The tax deduction trap – cross border leasing

Very often private investors are trapped by promises of tax deductions. Unreasonable risks are accepted when there is a chance to play tricks on the IRS.  A nice example for best intentions being abused by banksters is cross border leasing. Initially tax deductions were granted for US citizens investing in US air planes to be  leased by airlines in foreign countries. This should help the US aircraft industry to sell more planes abroad and create jobs in the US (and prevent aircraft industry growth in other countries). In the beginning this seemed to work rather well. The IRS lost some taxes thru cross border leasing but was compensated by additional taxes from the aircraft industry.  In the 90’s banksters figured out how they could get enormous tax deductions without investment in US products. CBL fonds started buying already existing infrastructure abroad (sewer systems, water supply, railroads, etc) and leased it back to the original owners. The original owners were offered an initial reward of immediate cash (typically 1 – 2 %  of the asset value)  for taking lots of risk whereas the banksters could make as much as 10 % profit on the deal immediately. In addition they could sell the tax deductions to US taxpayers. Typically cross border leasing to cities, public utilities and states was promoted by former politicians becoming lobbyists for US banks and became a multi billion “virtual” cross border industry in US and Europe. Lease takers are now struggling to manage their long term financing from banks which can no longer be trusted.

Why should US government be interested to grant tax deductions on such deals which do not create jobs in the US and reduce US tax income? This is a good example how laws and rules outside the finance industry must be corrected to prevent banksters from inventing new criminal schemes.