Tuesday, December 26, 2017

We Now Interrupt This Broadcast . . .

On Sunday, October 30, 1938, Mercury Radio Theatre fans, who were listening to Ramon Racquello and His Orchestra, were interrupted by a news broadcast reporting an odd explosion on the planet Mars. Soon after, they learned that a cylindrical object had fallen on a farm in Grovers Mills, New Jersey. The radio audience listened in horror as a pulsating Martian emerged from the cylinder and obliterated the crowd with heat rays. Soon, an entire army of Martians had invaded New York, and very real panic had spread across the country.

Last week, something a bit similar happened in the tax world. (Well, except for the Martians, heat rays, and destruction of Gotham.) After just six weeks of consideration, the House and Senate passed the Tax Cuts and Jobs Act of 2017, the biggest restructuring of the tax code in 31 years.

We don't usually use these emails to discuss "hard news" like the new tax bill. It's much more fun to walk through the "Twelve days of Taxmas," or how celebrities use offshore tax havens, or harken back to taxes in the 1980s as we enjoy Season Two of Netflix's Stranger Things. But this new tax bill is simply too big to ignore. And so we interrupt our usual broadcast of fun tax stories for something a bit more serious.

We shouldn't need to tell you much about the nuts and bolts of the new law — the lower tax rates, lower deductions, and new "qualified business income" rules for pass-through businesses. The news is already full of those discussions. Over the coming days and weeks, we'll be putting together material explaining how the new bill could affect you.

But we're going to do things a little different from everybody else. Most of those news outlets will be writing about how much you're going to owe under the new law. And that's important. But we're going to focus our effort on how you can pay less. And in the end, that service is even more important. Most tax professionals do a perfectly good job of putting the "right" numbers in the "right" boxes on the "right" forms. But then they call it a day. Our real value comes from delivering the proactive concepts and strategies that most tax and financial advisors simply overlook.

Of course, we'll also be highlighting some of the more absurd aspects of the new law. For example . .  under the old law, you could exclude a whopping $20 of income per month for expenses related to riding your bike to work, so long as you weren't getting other pretax transit benefits. The new law lets the air out of that benefit. And how much will putting a nail in that benefit save the Treasury? Austin Powers fans, channel your best Dr Evil voice and say it with me . . . "one . . . million . . . dollars." A rounding error, at best.

Here's another one you might like a little more. Under the old law, Code Section 162 said that members of Congress could deduct up to $3,000 per year for their living expenses while they’re away from their districts. At this point, though, Congressional net worths are hitting all-time highs (Montana Rep. Greg Gianforte, who started two software companies, is worth $315 million). And congressional approval ratings are hitting all-time lows, hovering somewhere around 11%. So the new law eliminates that little boondoggle.

This is the last time we'll be writing to you in 2017, and 2018 promises to be a busy year, full of opportunity and promise. So count on us to help you navigate the new rules, as you ring in the New Year. And don't forget, we'll be here for your family, friends, and colleagues, too!

Monday, December 18, 2017

The Twelve Days of Taxmas

Every year, PNC Bank publishes their "Christmas Price Index" to track the cost of the Twelve Days of Christmas. For 2017, it's a hefty $157,558. (And you thought your holiday spending was out of control!) The index may not be completely accurate — for example, the ten lords-a-leaping are valued using the cost of male ballet dancers, rather than actual lords, and the eight maids-a-milking don't include eight actual cows. But still, it got us wondering . . . what sort of taxes are we looking at on the whole affair?
•Twelve drummers drumming and eleven pipers piping make quite a racket every holiday season. Hiring all that help will stir up a cacophony of payroll taxes!

•Ten lords may look perfectly happy while they're leaping. But surely they must pay a king's ransom in income taxes — after all, they are lords!

•Nine ladies dancing make a lovely sight at Christmas time — especially if they're Rockettes. They also pay a cabaret tax for the privilege of displaying their talent.
•Eight maids-a-milking help make sure we have plenty of tasty eggnog to drink. Good thing so many states offer dairy tax credits to spur the cows on to higher holiday production!
•Seven swans-a-swimming? Six geese-a-laying? If we accept the rule of thumb that two birds per acre of pond is a manageable number, then we're looking at some serious property taxes to host our holiday flock!
•Who doesn't want five gold rings under the tree? But selling those rings can be an expensive proposition. Remember, jewelry held for personal use is still subject to 20% tax on long-term capital gains, plus an extra 3.8% "net investment income tax"!
•Four calling birds use a lot of cell phone minutes over twelve days. (They're calling birds, so unlimited texting won't help.) Naturally, that means a 5.82% federal excise tax, plus state and local sales tax too.
•Three French hens add a sophisticated "continental" touch to any one's holiday festivities. But don't forget the import duties you pay to bring foreign livestock into the country!
•Two turtle doves are known among bird watchers for forming strong "pair bonds," which makes them a symbol of devoted love. (That's why they're in the song.) Too bad that means they pay that pesky marriage penalty that hits high-income couples who file jointly! (Okay, we know this this one's a stretch. But we've got twelve days of taxes to fill here, so what can we do?)
•Nothing says "Christmas" like a partridge in a pear tree. And our tax code is full of juicy incentives for growing pear trees. You can deduct operating expenses associated with your crop; you can depreciate equipment and land improvements you use to manage your groves; and you can even take generous charitable deductions for rights you give up for conservation easements. Why, the tax savings alone should be more than enough to pay for the partridge!
Yes, even Twelve Days of Christmas just means twelve more opportunities for the taxman. So here's wishing you and your family the best this holiday season. We'll be back in 2018 to make sure you pay as little tax as possible, not just during the holidays, but all year long!

Tuesday, December 12, 2017

A Different Kind of Holiday Party

Your kids have finally finished eating their Halloween candy, which means that the real holidays are right around the corner. But before you sit down to open presents, December 16th marks the 244th anniversary of an important holiday in tax history — a pop-up costume ball in Boston Harbor called the Boston Tea Party.

From 1698 through 1767, Britain's Parliament passed a series of laws giving the East India Company a monopoly on the British tea trade, forcing the colonies to buy their tea from British wholesalers, and slapping hefty taxes on it all. But Dutch traders, who paid no tax, could sell their tea for less, costing the East India Company a fortune. (If you remember Miami Vice in the 1980s, try picturing a colonial-era Crockett and Tubbs, dressed in fly white buckskins, chasing Dutch bootleggers in a sleek Italian brigantine.)

In 1767, Parliament passed the Indemnity Act to lower the tax on tea to compete with the Dutch. (Earl Gray was just three years old, so he didn't vote.) But they needed a "payfor" to make up the lost revenue, so they brewed up the Townshend Acts taxing colonial imports, including tea. (Hmmmm . . . sounds like the sort of horse-trading today's Congress is up to right now with the Tax Cuts and Jobs Act.) Five years later, the Indemnity Act expired, and everyone was back where they started. (Sort of like what happened in 2013 when the Bush tax cuts expired . . . . )

The Tea Act of 1773 brought things to a head. The new law actually lowered the price of tea to undercut the smugglers. But the colonists still hated Parliament taxing them without their consent. They hated how England used those taxes to pay colonial governors and judges, thus insulating them from local influence. And that's where things stood in November, 1773, as the tea ship Dartmouth sailed into a Boston Harbor steeped in resentment and controversy.

British law required the shipper to unload and pay the tax within 20 days. But colonists, who gathered by the thousands, were determined to prevent that. On the night of December 16, the final deadline, a group of 30 to 130 of them boarded the Dartmouth and two more ships. A few of them sported elaborate Mohawk warrior costumes to hide their faces and show their loyalty to American identity. They spent three hours dumping 342 chests of tea into the water. The next day, future President John Adams wrote in his diary:


"There is a Dignity, a Majesty, a Sublimity, in this last Effort of the Patriots, that I greatly admire . . . . This Destruction of the Tea is so bold, so daring, so firm, intrepid and inflexible, and it must have so important Consequences, and so lasting, that I cant but consider it as an Epocha in History."

The Tea Party set all sorts of consequences in motion besides the obvious "American Revolution" thing. (Does that remind you of Taylor Swift's song, "We Are Never Ever Getting Back Together"?) If you're a coffee drinker, for example, you should know that coffee first became popular here as an alternative to "unpatriotic" tea. (Sort of like renaming french fries "freedom fries" during the Second Iraq War . . . . )

244 years later, we still resent paying taxes we don't have to pay. The good news is, you don't have to don a Mohawk headdress and row out into the middle of the harbor for three hours of creative vandalism to pay less. You just need a plan. So call us when you're ready to save, and let us give you something to celebrate!

Tuesday, December 5, 2017

Area Actress to Wed Ex-Soldier

Two hundred and forty one years ago, we declared our independence from Mother England — over taxes, of course. But here on our side of the pond, we've never completely lost our affection for all things British. We applauded as the Queen celebrated her 70th wedding anniversary. Netflix fans who just finished binge-watching Stranger Things are eagerly awaiting Season Two of The Crown. And now we've learned that Prince Harry and his longtime girlfriend, actress Meghan Markle, are getting married in May.

Now, Harry may be just fifth in line for the throne, and about to be bumped down to sixth when Princess Kate gives birth to her third child next spring. But a royal wedding is still a Very Big Deal. There's going to be lots of work to keep the couple knackered out for months to come. That includes a guest list, a gown, and flowers. And of course there will tax questions, too.

Here's the issue: Markle isn't a Brit. She's a Yank. Buckingham Palace has already announced that Markle will become a British citizen, which involves passing a test with questions like "What did the Statute of Rhuddlan in 1284 lay the basis for?" and, "Who or what is Vindolanda"? But that transition will certainly complicate her finances, and possibly the rest of the royal family's, whether she says cheerio to her American citizenship or not.

Giving up her U.S. passport would be a simple but possibly pricey proposition. There's no magic to it: you make an appointment at the nearest embassy, sign some forms, and take an Oath of Renunciation. There's a $2,350 fee to process the paperwork, but that's low enough that she could probably add it to her wedding registry and count on a generous Member of Parliament, or maybe a lesser Marchioness, pick it up for her.

The real problem with expatriating is the bloody exit tax. If your net worth is over $2 million, or your average annual income for the five years before you leave tops $162,000, you'll owe tax on any appreciated assets you own, calculated as if you had sold them on the day you leave. That could make it frightfully expensive to move into a palace!

Things get more complicated if Markle keeps her U.S. citizenship. She'll still owe U.S. tax on her worldwide income. And she can't hide foreign holdings from the IRS. If she keeps more than $300,000 in assets abroad, she'll have to file Form 8938 reporting them. (And, really, what's the point of being "Her Royal Highness Princess Henry of Wales" if she's not going to have more than $300,000 in assets?)

If Her Royal Yankee Highness hold anything jointly with Harry, those U.S. filings could reveal assets the Crown prefers keeping confidential. We know that Harry inherited half of his mother, Princess Diana's £21.5 million estate (roughly $28.5 million), and he shares a £3.5 million allowance with his brother. But the royals work hard to keep the bulk of their finances private. The recent "Paradise Papers" leak revealed that Harry's grandmum the Queen benefits from investments the Duchy of Lancaster holds in the Cayman Islands and Bermuda.

You probably thought that marrying a royal would solve your financial problems, not create new ones. But life is full of surprises, even for princesses. So let us propose a jolly good solution: a plan for paying the legal minimum, no matter who you marry! Call us when you're ready to save, and take a few quid to treat the queen to a cuppa!

Tuesday, November 28, 2017

Good Guys Share $175 Million Refund

April 15 hasn't always been the national exercise in self-flagellation that it is today. Up until the 1940s, you could just waltz into your local IRS office and they would do your taxes for you. But those days have long since passed. You're still welcome to do it yourself, if you need more stress in your life. But how will you know if you're paying too much? Even software like TurboTax can't guarantee you'll get it right. If you don't know how to use it, the program just helps you make the same expensive mistakes faster than when you made them with paper and pencils.

If you're like most Americans, you just throw up your hands and call a pro. That begs a new question: who to call? Certified Public Accountants and Enrolled Agents have traditionally dominated the field. But up until 2010, anyone with a pencil could call himself a tax preparer. (Most of them use computers now — but, surprisingly, not all. Hey, some people still carry flip phones, too.) That seems like an obvious vacuum in today's regulatory environment, considering that in most places, you need a license just to catch a fish. And we all know bureaucracy abhors a vacuum.

In 2009, the IRS decided to do something. After a series of public forums and comments, they launched the Registered Tax Return Preparer (RTRP) program. The new rules required preparers to: 1) sign up for a Preparer Tax Identification Number, 2) pass a 2.5 hour test, and 3) complete 15 hours of continuing education per year. Naturally, the IRS charged a fee for the program, which started at $64.25 per year. And they based their authority to do it all on an obscure 1884 law regulating representatives of civil war soldiers looking for compensation for dead horses.

Everyone was happy with the RTRP, except the people subject to the new rules (and maybe those long-dead horses). Preparers felt like they were being forced to take a test to prove they could do something they had done, in some cases, for decades. So three of them sued to shut down the program. And they won — the court agreed that the 1884 law didn't give the IRS authority to regulate an industry that didn't even exist when it was passed. (Oops.)

The IRS suspended the RTRP program. But they kept charging the PTIN fees, even though the program the fees were supposed to finance had ended. So, one year later, a different group of preparers filed another suit to recover those fees.

Once again, the court ruled in their favor. This June, the court decided that PTINs aren't a "service or thing of value" justifying a fee. The IRS can't charge fees for PTINs, "because this would be equivalent to imposing a regulatory licensing scheme and the IRS does not have such regulatory authority." (Don't hold your breath waiting for Congress to give it to them.) And yes, the IRS has to give back all the PTIN fees they've collected. That was $175 million when the plaintiffs filed their complaint; but it could be as high as $300 million now.

Chalk one up for the good guys, right? Well, sure. But here's the real lesson: most tax preparers, credentialed or not, focus on putting the "right" numbers in the "right" boxes on the "right" forms. They do a great job of telling you how much you owe — but nothing about how to pay less. And that has everything to do with attitude, not credentials. So call us when you're ready to save — and remember, we're here for your family, friends, and colleagues, too!

Tuesday, November 21, 2017

Ivy League Tax Problems

They say that "what goes up must come down." But that's not true when it comes to college costs. U.S. News reports the average private college tuition stood at $16,233 back in 1997-98 — roughly $24,973 in 2017 dollars. But the same tuition today costs $41,727. And that's before pricing in luxuries like, you know, meals, and a place to sleep. In-state college costs are rising even faster as legislatures cut budgets for higher education. That means colleges are increasingly turning to alternate funding sources, including their endowments.

In academia, though, as in so many other parts of our "winner take all" society, there's the 1%, and there's everyone else. America's richest 800 colleges and universities hold over $500 billion in endowments, which sounds like there should be plenty to help supplement tuition and fees. But the top 1% of schools hold over $10 billion each, and 11% of schools hog 74% of those assets. That leaves the Faber Colleges of the world essentially fighting over scraps. ("Knowledge is good.")

Now, the Phi Beta Kappas who write our tax code have turned their green eyeshades towards those mammoth pools of tax-free wealth. Both the House and Senate tax bills working through Congress would impose a 1.4% excise tax on net investment income of private colleges holding more than $250,000 per student. That group includes about 70 schools, including obvious targets like Harvard, Yale, and Princeton. At the same time, the proposal spares public school systems with big endowments like the Universities of Texas ($25.4 billion), Michigan ($9.7 billion), and California ($7.4 billion).

It's true that if any schools have "too much money" (LOL), it's the top-shelf Ivies. Harvard's endowment started in 1638 with £779 and 400 books. Over the next 379 years, it's grown to over $37 billion (and 16 million books), leading critics to call it a hedge fund with a university attached. In 2015 that fund grew by just 5.8%, compared to rival Yale's 11.5%. But Harvard Management Company paid its chief executive a whopping $14.9 million, with his deputy taking home $11.6 million. (And you thought college football coaches were overpaid!)

Academic endowments have grown so large that they're starting to use some of the same tax strategies as the richest individuals. The New York Times recently exposed how colleges use offshore entities to boost earnings, including "blocker corporations" that let them avoid tax on debt-financed "unrelated business taxable income." (Trust us, those UBTI rules are even more boring and technical than they sound.)

But naturally, academics are irate at the proposal, rolling up their leather-patched tweed sleeves and prepping for a (genteel) fight. "Endowments support substantial student aid and student service programs, and provide funding for instruction, research, and for building and maintaining classrooms, labs, libraries, and other facilities," said the Association of American Universities. At Princeton (the #1 target with $2.5 million per student), undergraduates from families earning under $56,000 pay no tuition, room, or board, while those from families earning under $160,000 pay no tuition.

Here's the good news. You don't have to be an Ivy League university — or even have an Ivy League education — to save big on your tax bill. You just need a proactive plan. So call us when you're ready for some real-world lessons on how to pay less!

Tuesday, November 14, 2017

The Rock Star, The Nude Estates, and the Lithuanian Shopping Mall

We've all got an image in our minds of who uses "offshore tax havens" to host their business. Let's say you're a junior-varsity Russian oligarch. You've spent a lifetime looting your country's resources like an all-you-can-steal buffet, and now it's time to take some of your chipskis off the table. You buy a flat in London's posh Mayfair, or maybe a condo overlooking New York's Central Park. Then you stash the rest of your rubles in some sunny flyspeck of an island like Bermuda or the Caymans, where Putin's goons can't steal them back.

But most people who do business offshore aren't crooked billionaires. They're perfectly legitimate multinational corporations, business owners, and investors just like us. If you've worn shoes from Nike, made calls on an iPhone, or downloaded music from Sheryl Crow, you've even done business with them!

Last month, the investigative journalists who brought us 2016's Panama Papers dropped Season Two of their effort to expose how the global 1% use international entities to structure their wealth. The "Paradise Papers" include 13.4 million electronic documents, mostly gleaned through a "data security incident" from the Bermuda-based law firm of Appleby Spurling Hunter. And one of the names that those intrepid detectives uncovered was Paul David Hewson, originally from Dublin's middle-class Finglas suburb.

Of course, you probably know Hewson better by his stage name, Bono. (His U2 bandmates dubbed him Bono Vox, meaning "good voice," in high school.) Now, Bono's made hundreds of millions of dollars in his career. But he's also hobnobbed with the Dalai Lama and been nominated for a Nobel Peace Prize. He's hardly the sort of guy you'd expect to be moving money in mysterious ways. So what's the deal? Here's how the BBC lays it out:


"Bono owned a share in the Ausra shopping center located in the Lithuanian city of Utena via his stake in a company called Nude Estates, based in Malta. In 2007, Nude Estates bought the mall via a company they incorporated in Lithuania called UAB Nude Estates 2. In 2012, Nude Estates Malta Ltd. transferred the ownership of both Nude Estates 2 and the mall to a new offshore company, Nude Estates 1, based on the English island of Guernsey. Both Malta and Guernsey are low-tax jurisdictions, though foreign investors pay a five percent tax on company profits in Malta, while they pay no tax in Guernsey."

There you have it. Even paying 5% tax in Malta, they still hadn't found what they were looking for. So Nude Estates tripped through the waters with Bono's money for the rattle and hum of tax-free Guernsey. Bono himself seemed taken aback by the disclosure. He said he would be distressed if "anything less than exemplary" was done with his name anywhere near it. And he said, "I take this stuff very seriously. I have campaigned for the beneficial ownership of offshore companies to be made transparent. Indeed this is why my name is on documents rather than in a trust."

Here in the U.S, we're subject to tax on all our worldwide income, no matter where it's earned. That means that moving investments offshore doesn't convey any sort of automatic tax benefit, with or without you. Fortunately, the same internal revenue code that taxes us on foreign income offers countless strategies to minimize or avoid that tax. All you really need is a plan. So call us when you desire to save, and let's see if we can rescue enough wasted tax dollars to send you someplace where the streets have no name!

Friday, November 10, 2017

Stranger Taxes

The streaming video service Netflix has earned a reputation for providing quality content like Narcos, Orange is the New Black, and The Queen. But Netflix has also upended how millions of people consume television. How have they done that? By dropping an entire season's worth of a series all at once, letting you "Netflix and chill" with a single episode or binge for an entire weekend. (What kind of savage network would make viewers wait an entire week between episodes of their favorite show? HBO, that's who.)
Netflix's latest hit, which dropped its second season last month, is Stranger Things, a love letter to the classic horror, sci-fi, and fantasy films of the 1980s. The show features a pack of bike-riding preteen friends from sleepy Hawkins, Indiana, who team up with the local sheriff and a mysterious paranormal girl named Eleven. Together, the motley crew fights to save the world from a parallel universe that connects through the super-secret "Hawkins National Laboratory."
Most Stranger Things viewers love the show's music and movie references. Naturally, it makes us nostalgic for 1980s taxes. (Have we told you we need to get out more often?) So, for all you "Upside Down" fans, let's take a walk down memory lane and see what taxes looked like when it was "morning in America":
  • The '80s opened with 15 tax brackets topping out at 70% for joint filers reporting $215,400+ in taxable income (roughly $683,000 in today's dollars). In 1981, Washington dropped the top rate down to 50%, and the Tax Reform Act of 1986 condensed the whole shebang into just two brackets topping out at 28%.
  • Tax shelters were big business! If you didn't feel like giving Uncle Sam 70% of your last dollar of income, you could buy limited partnership interests in all sorts of activities, including oil and gas programs, real estate syndications, cattle feeding schemes, aircraft and equipment leasing deals, and "master recording disks," whatever those were. Nobody "invested" in these boondoggles because they made business sense; they were all about the tax losses.
  • You could report your dependent children on the honor system, without supplying Social Security numbers. This led to millions of people fraudulently claiming deductions for nonexistent children and even household pets. (Don't just love them like family . . . deduct them like family!)
  • You could disappear from the office like Don Draper for a three-martini lunch and write off 100% of the cost, versus 50% today. (As former President Gerald Ford put it in a 1978 speech, "Where else can you get an earful, a bellyful, and a snootful at the same time?")
  • You could deduct interest you paid to buy almost anything except tax-free bonds. Want one of those little Japanese cars that were just hitting the market? How about your first "personal computer"? What about a microwave oven or VCR? You could deduct interest you paid to buy all of them. Here's something to think about as you sit down for season two of Stranger Things. The shadow monster, demogorgons, and The Upside Down are all just make-believe — but the risk of overpaying your taxes is very real. So don't fight your way out of a creepy government lab — or scary IRS tax code — all by yourself! Call us for a plan and we'll guide you to safety!
  • Monday, October 30, 2017

    Talk About "Prime" Real Estate!


    Former President Jimmy Carter once called our tax code "a disgrace to the human race," and there's really not a lot to like about it. There's at least some consolation, though, in the fact that we're all stuck with the same maddening rules. If you and your spouse file jointly, and your ordinary taxable income is $100,000, you'll pay the same amount as any other joint filers reporting the same $100,000 in ordinary taxable income.
    That's not always the case with state and local taxes, though. If you're big enough, and you're willing to flex a little muscle, you can find someplace willing to court you like royalty. Most cities are more than happy to trade away a bit of property tax on a corporate headquarters in exchange for the payroll taxes, income taxes, and sales taxes they can levy on the people who work there, along with the economic development that comes with new jobs. Other places are willing to offer flat-out bribes in the form of tax credits.
    And that brings us to this week's story . . . Amazon.com started life in 1994 as an online bookseller. Since then, though, it's grown to become the largest online retailer in the world. For four glorious hours this July 29, founder Jeff Bezos was the richest man on the planet. (The company reported disappointing earnings at the end of that day's trading, and Bezos's stock tanked $6 billion overnight. Must have been nice while it lasted!) If you're reading these words, you've bought something from Amazon, and you're probably one of its 80+ million Prime members.
    In September, Amazon announced plans to drop $5 billion on a second headquarters equal to their current home in Seattle, code-named HQ2. They want to locate the new facility in a metropolitan area of at least a million people, within 45 minutes of an international airport, with a highly educated workforce.
    The lucky winner will get up to 8 million square feet of new space and up to 50,000 new jobs paying an average of $100,000 per year. But the benefit of the new headquarters will ripple throughout the winning town's economy. Those 50,000 employees will all need places to live — pushing property values up an estimated 2%. They'll need places to eat, drink, and shop. Amazon reports that every dollar they currently invest in their current headquarters generates $1.40 for Seattle's economy overall.
    Naturally, every city in America wants in. By October 18, 238 municipalities had submitted their bribes bids, from 54 states, provinces, districts, and territories across North America. Seriously, winning HQ2 is the closest thing any city will ever come to winning the Powerball.
    New Jersey has offered $7 billion in tax rebates if Amazon picks Newark. Pennsylvania has offered up to $1 billion in breaks, with Philadelphia throwing in $2 billion more over the next 10 years. (That's a lot of cheese steaks!) Several cities went even further to stand out from the crowd. Tucson, AZ sent a 21-foot-tall cactus. The Mayor of Charlotte, NC declared October 18 to be "#CLTisPrimeDay." And the town of Stonecrest Georgia offered to rename itself Amazon.
    We realize you don't have enough muscle to negotiate your own tax rate. The good news is, you may not have to. Remember that tax code that Jimmy Carter called a disgrace to the human race? It's got 70,000 pages full of deductions, credits, loopholes, and strategies that you can use to pay less. So call us for a plan, and see how much we can deliver!

    Tuesday, October 24, 2017

    For the Love of Art

    In today's new Gilded Age, Americans are constantly vying to one-up each other. You show up at your high-school reunion in a new Mercedes E-Class; then your classmate pulls up in a Maserati Quattroporte. (Some would call it a $50,000 car with a $50,000 hood ornament, but still, it's a Maserati.) You show off a picture of your 42-foot sloop; your neighbor whips out his phone to show off his 62-foot schooner. You show up in Davos in your new GII; your business rival flies in on a GIV. When will it all end?

    The IRS isn't generally interested in financing your conspicuous consumption. (Not unless you drive that Maserati to work, in which case, trust us, you'll want to choose the "actual expense" method for calculating your deduction.) But there's a new toy that some of capitalism's winners are showing off, and this one comes with some beautiful tax breaks. We're talking, of course, about a private art museum.

    Rich art collectors have always taken fat tax breaks for donating art. The Association of Art Museum Directors estimates that 90% of the collections held by major museums were gifted by individual donors. This is an especially good way to avoid tax on capital gains. Let's say you bought a minor Cezanne or an early de Kooning 30 years ago for $100,000. Now the painting is worth $3 million. If you give it to your local art museum, you can deduct the full $3 million fair market value!

    Of course, there are rules in place to frame the deduction to make sure you don't abuse the privilege. If the value is more than $5,000, you'll need a qualified appraisal. Your deduction is limited to 50% of your adjusted gross income, although you can carry forward any excess for up to five years if you can't use it all in a single brushstroke. And the IRS maintains an Art Advisory Board to review appraisals.

    But museums can't always give your donation the same care and attention you would give it. New York's Metropolitan Museum of Art includes over two million pieces. It's easy to imagine your donation winding up somewhere back in storage, like the Ark of the Covenant in the last scene of Raiders of the Lost Ark. That's where the private museum comes in. There's really not much to it. Just set up a private foundation to hold the collection and operate the facility, then stuff it full with your art. Now you've got your deduction and control over your collection.

    Who sets up one of these private museums? Peter Brant Jr. is the son of a billionaire paper magnate who married supermodel Stephanie Seymour. In 2010, he opened the Brant Foundation Art Center, conveniently down the street from his Greenwich estate and next door to his polo club. In Potomac, MD, Mitchell Rales, founder of the Danaher Corporation, opened the Glenstone Museum across the duck pond from his house.

    Plenty of public museums, including New York's Frick Museum, Philadelphia's Barnes Foundation, and Washington's Phillips Museum all started life as private collections. But critics have argued that, while the new breed of private museum meets the letter of the law, it may not always meet the spirit.

    We realize your art collection might not include more than the dogs playing poker hiding in your basement rec room. But that doesn't mean you can't canvass the tax code for the same tax-planning strategies that major collectors use to structure their private museums. Just call us for a plan, and we'll see if we can make beautiful art with your finances.

    Tuesday, October 17, 2017

    Tax Strategies for Trick or Treats

    Halloween is almost here, and if it seems like things have changed since you were a kid, you're right! Halloween has become big business, with the National Retail Federation predicting Americans will spend $9.1 billion on the festivities. That includes $3.4 billion on costumes, with top choices being superheroes, animals, princesses, witches, vampires, and zombies. And, "pets will not be left behind, with 10 percent of consumers dressing their pet as a pumpkin." (If you've got a dachshund, of course, you have to dress it up as a hot dog. Rule of law.)

    Naturally, when the trick-or-treaters at the IRS hear the word "billions," they reach out for a "fun sized" treat, too. (Why do they call those dinky little candy bars "fun sized," anyway? What's fun about a bite-sized Snickers or Milky Way when you can score a full-size bar in the rich kids' neighborhoods?) Let's take a quick look at how the IRS taxes our favorite Halloween dopplegangers:

    Superheroes who emigrate from other planets, like Superman (planet Krypton) and Thor (planet Asgard) are subject to U.S. tax on their domestic-source income. ("Resident alien" status doesn't distinguish between aliens from other countries and aliens from other planets.) Superheroes who meet the "green card" test or "substantial presence" test are taxed just like citizens on Form 1040. Those who don't meet either test file Form 1040NR.

    Animals don't pay taxes. (Neither do princesses.) Come on, that's just silly.

    Witches generally operate as sole proprietors, which means reporting income and expenses on Schedule C. If they sell potions along with casting spells, they'll include their eye of newt and toe of frog in "Cost of Goods Sold" in Part I, Line 4. IRS auditors understand that witches' travel expenses can be high because they live so deep in the forest. The good news is, witches can claim the same 53.5 cents/per mile allowance for travel by broom as the rest of us can claim for a full-size truck or SUV.
    Vampires generally live for hundreds of years, which lets them really harness the power of tax-deferred compounding. At the same time, careful planning is required to manage drawdown strategies once required minimum distributions become a factor after age 70½.
    Zombies pose especially frightening tax problems because they're not dead — they're undead. If Dad can't outrun a brain-eating horde and gets zombified, is he "deceased" for estate-tax purposes? If your spouse is zombified, can you still file jointly?

    While we're on the topic of costumes, why don't kids ever dress up as IRS auditors? That would be scarier than anything else they can come up with. As for the grownups, can you imagine "sexy IRS auditor" costumes sitting on the shelf next to "sexy nurse," "sexy firefighter," and "sexy cop" outfits?

    You probably never realized tax professionals could be so busy at Halloween! Fortunately, you don't have to work quite so hard yourself. Call us for a plan, and we'll teach you the tricks to keep as much of your treats as the law allows!

    Tuesday, October 10, 2017

    The Long and Short of It

    Consumer surveys consistently show that CPAs are the most trusted financial advisors of all. But what happens in the rare instance when you can't trust your CPA? Nothing good, that's for sure!

    Back in 2001, John Baldwin helped engineer a deal to sell Louisiana's Delta Downs racetrack for a $74 million profit. Baldwin took a $10 million fee for his work, along with some hefty interest payments on a $17 million loan his company had extended to finance it.

    But Baldwin didn't want to share those hard-earned gains with the IRS. So he went to the "Big Four" global accounting firm of KPMG for ways to pay less tax. KPMG dug into their bag of tricks and pulled out a doozy — a "one-time fix" called SOS, or Short Options Strategy. Without getting too technical, here's how this little sleight-of-hand worked. (If you're thinking "sleight-of-hand" is an unfortunate term to use in the tax-planning context, you're right.)

        First, Baldwin put up $1.5 million to buy $22 million worth of "long" options on Mexican and Brazilian currency, betting the value of the currency would go up.

    Simultaneously, he sold $22 million worth of "short" options on the same currencies, betting the price would go down.

    Next, he transferred the offsetting positions into a partnership and, relying on an old Tax Court opinion, calculated his "basis" in the partnership solely on the "long" position.
    Finally, the partnership sold all the options for roughly what Baldwin paid for them and reported a tax loss in the vicinity of that long position — even though Baldwin was never at risk for losing anywhere near that much money.

    If the whole thing smells like something that comes out of the south end of a north-facing horse, that's because it was. KPMG knew it was. The IRS caught on, of course. They audited everyone in sight, and socked Baldwin with over $10 million in tax, interest, and penalties. Prosecutors indicted KPMG and 19 individuals for helping Baldwin and 600 more clients evade $2.5 billion in taxes — and the firm paid $465 million in to make it all go away. Years later, some of those 600 customers are still battling KPMG in court.

    And that brings us back to Baldwin, who sued KPMG for all sorts of nefarious-sounding offenses, like fraud, negligent representation, breach of fiduciary duty, and racketeering. Last month, the Third Circuit ruled that he really just should have known better: "the fact that a prearranged, 'turnkey' transaction could generate just the right amount of losses — for an 'investment' and fee orders of magnitude smaller — should have also seemed a serendipitous coincidence indeed." To add insult to injury, even KPMG says that Baldwin never should have trusted them in the first place!

    Here's the good news. The tax code offers 70,000 pages of green lights to pay less tax legitimately. So don't be afraid to ask us to show our work, and cite those green lights — book, chapter, and verse. And call us before your big scores, so we can help you make the most of them!

    Tuesday, October 3, 2017

    They Hate Him at the IRS, Too

    We live in an unfortunate era of disunity. Cultural divides, racial divides, religious divides, and political divides are threatening to tear America apart. Every so often, though, someone comes along to unite us all in a great primal scream of rage. Remember "Pharma bro" Martin Shkreli, who bought the company that manufactures the prescription Daraprim, then jacked the price from $13.50 to $750 per pill? We really do need more people like him to unite us against a common enemy.

    Rick Smith probably never imagined his company would become one of those uniters. But up until last month, he was CEO of Equifax, the credit-reporting bureau that got hacked and waited six weeks to reveal it. By that time, intruders had made off with critically sensitive information on 143 million Americans. Was the hacker just some pimply Russian teenager living in his babushka's basement? An international gang of cyber-thieves? We may never know. But that 143 million figure certainly includes thousands of our friends at the IRS, who may not look kindly on the millions of dollars Smith earned leading up to the leak.

    Smith's abrupt resignation means he'll walk away with only a pro-rated portion of his $1.45 million salary for 2017. He'll also lose his performance bonus, which could have been another $3 million. Of course, he would have paid the IRS 43.4% of those amounts anyway. But Smith can afford to shrug off losing the cash comp. That's because, like with most top executives at publicly-traded companies, the real action is in the stock. In fact, Smith has taken home 633,427 shares of Equifax stock, worth roughly $60 million, just since the start of 2016. Here's how it works:

        203,427 of those shares came at no cost in the form of restricted stock awards or outright grants. Smith pays ordinary income tax on the fair market value at the time it's awarded.

    He acquired the rest by exercising options at cost to him of about $15.4 million. He pays regular tax on the difference between that amount and fair market value at the time he exercises the options.

    Because Smith "retired," rather than getting canned, he keeps his unvested options to buy millions more worth of shares over the next few years, just as if he were still working for the company.

    No matter how Smith acquires his stock, he recognizes capital gain or loss when he sells. And he's not shy about selling — since 2016, he's unloaded 679,286 shares for a net gain of $68.9 million. That's nice timing, considering the stock has dropped by more than a third since the hack was revealed. It's cost Smith $13 million of his own fortune (sorry not sorry), and the rest of the company's shareholders, billions more.

    Usually when CEOs leave unexpectedly, they put out a lame excuse like "leaving to spend more time with family." In Smith's case, that might actually be true — his family is going to need a lot of help recovering their stolen identities following the breach! But hey, let's be fair here — it's not like everyone in America hates him. The class-action lawyers must be drooling at the thought of suing his company into the ground.

    Smith's story illustrates one of the most important lessons in tax planning. How you make your money is just as important as how much you make. So let us help you with a plan for making the most of your income — and hopefully you aren't hacking into anyone else's server to make it!

    Tuesday, September 26, 2017

    Too Tasty for the IRS

    Most of us like to eat, even if we choose to deny ourselves this pleasure from time to time. And those of us with an entrepreneurial bent often dream of opening a restaurant. Sometimes it's a bustling cafe fronting a busy urban sidewalk. Sometimes it's comfort food served on a rural byway. And when the dream works, it really is a dream. Just ask celebrity restaurateurs like Vanity Fair editor Graydon Carter, proprietor of Greenwich Village's Waverly Inn, or Hollywood legend Clint Eastwood, whose Mission Ranch eatery draws diners and fans to Carmel, California.

    Unfortunately, opening a restaurant is one of those adventures that all too often ends in disaster. Sure, FEMA may monitor Waffle House closings as a measure of hurricane intensity. But restaurants are notoriously difficult businesses to run. CNBC reports that about 60% of new restaurants fail in the first year, and nearly 80% close before their fifth year, mostly due to being in the wrong location. So if you're hoping to launch the next food empire, or just cash in on the next food craze (cupcake ATMs, anyone?) it behooves you to spend as carefully as you can — including serving the IRS as little in tax as possible.

    Jon Field, his twin brother Joel Field, Eric Schilder, and Paul Butler ran a group of restaurants called Cadillac Ranch, an American-themed eatery paying homage to the classic Route 66 which once wound its way through 2,448 miles of countryside "from Chicago to LA." The group naturally deducted the usual expenses you would expect from a restaurant business, like food, labor, and rent on their store locations. But that didn't seem to be quite enough for their taste, so they started looking for more.

    Internal Revenue Code Section 162 states, "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." That's a pretty broad standard, right? You know what they say, one man's "tax avoidance scheme" is another man's "ordinary and necessary." (Who decides in the end? Lawyers, of course.)

    So, our plucky restaurateurs decided to stretch the definition of "ordinary and necessary" to include things like personal cars, car insurance, country club dues, and personal credit card charges. One of them used company money to pay his lawn service, home maintenance and repairs, TV and audio systems, and even new granite countertops! (Maybe he thought he could test new recipes in his home kitchen?) They even got their CPA to buy in to the scheme — over a five-year period, he helped his clients burgle $191,000 from the U.S. Treasury.

    Sadly, even the tastiest restaurant fads must someday come to an end. When was the last time you saw an actual cupcake ATM? (Mexican food was never just a fad — we're pretty sure the right to tacos is enshrined somewhere in the Constitution.) Although the IRS Criminal Investigation unit opens only about 4,000 cases per year, the Cadillac Ranch made that cut. The Field brothers and the CPA all wound up sentenced to spend time as guests of the federal government, in facilities where the staff proudly dish out mystery meat three meals a day and frown when you ask to substitute a side salad for those high-carb french fries.

    Fortunately, there's a better way, at least for you. The tax code offers all sorts of creative recipes for arranging your affairs to pay the least tax possible. That's where we come in. Let's see if we can sit down and cook up a plan for you. And don't forget to leave room for dessert!

    Tuesday, September 19, 2017

    Sink Your Teeth Into This One



        "You better cut the pizza in four pieces because I'm not hungry enough to eat six."
        Yogi Berra

    The calendar is full of little-known commemorations that probably escape your attention, and this month is no exception. Some of them are just silly, like September 19's International Talk Like a Pirate Day. (Although, really, if you don't think pirates are cool, what's wrong with you?) Some are obscure, like September 23's Restless Leg Awareness Day. But some of those special days resonate with everyone. And that brings us to September 20: Pepperoni Pizza Day. Yes, it's really a thing, and yes, it's magnifico!

    Just about everyone loves pepperoni pizza. Even vegans can enjoy it with dairy-free cheese and meatless pepperoni substitutes. (Don't mock it until you've tried it!) Americans eat over 100 acres of pizza per day, and 36% of those pies have pepperoni on top. We eat over 250 million pounds of pepperoni on our pizza every year. Naturally, tax collectors love it . . . so let's see how they take their slice or two of the pie.

    Pizza is a $44 billion industry here in the U.S. The top 50 chains, led by Pizza Hut, Domino's, Little Caesars, and Papa John's, account for $24.75 billion in sales. Smaller chains and independents gross $19.75 billion more. That means billions in sales taxes going to state and local governments, billions in corporate income taxes from the companies that sell those pizzas, and billions in personal income taxes from the actual people who own those businesses.

    There are 76,723 pizzerias in America. Every one of those parlors pays property tax on the location. It would be poetic if New York-style pizzerias everywhere paid tribute to New York and deep-dish pizzerias nationwide kicked up to Chicago, but cross-state tax compacts aren't quite so flexible.

    Fortunately, taxes on pizza aren't all "takeout." Every one of those gooey delicious pies starts with raw ingredients like wheat flour, tomato sauce, cheese, and meat. Our tax code offers some savory tax breaks to the farmers who supply those ingredients. Pork producers, for example, get depreciation deductions for farm equipment and confinement facilities to turn three-pound piglets into 275-pound hogs in just six months. That's a lot of pepperoni!

    Does all this pizza talk have you thinking about opening your own place? Watch out for audits! Pizzerias are largely cash businesses, which makes it easy to skim off profits. In the early 1990s, the IRS conducted an in-depth study of mom-and-pop pizzerias in the Providence, RI area and wrote an entire guide for auditors examining them. If you're under audit, and the examiner suspects you're underreporting your sales, he might contact your meat supplier to see how much pepperoni you bought, then compare it to the pizza sales you report. If the numbers don't add up, you'll have some 'splainin to do!

    Finally, don't be fooled by places serving "flatbreads." It's pizza. They just call it flatbread to charge more.

    We realize there's no easy way to transition from pepperoni pizza to tax planning. But there is a connection. The less you pay in tax, the more dough you'll have to enjoy America's favorite comfort food! So come to us before you get hungry, and let's see how much more of your income "pie" you can actually eat!

    Monday, September 11, 2017

    Help With Help

    Ordinarily we use this space for lighthearted stories that poke fun at the tax system and some of the clever ways that people endeavor to make it work for them, successfully or not. But the recent stories coming out of Harvey-ravaged Texas and Irma-ravaged Florida suggest a more serious tone for a change. Today we're going to walk through some tax-related opportunities when it comes to reaching out to storm victims. You might be surprised to see how our friends at the IRS are jumping in to help, too:

        If you want to deduct your contributions, make sure you're giving to a properly registered 501(c)(3) nonprofit. There are more than 1.5 million of them, and many are making extra efforts to help storm victims. These include local groups in affected areas, faith-based groups, and even animal-welfare groups dedicated to rescuing pets displaced by the storms. Many national groups have established special funds for Hurricanes Harvey and Irma, which let you earmark your contributions.

    Be careful before you join crowdfunding efforts on sites like GoFundMe. While you can certainly find links to registered 501(c)(3) organizations, most individual campaigns won't qualify for tax deductions.

    Don't be afraid to do some homework on a charity before you give. Check out rating sites like Charity Navigator and Charity Watch, which can tell you how much of your donation your chosen group gobbles up in administrative expenses, and whether they submit their financials to an independent accountant for audit.

    There's no deduction for the value of time you volunteer for cleanup efforts and other relief. However, you can deduct any expenses you pay, such as for travel to an affected area. You can deduct 14 cents/mile driven in service of a charitable organization.
    If you don't itemize deductions, consider asking your employer to donate the cash value of your unused vacation time, personal days, or sick leave to charitable organizations. Your tax break will take the form of not recognizing that income in the first place. (Your employer gets the same deduction they would have taken if they had paid it out in compensation.) IRS Notice 2017-48 sets out the rules for you and your employer.
    The IRS has a web page discussing help for victims of Hurricane Harvey, and we can assume it won't be long before they update it for Irma (and possibly Jose, which at this writing could still hit somewhere on the east coast.) You'll find extended due dates for business returns, penalty waivers, and special provisions letting retirement plans expedite loans and hardship distributions to hurricane victims and their families.

    We realize that saving a few bucks on taxes may be the last thing on your mind when you see the devastation Mother Nature has wrought. But those tax breaks serve a purpose, to encourage giving and to help you give more. So don't overlook these opportunities to save. And call us with your questions — coming together as communities is how Americans support each other in times of need, like now.

    Wednesday, September 6, 2017

    $50 Million, Hut!

    The 2017 college football season kicked off this week, and for most people that means talk of pre-season polls, Heisman trophy hopefuls, and BCS championship prospects. But we're not "most people," are we? So today we're going to ignore all that boring on-field action and see how one coach's financial advisors lined up the X's and O's to outwit the defensive line at the IRS.

    Here's a little-known fact that might offend your sense of priorities. Seven-figure salaries are almost unheard of in academia. But the average major university's football coach makes $1.81 million per year. In fact, in 39 states, the highest-paid academic or public employee is a college football or basketball coach. (And how many of them do you think have performance bonuses tied to graduation rates?)

    Alabama's Nick Saban would seem to top that list with over $7 million per year. And why not? He's rolled his Crimson Tide to four national championships in 10 years. But here's the problem, at least as far as his salary and performance bonuses are concerned. The linebackers at the IRS are out for their share, too. And they're not satisfied with a pick-six — they're looking to intercept over 40%.

    It turns out that Saban's cross-country coaching rival, Michigan's Jim Harbaugh, found a clever pattern to weave around those defenders and come out on top where it really counts — after taxes. Here's how it works:

        The university established a nonqualified deferred compensation plan with Harbaugh that took the form of "split-dollar" life insurance. (Split-dollar is simply a life insurance policy where the costs and benefits are shared by more than one party — typically, it's an employer and employee.)

    The university agreed to make seven annual nontaxable loan advances of $2 million each for Harbaugh to use to buy a cash-value life insurance policy. Those premiums will grow to build a tax-free pool of assets while Harbaugh continues to coach the Wolverines.

    Harbaugh can take nontaxable loans from the life insurance policy for supplemental retirement income so long as the remaining cash value in the policy is enough to repay the loan advances.

    When Harbaugh dies, the university gets $14 million to cover the loan advances and Harbaugh's beneficiaries get the remaining death benefit. Harbaugh is a healthy 53 years old, which should leave a long time for that cash value to grow. Some experts estimate Harbaugh can run up that score to as much as $50 million.

    Harbaugh won't pay any interest on the $14 million in loan advances. However, he will have to pay tax on the value of the foregone interest he would have paid, as calculated by IRS tables. But since that tax shouldn't top much more than $100,000 per year at current rates, that's an easy call to make!

    Football teams have all sorts of ways to put points on the board: running plays, passing plays, options, sneaks, and even the time-tested fumblerooskie. The best coaches put together game plans to harness all those opportunities. It works the same way with taxes. So call us before you get to the red zone, and let us come up with your best game plan!

    Monday, August 28, 2017

    A Match Made in Dallas

    Where is "home"? Home is where the heart is. Home is wherever you make it. Home is wherever I'm with you. And, of course, I'll be home for Christmas. But what does the tax man think of all of this?

    In 2009, Greg Blatt was Executive Vice-President, General Counsel & Secretary of InterActive Corp (IAC), which ran 150+ web sites including About.com, Vimeo, and The Daily Beast. Blatt's title sounded impressive, but IAC had reorganized him out of much of his responsibility, and he started looking for a new position. IAC didn't want to lose him, so they made him CEO of Match, a collection of dating sites including Match.com, OKCupid, Tinder, and PlentyofFish.

    There was just one problem with the new gig — it was headquartered in Dallas. That held no appeal for the New York-based Blatt. So he worked out a deal to manage Match from New York. (Just another long-distance relationship, really.) He would keep his corporate position with IAC, spend most of his working time in New York, and keep his West Village loft and his boat in the Hamptons.

    They say no battle plan survives initial contact with the enemy, and Blatt's was no exception. He got to Dallas and discovered, much to his surprise, that he loved it. The people were friendly! The city was cosmopolitan! (We realize that may be hard for the bi-coastal elites to accept, but there really is life in flyover country.)

    Blatt loved the work, where he got to be "the decider." He loved his apartment in a swanky Uptown hi-rise, where 1-bedroom units start at $2,230 per month. He started dating, which makes sense for a guy running an online dating empire. (We're pretty sure Warren Buffett gets his insurance from GEICO, too.) He even moved his dog, who he had rescued from the SPCA, telling a friend, "Dog is the final step that I haven't been able to come to grips with until now. So Big D is my new home."

    Unfortunately for Blatt, his Lone Star adventure was short-lived. He did so well at Match that he got promoted to CEO of IAC. While he tried to run the corporate parent from Dallas, he quickly realized he couldn't do it, and he moseyed on back to the Big Apple in 2011.

    Everyone was happy except the romantics at the New York Division of Taxation, who didn't love the idea of losing taxes on Blatt's salary. In 2011, they audited him and hit him with $430,065 in taxes plus interest and penalties. Blatt paid the tax, then filed a petition for a refund. (Did we mention that New York's top tax rate of 8.82% is 8.82% higher than Texas's top rate of zero?)

    Administrative Law Judge Diane Gardiner issued a 23-page opinion walking through Blatt's story. She noted mundane factors like changing his driver's license and voter registration. But the real clincher? "As borne out by the evidence in this case, petitioner's dog was his near and dear item which reflected his ultimate change in domicile to Dallas . . . . As demonstrated by a contemporaneous email regarding his move, petitioner stated that his change in domicile to Dallas was complete once his dog was moved there."

    So, boys and girls, what have we learned today? Well, we've learned that home is where the dog is. More important, we've learned that home is where the tax savings are — in this case, $430,000 worth. So call us when you're ready to save, and let's see if we can help feather your nest!

    Tuesday, August 22, 2017

    TurboTax Made Me Do It

    One of the highlights of living in our technologically-advanced age is the ability to buy tools to do almost anything. If your kid fractures his arm playing baseball, you can hop on over to Amazon and order an orthopedic bone saw for less than the cost of a tank of gas. Then you can (probably) head over to YouTube and watch a video explaining how to smooth off the rough edges and set it for best results. You might not want to do that all yourself. But the tools are there if you want them.

    Here in the tax business, there's no shortage of similar tools you can use to help satisfy your obligations with your friends at the IRS. TurboTax, TaxCut, and similar programs give you much the same power as professional tax-prep systems. If your circumstances are simple enough, and you're familiar with the process, you might be able to do a perfectly serviceable job of preparing your own return. You might not want to write off an entire weekend wrestling with the various questions, forms, and procedures — but the tool is there if you want to.

    But sometimes, doing it yourself really isn't the best idea. Barry Bulakites just learned that the hard way, to the tune of a trip to Tax Court (where he represented himself, of course). Bulakites is a San Diego-based insurance consultant who works with accountants, but who didn't see the value in hiring a professional to prepare a pretty complicated return. Here's how his DIY tax prep worked out:

        He deducted $79,000 in mortgage interest in 2011 and 2012, for a loan that was due to be paid off in 2008. The court could see that Bulatikes had paid something, but he couldn't cough up the paperwork to show the amount of interest or even why he was obligated to pay. The court disallowed it all.

    He deducted $100,000 in alimony he paid over the same period. His separation agreement specified $2,000 per month, but he and his ex- orally agreed to bump it to $5,000. Unfortunately, the law specifies oral agreements aren't enough to qualify, so the court disallowed the excess.

    He deducted $185,673 for "other expenses" in 2011, which he claimed was a net operating loss carryforward from a previous year that he put on the wrong line of his return. Too bad he failed to file the required "concise statement setting forth the amount of the net operating loss deduction claimed and all material and pertinent facts relative thereto, including a detailed schedule showing the computation of the net operating loss deduction." The court allowed just $142.

    Bulakites admitted that he deducted things he shouldn't have and overstated things that he could. But then he threw TurboTax under the bus for "luring him into" claiming them! We can just imagine what that would have looked like. Did it dare him to stretch that alimony deduction by an extra $3,000 per month? Did it challenge him: "are you man enough to deduct this net operating loss?" In the end, the court concluded that "[t]ax preparation software is only as good as the information one inputs into it."

    Here's the real irony, at least as far as we're concerned. Preparing your taxes, on your own or with a professional, is important. But all that really does is record history. The real value comes from planning your taxes to pay less in the first place. So call us when you're ready for planning, and don't let cheap office-supply store software bully you into paying more than you have to!

    Wednesday, August 16, 2017

    Oops!

    Mark Twain once said, "Never put off till tomorrow what may be done the day after tomorrow just as well." But Twain's advice doesn't always pay when it comes to taxes. The calendar watchers at the IRS charge a 5% per month failure to file penalty, up to 25% of the amount due, along with a ½% per month failure to pay penalty, also up to 25% of the total amount due. And the IRS isn't the only tax man to pay attention to deadlines, even if they don't loom as large in our minds as April 15.
    Presidio Terrace is a private block-long oval of a street in San Francisco's pricey Presidio Heights neighborhood, lined with 35 multimillion-dollar mansions. Residents have included Senator Dianne Feinstein, Representative Nancy Pelosi, and former San Francisco Mayor Joseph Alioto. There's a stone-gate entrance to the street, a rent-a-cop stationed at the gate to keep out snoopy mcsnoopfaces, and a manicured island inside the oval for residents to enjoy.
    The street and sidewalks are owned by a homeowners association made up of surrounding residents. Because it's private, the association pays tax on the property — in this case, a whopping $14 per year. Now, $14 may not sound like it can power a lot of local government. But the city still wants their money. So, every year, the Treasurer-Tax Collector dutifully mails the bill to the association's accountant on nearby Kearny Street.
    There's just one teensie-weensie, tiny little problem. That accountant hasn't worked for the HOA since the 1980s. (Oops.) That means the bill hasn't been paid since MTV still played music videos and Madonna was a doe-eyed ingenue. Suddenly, $14 per year snowballed into $994 in taxes, penalties, and interest. Most of the street's residents could have covered it with spare change from their couch cushions. But the city went ahead and put the street up for auction!
    Enter Michael Cheng and his wife Tina Lam, real estate investors from nearby South Bay. Cheng spotted the listing for the auction and smelled money. He wasn't the only bidder looking to pick up this particular opportunity. But he outlasted the rest and, for $90,100 — sight unseen — the street was theirs!
    So how can a couple of scrappy young real estate investors monetize their ownership of a block-long street surrounded by card-carrying 1%-ers? Start with parking. The street has 120 spots, which make it a potential gold mine in a city where a single parking space recently sold for $80,000. (And if the folks on the street don't want to pay to park in front of their own houses, maybe the Chengs could rent spots to the peasants living outside the gates?)
    Needless to say, the people who actually live on Presidio Terrace aren't nearly as excited about paying to park on their own street as the investors who just bought it. The residents have hired an attorney, of course. (Funny how many of these weekly stories involve hiring an attorney.) They've petitioned the city to void the sale, and scheduled a hearing for October. And they've sued the city to stop the Chengs from flipping the street to anyone else until after they're done with that fight.
    Twenty years ago, an author named Richard Carlson made a fortune selling a book called Don't Sweat the Small Stuff: and It's All Small Stuff. Unfortunately, sometimes you really do have to sweat the small stuff. Fortunately, you've got us. So let us sweat it for you, and save you a buck or two in the process!

    Tuesday, August 1, 2017

    Making More By Paying Less

    When affluent clients want to pay less tax, they turn to accountants, attorneys, and financial advisors, among other advisors. And we can make a nice living helping clients accomplish that goal. (At the risk of sounding self-serving, it's because we're worth it.) But you won't find any tax professionals populating the Forbes 400, or your hometown paper's list of richest local residents.
    Having said that, there are a few people who have made legitimate fortunes helping people pay less tax. They just aren't working where you think they are.
    Most of us don't give much thought to tariffs, simply because we don't directly pay them. When we do pay them any mind, we typically think of international trade policy and raw materials like steel. But governments impose import taxes on consumer goods, too, including luxury favorites like perfume and cologne, watches and jewelry, high-end spirits, and the like. And while those duties don't add up like income taxes, buyers don't want to pay any more of them than they have to.
    Robert Miller grew up in Massachusetts and attended Cornell University's prestigious School of Hotel Administration. But he took a different direction than most of his classmates, and five years after graduating, he launched the first Duty-Free Shop in Hong Kong. In 1962, Miller secured the rights to operate the first duty-free shop in America, in the Honolulu airport. This opened his doors to servicemen returning from Asia and wealthy Japanese travelers.
    Miller and his partners eventually expanded the chain to over 420 locations in airports and high-end retail locations across the globe. In 1997, his partners sold their interests to the Paris-based luxury-goods conglomerate LVMH. But Miller kept 38% of the company, and today his net worth stands at about $2.8 billion.
    And how does a guy who made billions helping his customers sidestep taxes live? Pretty much exactly how you'd expect. Miller, now 84, is a champion yachtsman — he sailed his 42-meter monohull Mari-Cha IV to a world record Atlantic crossing in six days, 17 hours, and 52 minutes. He owns a 36,000-acre sporting estate in Yorkshire, along with houses in New York, Paris, and Gstaad. (It's pronounced g-schtad, for those of you don't regularly ski the Swiss alps.)
    Miller's three daughters have earned their own fame as socialites, and for marrying spectacularly well. Pia, the oldest, married a grandson of oil baron J. Paul Getty. Marie-Chantal, the middle, married Crown Prince Alexander of Greece. (We know the Greeks may not be the most prestigious royals these days, but their blood is more blue than ours!) And Alexandra, the baby, married the son of Prince Egon von Furstenberg.
    Miller's success in helping customers avoid import duties may not hold any direct lessons for us. But he's obviously done some sophisticated income tax planning, too. And that's where we come in. So call us when you're ready to save, and let's see if we can help you afford more luxury goods on your next international flight!

    Tuesday, July 25, 2017

    Celebrities Behaving Badly

    One day back in March, 2002, Us Weekly editor Bonnie Fuller spotted a photo of actress Drew Barrymore bending over to pick a coin off the ground. A light bulb flipped on over her head, and on April 1, her magazine debuted a brand-new photo feature that changed the paparazzi game forever. We're talking, of course, about "Stars — They're Just Like Us." (Of course, they're still not quite just like us . . . how many photographers are fighting to catch pictures of us picking up our dry cleaning, filling up our gas tanks, or trying to pick the ripest avocado at Whole Foods?)
    Here's something else the stars share with us. They don't want to waste money on taxes they don't have to pay. And since they tend to make more money than we do, they tend to owe more taxes. So that pain over unnecessary tax is greater for them than it is for us! (Who says money solves all your problems?)
    But sometimes they go a little too far to pay less. And that's when they discover our friends at the IRS lying in wait. Here's the problem: the IRS doesn't have nearly enough money to make sure everyone is paying their legal share. Audit rates are down to historic lows. So when they get a chance to make examples of bold-faced names, they're sure to jump on the case — even if Us Weekly won't be combing Tax Court filings and Justice Department press releases the way we do.
    Our first story this week involves boxer Floyd Mayweather, who's made as much money with his fists as any man alive. Back in 2015, he earned a reported $220-230 million for defeating Manny Pacquiao in the Fight of the Century. (Granted we're less than one-fifth into the century, but the payday itself lived up to the hype even if the fight didn't.) Unfortunately, Mayweather doesn't have anyone to withhold taxes from that paycheck.
    Mayweather isn't disputing how much he owes. He says he just doesn't have the cash to cover it. ($15 million worth of cars in his garage, sure. Cash in the bank, not so much.) So he's asking the Tax Court to grant him a short-term installment agreement and waive his failure-to-pay penalties. He's argued that he has "a significant liquidity event" coming up in approximately 60 days, by which he means his next fight of the century, a potential $400 million payday against MMF superstar Conor McGregor.
    This isn't Mayweather's first bout against the IRS. In 2008, they filed a $6.7 million lien against him for 2007 taxes. Mayweather won that fight on points, settling for $5 million. Last year, the Tax Court ordered him to pay $1,627,563 for 2006. Also last year, he sent a Las Vegas strip club a 1099 for $20,323 he spent on strippers on May 25, 2014. Apparently he understands that "making it rain" is a taxable event, but thinks it's the club's responsibility to cover the taxes for the dancers who actually took home the cash.
    Rapper DMX (real name Earl Simmons) is also feeling some summer heat from the IRS. On July 13, he was arrested on 14 counts of tax fraud. Feds say he turned the tables by using bank accounts in other peoples' names while fronting his expenses in cash. The haters at the IRS say he didn't pay $1.7 million in taxes he owed from 2002-2005, and failed to file returns entirely from 2010-2015.
    Look, we know you don't want to pay more tax than you have to. And we know you're not willing to risk an appearance in the news (or court!) to pay less. But you don't have to feel stuck between a rock and a hard place. You just need a plan. So call us when you're ready to lace up your gloves, and let us take your corner!

    Monday, July 17, 2017

    Caliente

    Summer is here, and in most of the country, it's hot! The All-Star game has come and gone, dog days are right around the corner, and if your air conditioner makes a funny noise, the hair stands up on the back of your neck. Now, we can't help you if your air conditioner breaks, but we can try and put a smile on your face with a few tax quotes to start your day. Try and spot the summer references hidden inside — they might not be quite as easy to find as you think!
    • "A dog who thinks he is man's best friend is a dog who has obviously never met a tax lawyer."
      Fran Lebowitz
  • "The United States will get a value added tax when conservatives realize that it is regressive, and liberals realize that it is a money machine."
    Lawrence Summers
  • "Baseball is a skilled game. It's America's game — it, and high taxes."
    Will Rogers
  • "Taxes are paid in the sweat of every man who labors. If those taxes are excessive, they are reflected in idle factories, tax-sold farms and in hordes of hungry people, tramping the streets and seeking jobs in vain."
    Franklin D. Roosevelt
  • "Taxation with representation ain't so hot either."
    Gerald Barzan
  • "The IRS spends God knows how much of your tax money on these toll-free information hot lines staffed by IRS employees, whose idea of a dynamite tax tip is that you should print neatly. If you ask them a real tax question, such as how you can cheat, they're useless."
    Dave Barry
  • "Republicans believe every day is the Fourth of July, but Democrats believe every day is April 15."
    Ronald Reagan
  • "If [a United States Supreme Court Justice is] in the doghouse with the Chief [Justice], he gets the crud. He gets the tax cases."
    Harry BlackmunNot many of us are thinking about taxes after April 15. But the reality is, there's never a bad time to stop wasting money on taxes you don't have to pay. The sooner you start planning, the sooner you'll rescue those dollars from your paycheck or quarterly estimates. So call us before the heat gets too high and see if we can bring you some cool relief! 
  • Tuesday, July 11, 2017

    Accountants Behaving Badly

    Actress Alyssa Milano first gained fame playing Tony Danza's daughter on the television sitcom Who's the Boss. The show ran for eight seasons, snagged ten Emmy and five Golden Globe nominations (winning one of each), and established Milano as a bone fide teen idol. While her star has dimmed since then, she continues to work in Hollywood and seems to be one of the few child stars in recent memory to grow into adulthood without well-publicized trips to rehab or jail.

    Today, Milano is as busy as a bumblebee. So she and her husband, agent David Bugliari, employed a business manager to handle "the details." Usually those relationships proceed without trouble. But that's not the case with Milano, who just sued her manager, CPA Kenneth Hellie, for $10 million.

    Milano says the relationship first soured with "a home improvement debacle." She and her husband bought their Ventura County home in 2013 with plans to spend $1.1 million remodeling it. They wound up spending $5 million on the house which is now worth $3 million. (That odd math may not sound implausible to anyone else who's done a gut rehab!)

    But Milano soon discovered that Hellie had made eight late mortgage payments in a 13-month period. That destroyed her credit, which meant she couldn't refinance the house. She also says:

        He failed to pay her 2013 and 2014 income taxes,

    He used scotch tape to attach her signature to wire transfers to make unauthorized withdrawals, and

    He failed to pay her employees or their taxes, and
    His reassurances that the finances were in shape gave her the confidence to pass up a $1.3 million paycheck for starring in a third season of ABC's "Mistresses" series.

    Of course, every story has two sides (especially in Hollywood). Hellie's response basically throws her husband under the bus, arguing that he approved additional remodeling expenses and may have been "intentionally or negligently keeping Milano in the dark regarding the couple's deteriorating finances." He blames the couple for their own lavish spending, including "a second home in the mountains, private planes, a country club membership, a boat, and numerous personal staff such as multiple nannies and housekeepers."

    Milano is hardly the only Hollywood celebrity to break with her manager. Actor Johnny Depp, who spent $3 million to shoot author Hunter S. Thompson's ashes out of a cannon, has sued his manager for $25 million for a similar series of offenses. And singer Alanis Morissette's so-called business manager has ironically just reported to federal prison in Oregon for embezzling millions from her and other clients. (She said he would literally cry when she asked where her money had gone!)

    Here's the lesson from today's sad stories. Choose wisely! Don't ask us for advice on remodeling your home or managing your household staff. But do count on us to help stop wasting money on taxes you don't have to pay. And remember, we're here for your co-stars, too!

    Tuesday, July 4, 2017

    IRS Slapshot Misses

    Summer is here, so naturally, everyone's thinking about hockey. The Pittsburgh Penguins have just taken their second Stanley Cup in a row, and the rest of the NHL is working to make sure there's no three-peat. But one of those teams just won a different sort of contest, in Tax Court of all places. So let's go to the tape . . .
    Jeremy Jacobs is the owner and chairman of Delaware North, a concession company operating at places like stadiums, racetracks, and national parks. (Sounds like he's as much to blame as anyone for the $14 beers you bought at your last ballgame.) He also owns the Boston Bruins, which finished 2017 with a 44-31-7 record in the league's Eastern Conference. Forbes magazine pegs his net worth at just $4.4 billion, which means he's barely a billionaire and still has to watch his pennies.
    The Bruins play half their games on the road. Those road trips can get expensive, especially when it comes to feeding everyone: "between 20 and 24 players, the head coach, assistant coaches, medical personnel, athletic trainers, equipment managers, communications personnel, travel logistics managers, public relations/media personnel, and other employees." The team actually requires everyone to attend breakfast, where players meet with coaches to talk strategy, review film, discuss media inquiries, and make roster changes.
    The Bruins spent $255,274 on team meals in 2009 and $284,446 in 2010. Now, we all know those are deductible: you can write off 50% of the cost of meals you eat while traveling for business. But Jacobs wasn't satisfied deducting just 50%. He (or at least his accountants) wanted to deduct 100% of those expenses as de minimis fringe benefits.
    Here's the problem. For employee meals to qualify as a de minimis fringe benefit, they have to be served at a facility "owned or leased by the employer." But the team served half of those meals on the road. So the IRS iced half of those expenses, and the parties wound up facing off in court.
    Judge Ruwe sounds like a hockey fan. His opinion runs a full 34 pages, which is the Tax Court equivalent of overtime for a case that size. The main issue was whether the hotel meeting rooms where the team served meals qualified as their "business premises" under code section 132(e)(2). And the referee judge, exercising some much-appreciated common sense, ruled for the team.
    In short, he said, league rules require the team to play half of its games away from home, and even arrive at least six hours before game time. Wherever the team hosts those meetings is its "place of business," sat least for that contest, so the meals the team serves are 100% deductible de minimis fringe benefits. The decision saved Jacobs $45,205 for 2009 and $39,823 in 2010.
    NHL Hall of Famer Wayne Gretzky once said: "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be." We agree with Gretzky, and we don't settle for playing where the puck is. So call us when you're ready to suit up against the tax code, and let's put some Ws on the board!

    Monday, June 26, 2017

    Clean Tax Savings Here

    Businesses generally try to get the highest price possible for their products. It's called "capitalism," and it generally works to establish "equilibrium prices" between knowledgeable buyers and willing sellers. But every so often, this mechanism breaks down and prices soar, resulting in howls of "price gouging!" from ticked-off customers. This is especially true with pharmaceuticals. In 2015, hedge fund manager Martin Shkrelli made himself the most-hated man in America when he bought Turing Pharmaceuticals and raised the price of the antiparasite Daraprim from $13.50 to $750 per pill.

    Another example: in 2007, Mylan pharmaceuticals bought rights to distribute the EpiPen, a device that costs $5 to manufacture and delivers a dollar's worth of epinephrine to stop severe allergic reactions. Mylan quintupled sales, and even helped pass legislation encouraging schools to stock the devices. But they also jacked pricing from $100 to $609 per pair, which led to harmful side effects for the business. Customers revolted and sent the CEO on a Bataan Death March of bad press. Even Martin Shkrelli piled on the criticism — and when that guy calls you a price gouger, you're "Code Blue."

    With sales going from $200 million to over $1 billion in just nine years, you'd think the IRS would get a full dose of the success, too. It turns out, though, that Mylan is just as clever about cutting its tax bill as it is marketing EpiPens. In 2014, they executed a controversial strategy called a "tax inversion," buying a smaller Dutch company in order to move their nominal headquarters to the lower-taxed Netherlands. And Reuters has just revealed another strategy involving huge stakes in, of all things, coal companies. Here's how it works:

        The company buys a coal-refining facility. (Mylan owns LLCs with 99% stakes in five of them, buried deep in the footnotes of the company's annual report.)

    The facility buys raw coal, often from a utility, and treats it to remove the chemicals that cause the worst pollution.

    The facility sells the coal back to the utility, usually at a loss.
    Finally, the parent company takes federal tax credits, which were equal to $6.81 per ton of refined product in 2016.

    As long as the tax credit from Step Four is more than the after-tax loss from Step Three, the parent company come out ahead! How far ahead? Reuters reports loss from the refining operations, depreciation from the facilities, and tax-savings from credits netted Mylan over $100 million last year. In fact, the company's effective tax rate for that year was an eye-popping -294.4%, which means they made far more in compounding tax benefits than they did in operating profit!

    So where does that leave us? Well, you probably aren't sufficiently well-heeled to buy a coal refining plant as a personal tax shelter. But the code is full of literally hundreds of ways to avoid paying more than your legal duty. All you need is a plan. So call us when you're ready to save, and we promise no harmful carbon emissions!

    Wednesday, June 21, 2017

    This Is Spinal Tax

    In 1984, the documentary filmmaker Marty Di Bergi scored a hit with This is Spinal Tap, a look inside Britain's loudest band and their 1982 Smell the Glove concert tour. Lead singer David St. Hubbins, lead guitarist Nigel Tufnel, and bassist Derek Smalls, were joined by a series of drummers who died under mysterious circumstances, including spontaneous combustion and a bizarre gardening accident that authorities said was "best left unsolved."
    Of course, the whole thing was a spoof. "Marty Di Bergi" was really director Rob Reiner, and the band members were played by actors Michael McKean, Christopher Guest, and Harry Shearer. (Having said that, they really did play their own instruments — and yes, they really did turn the volume up to 11.)
    This is Spinal Tap cost just $2.5 million to make. But it has become a cult classic, and grossed countless millions in ticket sales, home video sales and rentals, merchandising, and foreign rights. The four co-creators signed contracts giving them 40% of the movie's back-end profits, 50% of the the music receipts, and 5% of the merchandising. Yet they report getting just $179 in total income from 1984 to 2006. Now Harry Shearer, backed by the heavy duty millions he made voicing characters for The Simpsons, has spearheaded a $400 million lawsuit against the movie's owner, the French conglomerate Vivendi. And that got us wondering . . . do the fans at IRS have a stake in this particular fight?
    Hits like AvatarTitanic, and Star Wars: The Force Awakens can gross over $2 billion. Yet it's a strange Hollywood rule that as much as a movie might gross, there's never any net for back-end participants to share, never any big bottom line to share with the "talent." Return of the Jedi has earned $500 million since 1983, yet failed to show a profit. Harry Potter and the Order of the Phoenix "lost" $170 million.
    How do the studios do it? Shearer and his bandmates specifically accuse Vivendi of "cross-collateralizing unsuccessful films bundled with This Is Spinal Tap." This is when a studio sells a package of films overseas that includes both stinkers and hits, and assigns the same licensing fee to each of them. It has the effect of shifting income from the hits to subsidize losses from the stinkers. Other tricks seem to date back as far as Stonehenge, like undocumented marketing expenses and other improper deductions.
    Today's lawsuit isn't the first time someone has challenged Hollywood's accounting games. In 1982, humorist Art Buchwald wrote a screenplay he titled It's a Crude, Crude WorldSix years later, Paramount Pictures released it as Coming to America, and credited Eddie Murphy as author. Buchwald sued for story credit and won — but Paramount argued that the movie, which grossed $288 million, still managed to lose money. Having defeated the lawyers, Buchwald wound up settling for $900,000 rather than take on the accountants.
    And why would the IRS care? Well, for the most part, they don't. Studios might play accounting games that keep taxable income out of the talent's pockets — but most of that income winds up taxable to the studio or its subsidiaries. As long as the income stays here in America, the critics at the IRS still get their share.
    We make no representation that we could ever help you navigate the ins and outs of Hollywood studio contracts. Fortunately, it's a lot easier to avoid wasting money on taxes you don't have to pay. Call us for a plan, and we'll see how high we can crank up the savings! 

    Tuesday, June 13, 2017

    Does Your Money Need a Passport?

    Economic inequality is a hot topic in today's world. Researchers here and abroad consistently show the top 1% of earners gobbling a disproportionate share of gains throughout the world. This trend has more and more thinkers debating what to do about it. Do we redistribute the pie, so that everyone has a more equal share? Or do we grow it so that everyone can have a bigger slice? (There, we've just summed up three centuries worth of political economy in two short sentences!)
    Now there's new research that shows the old research actually understates that divide. (Don't you just love when the research changes?) Last month, a team of professors published a paper that reveals another gap between the rich and the poor — the rich hide a larger proportion of their income from the tax man.
    In 2015, the International Consortium of Investigative Journalists analyzed data covering 30,000 accounts and $100 billion of assets held at international banking giant HSBC's Swiss private banking department. In 2016, the same group analyzed data on 22,000 shell companies established by the Panama-based law firm of Mossack Fonseca. The professors matched the information from those leaks to population-wide tax and wealth records from Norway, Sweden, and Denmark.
    Scandinavians are known for their democratic socialist philosophies, relative equality, and overall happiness. (The 2017 World Happiness Report ranks Norway first, Denmark second, and Sweden ninth.) Surely the rich people in those countries are happy to support their less-fortunate brethren through taxes, right?
    Well, not so much. (With all that socialism and equality, it might surprise you to learn that there even are rich people in that part of the world.) While the overall tax evasion rate is 3% in Scandinavia, that rises to 30% for the top 0.01% of taxpayers, which includes households with more than $40 million in net worth.
    How does that correlate to inequality? In Norway, previous figures had estimated that the country's wealthiest 300 families control 8% of the country's net worth. The new data suggest those families keep a full third of their wealth offshore, which means they actually control at least 10% of the country's wealth. Researchers just didn't know where it was hiding!
    Over 1% of the Scandinavian families use HSBC's Swiss private banking services. Another 1% own a shell company created by Mossack Fonseca. One percent may not sound like a lot. But remember, HSBC is just one Swiss bank out of over 300, and Mossack Fonseca is just one law firm out of countless more.
    The paper's authors found that, "In practice, about 95% of all the individuals on the HSBC list that could be matched to a tax return did not report their Swiss bank account." In fact, when Norway and Sweden passed tax amnesty laws letting scofflaws pay reduced penalties, over 8,000 taxpayers 'fessed up. And further, the numbers suggest that 15% of the wealthiest households have stashed at least some money abroad.
    Here's some good news for those of us who live in the U.S. and don't have $40 million to worry about. Our country is actually considered a tax haven by many foreigners. That means we have countless opportunities to save taxes without sending our money on a Swiss holiday. All you really need is a plan. So call us, and see if we can help send you on vacation!

    Monday, June 5, 2017

    Trigger Warning: Snakes

    What scares Americans most? It's not the IRS, or public speaking, or even sharks. No, the answer, as you probably guessed, is snakes. Gallup once polled 1,016 American adults, and found that fully 51% of us are afraid of the scaly, coldblooded carnivores. Snakes have been bad guys going as far back as the Book of Genesis, when the serpent tempted Eve with an apple. And they've terrorized the rest us ever since. Who can forget Samuel L. Jackson, snapping out the only line anyone remembers from Snakes on a Plane, declaring "I have HAD it with these @#$%^ SNAKES on this $%^$@ PLANE!" or words to that effect.

    If you're part of that 51%, you won't be happy to hear the latest news from Mother Nature. Last month, a scientist announced he had observed a species of snake, the Cuban boa, that hunts in packs, using teamwork to catch their prey. He watched the three-to-six foot serpents join each other to hang upside down from roof of a cave to create a "curtain" and snatch bats trying to fly out. (Last we heard, he was spotted sprinting headlong away from the cave, screaming at the top of his lungs.)

    If this news hasn't sent you sprinting from the room, you're probably wondering what any of this has to do with taxes. We'll confess, we took the "snakes hunting in packs" story to test our own scientific hypothesis that we can find a tax connection anywhere. And it did take a few minutes on Google. But we did it!

    So . . . halfway around the globe, the world's most populous country is struggling to stamp out a pattern of petty corruption and bribery that keeps it stuck in the ranks "emerging democracies." Mother India currently ranks 79th out of 176 on Transparency International's corruption index. This puts India just behind that paragon of transparency Turkey, tied with Brazil, and ahead of the petty crooks in Albania and Jamaica.

    What does that mean for daily life? Bribery in India is everywhere. Want to open a business, get a drivers license, or schedule an appointment with a doctor? Pay up. Anticorruption campaigns have helped tame the problem, including one clever effort to post Youtube videos of ordinary citizens naming and shaming corrupt officials. But old habits die hard, especially away from the capital in New Delhi.

    Hukkul Khan and Ramkul Ram are two farmers from Narharpur village in Uttar Pradash, a northern state bordering Nepal. The men wanted tax records for their land, but officials refused to turn them over without the usual bribes. And Khan is known in his village as a snake charmer. So one day, the farmers showed up at the tax office with three bags full of snakes. There were about 40 in total, all different sizes and species, including at least four deadly cobras.

    One state official said they started climbing up the tables and chairs. "There was total chaos. Hundreds of people gathered outside the room, some of them with sticks in their hands, shouting that the snakes should be killed." Fortunately, no tax collectors or taxpayers were harmed during the making of the farmers' stunt. Police and forest officials rounded up the snakes, and everyone who wasn't in that office had a good laugh. (As Indiana Jones said in Raiders of the Lost Ark, "Snakes . . . why'd it have to be snakes?")