Today I met with a good friend who is co-owner of a very successful insurance agency. He has been paying in the neighborhood of $250,000 per year in federal and state taxes. He claims that he can reduce his tax liability to $0 by transferring ownership of his agency, as well as his personal assets to an off-shore corporation in the Bahamas by the name of Foster & Dunhill Ltd. By this move he can eliminate any taxes on his income and capital gains to ZERO by paying them 15% of his tax savings ($37,500). The presenters of the seminar that he attended claim that Bill Gates and Ted Kennedy avail themselves of such service. To me, the skeptic, this sounds too good to be true. I am seeking input from people who know more of this topic, especially The Atlanta Tax Expert.

This isn't going to help you really, but I've heard of other tax avoiding ideas...

I don't know the details, but I do know of a situation where a person who worked for a european manufacturing company with plants in the US was going to setup a separate company in one of three places... one was the cayman islands, one was maybe switzerland, and I forget the third.

The idea was to avoid US taxes in the purchase of some raw materials and then somehow sell it to the US manufacturer in some way that limited their tax liability. I don't know if itd be repackaged or what... but somehow they were going to avoid some taxes by going through a middle man company.

It was never done, but the idea apparently was thrown around by a leader in the company that I know to be very intelligent financially.

Now, as I said, they didn't do it... but the fact this guy I know considered it... means it was a possibility.

Look forward to hearing from the experts now...

Foster & Dunhill, Ltd. Are noted as a compnay who serves high end financial clients.

Here is their little promo:

Foster & Dunhill, Ltd. Is a widely respected international financial services firm headquartered in Freeport on Grand Bahama Island in the Bahamas. Foster & Dunhill, Ltd. Serves a worldwide clientele that includes high net worth individuals, closely held corporations, non-U.S. trust companies, tax attorneys, CPAs, financial planners and international money managers. While Foster & Dunhill's clientele includes Canadians, Europeans and South and Central Americans, the company's expertise in helping to deal with U.S. tax and asset protection laws has made it the first choice for U.S. citizens interested in reaping the benefits of offshore planning, while staying in strict compliance with the many IRS and U.S. Treasury Department regulations that are an ever-present consideration.

Tax Benefits:

One of the principal reasons a person should consider an offshore strategy is income tax deferral. If an individual is not currently spending every dollar he or she is earning, the proper offshore structure could enable him or her to defer a significant amount of U.S. income taxation. Additionally, if an individual's business extends beyond the borders of the United States, income which is earned abroad may not be subject to current U.S. income tax. This could mean that an individual could have up to 39.6% more money with which to operate, when compared to the manner in which he or she is presently investing or conducting business operations.

It almost sounds too good to be true but apparently many people use their services. It seems one can get anything done in the Bahamas.

This is not a good idea. He could end up paying 3 levels of tax. If the Bahamas corp is engaged in a U.S. trade or business, then the U.S. branch will still be subject to U.S. income tax. When the earnings are taken out of the U.S. branch and moved to the Bahamas corp, they will be subject to a 30% branch profits tax. Then, when the earnings are ultimately dividended to the U.S. shareholder, they will again be subject to U.S. income tax and the dividends will not qualify for the lower dividend tax rate. I definitely recommend that you friend have a U.S. tax attorney look the proposal over before he does something he regrets.

Exactly what IntlTax said! He needs to be very careful. It all sounds so wonderful until you discover things like Subpart F income, PFICs etc.

If it involves avoiding tax and it sounds too good to be true, it probably is!

Hello Dr D:

I spent time in the federal slam with some previously very well known tax avoidance specialists.

excon

I will go with excon, I worked in a couple of those "county club" federal prisons, ( the ones with the tennis courts, the food buffet, and the movies) * yes for real, well we got a lot of those people who just knew ways not to pay their taxes, you would see them drive up in their limo, and turn their self in.

Remember in IRS, you hearings are held by them, and they can act without normal things.

Now what you have to remember if you are paying 1/4 million in taxes, how much you must be making, I would be happy to pay that much in taxes, since it means I am keeping a lot more than that.

Now there are a lot of investments that you can invest in, to lower tax liability and a lot of business expenses you can come up with.

All very well stated, if a bit over my head!