This blog is about “Offshore Company International Tax Plan” approved by the the U.S. Tax Court. The court’s blueprint on offshore tax planning with a tax haven corporation will cut your tax burden in half.
In this Tax Court case, a private annuity was used to fund the foreign corporation. The corporation invested in publically traded stocks.
A private annuity with a foreign corporation is a popular tax plan for the very rich.
What I like about the case, is that the IRS is the victor. This means the IRS is not likely to disagree with its court victory.
Offshore Company International Tax Plan with a Private Annuity
It works like this. I form a BVI company with $10,000 as capital. Then I fund my BVI corporation with an additional $90,000. However, this time my corporation signs an agreement promising me an annual payment of $8,000 a year for the rest of my life or until I dissolve my corporation. This arrangement is called a “private annuity.”
My BVI company earns $8,000 a year on its $100,000 (the $10,000 for the capital and the $90,000 for the private annuity). It also deducts the $8,000 it pays me on the annuity, leaving the corporation with no taxable income. However, the annuity income tax rules, section 72, allocates $4,000 a year to my cost. Of the $8,000 I received on the annuity, only $4,000 is taxable ($8,000 minus my allocated cost of $4,000).
I cast my tax planning is stone by filing IRS Form 5471. Of course, I reference the IRS Tax Court case victory on the Form 5471. It is in this form that I report the activity of my offshore tax haven corporation. As you may know, Congress enacted new laws to improve offshore corporations. Here is a link with the basic.
Listen to our internet radio show, Tax Talk, below (the show is about 15 minutes) to learn how to save taxes on your investment income with your controlled foreign corporation funded by your private annuity. The term “private annuity” means that no insurance company is involved. Only you and your corporation are involved.
Too busy to listen now? Ok.. then download the episode from our free Itunes page on this link.
Seemingly innocent but deadly to the IRS, private annuities have saved taxes since the beginning of the 1900’s. But, now they are better. The U.S. Tax Court agreed that private annuities paid by a tax haven corporation avoid all of nasty the anti-tax haven laws.
It gets better. The IRS private annuity interest rates are at an all-time low (about two percent). This allows for income shifting to your offshore company.
Something as simple as your controlled foreign corporation funded with your money provides tax savings and asset protection beyond your wildest dreams (tax dreams that is).
The trick? The trick, as you will learn on our internet radio show, Tax Talk (below), is the IRS’s information return, regulations and a recent Tax Court victory in Dante and Sandi Perano, Petitioners vs. Commissioner of Internal Revenue.
Need Help with your Offshore Company International Tax Plan
If you need advice for your office company international tax plan, then contact me, Brian Dooley, CPA, MBT, at [email protected]