Tag Archives: NEVADA TRUST

Five Best Tax Saving Plans For Small Business Owners

The new GOP tax laws start in 2018. Here are the Five Best Tax Saving Plans For Small Business Owners.  

Saving taxes will require some changes in your entity structure.  You want to focus on the low corporate income tax rate.  However, you need to keep certain assets out of corporations.  These assets are your trade name, trademark, copyrights and patents, if any.

Big Business uses many tax plans that are not well known.   The five best tax saving plans for small business owners are:  

 1.    Have one use the accrual basis of account.   This allows you to avoid taxes on prepayments  (more on this link) and expense costs before they are paid.   Have one entity be a corporation.    Corporations can be taxed as a separate entity (which means they pay their own taxes) or a pass through (by election subChapter S of the tax code).

Each of these corporate taxation methods has a unique advantage.   For a start-up, the separate entity has the benefit of allowing you be late on paying income tax on the profits.  Thus, you have more money to invest in growth.

Have one corporation doing business in a tax-free state such as Nevada.

2.  If you have only part-time employees or no employees, then fund your business  with the little-known tax savings of a solo 401K plan  (more on this link).  This works only if you have no full-time employees.  Big businesses use the ESOP retirement plan.  It is a fantastic tool but most small business can not afford the annual compliance cost.

3.  If you make sales via your website, place your website on a server in a tax-free state (learn more here) Also, have the server and website owned by a corporation in the same state.  If your website sells a service or another intangible item, use a tax haven corporation to own the site.  The server needs to be in the same country as the corporation.

4.  Use an irrevocable non-grantor trust to own any passthrough entities.   Of course, have the trust in a tax-free state such as  Nevada.   A non-grantor trust has almost no audit risks.  This type of a trust files its own tax return (Form 1041) and pay its own taxes.  By moving income to this return, you have a lower “adjusted gross income.”

A lower adjusted gross income allows you larger itemized deductions and more tax credits.  It also reduces your chances of a tax audit.

5.  Don’t rely upon year-end planning.  It is a suckers move.  Usually, you end up spending money to be able for a deduction.  Big Business plans a year in advance and not a month before year end.  Each time they add a product or service, they think about tax planning.   The most effective tax planning looks at income and not expenses.

If you need help creating a strategic tax plan, then contact me, Brian Dooley, CPA, MBT at [email protected]   A recent Government study showed that tax planning businesses are taxed at 14%.  For every one dollar spent in tax planning,  ten dollars are saved in taxes.

U.S. International Tax Planning for the Canadian and U.K. Investor in U.S. Real Estate

The goal of the U.S. International Tax Planning for the Canadian and U.K. Investor is to a double tax issue.  On one side, there is income tax.  On the other hand, there is inheritance tax (for the U.K. citizen), estate tax in the U.S. (which will be repealed but only for a few years) and the Canadian deemed sale at death tax.

We all want the American 20% long-term capital gain tax rate.  However, this means the foreign investor can’t own the U.S. real estate in a corporation.    Both a domestic corporation and a foreign corporation incur two U.S. income taxes.    For the domestic corporation, the second tax is called “the accumulated earnings and profits tax”.

For the foreign corporation, the tax is called the “branch profits tax”.   Foreign shareholders of a corporation owning U.S.  real estate are subject to the U.S. estate tax (but not the gift tax).

U.S. International Tax Planning for the Canadian and U.K. Investor uses a Nevada Trust

Wealthy Americans have the same tax problem.  They solve the problem by using a special type of a trust.  Here is a short video on reducing U.S. taxes with the use of a trust.   If you want to learn more about a Nevada Self-directed trust for your tax planning, then contact me, Brian Dooley, CPA,MBT  at [email protected]

A Nevada is one of the few states that have a special trust law. It is called a “self-directed” trust. As the name implies, you can direct the trustee.   The IRS has issued favorable rulings on this type of trust. 

French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy

The French U.S. Tax Treaty gives French citizens  preferred inheritance tax strategy. 

France is on the United States’ favorite country list.   Recently, France and the U.S. changed their tax treaty.   Under the new treaty,  the U.S. estate tax does not apply if the spouse inherits the property.   And it gets better with the new $11,000,000 exemption.

French U.S.  Estate Tax Treaty Gives French Citizens part of the $11,000,000 Exemption.

This is how it works.  François owns $14,000,000 in assets.   $5,000,000 is invested in the U.S. stock market.  $9,000,000 is property and other assets in France.   His U.S. estate tax exemption is 5/14th of $11,000,000 (which is $3,928,571). 

If François should die, his U.S. taxable estate is $1,071,428 ($5,000,000 in stocks minus $3,928,571).  The U.S. estate taxes will be approximately $400,000.

The surviving French spouse can sell the property located in the U.S income tax-free.

This is  how it works.   When the spouse inherits the property, she or he has a new cost for tax purposes.   The cost is the market value at the time of the death.  For example, French couple acquired a home in Los Angeles in 2009 for U.S.$500,000.

The husband dies in 2017.   The house is now worth $1,500,000.   The wife inherits the homet.  The U.S. death tax does not apply because of the U.S. – French Tax Treaty.

Next, U.S income tax law increases the tax cost of inherited property to the market value as of the day of death.    When the spouse sells the property for $1,500,000 she will have no gain or loss.

This new tax law is found in a “protocol” to the original French-U.S. income tax treaty and not to the estate tax treaty.  Here is a link to the protocol.

If you need help with your U.S. – French tax planning, then please email me at [email protected]  Also, here is a link in French explaining the U.S. estate tax laws.

By the way, U.S. tax laws allow a unique type of trust that will avoid inheritance tax for the children of French citizens.  The  trust is called a “marital deduction trust”.  This trust created at the time of the death of the first spouse.   For French tax law, this trust is a U.S. person which provides interesting tax savings.  

New French U.S. Tax Treaty Gives French Citizens Preferred Inheritance Tax Strategy with a Nevada Trust

If you find that you owe U.S. estate taxes, consider a Nevada Self-Directing Trust.  The IRS has issued very favorable rulings on these trusts.   Just as the name sounds, you direct the trust investments and also distributions to your family. 

If you would like to discuss  how the new french – U.S. tax treaty  gives french citizens preferred inheritance tax strategy, then contact me at [email protected]  

You can learn more on how the  French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy  on this link.  This page has the IRS international estate tax treaty explanation.  This IRS page applies to all estate tax treaties. 

International Tax Treaties Planning and Strategy for Small Business

International tax treaties planning and strategy for the small business are often overlooked by the U.K., French, Netherlands, Belgium, Germany, Austria, Australian and Canadian business.

These treaties have favorable rules for their citizens doing business in the United States.  The tax savings are not what you read about on the web. The web talks about permanent establishment planning.   And to be frank, the U.S. courts are not independent.  The courts consistently rule for the IRS.

My advice, is  don’t even think about the permanent establishment clause of a tax treaty (this link has is more on this topic).

The Best International Tax Treaties Planning and Strategy for Small Business

The best tax treaty feature is found in the articles on the treatment of different type of entities.  For example, the U.S. has corporations, trusts (most other countries do not have trusts), limited liability companies(LLC) and many types of partnerships.

The best international tax treaty plan is based upon the home country’s tax treatment of either a trust or a LLC.  For example, Canada sees the American LLC has a tax haven corporation.   The  Canadian-U.S. tax treaty does not address the treatment of the LLC.

The Canadian using an American LLC can enjoy unique tax savings.   On the other hand, the American using a Nova Scotia (which is part of Canada) unlimited company can enjoy a larger foreign tax credit.  The unlimited company is non-existing for U.S. tax law.  However, in Canada, it is treated like any other corporation.

I hoping that I am able to explain to you that each international tax treaties planning and strategy is unique to the country of citizenship business entities.

International Tax Treaty Planning with the Nevada Trust

American tax law give trusts four very different tax classifications.  Looking at the tax treaty, you decide which of these four save you the greatest in taxes.

At this stage you need an attorney.  The terms in the trust agreement determine the tax classification.   You should expect to spend serious money for this agreement. Fees are between $25,000 and $50,000.

Nevada trust law allows you to direct the trustee investments and distributions.  A Nevada trust last 365 years.  Nevada has no income tax.

If you would like help with your international tax planning, then contact me, Brian Dooley, CPA, MBT via email at [email protected]

Tax Planning – Transferring Appreciated Property to a Trust & Avoiding the Assignment of Income Tax Law

American has two sets of tax laws.  The set that you read about is the laws passed by Congress and administered by the White House (through the IRS).  Most tax planners know these laws.
This blog explains the second set of tax laws and explains tax planning with a Nevada trust. 

saving taxes with the Supreme Court

Saving taxes with the Supreme Court tax laws.  These laws are known as “doctrines.”

Another equally important set of tax laws are created by the courts.  America is a common law country.  In a common law country courts create laws. For example, the concept of a trust exists only in common law countries.

Tax laws created by courts are known as  “doctrines.”  Ignoring a doctrine in your tax planning subjects you to an IRS penalty and in some cases prison.

One of the first doctrines is income must be taxed to him that earned it.[1]

This principle was well stated by the United States Supreme Court in Lucas  Earl,[2] as follows: 

    “… this case is not to be decided by attenuated subtleties. It turns  on the import and reasonable construction of the taxing act. There is no doubt that the statute could tax salaries to those who earned them  and provide that the tax could not be escaped by anticipatory      arrangements and contracts however skillfully devised to prevent the salary when paid from vesting even for a second in the man who earned  it.”

    “That seems to us the import of the statute before us and we think that no distinction can be taken according to the motives leading to  the arrangement by which the fruits are attributed to a different tree from that on which they grew.” 

In Helvering v. Horst,[3]  the Supreme Court stated:  

     “The taxpayer has equally enjoyed the fruits of his labor or  investment and obtained the satisfaction of his desires whether he  collects and uses the income to procure those satisfactions, or  whether he disposes of his right to collect it as the means of      procuring them.”

The idea that anticipated earnings may not be assigned to another has been upheld in the courts in the transference of securities.[4]   For taxpayers living on the West Coast, the Ninth  Circuit Court of Appeals[5] made the point about securities as follows:

 “Under the anticipatory assignment of income doctrine, once a right to receive income has ripened”.

“The taxpayer who earned or otherwise created that right will be taxed on any gain realized from it, notwithstanding the fact that the taxpayer has  transferred the right before actually receiving the income.” 

The key word is “right”.   “Right” does not mean appreciation.  “Right” means that the sale is in process or has been completed (and you are waiting for payment). 

An old income tax regulation regarding the use of a trust to avoid taxes[6]  provides that a person who transfers his right to future income earned by his services is taxed on the income.  

This regulation applies despite the assignor not having control over the trust. This type of trust is used for estate planning and asset protection.   

Let me provide you an example of what is not the assignment of income.  

You live in high tax state such as New York or California.  You decide to form a trust in Nevada (see more on the IRS designer trust used to avoid state income taxes on this link)

You own shares of stock in a company.  The shares have appreciated in value. You gift the shares to our Nevada trust.  The trust sales the shares. The trust is taxable on the gain.  The gift of the shares to the trust is not an assignment of income.

On the other hand, a buyer enters into a contract with you to purchase your shares.  While the buyer is due his due diligence, you gift the shares to the trust.  The gift of the shares  is an assignment of income and you are taxable on the gain.

Need help your tax planning?  Then contact me, Brian Dooley, CPA, MBT at  [email protected]

[1] Commissioner v. Culbertson, 337 U.S. 733; Helvering v.

Clifford, 309 U.S. 331 (1940); National Carbide Corp. v. Commissioner, 336

U.S. 422 (1949).

[2] 281 U.S. 111 (1930),

[3] 311 U.S. 112 (1940),

[4] Hallowell v. Commissioner, 56 T.C. 600 (U.S. Tax Ct., 1971)

[5] Ferguson v. Commissioner, 174 F.3d 997 (U.S. App., 1999).

[6] Treas. Reg. Section 1.671-1(c)