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Its a little late to respond to this thread, but I've been skiing the last 8 days and the 800+ posts took awhile to read.

Asset Protection: RUN! All you need is good estate planing and liablitiy coverage. See link:

http://www.falc.com/finance/devilwit.htm

Go to the back newsletter site and read the Anderson case. Look up the Marc Harris Org. lawsuit.

http://www.falc.com

Cindy: Sorry about your brother but its the best thing that could happen to him. The quicker he finds out he is working for his interests and that NO employer has his best interest in mind the happier and richer he will be.

Publications: Gilder Tech., Smartmoney, Skiing.

Re: TheBadger: Red Star, age, menopause, lack of joke timing or not I LUV YOU MAN. You are a treasure for this board.
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Thanks for your kind thoughts; sometimes the mouth/fingers are capable of moving faster than a sodden brain.

Where have you been skiing? We ski usually 4 to 6 times per year but usually do it in 3 - 4 day mini-trips.

I think it would be an absolute gas & a half to have a Foolish dinner after a day of great Colorado skiing.

TheBadger
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To TheBadger,

I was in Winter Park this time. I was in the market for some new boots and there is a world class boot fitter there.

In 2 weeks I am going heli-skiing in Canada. End of March I suposed to go to Salt Lake.

I would love to have dinner(and a couple of drinks) next time in Colorado. I have been to every mountain
there I think. Whats your favorite?

Oh yes, I'll buy dinner, that way I won't feel to bad about all the free advice I can get from you over dinner. Depending on the snow I may be back in Colorado before the season is over. I hear Arrapahoe
is open year round, you ever ski in the summer?

Sorry if this clutter offends anyone on the board but I have endured your anti tax/government rantings.
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Anes, I retract everything!! I also apologize profusely to TheBadger. It's my brain that has gone soft. I just put myself on ERT (estrogen replacement therapy). Your post and links are excellent!! That leaves my recommedation of responsible and ethical offshore organizations at ZERO as I sit here and chew on humble pie.

What the readers of this board need to understand (as you and TheBadger obviously do) is that the offshore world is VERY treacherous and full of thieves and charlatans. The one organization that I thought was not crooked turns out to be as crooked and as bogus as the rest.

That said, I still feel that an IBC used as an investment vehicle is still a good choice for some people like myself for example. As I mentioned before, for a foreigner, the USA is a great tax haven. Depending on his country of residence, a foreigner only pays 10 to 30% withholding taxes on dividend and interest income. Foreigners pay NO capital gains taxes.

The only problem with opening an account in one's name at a US brokerage is the VERY PUNISHING inheritance taxes the US will apply to a foreigner's account if the foreigner happens to die. An American citizen or resident gets a $600K or so exemption from inheritance taxes. A foreigner gets $60K.

Some foreigners feel comfortable by opening a joint account with their wives. But what happens if both the husband and wife die together in an accident?? The hiers will get slammed.

I will never again make the mistake of assuming that you and TheBadger are parochial America-Firsters that have no clue about what happens outside of the US borders. It is I who is the obvious "Clueless" person here.





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See your e-mail.

P.S. We are both looking for new boots in 2 weeks. Mine are 9 years old; hers are 15 years old.

What do think of "Q-tip" or "shaped" skis? We are old school parallel skiers.

TheBadger
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Wow, thanks Galeno, but now I am lost. If I could still live in the good ole USofA (because I really do like it) versus the other parts of the world and impliment further tax avoidance strategies, I would do it in a moment. Let's get some definitions down:

Tax Stupidity --- 1040 EZ.

Tax avoidance --- everything and anything under the sun that is white, grey, dark grey, almost black, but never 100% black in the IRS field manuals. As others will tell you, I as about as aggressive as they come in tax strategies.

Tax evasion --- 100% black; remebering that those guys know what I sometimes do & used to do for a living (legally relieving others of their hard earned money to help them kick the snot out of the IRS); this last step absolutely guarantees me a 5 year all expenses paid vacation is Leavenworth, Kansas.

TheBadger
Praying For Snow


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TheBadger wrote:
Tax avoidance --- everything and anything under the sun that is white, grey, dark grey, almost black, but never 100% black in the IRS field manuals. As others will tell you, I as about as aggressive as they come in tax strategies.

Tax evasion --- 100% black; remebering that those guys know what I sometimes do & used to do for a living (legally relieving others of their hard earned money to help them kick the snot out of the IRS); this last step absolutely guarantees me a 5 year all expenses paid
vacation is Leavenworth, Kansas.


You're confused? So am I. How about this?

Tax Avoidance --- pretending your personal vacations are business related or that your last year's dinner parties were to entertain business clients. Result --- no problem??

Tax Evasion --- paying your next-door neighbor's kid in cash for baby-sitting services and not declaring social security or income tax to the IRS. Result --- you and the kid go on paid vacations to Leavenworth, Kansas??

Frankly I don't see the difference between "avoidance" and "evasion". To me, you either pay EVERY SINGLE TAX the government says you should or you are "evading". Just to make sure I'm not having ESL problems, I looked up "evade" and "avoid" in the dictionary. This is what I got:

evade -- To escape or avoid by cleverness or deceit.
avoid -- 1. To stay clear of, evade, shun. 2. To keep from happening. 3. To refrain from.

I'm not trying to be cute here. I know enough Americans to realize just how much terror the IRS strikes into their hearts. Our Ministry of Hacienda just doesn't have that kind of impact. They can be annoying, but they do not strike terror. A quick bribe of 10 to 20% of the tax owed usually clears things up right away.

To us, it's all tax evasion whether I tell my mechanic to "skip the receipt" (translation: don't charge me the sales and VAT taxes plus give me the standard 10% cash discount off the listed price) or tell my local banker to put my CD in their "offshore branch" because I don't feel like paying Hacienda the required 10% withholding tax on passive income derived in Costa Rica.


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I guess we use different dictionaries and a different logical process with that information:

Tax Evasion: when the issue is black & white and the facts are black and white; you choose black; the law says white. Examples:

1. Taking your dog & cat as dependents
2. Fact falsification (start with age & move on)

Tax Avoidance: when an issue is not black & white and the facts are not black & white & often most importantly; the valuations are not black & white. Example:

Joe is on disability for extensive & persistent back pain which is physically debilitating. Joe's doctor says he needs 3x per week whirlpool treatment. Joe installs whirlpool on back deck & takes medical deduction on 1040/Schedule A for $10,000; all of which are direct costs of whirlpool/suana, installation, supports,etc. After each whirlpool treatment:

A. Joe grabs his "walker" & goes back to hallways & rides up the power elevator into his bedroom and sits down in his wheel chair.

B. Joe grabs his keys & takes a quick 60 minute ride on his "hardtail" motorcycle; comes home after a few at the bar & has wild uncontrollable sex with his wife in new positions that even I can't get into.

Which Joe has committed tax avoidance? JoeA, JoeB, both, neither?

Which Joe has committed tax evasion? JoeA, JoeB, both, neither?

The logical (maybe) & certainly emotional conclusion is that JoeA committed tax avoidance: very legal, appropriate & sometimes appaulded & that JoeB has committed tax evasion but has documents behind which he can hide if ever challenged & is generally scorned.

I know, in first detailed person; both JoeA & JoeB. The answer above is incorrect. Whether, we, who live in the good ole USofA like it or not; Congress passes tax laws & for the most part the IRS enforces them (unbelievably in a relatively evanhanded manner & I am no supporter of the IRS) & we are obligated to abide as part of the privilege of living here. Needless to say, if you don't like it here you are free to leave.

OTOH, no citizen is obligated to pay a tax that is not rightful; therefore, enter stage left the concept of tax avoidance. Tax avoidance = Gray. Gray (or is it grey) is the property & province of the taxpayer & is his or her property until proven otherwise. OTOH th eline between avoidance & evasion is continually being defined & occassionally moves & this process is governed by a relatively strict process that mostly eliminates emotion.

I LIKE GRAY. IT IS MY FRIEND & MY WEAPON.

TheBadger


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Hi all

I have been following this thread with quite a bit of interest, as I have my CPA certificate and I did enjoy the tax section. (please don't tell anyone about the CPA part - everyone seems to think that I can do math in my head because of it, and I just can't - it only means that I can take a 15 1/2 hour exam!)

The one thing that I did learn in my tax classes was this - live by tax code, die by the tax code. The minute you think you have got it figured out, someone in Congress is going to come along and change everything and all that great planning is down the tubes, unless you are lucky enough to have found the vehicle/loophole that gets grandfathered because there are some major political contributors that are also using the same vehicle/loophole.

Now I would certainly not advocate completely ignoring the tax aspects of your investments and early retirement planning, but always remember that things can and do change, especially with the tax code.

In my own personal situation, I am going to use a Roth IRA as one of my investment vehicles. Do I think it will still have the tax advantages when I have to access that money? I have no idea, and frankly, I am not counting on it - I figure if I still get a tax break by the time I make withdrawals, it is a bonus. But I just can't count on it. I max out my 401-k, because it does help my taxes now, and my retirement account for later. Now, if I didn't get the current tax break on it, I would still be contributing for the tax deferred aspects of it.

Will I pick my retirement location based on the tax situation? Highly unlikely, because again, things can just change too much and too quickly.

I take taxes into account when I do my planning. But only as one aspect of my planning. I try not to put myself in a position where I am paying taxes that I could have avoided if I had done something differently, but taxes are not my #1 consideration by any means.

And no matter what - I still don't like paying them!!

Just wanted to toss in my 2 cents on this one.

Cindy
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TheBadger wrote:
Needless to say, if you don't like it here you are free to leave.

Free to leave with the shirt on his back? Yes. Just like the capitalist Cubans in 1961. But NOT FREE TO NOT DANCE!

"Our guy" with the $1M IRA and lack of "dancing desire" had to pay a 36% federal tax and a 10% penalty. Then he got levied with another 25% "exit tax" on the remaining $540K (or is it 25% of the original $1M?) reducing his original $1M to $405K. That's a 59.5% "no dance tax"!!!!

From what I learned from the "What's wrong with this picture" thread, "our guy" still has to pay income and capital gains taxes for the next 10 years (more?) on whatever his now puny nest-egg generates. If he doesn't, he gets a 5 year vacation in Kansas.

With the exception of Cuba and North Korea, I know of no other country that imprisions its own citizens and residents so effectively.

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galeno wrote:

You're confused? So am I. How about this?

Tax Avoidance --- pretending your personal vacations are business related or that your last year's dinner parties were to entertain business clients. Result --- no problem??

Tax Evasion --- paying your next-door neighbor's kid in cash for baby-sitting services and not declaring social security or income tax to the IRS. Result --- you and the kid go on paid vacations to Leavenworth, Kansas??


Hmm. Well, the first is deliberately falsifying statements to the IRS. It may be common practice, but that doesn't make it any less illegal. I'm not talking about 'right' or 'wrong' here, just legal and illegal.

The second example is inaccurate. Current IRS regulations (I'm sure I'll be corrected if I'm wrong) set a floor level below which employers don't need to file any paperwork (such as 1099s) for employees. Something like $400 per year IIRC. Therefore the occasional baby sitter transaction is perfectly legal, the tax code does indeed provide for this.
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Tax Avoidance --- pretending your personal vacations are business related or that your last year's dinner parties were to entertain business clients. Result --- no problem??</>

Actually, we can take even this one, one step further. We all have emotioanl biases in our heads that lead us to conclusions that may be true in everyday life but may not be true regarding something as simple as tax deductibility. Take the above; as drafted it appears to be tax evasion. But is it? When you went on vacation did you look at potential investments? Were any of your business clients in fact present at you dinner party?

If your answer is no, no way, not ever; then taking a deduction would be falsification & therefore tax evasion.

If your answer was: well sort of; we did go on that "time share" tour to get a free dinner & A,B&C were at the dinner party; they are (potential) clients but they are also friends & nieghbors & we really didn't spend more than 3 minutes talking about business.

Guess what guys; you have legitimate investment/ business expenses even though your brain says no. Now we would get into some detail on how much, how to prorate; where to put the expenses, etc. However, the basics are there even though that was not your intent & does not even "sit right" mentally. They are there; it is simply a matter of applying the rules and doing the math.

TheBadger




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The second example is inaccurate. Current IRS regulations (I'm sure I'll be corrected if I'm wrong)
set a floor level below which employers don't need to file any paperwork (such as 1099s) for
employees. Something like $400 per year IIRC. Therefore the occasional baby sitter transaction is
perfectly legal, the tax code does indeed provide for this.


I was under the impression that after all the Nannygate stuff, the limit was raised to $1,000. Not a tax person however.
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Anes, I retract everything!! I also apologize profusely to TheBadger. It's my brain that has gone soft. I just put myself on ERT (estrogen replacement therapy). Your post and links are excellent!! That leaves my recommedation of responsible and ethical offshore organizations at ZERO as I sit here and chew on humble pie.

galeno,

Can I still come visit?<grin>

You make interesting points. The point I was trying to get over is IF you live in the USA, have your assets in the USA you can't expect with any level of safety to avoid creditors or the IRS. Off shore *&^%$ does not work. If you want to be a test case ok. Will some people slip by and get away with it, sure. Unless your prepared to leave the country and take all assets with you its not worth the risk. I think your more likely to end up with nothing. I like the good ol USA. No high fence around my compound. Its not perfect but damn close to it. I am not big on armed soldiers in the streets.

I prefer gin on the patio, should I bring my own?<grin>

best wishes, Anes

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Anes wrote:
Can I still come visit?<grin>

Absolutely! You gave me the best URL on offshore stuff I've ever found. You also probably saved me from a big problem.

Some time in the near future, I want to form an Irish or Mexican IBC to use as my investment vehicle to reduce my US dividend and interest income withholding taxes from 30% to 15%. I don't need it now but eventually I will when I start shifting my portfolio to more stodgy dividend yielding stocks in a few years time.

Since I was feeling lazy, I called the Marc Harris Organization here in San Jose a week ago to see if they had one "off the shelf" that I could buy. The local MHO manager and I had been playing phone tag and then you hit me with that URL bomb.

Bottom line, I'll continue to form my own IBCs myself by doing it the old-fashioned way. I'll go to Mexico or Ireland and visit a local lawyer and form it myself. No intermediaries. No hotshot consultants. No outrageous fees. Plus, I get to go on a vacation that I can justify to my wife.

The gin is on me my friend. Thanks!!!

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