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Simple English definitions for legal terms
look-through principle
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A quick definition of look-through principle:
The look-through principle is a rule used in taxes to figure out who really owns a piece of property. Instead of just looking at the person or company who legally owns the property, we look at who actually benefits from it. This helps make sure that everyone who should pay taxes on the property does so fairly.
A more thorough explanation:
The look-through principle is a tax doctrine that is used to allocate transfer-gains taxes on real estate. This principle involves looking beyond the legal title holder of a property to identify the beneficial owners of the property.
Let's say that a company owns a piece of real estate, but the company is actually owned by several individuals. Under the look-through principle, the transfer-gains taxes on the property would be allocated to the individual owners, rather than the company itself.
Another example would be if a trust owns a property, but the beneficiaries of the trust are the true owners. The look-through principle would allocate the transfer-gains taxes to the beneficiaries, rather than the trust.
These examples illustrate how the look-through principle is used to ensure that the true owners of a property are responsible for paying transfer-gains taxes, rather than the legal entity that holds the title to the property.