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theprofessor24 t1_isca0c0 wrote

Is this fraud? Yes it is. Is it that bad? No it isn't. Essentially what's happening here is a home buyer owns a business. This business generates monthly cashflow but the owner does not take a salary. If you do not take a salary, you have no taxable income. No taxable income, "A" banks won't accept you. In theory, a business owner could make a million dollars a month. However, because they do not show any income, they are SOL.

This is not the type of fraud used to hurt anyone. This is the type of fraud that is used to go around bureaucratic nonsense. The mortgage will be paid because the funds needed are there.

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ConcreteState t1_iscc3x8 wrote

Fraud is fraud.

If a business owner wants income they should pay themselves and pay taxes on this income.

Your made up scenario is illegal twice, for tax evasion and fraud.

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theprofessor24 t1_iscdjz2 wrote

They are not evading taxes. They pay their business taxes, they just don't draw a salary. Nothing illegal there. Like it or not, this is a very real problem that business for self individuals face. Also, like it or not, I am more educated on this topic then 99.9% of people.

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ConcreteState t1_iscex20 wrote

>They are not evading taxes. They pay their business taxes, they just don't draw a salary.

If they want a salary they should pay a salary. And taxes.

> Nothing illegal there.

Incorrect, fabricating a loan application is fraud.

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theprofessor24 t1_iscfg3f wrote

No. You called it tax evasion. I'm saying it isn't. Fabrication of paperwork to close on a house is fraud. We agree.

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tcisme t1_iscp7kw wrote

Would this person with a lucrative business but no income be eligible for Medicaid (based on having a low income in a state with expanded Medicaid)?

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destinationlalaland t1_iscdu31 wrote

That doesn’t really pass a sniff test to me. Seems like something that you should have got advice on from your accountant, if you want to avoid personal income taxes, there’s a consequence. Your scenario reads to me as “I want to have my cake and eat it.” These systems are in place for a reason, and fraud is fraud.

If you have sufficient wealth - and a bank won’t take you, you may need to find an alternative lender - not commit fraud.

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theprofessor24 t1_iscf78j wrote

Well unfortunately in today's society it seems the only real way to get ahead is to do things like this. It is absolutely a "Have cake and eat it to" scenario. I'm not advocating for any of this, but I understand where it comes from.

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destinationlalaland t1_ischmf2 wrote

Have we got problems in society and as a nation? Absolutely. Loads of them. But when a plurality of society abandons the rule of law to get ahead, you start on the road to being a failed state.

Your “legitimate use case” will work equally as well for money laundering and bad actors.

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blueblackwolf t1_isckkvz wrote

There are legal means of addressing this type of situation. It's a whole specialty in wealth management. Very different from fraud

Edit: sp

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PseudonymIncognito t1_isdve93 wrote

So then how does the money get from the business to the owner in order to pay the mortgage? The owner is either drawing a salary, or is taking some other capital distribution from the business, which should be reported as income to the appropriate taxing authorities, or the business is a pass-through entity in which case the business income is their personal income and should also have been reported to the taxing authorities.

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