For centuries, banknotes have been used in the UK and Europe as “private money”. Now, innovative tax planners are creating private money to create wealth and to save taxes.
Now, successful businesses are using private money for sophisticated related party tax planning.
Disney profits from its private money and gets amazing tax savings. Its private money is in the form of a “banknote”.
Amazon announced it will be issuing its private money starting this May. Their private money will be in the form of virtual currency. With this in mind, your related party private money can be in virtual currency form.
Other types of private money are coupons and gift cards. They all have two thing in common. They are in bearer form and they save taxes.
In most cases, private money is redeemable in product or services and not in U.S. dollars. Disney private money is used to purchase Disney products and services. Since it is in bearer form, you can transfer the Disney money to anyone, either as a gift or as currency.
For example, I prepare your tax return. I invoice you one Disney dollar. The tax law states my income is the value of the property I receive. If I live in Nebraska (far from a Disney park), the value might be less than if I lived in Orlando.
Just how do you save taxes?
The IRS has announced that income from the issuance of private money is tax deferred. The tax deferral can go on for years, even decades (as in the case of a business like Disney). Here is the link to the IRS tax planning rules.
The wealthy eliminate taxes by using private money for related party tax transactions including factoring of their accounts receivable to a related Nevada company and the paying management fees and marketing fees related corporation.
This is what happens: Related party income shifting is allowed when payment is made. Real money is need for real expenses such a payroll, rent and inventory. Your private money is used to pay your related companies. It can be used again and again.
Why now? The Federal Reserve loose money policy affects the tax law on private money. Printing your private money, now, creates a powerful and unique tax saving asset.
This loose money policy has stymied the IRS related party interest rate rules (but don’t wait too long; the IRS announced they are planning to change this rule, on this link).
Well, this is enough in writing. To learn new tax planning ideas, listen in to my Blog Talk radio show, Tax Talk.
Part I will give you the fundamentals and Part II will give you advance tax plans. If you would like to brainstorm your tax planning, then please call me, Brian Dooley CPA, at 949-939-3414 for a free one hour consultation..
Listen now by pressing play button below Part I ’s play time is about 30 minutes. Part II ‘s play time is about 15 minutes.