From Nuyorican to Puerto Rican

I just added a new article to my JD Supra site “From Nuyorican to Puerto Rican”. The thinking is that there are a lot of U.S. citizens of PR ancestry living in the NY metropolitan area. In some cases, the parents came from the PR 30 or more years ago. Some of the children and grandchildren and great grandchildren may struggle to speak Spanish. Nevertheless, the tax incentives implemented by the PR government are enough to make someone of PR descent to seriously consider a reverse migration to the land of their forefathers – La Isla Del Encanto. If you are a New Yorker of PR descent being taxed at a 50 percent bracket in New York or New Jersey, the tax planning opportunity may be very compelling.

I continue to get a steady trickle of calls from people all over the country asking whether moving to the PR would make sense. In cases where the taxpayer has primarily investment income – short and long term capital gain income and interest income or dividends that are not U.S. sourced – the taxpayer would essentially have tax-free income for both federal and Puerto Rican purposes. For a service oriented business that is based in the PR but doing business outside of the PR, you are looking at taxation at a 4 percent rate.

If I were a Nuyorquino being taxed at a combined federal, state and city rate of 50 percent. It would not take too much convincing to say – ” Honey, back the bags!

Remember to count your blessings today!

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Miami Sound

I often joke with my Colombian father-in-law about the number of “Anglos” left in Dade County. I say “Is it two or three”. He answers, “Probably not that many!” Miami has the only Walgreens in the country where you can get “pastelitos” and “empanadas” and a cafecito while you pick up your Prozac, Xanax, and Lipitor. You need all of those drugs after dealing with the traffic. I have been back working in South Florida on business regularly having recently affiliated with a Boca-based law firm (Osborne & Osborne PA), only 30-45 minutes away from Miami but a different world. Regarding the Miami Sound Machine. I had a Cuban friend at West Point who introduced me to the band before they were famous in the late 1970’s. I remember telling a fellow Army officer in around 1983 that they would be famous one day. Mrs. Nowotny’s best friend had the band play at her sister’s wedding reception before they were famous.

When it comes to the tax law and Miami, two things come to my mind – (1) FBAR and FATCA and (2) The tax court case of Genaro Delgado Parker, come to mind. GD Parker is a very wealthy Peruvian who owned a Key Biscyane home on the water with over 10 thousand square feet of living space. Seven bedrooms and seven bathrooms. It short, a palace. Many Latin Americans have purchased homes in South Florida, Texas, New York and California. Sometimes, the non-resident alien (NRA) owns the house through an offshore corporation. Sometimes, the NRA creates a U.S. LLC which is treated as a disregarded entity. The LLC is owned by the foreign corporation. Sometimes, the LLC makes an election to be treated as a corporation for tax purposes.

GD Parker’s planning used the latter arrangement. The IRS got involved in a tax audit on other issues and in their poking around realized that he lived in his house without a lease between the corporation and himself. The IRS determined that a fair market rent was about $275,000 per year. The IRS treated this amount as a deemed dividend from the corporation that owned the home and disallowed about $1 million of home related expenses which they considered to be personal expenses. Of course, there was the issue of interest and penalties on top of the taxes for the years in question. The big point here is that every NRA that owns a home in the U.S. is sitting on the same time bomb.

The other issue is the statistical probability that all of the Latinos here legally and illegally are in compliance with the foreign bank account reporting requirements. Don’t make that bet! The problem is that after the UBS mess and the implementation of FATCA, you can no longer run and hide. The Government will find you and tax you into submission. Teh combination of taxes and penalties will consume all of the offshore money.

Don’t forget to count your blessings today. You have a roof over your head, clothes on your back and food in your stomach (we could all afford to miss a meal or two!) and we still live in a reasonably free country and parents who have girls at Prep school don’t have to worry about them being kidnapped by Islamic extremists.

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Hello Again!

It has been awhile since my last post. In the meantime, I have been feeding my JD Supra site with new articles three-four times per month on a variety of topics. I am still writing and thinking about private placement insurance solutions. I think that the use of these products will proliferate for use by foreign investors making inbound investments into the U.S.. I am still writing and thinking about Puerto Rico a lot. I happen to think that this is a great solution. It may not be for everyone but it is for someone. This is a great solution for any American – investor or business owner – trying to escape the sharp claws of taxation.

I have gotten a steady stream of calls from Californians. Facetiously, I remind them that they have “Spanish” people in the PR too. I asked the Puerto Rican Government officials if one of the requirements of Puerto Rican residency is the ability to sing “En Mi Viejo San Juan” in Spanish with no accent. All verses. It is a beautiful song and second national anthem. Any place that has a anthem like that is a place to live!

The great “Sonero” Cheo Feliciano who enjoyed great success first singing Latin Boogaloo (I like it Like That!) with Joe Cuba and then had his best run during the Fania All Stars era. I am still irritated by the comments of Howard Stern who mocked the passing of Tito Puente a number of years ago. I was fortunate to see him play with Celia Cruz and Johnny Pacheco and his black flute in the Bronx no less. Tito had more talent in his “pinky” than all of the heavy metal bands that Howard Stern promotes put together. Speaking of great drummers, I watched Santana’s concert in Guadalajara on HBO Latino. His new wife Cindy Blackman Santana is an outstanding drummer in the tradition of Pete Escovedo (Sheila E’s Dad).

The last article that I posted on JD supra – Mi Casa es Su Casa, brings up an issue which I believe that every foreigner who owns a house in the USA must face. Many foreigners may be sitting on a ticking time bomb and an opportunity to know their Tio Samuel on a more intimate basis. Check it out on JD Supra. The link

It’s ironic that most foreigners except for the Europeans and Asians have a blatant disregard for tax authorities in their own countries and underestimate the power of the IRS. I have had very wealthy Americans tell me that while they would not welcome the FBI kicking down there door, they would rather deal with the FBI versus the IRS.

We will see each other online. Do not forget to count your blessings today – You have a roof over your head; food on the table along with a few extra pounds; and friends and family that tolerate you most of the time.

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Day Tripper – Tax Planning Considerations for Day Traders


One of the things that I like to do at social gatherings is to start a discussion over which musical group was musically more gifted – The Beatles or Bee Gees. I did not say which group made more money or was more famous. I say the Bee Gee “hands down”.

Hear me out! The Beatles had the benefit of social timing and marketing. If you listen to the early Beatles, they needed music lessons. Yes, they were good song writers. Nevertheless, when you consider the Bee Gees, the harmonization between the Brothers Gibb and more importantly their ability to reinvent themselves in the disco era with some of the most memorable tunes of the era, you will see it my way (or not!). All of this for the title of the blog post.

The IRS makes important distinctions between traders and investors and dealers. the distinction is important in a couple of area. Dealers and traders are viewed as being in business. A trader must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation.
The treading activity must be substantial, and must carry on the activity with continuity and regularity.
The following facts and circumstances should be considered in determining if your activity is a securities trading business:

(1) Typical holding periods for securities bought and sold.
(2) The frequency and dollar amount of trades during the year.
(3) The extent to which the trader pursues the activity to produce income for a livelihood, and
(4) The amount of time you devote to the activity.

Many traders had to get a day job after the 2008 market correction. Nevertheless, many day traders continue to make a profitable living with market returns that many professional money managers would envy. The problem is what do to do about taxation for the frequent trading – short term capital gain income taxed at ordinary rates.

What to Do This Year

1. Create a Qualified Retirement Plan – Run your business through an investment LLC. Pay yourself a management fee. You will pay some self employment taxes but who cares! A combination of plans – defined contribution and defined benefit – such as a 401(k), profit sharing and cash balance defined benefit plan. The combination of these plans will create a deduction much larger than your management fee at virtually any age. From that point, your investment earnings within the plans will grow on a tax deferred basis.

What to Do Next Year

1. Become Puerto Rican

The PR has passed a series of tremendous tax incentives that favor the Day Trader. Essentially all of your treading income will be income tax free for federal and PR tax purposes after you become Puerto Rican. You need to live in the PR for six months per year so that if you live in Dubuque, it should not be that hard to move to San Juan in the cold months.

2. Private Placement Insurance Products

Your parents may still be complaining about how much they spent on your education and why can’t you get a regular job. Make their complaining useful. Use them to structure and purchase a private placement life insurance or a private placement variable deferred annuity. PPLI will provide tax-free treatment on the investment income and provide you with the ability to take distributions from the policy on a tax-free basis. The investment gains will also pass tax-free at the death of the insured. The deal can be structured to avoid the dreaded investor control rule. You will be surprised how fast your investment capital will grow with tax deferral.


I will do a longer article on this topic after Year End. I wanted to outline a few ideas for any day traders staring year end in the face. These ideas will help you come out on top.

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If I Were You!


My day job has kept me from writing in the last two weeks so I hope to add a few timely posts with year end approaching so quickly. I wanted to outline in this post some of the things that I would consider as part of my year end tax planning and tax planning arsenal going into 2014 if I were you.

Medical Expense Reimbursement Plan (MER)
Everyone one of you has out of pocket medical expenses that you probably can’t deduct on your personal tax return. This problem has only increased in recent years with higher deductibles on most plans. Why? For starters, maybe you don’t itemize deductions on Schedule A on Form 1040. The only way to deduct these expenses might be a MERP. The more obvious reason might be that your medical expenses don’t exceed the threshold of 7.5 of Adjusted Gross Income (AGI) threshold. At the same time, these deductions are a preference item for AMT purposes and might throw you into a higher tax bracket. Retirees with large out of pocket medical expenses can easily adopt this strategy.

You may say “Who cares?”. If you are in a 40 percent tax bracket – federal and state – and have $10,000 of out of pocket medical expenses (including Junior’s braces so that he does not have a smile like Mr. Ed), you will need to earn $14,000 to net the $10,000 after-taxes. The savings are $4,000 in my example. Some people can afford to throw this type of money away but even the people that can, don’t like to.

If you are a W-2 employee working for the Man (your Company), here is what you need to do? Create a company or LLC. If if is an LLC, make your spouse an employee of the LLC who only works for benefits. The technical reason is that tax law would limit the ability of a more than 2 percent shareholder, member in a LLC or partner in a partnership from directly participating as an employee in certain benefit arrangements. Take it on faith for now that I am not a tax fiction writer.

If you are a sole proprietor, on a consultant with a LLC and with or without employees or making money or not, you should implement the MERP strategy without hesitation. The Plan will allow you to deduct out of pocket medical expenses of every type – co-pays, co-insurance, deductibles, etc. It is my impression that every taxpayer has this problem.

The MERP allows the business to deduct the out of pocket expenses – 100 percent. The MERP payments are not subject to employment taxation. Lastly, the reimbursements are not taxable to you individually.

How to set the MERP? First, call me. Second, set up a new LLC if you don’t have an existing business. Third, complete the documentation to set up the MERP. Not to worry, I have those documents. Simple and low cost to set up and operate. I can do all of these things for you at a nominal fee.

Family Defined Benefit Plan

If you have investment income taxed as ordinary income – short term capital gain, interest or partnership income, you can easily convert this income in to a format that can become a contribution into a new defined benefit plan. Here is an example. Joe has a job in corporate America and has W-2 income. He has discretionary investment income of 100k taxed at ordinary rates. Joe’s combined federal and state marginal tax bracket is 45 percent. Joe and his wife are both 50.

Joe and his wife create a family investment LLC. It could be the same one that you set up for the MERP. Joe pays his wife a salary of 25,000 from the LLC. Joe takes a management fee of $25,000. The LLC adopts a 401(k), profit sharing
and cash balanced defined benefit plan with a medical savings account. Joe’s wife is able to contribute $23,000 in to the 401(k) Plan – the regular contribution of $17,500 with a catch up provision of $5,500. The LLC is also able to contribute an additional $1,500 into a profit sharing plan. The company is able to contribute $28,000 into a cash balance defined benefit plan for a retirement payout equal to percent of her highest three year’s salary average. The LLC is also able contribute an additional $9,250 into the Medical Savings Account. The total contributions for Joe’s wife are $61,740.

Joe participates in the 401(k) of his company. He can continue to contribute up to a level that maximizes his employer’s match and contribute the balance into the LLC 401(k) plan. The LLC can make a profit sharing, cash balance defined benefit and medical savings account contribution. These contributions not counting the 401(k) are approximately are $38, 740. The combined contributions for Joe and his wife are $100,740 sheltering the entire amount of investment income.

The contributions are fully tax deductible. The investment earnings are tax-deferred until distribution. These plans are self-directed meaning, you get to manage the investments for better or worse. At retirement, Joe and his wife can take a retirement annuity or rollover to their IRAs.

Charitable LLC

You have high taxable income and really don’t have any other practical outlet for tax planning purposes. You work for a Company, and have a business with too many employees etc. The idea here is to create an investment LLC. Capitalize the LLC with cash and marketable securities. Contribute a 99 percent non voting LLC interest in the LLC to a Donor Advised Fund (DAF). The DAF is a charitable foundation administered on your behalf by a 501(c)(3) charity for your benefit and the charities that you sponsor. You retain a controlling interest and continue to control the LLC and LLC assets.

You retain a management fee for the performance of your duties as managing member. As managing member, you decide how much and when too distribute cash or dividends to the DAF. In my example, you receive a deduction up to 50 percent of AGI for the charitable contribution. In my example, 99 percent of the investment income of the LLC will be tax-free. You opt to defer your management fee because The Man is paying you so much. The operating agreement allows the managing member to borrow from the LLC on an arms-lenght basis, i.e. commercial terms.

In summary, similar to a pension plan, you receive a deduction that can be up to 50 percent of your AGI. You create a long-term legacy for your favorite charities through the DAF. You control the distributions to the DAF. Virtually all of the investment income is tax-free.The LLC assets are protected from your personal creditors. Lastly, you retain full management and investment control over the assets. If that weren’t enough, you can add the MERP and Family Defined Benefit Plan in subsequent years.


I know that I should have told you about these things a month ago. I did!!! It is not too late to implement these strategies for 2013 but you need to move quickly. Call me at (860) 404-9401 or send me an email at if you have any questions on these strategies.

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The Strangest Secret (About ObamaCare)


I describe myself as a moderate Republican. I served as an Army officer. No wars were won or lost because of me. I have spent most of my career serving the small business owner market. As a tax and estate planning attorney I try to think about creative ways for business owners to lighten their tax burden. I also like to listen to talk radio, but lately I have gotten to the point that I want to scream when I hear Fox News and El Rushbo cover the Republican Party talking points on Obamacare 24-7.

Furthermore, I am clearly stating that I am not a proponent of Obamacare either. One thing is certain, the system that we had was not working either. And do we need to shut the Government down to make a point?  The fact of the matter is that Obamacare is the law. After 41 or 42 attempts to repeal the law, it seems to me that you either need to move on or or come up with a better proposal than the current law and make your case to the People. 

Earl Nightingale’s classic The Strangest Secret is a motivational message that says that you become what you think about. The Republican Party has been lambasting The Affordable Care Act (ObamaCare) principally on the grounds that it will put the small business owner out of business. Most people oppose the law without even understanding it. The more that I understand about  ObamaCare and some of the planning uses involving the law, I am struck by the “strangest secret” that Obamacare may actually be a windfall for small business owners rather than the thing that puts the small business owner out of business.

I have previously established that I know squat (and I do. I was a big squatter in my powerlifting days) but I am increasingly able to identify a pathway towards employee benefit cost reduction for small business owners. This is the Strangest Secret. 

A quick primer on the basics of ObamaCare. 

Obamacare Basics

In 2010, President Obama signed the “Patient Protection and Affordable Care Act” and companion “Health Care and Education Reconciliation Act of 2010.” Together, those two pieces of legislation – better known by Republicans and Democrats alike as “Obamacare” — represent the biggest change in how we finance healthcare since Medicare was created in 1965.

In 2012, the U.S. Supreme Court ruled that the Act’s controversial “individual mandate” was a constitutional exercise of the government’s power to tax. On the tax side, small businesses with up to 25 employees earning $50,000/year or less qualified for a new tax credit of up to 35% of the cost of providing health benefits to their employees. On the healthcare side, insurance companies can no longer deny coverage to children for pre-existing conditions. Insurers can’t set lifetime limits on plan coverage. Plans must  let children stay on their parents’ plans through age 26.

Next year  brings the most controversial changes. Most individuals who aren’t covered through their employer will have to maintain “minimum essential coverage” or pay individual penalties. This is the so-called “individual mandate” you’ve heard so much about. Let’s be clear, the people who wanted to keep their coverage and had their policies had coverage that did not meet the essential coverage requirements. The problem is that under Murphy’s Law, someone ends up getting sick with something that is not covered by the limited policy that covers me for straining my back on Tuesday only while deadlifting!

 2014 was the year when it was originally scheduled that employers with more than 50 employees have to offer health benefits or pay a penalty of up to $2,000 per employee. (If they offer coverage that doesn’t meet minimum standards, the penalty could jump to $3,000. ) The Obama administration has since postponed this requirement to 2015.

Next year (2014) is the year when the biggest insurance changes go into effect. Specifically:

(1) Insurance companies can’t deny coverage to anyone for pre-existing conditions.

(2) Plans can’t set annual limits on coverage. Tax subsidies become available on individual coverage. 

 This is important. 

(3) States can choose (or not choose) to expand Medicaid eligibility to non-elderly, non­-pregnant individuals with incomes up to 138% of the federal poverty level. For 2014-2016, the federal government will pick up 100% of those costs.

Small business owners that provide coverage their employees may qualify for tax credits. In order to qualify for the credit, the business owner has to pay at least 50% of the “employee-only” premium amount for your employees’ coverage. The business owner can’t have more than 24 “full-time equivalent” employees, or FTEs. The average wage in the business can’t be more than $50,000 per year.

For tax years 2010 through 2013, the maximum credit is 35% of the amount of premium the business owner pays in premiums (not including his own premium. The credit goes down if business owner have more than 10 employees or average wages of more than $25,000.

Starting in 2014, the maximum credit goes up to 50% of premiums paid. If the credit is more than the business owes, the business owner can carry it back against previous taxes  paid, or carry it forward to offset future taxes.

The law says that by 2014, all Americans have to maintain “minimum essential coverage.” If not, individual taxpayers face a penalty. That penalty starts at $95 per adult or $47.50 per child, up to a maximum of $285 per family or 1% of income in 2014. It rises to $695 per adult or $347.50 per child, up to a maximum of $2,085 per family or 2.5% of income in 2016. After 2016, those dollar amounts are indexed for inflation.

The penalty is assessed through the Internal Revenue Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Internal Revenue Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty.

Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Internal Revenue Code and interest does not accrue for failure to pay such assessments in a timely manner.”

The insurance exchanges offer four levels of coverage: bronze, silver, gold, and platinum. There will also be a bare-bones “catastrophic-only” plan for those under age 30.

(1) The bronze plan is designed to cover 60% of the average insured’s healthcare costs.

(2) The silver plan is designed to cover 70%.

(3) The gold plan is designed to cover 80%.

(4) Finally, the platinum plan is designed to cover 90%.

Each level  offers different premiums, co-pays, deductibles, and other out-of-pocket expenses. The law limits out-of-pocket expenses to $6,350 for individuals and $12,700 for families.

Individuals will qualify for subsidies under two conditions:

A. The insured’s “household income” has to be less than 400% of the federal poverty level, or “FPL.” For 2013, the FPL is $23,550 for a family of four, which means subsidies are available for incomes up to $94,200. “Household   income” includes income from the employee, employee’s spouse, and any  dependents.

Comment – Play around with the Kaiser Permanente calculator and you will see that the tax subsidies are significant . This is part of the “secret sauce” of how to deal with Obamacare. If an an employer offers group health coverage to his employees, the employee is unable to qualify for tax subsidies. With individual coverage, the employee is able to qualify for tax subsidies. 

B. Second, if the employee has an employer who offers coverage, the employee’s  share of the  premium has to be more than 9.5% of your household income. 

The goal of the subsidy is to make sure the individual does not  spend an unreasonably high percentage of personal income on health insurance. The range is 2 percent of income up to 133 percent of the federal poverty level (FPL) and 9.5 percent at 400 percent of the FPL. The subsidies are based on the cost of a “silver” plan.  Premium will vary according to where the employee lives, and the subsidies will always cap your premium at the appropriate percentage.

The subsidy itself takes the form of a “refundable tax credit.” That means you can use the subsidy to offset your total tax bill for the year and, if the subsidy is more than your tax, the IRS will send you a check for the difference. The law lets the taxpayer apply for the tax credit when he applies for the insurance, and the government will pay the subsidy directly to the insurance company.

The Strangest Secret – Making Obamacare Work for You!

The best solution is for the small business (in my view) is for the business owner to get out of the group health insurance business. No more being held hostage by the amount of annual rate (15-40%) increases. No more haggling from employees that Mrs. Potts’ medical claim didn’t get paid and a collector is calling.

Get out there on the insurance exchange and let your employee’s purchase individual coverage. Of course, this assumes that you can actually get on the exchange website! 

Your Action Plan

Step 1 – Drop Group Health coverage beginning on January 1, 2014

Step 2 – Have all employees (including the business owner) purchase individual coverage. Remember, no more preexisting conditions and no more limits on benefits. Workers who have household income between $23,500-94,500 will qualify for tax subsidies. 

Step 3 – The Individuals purchase Bronze-level coverage. The cheaper, the better!

Step 4 – The employer creates a medical expenses reimbursement plan (MERP) to cover out of pocket expenses not covered under the individual plan. A second medical card provided by the third party administration company administering the MERP will pay medical providers directly for the employee. The employer will provide a uniform annual allowance to employees under the MERP that the employer determines. The payments are tax deductible to the employer and non-taxable to the employee. FICA and FUTA withholding do not apply. 

Step 5- The employer will establish a Sec 125 cafeteria plan and pay the premiums directly to the various insurer’s for individual health plans on a pre-tax basis. 

The Bottom Line

If a business owner follows the approach outlined above, the business will reduce its cost for health insurance by 40-80 percent. The business will have the same or better benefits than it previously had under the group plan. It does not matter how many employees the company has on its payroll, the cost will be a lot lower. Why?  The benefit of tax subsidies is powerful. Secondly, it many cases (but not all) the cost for those who do not qualify for tax subsidies is much lower than the cost for group health. 

The company will no longer remain hostage to annual rate increases of 15-40 percent. The company that had a self-administered health plan will have much lower financial exposure than it had with “stop-loss” coverage. Employees who had pre-existing conditions and large claims will receive the same coverage as any one else without any benefit limits or additional ratings. 

Most importantly, the financial risk is now off of the employer. 

The Offer

Why does a tax attorney care about employee benefit costs? First, I do some benefits work. Second, the U.S. Supreme Court called ObamaCare a tax. As a result, it is now my part of my professional responsibility as a tax attorney to help business owners in this area.

I am working with a specialty third party administrator that implements and administers the solution outlined above. You owe it to yourself to compare what you are doing versus what you could be doing. If this analysis provides no benefit, keep your group plan. If as I suspect, the proposal provides annual  savings of 40-80 percent in your second largest expense after payroll, you need to think seriously about making a change. 

For financial advisors or insurance agents working with small business owners, you need to bring this solution to your clients. You will be compensated well for a successful transition on an ongoing basis. The savings will provide capital for investment or insurance purchases. 

What are you waiting for?

Remember to count your blessings today!



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What is your Plan for Year End Tax Planning?

Here we are in mid-November and year end is approaching quickly. Still waiting for your CPA to pull a rabbit out of his hat for you. He won’t!

Waiting for a tax miracle to fall out of the sky? It won’t happen because the Almighty is focused on healing the sick and feeding the poor instead of your year end tax planning. Shame!

You are going to look elsewhere for your year end tax planning miracle.

Here are a few things that you might consider:

1. Family Investment LLC – Create a new investment company. Capitalize it with cash and or marketable securities. Contribute a 99 percent non voting LLC interest to a Donor Advised Fund that you create or your favorite charity (Army Powerlifting). Retain a managing member interest. This retention of control will allow you to legally retain control over the LLC’s assets. You can legally retain a management fee from the LLC even though you gave most of it away to charity. A tax deduction up to 50 percent of your AGI. Tax-free income on the pro rata income attributable to the charity. As managing member you determine when to make cash contributions to the charity. Asset protection from creditors. Oh, I forgot to tell you that you can make an arms-length loan to yourself as well. 

2. Captive Insurance Cell – So you have lots of discretionary income and don’t like qualified retirement plans. Create a captive cell which insured your business’ under-insured and uninsured risks. Make the IRC Sec 953(d) election which treats up $1.2 of premium into the captive as exempt income to the captive. Only the captive’s investment income is taxable. The operating company takes a full deduction. The tax characteristics are better than those of the qualified plan. Virtually tax deferred investment growth and long term capital gain treatment upon liquidation. Qualified dividend treatment on dividend distributions. No early withdrawal penalties. This may also provide good opportunities as a vehicle for non-qualified deferred compensation planning for key executives on a pre-tax basis. 

3. Discriminatory Defined Benefit Plan – Create a new DB Plan and eliminate your employees from participation by unionizing them. If that sounds like asking you to join the communist party, i have a nice union for you. This allows you to legally to exclude your employees from participation. Get the documents signed by 12/31/13.

4. Obamacare Rescue Plan – Now that you have a new DB Plan you need to come up with the money to fund it. Drop your group health coverage for your employees effective 1/1/2014. Have your employees pick up individual coverage on the healthcare exchange and enjoy the benefit of tax subsidies. Create a Medical Expense Reimbursement Plan at the business level for employees. Use the substantial savings to fund your DB Plan. You have until the filing of the return plus extensions to fund the Plan. As a result you have an additional 8-10 months to come up with the funds to make your 2013 contribution. 

I do know squat so if you also need how to add 100-150 lbs to your full squat or deadlift, I am qualified in that area as well. 

Feel free to call me up (for free) to discuss your situation and determine if their is some salvation (at least tax-wise) for you this year. 

Don’t forget to count your blessings each and every day!








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