Tax Loop Holes Were Created For A Reason

This article is in response to this Bloomberg View

http://www.bloombergview.com/articles/2016-04-11/those-tax-loopholes-were-created-for-a-reason

I’m not sure I agree with the sentiment in that sentence. But I’ll use it to segue into something more interesting.

The only loopholes intentionally created, were created for a specific persons or companies.  The only reason is payback for contributions or political favors. One of the big ones is the ‘carried interest’ loophole that allows money managers to pay tax on ordinary earnings at capital gains rates, presumably as payback for political contributions. Who knows how many of these targeted tax loopholes are out there? They aren’t exactly publicized.

During the election cycle all Super PACs out there buying the heart and soul of candidates.

But most loopholes aren’t intentionally created, they occur naturally from combining two or more unrelated tax codes and getting results unintended by Congress. That’s the area we work in.

This article makes one thing clear, there is no place in the world Americans can safely cheat on their taxes. It’s even getting difficult to open foreign bank accounts. They have laws in place to hunt you down wherever you go.

Something I tell staff all the time is … ‘assumptions kill’. Even when you’re working with legitimate tax preferences, you still have to custom design them for your personal and business circumstances and everything needs to be built on a solid foundation.  All the big stories you read about in the news, such as when KPMG partners were tried for tax fraud, are the result of a good idea wasted by building it on shifting sand.

We specialize in solid foundations. After familiarizing ourselves with your personal & business circumstances, we rearrange your business along functional lines in order to take maximum advantage of tax deductions otherwise not available. B doing this we take advantage of completely legal tax preferences and tax savings devices hidden away in the tax code. Some are hiding in plain sight, others aren’t. Sometimes we can achieve uncommonly solid results.

One other thing, this article appears to be an advertisement for Delaware corporations. But Delaware isn’t the only state that offers this kind of thing.  Even in Delaware it isn’t as simple as pretending to set up camp in Delaware and crawling in your hammock. This practice can still be attacked and frequently is. Especially if your residence is CA. CA comes after this thing with a vengeance. Once they know you’re doing it, you may as well go ahead and schedule a court date.  CA is notoriously difficult to negotiate with.

In everything we do, we consider how the IRS could possibly attack it and build the defense.

At Ellis, we stay right smack dab in the middle of the tax code. We never venture into the dreaded grey areas. We make hay where the soil is fertile by mixing and matching existing litigated and legislated tax law with your personal and business circumstances in an effort to save tax.