In fact, if the seller paid more than $1 for the house, he can take a nice deduction for the “loss.”
In this example, in the US, it will be obvious to the IRS that the transaction is not arms-length, and they might levy gift tax on the fair market value of the house. They already thought of this loophole.
There are, in fact, situations where the law is written to look more at intent than technicalities, for example in many areas of US immigration law, or generally in tax law when determining where a person’s residence is. That’s not always a good idea either because it leaves a lot of discretion for government officials and creates uncertainty about what the law is.
An uncynical observer of the political system would say that the legislature has already thought of this: they’ve made the law very technical in areas where they want it to be, and less so in other areas.
In this example, in the US, it will be obvious to the IRS that the transaction is not arms-length, and they might levy gift tax on the fair market value of the house. They already thought of this loophole.
There are, in fact, situations where the law is written to look more at intent than technicalities, for example in many areas of US immigration law, or generally in tax law when determining where a person’s residence is. That’s not always a good idea either because it leaves a lot of discretion for government officials and creates uncertainty about what the law is.
An uncynical observer of the political system would say that the legislature has already thought of this: they’ve made the law very technical in areas where they want it to be, and less so in other areas.