Tag Archives: PRIVATE ANNUITY

U.S. International Inheritance Tax Plan for the British, French, Dutch, Germans and Canadians

International inheritance tax plan for the United Kingdom citizen, the French citizen, Dutch citizen, German citizen and Canadian citizen is unique.   Citizens of these countries have numerous tax treaties allowing for unique tax treaty planning. 

The “trick” is to balance the inheritance tax law in the U.K., France, the Netherlands and Germany with both the U.S. estate tax laws and income tax laws. The U.S. laws are different from the laws in other countries. 

Canada does not have an estate tax or an inheritance tax.  Thus, the “trick” is to balance the U.S. income tax laws with the Canadian income tax laws using the income tax treaty.

While some European countries do not recognize trusts, these countries do either because of their local laws or European treaties.   The United States has many types of trusts.  There is almost always a trust type that will reduce the inheritance tax and or the U.S. estate tax.

One of the special rules that the U.S. has for estate planning, is the use of a “private annuity”.

Here is an example.    Ian owns property in the U.S. and the U.K.  He is a U.K. citizen and resident.   Part of his assets are in the U.S. stock market.     Ian decided to create a trust in the state of Nevada.  Nevada trust law allows Ian to direct the trust investment and direct distributions to any person other than himself.

Ian settles the trust with an initial gift of $2,000,000,  He wants to limit his gifts (for both U.K. and U.S. tax reasons).    He decided to places an additional $2,000,000 into the trust with the agreement that the trust will pay him a lifetime annuity.  

Ian is age 75. Based upon an IRS tax table, the trust will pay him $200.000 a year.  

By using the annuity, Ian avoids having a gift in both the United States and the United Kingdom.  The annuity payment can be deposited in a U.S. bank account or a bank account in another country.

International Inheritance Tax Planning Involves Income Tax Planning

There is more than just avoiding tax upon death.  You want your heirs not to pay income tax because you took a shortcut in your international  inheritance tax planning.

Learn more about UK  tax planning on this link,

Learn more about French tax planning on this link.

The United States has a special tax savings law for heirs.  The property inherited gets a new tax cost for income taxes.  The new tax cost is the value of the asset on the date of death of the decedent.   If you would like to strategies your international inheritance tax plan, then please contact me, Brian Dooley, CPA, MBT at [email protected]

 

 

Court Gives New Tax Breaks for Tax Haven Investment Companies

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Tax Court explains great tax planning in this case.

A  Great Tax Tool is a related party private annuity.  This tool saves taxes on investment income.  Now, a Tax Court case provides the blueprint.   The Court’s decision allows you to fund a tax haven corporation with a private annuity and cut your taxes in half.

Saving taxes requires you to invest your time with your tax team.  Tax planning requires your involvement.

To learn how to save taxes, listen to our internet radio show, Tax Talk, below.   The show is about 15 minutes. The entertaining show explains how you save on your  investment income.

Seemingly innocent but deadly to the IRS, private annuities have saved taxes since the beginning of the 1900’s.   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 own offshore corporation  funded with your own money provides tax savings and asset protection beyond your wildest dreams (tax dreams that is).

The trick?   The trick, as you will learn, is the IRS’s own information return, regulations and a recent Tax Court victory in  Dante and Sandi Perano, Petitioners vs. Commissioner of Internal Revenue.

Need some tax brainstorming?   Then please call me, Brian Dooley, CPA, MBT at (949-939-3414) for a one hour complimentary consultation.  Looking for more tax plans.  These books at Amazon can help you. 

Court Tells How to Save Taxes with an Offshore Company

tax planning, saving taxes, how to save taxes, tax court

Tax Court explains great tax planning in this case.

The U.S. Tax Court’s blueprint on how to save taxes 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.  

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.

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 some tax brainstorming?   Then please call me, Brian Dooley, CPA, MBT at (949-939-3414) for a one-hour complimentary consultation.

Saving taxes on your Investment Income with an Offshore Corporation

foreign corporation, IRS audit, saving taxes, how do I save taxes, tax planning

Saving taxes with IRS approved tax planning

Today,  financial articles are buzzing how taxpayers are surprised at the higher tax rate on investment income.  Here, in California, it is up to 56%.  Yep, you take all the risk and you “give” more than half to government programs.    

We thought President Trump would lower taxes.  He did.  Just not on investment income.

Tax planners for the Wealthy use a controlled foreign corporation to cut these taxes in half.  The savings is in the way you fund the corporation.  We have a tried and true blueprint for our best and wealthiest clients.

Before I explain this tried and true method, I recommend that you get an IRS private letter ruling guaranteeing your results.  You can learn about our private letter ruling services here.

Here is the blueprint.

  1. You create a tax haven corporation.  My favorite location is the British Virgin Islands.
  2. When you fund the corporation, 25% is allocated to common stock (which you own).  You place the other 75% in the corporation as a private annuity transaction. The term “private” means the annuity does not involve an insurance company. 
  3. The corporation makes annual payments to you (or you and your spouse).  Depending on your age (I am assuming that you are in your fifties or older), about half of the annuity payment comes to you tax-free.
  4. Each year you file IRS form 5471 for the corporation.  The annuity payment to you is a deduction against the corporate investment income.

For example, you are age 55.  You fund the BVI corporation with $125,000 for the common stock.  You place another $375,000 for an annual (lifetime) annuity.   

Bases upon the IRS rules (as of April 2015), the annual payment is $20,074.  Part of this is investment income ($6,729) and part is not taxable ($13,345).  Other words, you pay tax on $6,729.

If the BVI company made 5% on your $500,000, its gross income is $25,000.  From the $25,000 the corporation subtracts the full annuity payment of $20,074.  Its net taxable income (and taxable to you) is $4,926.  

Now the bad news.  The form 5471 is a complicated tax return.  You should expect to pay $5,000 a year for the accounting and the return.

As you may know, our firm does not prepare tax returns.    However, we do to tax planning and IRS rulings.

If you would like to brainstorm your tax idea, then please call me, Brian Dooley CPA, at 949-939-3414 for a free one-hour brainstorming consultation. 

P.s.-The savings are greater if your foreign corporation invests in foreign investment funds. These funds are called a “passive foreign investment company.”  Here you will learn a complex and important tax law on the topic. 

Viager: The Swiss Private Annuity for Estate Planning & Asset Protection

With the deadline for the new foreign asset reporting looming, it is time to turn a lemon into lemonade.

The Swiss/French Viager transfers Swiss or French real estate and escapes both Swiss and French inheritance and American estate tax.   A Viager also protects assets. 

This is how it works.

Parents have a home in Geneva. Daughter is doing great as a Swiss banker. She buys the home by paying the parents an annual payment for life.

The payment is less because the parents have the right to live in the house or lease the house to a third party until their death.

Like a private annuity, the home is removed from the estate. Now, toss in some asset protection–and voila!   You have the perfect arrangement.

Private annuities avoid both section 2036 and section 2038.

If you would like to brainstorm your international tax plan, then please call me, Brian Dooley CPA, at 949-939-3414.