"I am an individual investor and I pay taxes on Form 1040 based on my taxable income every year. Can I set up a "hedge fund" that pays me no salary, contains all of my investments and pays for all of my personal expenses? If so, I could realize enough investment income in any given year to cover all of my personal expenses thereby reporting zero net income and paying no taxes at all."You should consult a tax attorney but I suspect this wouldn't be optimal. For one you would have to pay the corporate tax rate on all gains above the expenses. Secondly, I am pretty sure the IRS requires expenses to be work related. Thirdly, I believe (but am not sure) the IRS will require you to take some sort of nominal salary.Let's look at Warren Buffett though. Since Berkshire Hathaway represents so much of his life probably 50% or more of his dining out meals and travel costs could easily be classified as relating to Berkshire Hathaway in some way. Obviously some more directly than others. If a company like Goldman Sachs can expense sending a low level research analyst to some industry conference, I am sure most tax attorneys would feel confident defending Berkshire expensing the costs of Buffett going to China and meeting whats his face from BYD."I suspect that my main savings from this "strategy" will be fully paid for room, board, and medical care for 10-20 years in a nearby federal prison."The argument is that many expenses can be related to work and if there was no corporate income tax it would be logical for **some** individuals to set up personal corporations to avoid taxes. Taking that argument to an absurd extreme that no one is really arguing doesn't really contribute anything to the discussion.
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