How to Lower Your Taxes - Technique #1

[hspotman]

OK, everyone stop worrying about how much you have to pay in taxes and just pay them We're going to make more money than we would have in three lifetimes without RV, so let's stop being greedy

Edited November 3, 2010 by hspotman

[ExecConsult]

Mark I looked into Wyoming as a State with no income tax to move my LLC to.

Here is a statement from one of the Wyoming State websites

[i]LLC Footnotes:

Here are a couple of other points about an LLC.

If you are looking for state tax savings, an LLC passes the tax through to the members. So, if the member(s) are in a state where you pay state taxes, you still pay state taxes on the profits that are passed through the LLC.[/i]

So since I live in MN this says I will still pay MN State Tax on the profits so where is the benefit of moving to Wyoming, Nevada, Etc...

Please advise

Thanks,

Tomcat

Tomcat, I'm sorry. You are right. MN will not allow you to deduct from your federal Adjusted Gross Income income earned in another state.

I am glad you do your own due diligence. (That is why I use a disclaimer.) I want people to check into their own circumstances because I don't have time to check everyone's individual situation and give individual advice.

I am very sorry that I did not think to mention that this could vary state by state where you live.

However, all is not lost. Since this tactic will not work in your circumstances, you just need to look a little further.

If you set up an LLC, you may elect to be taxed as a corporation. An S-Corp would still flow income through to you. However, if you elect to be taxed as a C-corp you are only taxed on what the LLC pays you as an employee. The LLC will be taxed on its income and it will NOT flow through to you. To elect this alternate taxation you simply need to fill out and file form 8832. However, handling the taxes gets a little more complex. Using this structure has drawbacks as well.

For those of you who's states might be like Tomcats, (Please check) - you have some time from the date you set up your LLC to elect to be taxed as a C-corp. Additionally, you have 75 days from the beginning of any tax year to file to make it effective starting in that tax year.

You may also think about using a self-settled irrevocable trust. However, again what works will differ state by state. Some states will have advantages over others. For instance if you live in New York, New Jersey, Kentucky, Massachusetts, Michigan and Missouri your state does not tax income from Delaware state non-grantor trusts and Delaware will not tax the income on the trust if it is for the benefit of a non-resident. (However there are some drawbacks to "abusing" this structure. I don't know what they are and am not going to take the time to look them up, but I know they are there.)

Please Always check with your tax professionals before implementing any strategy. (I mean one you pay who will take the time to look into your individual circumstances.)

It occurs to me again that these strategies might get too complex or too cost prohibitive for some/many of you. I would refer you to How to Lower Your Taxes - Technique #2. It is VERY simple and may be the most cost effective tactic you can use. You can find it here:

Best of Blessings,

Mark

P.S. I feel really bad for not warning you all ahead of time that it may not work for your state to simply set up the LLC without any extra work or tax wranglings. <mumbling to self, "Bad attorney. Bad attorney.">

[buckeye88us]

Mark, I just wanted to thank you for all your posts & information!!

I have learned a great deal.

Have a great day and Go RV!!

[tomcat]

Hello Mark,

Thank you sir for answering my questions, please don't apologize for me as my LLC was already formed months before I got into this investment.

You have helped greatly in educating me through all your posts out of the goodness of your heart.

I look forward to your posts and answers

Best regards,

Tomcat

[hspotman]

Hey Mark, another question regarding gifting dinar to my friend in need pre-rv. Can I just give him one of my notes,pre rv, and just let him exchange it when it rv's? Why would he or I need to sign a gifting contract to be signed in front of a witness, and/or notarized? He is still not believing something like this will never happen, so he just says to give him one "when" it happens, and we can backdate a gifting contract if we need to do one. I know people will say,"if he doesn't believe in this,then screw him...don't give him one!" BUT he is in a dead end job that he hates, making 3/4 less salary than he made at his previous job he got laid off from over a year ago, and he has his first child due on New Years. So whether he believes in this or not, it will be an immense help at this time.

Edited November 4, 2010 by hspotman

[ExecConsult]

ExecConsult

If I set up a LLC in Nevada or Wyoming and gift my dinar to that corp. hopefully pre-RV. Can I have a bank acct in TN set up for that LLC corp using that LLC EIN where I depost the $$ after RV??

I gift lets say $1,000,000 IQD to the LLC and then it RV into $1,000,000 USD.

I guess at that point I can write check to me personally from the LLC Corp for some or all of the USD, thus I would owe fed tax on this amount on my personal income taxes but This will save me from TN state income tax (Hall tax).

I would pay no state taxes or fed taxes from the LLC.

After tomcat's post above, I took the time to look at his state's income tax regulations and I have now taken the time to look at your income tax regulations. I also went back to section 988 and reread the subsection (2) that indicates that the income should be treated as interest income. (I have spent over 2 hours doing this so far this morning)

YOU ARE IN LUCK!!! -- Forget setting up anything outside of TN to avoid state taxes on interest income. You don't even need to worry about it. Your tax regulations have a "list" of what is considered taxable interest and they didn't think to include disposition of non-functional currency. It appears to me that your state is not considering section 988 gains as taxable interest income. Also, section 988(2) states, "To the extend provided in regulations . . . income . . . shall be interest income." This refers to federal regulations and further qualifies the statement. It indicates how the income should be viewed for federal taxes, not state.

Again - don't take my word for it. I didn't check nearly as thoroughly as I would have if you were a paying client of mine. Take the time to look into it yourself (look at the instructions for your Hall Tax form found here:

http://www.tennessee.gov/revenue/forms/indinc/inc250.pdf ) or pay a tax professional in your state if you want a "legal opinion."

Best of Blessings,

Mark

[ExecConsult]

Hey Mark, another question regarding gifting dinar to my friend in need pre-rv. Can I just give him one of my notes,pre rv, and just let him exchange it when it rv's? Why would he or I need to sign a gifting contract to be signed in front of a witness, and/or notarized? He is still not believing something like this will never happen, so he just says to give him one "when" it happens, and we can backdate a gifting contract if we need to do one. I know people will say,"if he doesn't believe in this,then screw him...don't give him one!" BUT he is in a dead end job that he hates, making 3/4 less salary than he made at his previous job he got laid off from over a year ago, and he has his first child due on New Years. So whether he believes in this or not, it will be an immense help at this time.

You are a wonderful human being. Questions like this I don't mind at all taking unpaid time to answer.

The issue to worry about is Gift tax. If the Dinar revalues at $1.00, the note you want to give him suddenly becomes worth $25,000. You can only gift up to $13,000 to any individual in any given year without paying gift tax. You can, however, gift to your friend his wife and his son (once he is born). This would allow you to gift up to $39,000 worth of Dinar without any need to file a gift tax return.

What if the IQD RV's at $3.00? A 25,000 IQD note would be worth $75,000. Are you married? If you are married, you and your wife could join in the gift to your friend and his wife and his son and gift up to $78,000 worth of Dinar so you would still be okay. However, you are supposed to file a return showing your wife joined in the gift. If you are not married, or the Dinar RV's higher, or his son is still born, or his wife dies in child birth then you have to pay gift tax on that amount. (Sorry to be so morose, but I have to think worst case scenarios and give you advice on how to work around them.)

To avoid any possible gift tax hassles, it is best to give it when it is still low in value. Do your gift letter. You sign it and have it notarized. Include in it the date that you are mailing the Dinar to your friend. Keep a copy for yourself. Then mail the note with a return receipt. When the receipt comes back attach it to the copy of the gift letter and I think you have done pretty well to establish the date of the gift being prior to the RV. If you work at it, you can find a workaround to most situations.

Best of Blessings,

Mark

[hspotman]

You are a wonderful human being. Questions like this I don't mind at all taking unpaid time to answer.

The issue to worry about is Gift tax. If the Dinar revalues at $1.00, the note you want to give him suddenly becomes worth $25,000. You can only gift up to $13,000 to any individual in any given year without paying gift tax. You can, however, gift to your friend his wife and his son (once he is born). This would allow you to gift up to $39,000 worth of Dinar without any need to file a gift tax return.

What if the IQD RV's at $3.00? A 25,000 IQD note would be worth $75,000. Are you married? If you are married, you and your wife could join in the gift to your friend and his wife and his son and gift up to $78,000 worth of Dinar so you would still be okay. However, you are supposed to file a return showing your wife joined in the gift. If you are not married, or the Dinar RV's higher, or his son is still born, or his wife dies in child birth then you have to pay gift tax on that amount. (Sorry to be so morose, but I have to think worst case scenarios and give you advice on how to work around them.)

To avoid any possible gift tax hassles, it is best to give it when it is still low in value. Do your gift letter. You sign it and have it notarized. Include in it the date that you are mailing the Dinar to your friend. Keep a copy for yourself. Then mail the note with a return receipt. When the receipt comes back attach it to the copy of the gift letter and I think you have done pretty well to establish the date of the gift being prior to the RV. If you work at it, you can find a workaround to most situations.

Best of Blessings,

Mark

Thx for the reply Mark. I was not worrying about the gift tax, as I was planning on doing it pre-rv when I gifted it to him, which would only be worth around $30. But couldn't "HE" just cash it in himself without a sales receipt?....and then I don't even have to worry about any gifting tax that way? Or does the IRS require a sales receipt for something of this magnitude?

[pmoneil]

ExecConsult

Thanks for the time you spent on my question concerning TN. I looked at the Hall tax guidelines and also could not find anything. I have also asked my tax man to research also. I am glad it appears now from your research that by increase from cashing in Dinar will not be taxed by TN thus saving 6%. Of course the feds will get their 35%.

Again thanks for allthe research you have supplied to this site not only for me but for the other posts also. God Bless

[ExecConsult]

Thx for the reply Mark. I was not worrying about the gift tax, as I was planning on doing it pre-rv when I gifted it to him, which would only be worth around $30. But couldn't "HE" just cash it in himself without a sales receipt?....and then I don't even have to worry about any gifting tax that way? Or does the IRS require a sales receipt for something of this magnitude?

If you are gifting pre-RV, the gift letter is not just to establish the date of gift for the IRS. It is for the bank/dealer who is cashing out the note that will be worth enough that a FinCen 104 form needs to be completed. They are worrying about counterfeit and money laundering. The gifting letter (along with any documentation you provide to him) shows the financial institution where the large amount of foreign cash came from so they can cover themselves and not get fined. We don't know what policies financial institutions will have in place regarding cashing in Dinar (which we hope will be worth a lot) so we just prepare everything that we can to help insure we can meet those policies when they are in place. You and your friend may not need it at all. However, if they do want something, you will have it ready.

Best of Blessings,

Mark

[Jac]

Thank you, Mark for this very thorough post!

God Bless America!

[hspotman]

If you are gifting pre-RV, the gift letter is not just to establish the date of gift for the IRS. It is for the bank/dealer who is cashing out the note that will be worth enough that a FinCen 104 form needs to be completed. They are worrying about counterfeit and money laundering. The gifting letter (along with any documentation you provide to him) shows the financial institution where the large amount of foreign cash came from so they can cover themselves and not get fined. We don't know what policies financial institutions will have in place regarding cashing in Dinar (which we hope will be worth a lot) so we just prepare everything that we can to help insure we can meet those policies when they are in place. You and your friend may not need it at all. However, if they do want something, you will have it ready.

Best of Blessings,

Mark

Here is my gifting letter Mark, what do you think? Blank.rtf I put "my name" and "his name" where our names are to be, and the lines are where we sign it. In the "witness" part, the first line is for them to print their name, and second line is for them to sign it.

[ExecConsult]

Here is my gifting letter Mark, what do you think? Blank.rtf I put "my name" and "his name" where our names are to be, and the lines are where we sign it. In the "witness" part, the first line is for them to print their name, and second line is for them to sign it.

That was a good start. How about something like this?

Best of Blessings,

Mark

Affidavit of Gift-Dinar.pdf

[ExecConsult]

That was a good start. How about something like this?

Best of Blessings,

Mark

I've improved it a bit now.

Affidavit of Gift-Dinar.rtf

Edited December 17, 2010 by ExecConsult

[AoK]

Hi ExeccConsult!!! Thank you for all you do!! I was wondering do you have a form for gifting to a corporation?

[tlammy]

The value of the things I have learned from all of you great contributors FAR exceeds the amount of $ I have spent on dinar.

You guys are all awesome!!!!!

Thank you so much for taking time to share what you know with us.

[lechesuerte]

Thanks Mark ..good info.

[ExecConsult]

Hi ExeccConsult!!! Thank you for all you do!! I was wondering do you have a form for gifting to a corporation?

I don't have a form. Typically to contribute assets to a corporation, you would use a corporate ledger. The ledger should show the assets contributed, the date, your cost basis in the assets (what you paid for them), and the assets current value. If you are making the contribution in exchange for stock, then it gets a little more involved but not much.

Best of Blessings,

Mark