new house? Even if I were stupid enough to buy the new house, if I had to sell within a few years, I wouldn't be able to get what I owe out of it since used houses would be worth 30% less. You'd be better off with a federal property tax than trying to implement different taxes depending on whether a property is new, used, for investment, etc.