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Provocative International Tax News

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International Tax Planning for the Entrepreneur is easy to read and understand.

You are in good company reading this blog with 50,000 other smart viewers  (from more than fifty countries).

Making you wealthy with innovative tax planning is the mission of this blog. Wealth is not created by your tax deductions. Spending a dollar to save forty cents in taxes will not make you wealthy. Wealth is created by good business including innovative and, in some cases, provocative tax plans.

Get the 2015 edition of International Taxation in America for the Entrepreneur at Amazon on this link.  You will learn the tried and true methods of international tax planning for the business owner and real estate investor.  

Want to brainstorm your tax idea?   Then, please call me, Brian Dooley, CPA, MBT at 949-939-3414 for a free brainstorming consultation.

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Tax planning and saving taxes does not work when you IRS deposits are stolen. Use the “Safe Lock” to protect yourself.

Protect your tax refund from ID thieves with the free “Safe Lockon this link.  Until the Obama’s Attorney General Holder was robbed twice, the Administration did little.  Then they got Michelle’s Obama’s social security number.

Local drug gangs have turned into tax refunds thieves.   60 Minutes reported that they have “laptop parties” where they get together and chit chat as they steel your money.   Often they have a friend or a mole working at a doctors office. The mole gets your information..

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American firms are finding England a great low tax haven.  Pfizer Pharmaceutical move to London, has let the “cat out of the bag.” Here is how it is done if you are a small business.  If you are going to move your headquarters outside the U.S., do it quickly.  Congress is panic and plans to have an “exit tax” (just like the Soviets back in the hey days of the USSR).

Best Country for Tax Inversion and Starting an Offshore Business? I looked at tax rates,  the type of commercial laws and supply of English speaking well educated work force.  Here is where save taxes and enjoy life.

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i Saving taxes with an IRS approved tax plan is called a private letter ruling.

New IRS internal legal memo gives tax breaks to the “check the box” foreign company incurring losses.  Here are the tax saving IRS rules.

  • Avoiding state income taxes this new IRS  designer  Nevada trust.  IRS tells how to use your Nevada corporation as your trustee to legally stop paying state taxes on your investment income. Here’s what’s happeningon this link.

New- IRS discloses the best business structure for the entrepreneur.  Designed to allow you to pay less taxes now and to get the best refund during the next recession.  Here is what is happening.

Tax planning,  with the Supreme Court common tax laws

Tax planning with Supreme Court common tax laws

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a big defeat.  Here is what happen.   The Supreme Court is the “law of the Land”.  It rules over the IRS and Congress.   

It works both ways.  The blog on this link explains the most missed Supreme Court Doctrine in this offshore plan blown away by the IRS.

Cleaver Apple with their iPad and now their iTax Haven. Learn how Apple save taxes using this 1960 tax law in this 8 minute entertaining  video.

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International tax planning and international tax savings with this Treasury Department report.

The U.S. Department of the Treasury (a branch of the White House) issued a secret report on tax savings international tax plans that the IRS cannot stop.   They reported the successful foreign tax plans of international businesses. We have obtain a copy.  It is on this link.  

 

offshore trust, foreign trust, nevada trust, estate planning trust, esbt, Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes.

Trust are the most effective tax tool. International tax planning should start with a Nevada trust to own the foreign company.

This easy to read blog post has the blueprint for successful trust tax planning. International Tax Planning should start with a trust to own the foreign companies. Besides avoiding state income taxes, the trust can move onshore or offshore at any time.   Surprisingly, an internal IRS memo disclosures how to protect assets and save taxes with an offshore trust.  In this blog post, I discuss offshore tax planning and provide the IRS memo. 

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Saving taxes with the cloud based

Learn how businesses are using the cloud to save taxes on this link.  E-commerce businesses are avoiding state income taxes and in some cases deferring U.S. taxes.

Be an IRS tax wizard with our new custom Google search, below .  I personally programmed this custom Google app to read 800,000 pages deep inside the IRS’s web site and the tax court’s web site. 

Foreign Corporate Tax Planning for the Branch Profits Tax

A successful foreign corporation doing business in the U.S is taxed a second time.  The tax is called the branch profits tax.   A U.S. business includes real estate, investments in a domestic (American) limited liability company or partnership, manufacturing, retail, distribution and providing services.

With a rate of up to thirty percent (less if the corporation is taxable in a tax treaty country), the successful business wants to minimizing or eliminating the branch profits tax.  The tax is reported on Form 1120F.

The Problem:  The Hidden Branch Profits Tax Trap

This tax applies when the foreign corporation has accumulated profits beyond the needs of its active  business.  The theory of the branch profits tax is similar to the accumulated earnings and profits tax that applies to domestic corporation.   This domestic tax has applied to domestic C corporations for more than half a century.  Thus, the tax planning, below, is based upon the tax court cases regarding the domestic tax.

For example,  In 2000, a foreign corporation invests $2,000,0000 of  cash into a partnership that owns commercial rental property in the U.S.   The partnership is successful and has distributed profits each year of $100,000. The U.S. and state income tax is $40,000. The net cash after tax is $60,000. After 15 years the $60,000 per year plus the investment income has grown to $1,000,000.

The  foreign corporation has kept the money in U.S. banks and the  U.S. stock market.   These assets are not used in the foreign corporation business, that of being a partner.

The IRS audit the foreign corporation and successfully assessed the branch profits tax.  The foreign corporation owes $300,000 in tax and a $60,000 penalty for reporting the tax.

How to avoid the branch profits tax

Here are few tried and true methods that have been used by U.S. corporations to avoid a similar tax known as “the accumulated earnings tax”.

By the way, merely keeping the profits in U.S bank accounts or investments does not avoid the tax unless you can prove the funds are necessary for the business activities.  Below are some business activities that have been accepted by the courts.

(1) Convert the business arrangement into a non-corporate structure.  The most popular is a combination of a Nevada trust with a Nevada single member limited liability company.   Since many corporations do not know what their earnings and profits are, the corporation’s earnings and profits should be calculated before deciding whether the conversion is a good idea.

(2) Increase salaries within the reasonable compensation  rule limits.  Avoid issuing bonuses since the tax court often sees a bonus as a non-deductible and taxable dividend.

(3) Provide more fringe benefits (e.g., a qualified pension plan).

(4) Have the corporation invest in securities generating capital   gains.  Since the accumulated earnings tax only falls on taxable income, the corporation should invest in securities, the sale of  which generates capital gains.

(5) Redeem stock, using a deferred payment obligation as   Consideration.  Accumulating money to pay for a redemption is not   generally considered a valid purpose for accumulating earnings but   redeeming now and paying off the debt later is permissible.[1]

(6) Establish a qualified pension plan.  A resulting unfunded pension  liability should reduce unreasonable accumulations.

(7) Recapitalize the corporation to shift dividends to selected shareholders.

(8) Buy business assets instead of leasing them.

(9) Most important!   Keep corporate minutes.  Do the minutes within a reasonable time after the meeting of the board of directors of the corporations.  These minutes must prove the business reason for the corporation retaining its profits.  The eight items above are example of business reasons. 

[1] Mountain State Steel Foundries, Inc. v. Commissioner, 284 F.2d  737 (4th Cir. 1960); C.E. Hooper, Inc. v. Commissioner, 539 F.2d 1276  (Ct. Cl. 1976).