-----BEGIN PGP SIGNED MESSAGE----- On Sat, 11 May 1996, Anonymous User wrote:
Black Unicorn wrote:
In this case the people paying the offshore company for Mr. May's services are also subject to reporting requirements and a 30% withholding tax for which they will be held liable.
Nobody pays offshore for Mr. May.
Except see footnote 1.
They pay a domestic corporation for his services. The corporation pays Mr. May a sufficient taxable salary for his domestic expenses.
Footnote 1:
Anything above that (i.e. money that Mr. May don't need right now) is paid to the offshore entity as (for instance) deductible license fees.
Looks like someone paying offshore for Mr. May to me. Again, 30% withholding requirement unless you intend to hide it. The only way to avoid this is to conceal Mr. May's involvement. I really suggest you read some U.S. tax code provisions.
The payment should probably go to a jurisdiction with a double taxation agreement with the US, like Holland or Ireland. In Ireland it's easy to setup a tax free corporation that sends all it's income to an offshore trust, where the money stays until Mr. May needs them.
Such a jurisdiction will have extensive information sharing provisions with the United States. If you're planning on secrecy, avoid jurisdictions with tax treaties. Also note that payments to an account for which Mr. May is the beneficiary can trigger realization in several circumstances. In this case the offshore entity can easily be classified as a Foreign Personal Holding Company. The resulting assets will be taxed per Subpart F income. (i.e. without regard to their distribution). If the offshore entity is held by U.S. stockholders it is going to cause major problems. If not it still has major problems. What you fail to mention is that in the event Mr. May actually holds the assets until his retirement, he will still have to deal with realization and full taxation when he taps into the funds. You also fail to mention the reporting requirements for U.S. citizens holding offshore assets of significant size. Because this plan can't seem to decide if it is secret or not, it has serious shortcomings.
This adds the requirement that the individuals or corporations receiving Mr. May's service be involved in this conspiracy. If they could have been, why do you need the offshore connection? Why not just conspire with them to pay Mr. May in cash and not report it?
They just deal with the vice president of a typical domestic consulting corporation. That the CEO of the company is an alcoholic living on a park bench (for the ultra cheep setup) is nobody's business. He's on permanent vacation for all they care.
The example given looked to take advantage of large numbers of fictitious employees all participating in the endeavor. This is foolish. Even in your example above, secrecy is poorly thought out. Either it is a tax avoidance plan, or it is a tax evasion plan. Which is it? Practically speaking I think you have merely altered the plan to adjust for my comments and are stuck between both fact scenerios now.
If your above scheme is intended merely to conceal funds it is a fairly poor example as it depends on the secrecy of each and every 'employee' of the company.
Only one individual and he's too drunk to remember anything.
See above. See also foreign personal holding company and passive income provisions. Wherever Mr. May sends his money it is still subject to taxation in the United States if Mr. May is a citizen. Structuring the payments to an offshore entity in an attempt to avoid taxation on those payments is an attempt to get the IRS to honor form over substance. Good luck.
Continue your participation in such a plan. I will send you cigs.
Thanks, but I can afford Cuban cigars. I'm selling setup's like the above for a very nice fee.
Caveat emptor. (What's the name of your firm by the way? Or do you prefer to keep it concealed? I would think you'd advertize it here if you had anything worth selling). Your ilk, (other examples of which can be found in the back of The Economist, and Soldier of Fortune), are a small step above "get rich quick" types. Off the shelf companies and trusts have their uses but anyone proposing to sell a standard tax avoidance/evasion setup off the shelf should trigger major alarm bells. Cuban's will serve you better in a federal country club than cigs, this I admit.
And this is the kiddie version of serious tax planning. After all, Mr.May would still pay taxes on his domestic spending.
I think calling this any kind of version of serious tax planning is inaccurate.
X
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