By
Gary Scott
I pondered a real international
tax savings fact as palm trees and oak-shrouded pools hiding crocodiles and moss
rushed by. Palmetto hammocks surround murky Everglade pools of fetid air and swamp.
Black thunderheads build. Lightening splashes brilliant exposure across a flat,
gray sky. The tropical storm begins.
Highway 41, the Tamiami Trail,
a thin ribbon of black that cuts a straight swath through south Florida's green.
We are returning from Miami and tax meetings with international tax attorney,
Leslie Share and are driving through the daily, summer squall.
Real International Tax Savings
Fact Privilege
Fighting the rain was worth it
as I have been privileged to work with two of the finest tax attorneys in the
world, Joe Cox and Leslie Share. Each at one time or the other has saved me from
enormous costs, had I been unprepared or undefended.
Though each of these advisors
have saved me and many readers members huge sums, the quality I respect most about
each is their realism. In the tax environment where tens of thousands of pages
of tax code contradict and confuse, we all live in a swampy gray taxation twilight
zone!
This tax fogginess makes it all
too easy to believe in tax avoidance schemes that appear to work and are supported
by one part of a tax code. Yet my experience in dealing with tax avoidance regulations
for over thirty years is that there are few ways left to avoid all tax. In most
industrialized countries some part of the tax code will catch you, if you live
work and earn in that country.
Yet there are plenty of promoters
who will try to disillusion you. They want to lure you into tax avoidance structures
that really do not work, so they can charge high fees or worse.
Their story is compelling and
most of them know that one of the first things anyone does to create a cult is
to create a common enemy for the group. It is so easy to make the tax man the
enemy because he is usually so all-pervasive.
First Real International Tax
Savings Fact
Most tax law is unfair.
Second Real International Tax
Savings Fact
Yet it is with regret that I
must write, "get real". Death is part of life and taxes go hand in hand
with wealth. We may not like taxation, but it has been and always will be with
us. This lesson examines the risks that those who believe all tax can be avoided
face. The thought that we can truly avoid all tax is attractive, but it is not
real! Only when we accept this fact can we seriously look at how to really reduce
and defer taxation.
We have to get real if we want
to be sure we will avoid trouble while getting the best tax avoidance we can.
Until we accept the enormity and limitations of the law, fair and unfair, we cannot
really get down to doing what will reduce the affects of punitive tax.
Real International Tax Savings
Fact Avoids Trouble
No one likes to write large tax
checks, but when we try to avoid ALL tax we lose perspective and can get into
trouble. We take imbalanced steps that can create legal problems plus seduce us
into thinking that we do not have to spend continual effort to keep our tax bills
down. For example here is a press release just sent to me by tax attorney, Leslie
Share.
Real International Tax Savings
Fact Article
"DAY IN COURT" MAY
BE COSTLY FOR FRIVOLOUS TAX CASE FILERS WASHINGTON--Getting their "day in
court" has been an expensive proposition for some people who have recently
faced stiff penalties from the Tax Court, Appeals Courts and District Courts for
pursuing frivolous tax cases. The Internal Revenue Service warns that the courts
are sending a clear message to others who may be considering such positions -
they do so at their own risk. "Congress was concerned about taxpayers misusing
the courts and obstructing the appeal rights of others when it enacted tougher
sanctions in the 1980s," said IRS Commissioner Charles O. Rossotti. "The
courts are for resolving unclear issues of law, not a forum for repeating arguments
that the courts have already rejected. Taxpayers intending to use the court as
a soapbox should consider the potential cost."
Real International Tax Savings
Fact Penalty
The law allows the courts to
impose a penalty of up to $25,000 when they come to any of three conclusions:
a taxpayer instituted a proceeding primarily for delay, a position is frivolous
or groundless, or a taxpayer unreasonably failed to pursue administrative remedies.
The courts' determination to use their sanctions authority to discourage the filing
of frivolous tax lawsuits is evident in the case discussions that follow, which
are taken from the public court records from the court proceedings:
Real International Tax Savings
Fact History
Tax Courts penalized two California
residents in separate cases for trying to avoid taxes through the use of trusts.
On June 21, the Court said that Charles and Francesca Sigerseth of El Macero met
all three of the above criteria and fined them $15,000. The Court pointed out
that the case was "a waste of limited judicial and administrative resources
that could have been devoted to resolving bona fide claims of other taxpayers."
(Sigerseth v. Commissioner)
On June 7, the Court found that
Andy Hromiko of Roseville, Calif., not his trust, was the true earner of income.
It noted that he had made "shopworn arguments characteristic of the tax-protester
rhetoric that has been universally rejected by this and other courts," and
fined him $12,500. (Matrixinfosys Trust v. Commissioner)
Last Dec. 4, the Tax Court imposed
a $25,000 penalty against Hae-Rong and Lucy Ni, of San Jose, Calif. Contesting
the IRS rejection of various deductions on their tax returns, the Nis were not
responsive to orders for supporting records. Instead, they challenged the authority
of the IRS to audit their returns and of the government to impose taxes. The Court
concluded that the Nis had chosen "to pursue a strategy of noncooperation
and delay, undertaken behind a smokescreen of frivolous tax-protester arguments."
The Court also imposed sanctions of more than $10,600 against the Nis' attorney,
Crystal Sluyter, for arguing frivolous positions in bad faith. (The Nis Family
Trust v. Commissioner)
While at the Federal Prison Camp
in Duluth, Minn., for tax evasion, Darlow Madge contended that he wasn't a taxpayer,
that his income from selling hospital supplies wasn't taxable, and that only foreign
income is taxable. On Dec. 7, the Tax Court imposed the maximum $25,000 fine after
having warned Madge that continuing with his frivolous arguments would likely
result in a penalty. (Madge v. Commissioner)
Regina Davis of Cincinnati, Ohio
received a $4,000 penalty from the Tax Court on April 10 for frivolous and groundless
arguments, including that the IRS is not an agency of the United States and that
it is a function of the Puerto Rican Bureau of Alcohol, Tobacco and Firearms.
Davis persisted in her contentions even after the Court warned her that she could
be fined for doing so. (Davis v. Commissioner)
The Tax Court is not the only
place for arguing tax cases. Other courts are also experiencing frivolous cases
and imposing sanctions.
On Feb. 2, the Tenth Circuit
Court of Appeals imposed an $8,000 penalty on Larry and Sandee Gass of Capulin,
Col., for appealing district court decisions which rejected their contentions
that taxes on income from real property are unconstitutional. The Appeals Court
had earlier fined them $2,000 for using the same arguments in another case. (Gass
v. U.S.) Michele Brashier and Richard Hembree, of Tulsa, Okla., each drew $1,000
penalties on April 13 for arguing that requiring them to file sworn income tax
returns violated their Fifth Amendment right against self-incrimination. The Tenth
Circuit Court of Appeals noted that sanctions were warranted because the Tax Court
had warned them that their argument--rejected consistently for more than seventy
years--was frivolous.
(Brashier v. Commissioner)
After losing the argument that
his wages were not income and receiving a $500 penalty, Garnell McAfee, Jr., of
Flowery Branch. Ga., returned to U.S. District Court in Northern Georgia to try
to stop the government from collecting the penalty by garnishing his wages. On
April 4, the judge stated that "bringing this ill-considered, nonsensical
litigation before this court for yet a second time is nothing but contumacious
foolishness which wastes the time and energy of the court system." He then
imposed a $1,000 penalty, added 10 percent to the original penalty, and ordered
McAfee to pay the U.S. Marshal's costs of serving the writ of garnishment on his
employer. (McAfee v. U.S.)"
Accept Real International Tax
Savings Fact
Let's get real. Taxes are here
to stay. There is no plan that avoids all tax. Believe otherwise at your peril!
So what do we do?
The first step is to determine
our individual philosophy towards tax and to assess our own unique situation to
determine if there are any tax avoidance steps that we can take which do work.
Second, make sure you do not
get so caught up in this tax reduction process that you fail to make money. The
sad reality is that many individuals warp their entire lives to make them tax
efficient. This is like chopping off your feet so you don't have to wear shoes!
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Real International Tax Savings
Fact Examples
Your approach to legally reducing
and deferring tax should be to create a unique plan that fits your circumstances.
For example I know a best selling author who receives large (six figure) royalty
income. He lives in the U.S., writes in the U.S. and is paid in the U.S. He pays
a very large amount of tax on that income. Since he loves how he works, earns
and where he lives, he has not tried to warp his life to reduce the tax he pays.
"I have plenty left " he says. By all means he uses every deduction
he can get (within the scope of his profession), but getting on with and enjoying
life are more important to him than reducing his tax bill one more notch.
I have another reader who is
in global manufacturing and import-export. He may earn ten times more than the
writer, yet pays less tax. His way of life happens to be one that is more tax
efficient than the writer. Yet again the emphasis on how he lives and works the
way he does is the fulfillment he gains from his way of life.
Perfect Real International Tax
Savings Fact
One of the best stories on how
diverse tax philosophies can be is about a successful publisher who it was said
wanted to pay one million dollars in tax. His philosophy was that if after using
his best shots to reduce tax, he still had to pay a million, he was earning a
huge income.
The story goes that at year's
end he was working with his accountant and they concluded that his tax liability
that year was $978,303. He was $21,697 short of his goal. "Isn't there any
way we can pay this extra $21,687 tax, he asked his accountant?
His CPA deadpanned without missing
a beat, "Not unless we cheat!"
Greatest Real International Tax
Savings Fact Risk
Few of us will set a goal to
pay more tax, but in reality this plan has a better chance for most to increase
your total wealth than others. One of the greatest risks of tax avoidance is to
so bend your affairs, for the purpose of keeping tax down, that you make less.
Keeping your taxes as low as
you can is healthy. Shaping your life to the health code is not and it can seriously
reduce your chances of success. When you face this reality of taxation you can
then begin to intelligently look at international structures that can be used
to legally reduce or defer tax.
P.S. Learn more about offshore
trust tax tips in the correspondence course International Business Made EZ at
GaryScott.com
Real international business is
fun and can bring tax advantages and asset protection. Gary and Merri Scott gain
tax advantages as they enjoy developing their healing center in Ecuador
