Great strategy.... except it's completely illegal

What's the craziest tax strategy you've ever seen work? Oh man, this is insane. It was a loophole we found in like 2005, 2006. Well, what we would do is I would buy a piece of commercial real estate, do all the improvements that a buyer wanted, and then I would sell them that piece of property, except I wouldn't really sell it to them. Let's say I bought the property for $2 million, I put $2 million into it, and then was selling it for $6 million. The buyer would actually lend me $6 million. The very next day, I would default on the loan, and instead of going into foreclosure, I would surrender the deed in lieu of foreclosure. And guess what? I now had $6 million of debt that wasn't income, so therefore it was tax-free.

Wow, that's so cool, except that that's tax fraud and completely illegal. Not only that, but if you ever fill out commercial debt, when you're applying for a new loan, you have to disclose, have you either been foreclosed on or done deed in lieu of foreclosure, which is exactly what he's done here. If he says no, not only is he committing tax fraud, every other loan he gets, he's committing bank fraud. Both are illegal. Don't do it.