Tag Archives: saving taxes

Internet Tax Planning – Saving Taxes with the Cloud

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Saving taxes with the cloud-based business requires innovative tax planning,

Internet tax planning provides fantastic tax savings. 

The Internet-based business decides which country or state has the best tax advantage.  Saving taxes is easier than ever.  You will learn how to save taxes on this blog.

International e-commerce tax planning starts with placing your computer server in a low tax or no tax jurisdiction.  Web-based business tax planning provides big state and federal tax savings. 

To learn how big international companies are using the internet to legitimately avoid taxes, please view the California Society of CPAs 40 minutes seminar on this link or listen below on my blog Tax Talk radio show.  You can also download the show as a podcast from iTunes.    

Don’t miss out on our new e-commerce tax planning book.  Learn more on this link.
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Avoiding the Form 1120F- Foreign Corporation Branch Profits Tax Trap

Preparing the Branch Profits Tax section of the IRS form 1120F  has trapped many foreign investors in U.S. real estate and with US business operations.

 In addition to paying income tax on your profit, the foreign corporation pays tax again on the change in the value of its U.S. business. 

The branch profits tax is based upon a law from the 1950’s. The section 531, tax on accumulated earnings, was deadly to a small business.  However, now most small businesses operate in S-corporations or limited liability company. Since entities of this type are pass through, avoid section 531 does not apply.   Because of this many tax professionals are unaware of this law.

The branch profits tax is just as deadly to the foreign business.  This tax applies if the foreign corporation has income effectively connected with a U.S. business. The applies if the corporation has either a permanent establishment of a fixed place of business.

 If you want help preparing your Form 1120F, then call me Brian Dooley, CPA, MBT at 949-939-3414.

Some CPA’s are advising their clients that keeping assets on the American branch office balance sheet avoids the branch profits tax.    Just holding assets on the books,  does prevent the branch profits tax.  The assets must be continued to be used in an active corporate business.

Section 531 (a tax on accumulated distribution) is the concept used when the branch profit tax was enacted.  Under this section, the corporation must prove the business reason for keeping liquid assets.   The point of section 531 is to cause the second tax.  This is a tax on a dividend that the corporation has refused to distribute.

Likewise, the IRS can impose the branch profits tax when a foreign corporation with a US branch merely retains liquid assets just to avoid the tax.   

Upon a distribution of property to the shareholder of a foreign corporation, the 30 percent branch profits tax apply.  Similar to section 531, corporation needs to maintain ongoing director minutes, shareholder minutes and business plans explaining why assets are not distributed to the shareholder or the home office.

Learn about winning the IRS audit of the branch profits tax on this link.   On this link, find out more innovative methods to eliminate both the branch profits tax and foreign corporation income tax on this link.   If you need help with an international tax audit, then contact me at[email protected]

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Learn how to save taxes with “International Taxation in America for the Entrepreneur” using tried and true methods.

If you would like to us to prepare your Form 1120F,  then please call me, Brian Dooley CPA, at 949-939-3414.  

Learn move about international tax planning with my easy to read book, International Taxation in America for the Entrepreneur available at Amazon on this link.  The book takes about two hours to read.

 

 

Best Trust Structure for Estate and Business Planning

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Trusts first came into use during the Great Crusades. Knights would entrust their land and manors while away at war to their best  friend or attorney.

Do you have a business or real estate that you want to leave to your heirs?
However, you do not believe that your heirs will make the correct choices in life. The Wealthy use a trust to solve this issue.

What is a trust?

A trust is a contract between you and a person that is referred as the “trustee”.  The trustee holds property for the benefit of your family.  The family members are called the beneficiaries.

A testamentary trust is a trust created by will.  An inter vivos trust is a trust created by you during your lifetime.  If you create a trust during your lifetime, the trust can be revocable or irrevocable.

The tax treatment of an inter vivos trust depends who you have as trustee. Continue reading

Saving Taxes with the New IRS “Never Tax Plan”

The world’s “wealthy” have a tax plan: “Never Pay Tax!” And South Dakota is teaching them how with virtual life insurance companies. These companies (which are licensed and adequately funded) provide a private life insurance policy.

The policy is unique to you.

Unlike whole life insurance or variable life insurance, these policies focus on income tax elimination. While many see private life insurance as an insider’s secret for the world’s wealthiest, many wealthy people are still unfamiliar with it. Ironically, Europeans used this strategy first.

Private life insurance allows you to wrap your investments inside your policy. That way, you keep the same investment advisor and the same investments. The IRS treats the taxation of insurance differently from stocks or hedge funds. It doesn’t charge income tax on a life insurance policy when it pays out as death proceeds.

You can borrow up to 90 percent of your investment fund without being taxed. The loan can remain unpaid for decades. By stuffing your taxable investment inside your tax-free private life insurance policy, you get both the compounded gains of that investment and the death benefit tax-free. Because the death benefit is low, you spend less on insurance.

Take this example: The Smith family has established a Nevada irrevocable trust. Besides protecting assets, a Nevada trust can last 365 years. Also, the IRS allowed the Smiths to be the trustee using a Nevada corporation (more on this link). The trust fund is $5 million of stock funds.
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Avoid Taxes Learn What the IRS Teaches Auditors About Sham Transactions

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Saving taxes requires you to plan your taxes. Tax Planning takes time and effort. The Department of the Treasury governs the IRS.

Wow, the IRS must have a new group of hot shot attorneys.  They are wiping out small businesses tax planning with the concept of a sham. International tax planners seem to fall prey to this new IRS attack, and it costs their client’s big.

I found an IRS internal report to its auditors explaining the sham transaction.  I have the report below in blue print. The report is good news for tax planners. The auditors are being trained using older concepts.

Also, you will note, the report is not overly clear.  The best part is in the last paragraph.   Continue reading