Category: tax shelter

off shore trust

What is an Off Shore Trust? – PART 1

Posted by Richard Colombik, JD, CPA on

An offshore trust is a primary legal tool involved in offshore planning.  The offshore trust is generally a “self-settled trust.” This is a trust where the settlor and the beneficiary are both one and the same.  The trustee is a person who is nominated by the settlor and is either an individual who is not a U.S. citizen or a business having no U.S. offices or affiliation.  An offshore trust has additional people who serve as trust advisors or trust protectors.  These individuals are not under the settlor’s control, but they have certain powers in the administration and protection of the trust and its assets. Offshore trusts provide a method of transferring assets between generations, probate free.  The trust will usually provide that assets will automatically pass to named successor beneficiaries upon the settlor’s death.

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Tax Free Charity

A Charitable Tax Break

Posted by Richard Colombik, JD, CPA on

The problem with most tax planning is that you have to give up something to get something. To get an income tax deduction you must spend a dollar to save taxation on a dollar. To get a deduction for a business expense, you must incur a business expense. To get a personal deduction you must pay a deductible expense.

Income taxes are not at a 100% rate thankfully, so one normally thinks wisely before spending a dollar to save tax on a dollar, usually about 40% (35% federal plus state tax). Then if you save the dollar long enough your estate may become so large that it has to pay an estate tax of almost 50% (currently 47%). Let’s not forget FICA and Medicare, both sides being around 15%. Phew, it’s no wonder why most people loathe the IRS and tax time.

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CAN MORE THAN ONE BUSINESS MAKE YOUR HOBBY PROFITABLE?

Posted by Richard Colombik, JD, CPA on

CAN MORE THAN ONE BUSINESS MAKE YOUR HOBBY PROFITABLE?

Internal Revenue Code §183 disallows losses taken regarding any alleged business where there is not a profit motive.  If a transaction is not being engaged in for profit, the Internal Revenue Service will disallow all losses related to such activity.  The service provides various safe harbors, such as showing a profit three out of five years or five out of seven years.  This will establish a presumption that a hobby is not present, but an actual business is.  What happens when you run more than one trade or business that are related and one activity creates a loss while others create a profit.

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Tax Shelter

The Last Tax Shelter?

Posted by Richard Colombik, JD, CPA on

Tax shelters have been a bad word since legislation was designed to eliminate what was considered abusive.  From the sweeping language of the Tax Reform Act of 1986, Pub L. 99-514, tax shelters were, in essence, wiped out and became the equivalent of a 4-letter word in tax planning.

But are tax shelters really gone?

Haven’t there been cases where the IRS has alleged that certain devises are still abusive tax shelters?

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