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-   -   B2B or saving tax $$. (http://forum.competitionplus.com/showthread.php?t=15674)

a21stud 01-05-2018 02:58 PM

B2B or saving tax $$.
 
Racemaster posted the following and Hemi said it was probably a B2B deal which got me to wondering how B2B deals work. Below is my stab at it. I'm sure someone will let me know where I'm wrong and it's cool as I want to get it right.

Originally Posted by Racemaster
That's true it will not lead to increased sales. Why Ford is involved with Tasca in FC is puzzling.


Here is my guess at how B2B's work. One of you tax/accounting guys please correct me where I’m wrong..

If Tasca pays Ford $300 million this year for cars and parts for their dealerships, Ford must pay taxes on that $300 million minus the costs of sales. If it cost Ford $270 million to produce and deliver the $300 million dollars in cars and parts, they might pay something like 35% tax on the $30 million profit. In this example that would be paying $10.5 million in taxes.

But if Ford trades Tasca $10 million dollars worth of product for Tasca to run his Funny Car with “Ford” in big letters on the sides, that reduces Ford’s tax burden to $290 million in gross sales minus the same $270 million it cost to produce and deliver the product. That makes Ford pay my guestimated 35% tax on "only" 20 million of profit or $7 million. Ford just saved $3.5 million in tax burden they were going to have to pay while getting advertising at 24 events around the country plus any TV, internet and paper publicity Tasca can generate for a net cost of $6.5 million.

Plus Ford gets to keep one of there best dealers very happy. They now have bought NHRA based marketing at a 35% discount. Tasca Ford doesn’t have to spend $10 million of their own to advertise Tasca Ford on the car, car hauler, etc.

Bob Tasca also gets to do what he wants, (drive a funny car) without having to use any personal “after tax” dollars of his own.

Is this close to right?

HEMI_guy 01-05-2018 06:14 PM

I believe anything of value that has been traded in some form is considered taxable income. A few years ago a friend was in trouble with his credit card debt and was able to negotate a deal with the CC company.... but had to pay tax on the amount they let him slide on.

Yvonne* 01-06-2018 09:49 AM

Quote:

Originally Posted by HEMI_guy (Post 207452)
I believe anything of value that has been traded in some form is considered taxable income. A few years ago a friend was in trouble with his credit card debt and was able to negotate a deal with the CC company.... but had to pay tax on the amount they let him slide on.

This is also true of contest prizes. You have to pay tax on their worth. I remember hearing about a guy who won a year's worth of donuts. The tax bill was hefty if memory serves.

HEMI_guy 01-06-2018 12:50 PM

Quote:

Originally Posted by Yvonne* (Post 207466)
This is also true of contest prizes. You have to pay tax on their worth. I remember hearing about a guy who won a year's worth of donuts. The tax bill was hefty if memory serves.

Game shows now do credit checks before they let you on their shows so they know winners can afford the taxes on their winnings.

Yvonne* 01-07-2018 12:10 PM

Quote:

Originally Posted by HEMI_guy (Post 207471)
Game shows now do credit checks before they let you on their shows so they know winners can afford the taxes on their winnings.

I've also heard some of the families that benefit for those new homes that get built for them as a charitable endeavors end up not being able to afford the property taxes and other expenses. It makes for a great TV show but the sad thing is its not necessarily doing them a favor by giving them a luxury home they can't afford.

HEMI_guy 01-07-2018 12:45 PM

Quote:

Originally Posted by Yvonne* (Post 207513)
I've also heard some of the families that benefit for those new homes that get built for them as a charitable endeavors end up not being able to afford the property taxes and other expenses. It makes for a great TV show but the sad thing is its not necessarily doing them a favor by giving them a luxury home they can't afford.

I think that's one of the reasons the show went away. In one scenario the father took a loan against the house to fund a business... then lost it all. In my area they brought the show in and built a house that was so over-valued for the neighborrhood it raised the prop. taxes on all the homes around it. Talk about pissed off neighbors! I also knew a few of the contractors on that job that told the show they intended on paying their workers to work on the project. They were told that EVERY worker on the job HAD to donate their time. LOL.. And the concrete comany that donated the concrete for the baseent used a speacil hot mix that raised the temp. of the house to 140 while everyone had to work in it! The humidty from the concrete was so high all the doors and finish trim had to be replaced twice. Thoe concrete was such a hot mix the trucks had police escorts to and from the job. An unsubstantiated rumor was that it took a week to break up and clean out dried cement out of one of the trucks. So glad I didn't get involved with that one!

Yvonne* 01-07-2018 01:14 PM

Quote:

Originally Posted by HEMI_guy (Post 207515)
I think that's one of the reasons the show went away. In one scenario the father took a loan against the house to fund a business... then lost it all. In my area they brought the show in and built a house that was so over-valued for the neighborrhood it raised the prop. taxes on all the homes around it. Talk about pissed off neighbors! I also knew a few of the contractors on that job that told the show they intended on paying their workers to work on the project. They were told that EVERY worker on the job HAD to donate their time. LOL.. And the concrete comany that donated the concrete for the baseent used a speacil hot mix that raised the temp. of the house to 140 while everyone had to work in it! The humidty from the concrete was so high all the doors and finish trim had to be replaced twice. Thoe concrete was such a hot mix the trucks had police escorts to and from the job. An unsubstantiated rumor was that it took a week to break up and clean out dried cement out of one of the trucks. So glad I didn't get involved with that one!

Wow, that must've been bad! Lucky you dodged that project.

I think the main thing for A21's thread here is that the tax man is going to get his due one way or another. LOL

a21stud 01-07-2018 04:54 PM

Quote:

Originally Posted by Yvonne* (Post 207520)
Wow, that must've been bad! Lucky you dodged that project.

I think the main thing for A21's thread here is that the tax man is going to get his due one way or another. LOL

So does anyone know how the B2B works to both parties advantage? Sounds like my example wouldn't work at all...

HEMI_guy 01-07-2018 05:53 PM

Quote:

Originally Posted by a21stud (Post 207528)
So does anyone know how the B2B works to both parties advantage? Sounds like my example wouldn't work at all...

B2B's can very in a vast number of ways. One example I've been told about is DSR's deal with NAPA. Supposedly DSR threw in the F/C deal to get Schumacher battery chargers in their stores. A similar deal was supposedly made with Sears with Hagan's Die Hard car. Supposedly Schumacher makes their battery chargers.


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