In the final days of 2013, just after completing a prize-winning renovation of a 113-year-old mansion in the tony Louisville suburb of Anchorage, businessman Neil Ramsey sold the house and a surrounding 19-acre parcel to his limited liability company, The Anchorage LLC, for $3 million.
Ramsey hoped to turn the historic home into a bed-and-breakfast, but that plan soon faded. A little more than three years later, The Anchorage LLC took a loss of perhaps more than $1 million when it sold the mansion and 10 of the 19 acres for $1.6 million to Anchorage Place LLC, a limited liability company owned by Gov. Matt Bevin.
That transaction has since spawned two ethics complaints against Bevin, questioning whether the seemingly low sales price is tantamount to an improper gift to Bevin from a friend and political donor, but tax experts point to another possible benefit to Ramsey from the deal: a big tax break.
“It would be a tax loss, which he could use to offset any capital gain income he had in that year,” said Jennifer Bird-Pollan, an associate professor of law at the University of Kentucky who specializes in tax law.
In other words, Ramsey’s potential $1 million loss means the Internal Revenue Service will allow him to reduce his tax bill for 2017 by using that loss to offset his long-term capital gains — any profits he earns from selling assets in 2017 that he has owned for at least a year.
For example, if Ramsey sold stock at a profit of $1 million this year, he potentially could use the loss from the sale of the house to eliminate his tax bill on the stock sale. Under that scenario, if Ramsey were taxed at the top federal rate, he would potentially avoid paying $200,000 in federal taxes.
“When they’re able to claim (the loss), it reduces their tax bill depending on what tax bracket they’re in,” said Jason Bailey, the executive director of the Kentucky Center for Economic Policy. “And if you’re a higher income person, the benefit is even greater.”
Bevin gets a neat house, the guy selling it gets a huge tax break, and this is how things work now here in Kentucky, where if there's not a scandal involving a Republican in Frankfort, you're just not looking hard enough.
Will the GOP super-majority in the state legislature give a damn?