Building Your Wealth Preservation Fortress

The USA is a Great Place to do Business

2011-09-12T08:12:00.000-07:00

With all the bad press going around, I thought now would be a good time state the obvious: The USA is a Great Place to do Business... If you can figure out how to get started here.

The USA:

has advanced pro-business laws and regulations making it easy to start a business and form a company,
has state of the art banking and financial access at very reasonable terms,
has a dynamic economy,
has a spirit of rugged individualism, and
can offer foreigners privacy, tax reduction, and advanced asset protection.

But most people need a little help getting started. Specifically, they need help getting a US Bank Account opened and operating. Since 9/11 this has become a much more difficult process. But it is not impossible. In fact, it can be quite easy.

If all you need is a US bank account for personal banking with basic services (receiving funds, buying and selling things on Ebay,etc.), check out: http://urbankacct.com/.

If you need a more comprehensive business solution, see: http://www.connex-services.com/.

How the USA can provide you financial privacy

2011-06-12T10:05:00.000-07:00

Do you want Financial Privacy?

Many people are surprised to find out that the USA actually provides better financial privacy than most other developed countries, and even better than most “tax havens”.

It is my considered opinion that some of the best banking privacy in the world is now found in the United States of America. As long as you are not "laundering money" (the vague definition does cover a lot of ground) or supporting national security threats, the US provides some of the most strictly ENFORCED privacy rules around. Notice my emphasis on the word ENFORCED.

There are many jurisdictions that have such amazingly draconian bank privacy laws that you wonder why anyone would ever take the risk of becoming a banker in those countries. I am thinking of one small country where even a minor disclosure released through mistake can result in jail time and fines for the banker, at least under the terms of its laws. Wow! That must mean that your money and your information is safe! Well let us look at how often these laws are enforced. After all no one is perfect. In the country I am thinking of there has never been, to my knowledge, a single banker prosecuted under the draconian bank privacy laws. Not even a slap-on-the-wrist or a probated sentence. Either bankers in that country never make mistakes, or the laws are never enforced. What good are bank privacy laws that are not enforced?

In the USA on the other hand bank privacy laws are enforced (to the chagrin of most of my banker friends) by a bevy of alphabet soup Federal, State and Local agencies whose only reason to exist is to enforce various consumer protection laws, banking disclosure rules and credit protection regulations. In addition to all the government agencies looking to enforce these rules (and levy punitive fines that go to fund their activities), the laws themselves almost always give the victim the right to sue the bank in civil court with punitive damages and attorney's fees awarded. I know a lawyer who specializes in class-action law suits against banks who violate these consumer protection rules.

In addition most states have enacted Deceptive Trade Practices Acts which provide treble damages plus attorney's fees to the victim of any Deceptive Act, disclosure of prohibited information being among them.

Because of these consumer protection laws combined with vigorous government enforcement along with civil court remedies for victims, US Banking has become some of the most private in the world in spite of the rather sinister reputation of the Patriot Act.

If you would like more information on how best to take advantage of the USA contact me.

PayPal is NOT the Solution

2011-06-02T10:17:00.000-07:00

Many of my Non-Resident clients want to obtain a US bank account in order to be able to better use PayPal.

THIS IS A MISTAKE!!!!

PayPal is not the solution. PayPal is more of a problem than a solution. It lures you into the system with false promises and a misguided sense of comfort. But when you try to use it, it snaps at you.

I have far too many clients who have had horror stories using PayPal. Yes, it is easy to start up, and yes, it is easy to use. But it is also very easy for your account to be frozen with no explanation, your funds withheld for up to 6 months, and transactions canceled by buyers after they have received the goods and/or services with almost no recourse by the seller.

PayPal is ok if you are selling stuff on Ebay, but I have two rules regarding PayPal:

1. Never attempt to increase your monthly withdrawal limits (this seems to be what triggers most problems with PayPal), and
2. Never leave more money in a PayPal account than I can afford to lose.

A POSSIBLE SOLUTION: Google Checkout: checkout.google.com. This is a really nice service. There are no sign up fees, no monthly fees, the transaction costs are lower than PayPal, and they DO NOT HOLD ONTO YOUR MONEY!!! After a brief waiting period Google Checkout transfers the funds directly into your US bank account.

What you need to open a Google Checkout Seller Account:

* A US based credit or debit card,
* A US based bank account, and
* A US Federal Tax ID (EIN).

That is it. All these things are provided by the www.urbankacct.com package so that you can get started with Google Checkout. With the UK LP and the US Bank Account provided with the package, you can start accepting credit cards almost immediately in a safe and secure manner.

There is only one thing to be careful about when using Google Checkout: Google restricts certain types of transactions that other payment systems approve.

See https://checkout.google.com/support/sell/bin/answer.py?answer=75724&hl=en.

Google is very fair in how they enforce these restrictions. Unlike PayPal they treat you as if you are innocent, and if there is a question about your account or a particular transaction they give you an opportunity to explain yourself instead of just freezing your account and giving you an endless list of things you need to do that won't even work if you do them.

Why a United Kingdom Limited Partnership?

2011-05-26T09:46:00.000-07:00

For clients who wish to Open a US Bank Account, using a corporate entity is ideal. We often suggest using a United Kingdom Limited Partnership (UK LP) to help our clients to open US Bank Accounts.

The UK LP is easy to establish, and once established requires zero reporting since it is a truly 100% "pass through" entity. The income from the UK LP is attributed to the partners without the need to file a partnership return in the UK. If the partners are not in the UK and the income is not derived from UK business, there will be no UK taxes and thereby no reports or tax returns that need to be filed. Now since the UK has some of the best tax treaties around, this income may also be tax exempt in your home country.

In addition, as long as you are not a resident or citizen of the the USA, and you are not "doing business" in the USA (this usually means making, providing, storing and/or transporting goods or services inside the USA), there will be no tax liability in the USA either.

There are many ways of setting up a UK LP depending upon the needs of the client.

For Non-Resident Aliens (NRAs) looking only to obtain a US Bank Account this website can be of help: http://urbankacct.com/

For Non-Resident Aliens (NRAs) who have more complex business needs, and are more interested in using the USA to improve their asset protection, tax planning and financial planning purposes see: http://www.connex-services.com/

If you are a US Citizen or Resident, and want to find out more about how the UK LP can help you see: http://www.squireorg.com/

What is an LLC? Why should I care?

2011-04-29T08:13:00.000-07:00

A limited liability company (LLC) is a hybrid business entity that blends together characteristics of a partnership and a corporate structures. It is incredibly flexible giving limited liability to its Members (the owners) just like a corporation, but offering the ease of management of a partnership.

It also can offer interesting tax advantages depending upon how you want to use it (but only if properly set-up). It can be set up to be treated as a "disregarded entity" providing "pass through" tax treatment, or it can be set up as a "taxable association" in which case it is taxed like a corporation, but without some of the negative aspects of a corporation. This can often avoid double taxation.

But the most interesting aspect of an LLC is its ability to protect your assets. How can an LLC protect your assets?

The LLC has many special features similar to a partnership that are very beneficial for asset protection:

A partial LLC interest, unlike shares in a corporation, cannot be easily seized by creditors. If a Creditor attempts to take your Membership Interest, the creditor will only receive an "assignment" of the interest. The creditor can take away your membership interest, but will not be able to vote in the absence of the unanimous approval of all the other Members.
An LLC can require Members to make additional contributions of capital. So if a creditor takes away your Membership Interest, the LLC may require the Creditor to make additional contributions to the LLC. If the Creditor refuses, he may lose his interest in the LLC.
If the LLC shows a profit, it is not necessary for the profit to be distributed to the Members but can be retained by the LLC. However, the Members will be taxed on this profit even though they did not receive it. So if a Creditor takes your Membership Interest, the LLC can operate at a profit, and may be able to force the Creditor to pay taxes on profits which the Creditor never received.

A creditor who attempts to take your shares in the LLC will only get an assignment of non-voting shares. The remaining shares will be held by the other members who may be friends, family, or even specially designed trust that will protect your interests. These other Members will be able to vote on who becomes Manager of the LLC, not the creditor that took an assignment of interest.

The other members may choose to appoint you or another friendly person to be the Manager of the LLC. As Manager of the LLC you will be able to decide whether or not you and other employees get a salary, whether or not assets are sold, whether or not profits are distributed, whether or not there is a need for additional contributions from the Members, etc.

In essence, a Creditor who takes your shares in a cleverly designed LLC will not be able to vote or control the company, will not be able to force distribution of assets or profits, may have to pay taxes on income earned by the company even though it never received the profits, and will be vulnerable to demands for additional capital.

As you can see this would be a very unpleasant situation to be in if you were a creditor, but a very good situation to be in if you are trying to protect your assets. Few creditors will want your membership interest in the LLC when they realize what a hornets nest they are getting themselves into.

I have designed a specific system to be able to take advantage of these attributes of an LLC. I call it The Personal Preservation Fortress®. Check it out if you would like to get more information on how to effectively and affordably protect your assets.

Passion vs Persistence

2011-03-23T07:00:00.000-07:00

I was initially going to name this post "Inspiration: Passion vs Logic and Persistence" but I thought that might put people off. Has it so far???

Early this week a very nice lady from my business networking group contacted me on Facebook and in introducing herself asked me "what is it you are passionate about"?

Passionate? Me? I am a lawyer who specializes in asset protection and tax planning. I avoid talking about what I do at parties because I don't want to put people asleep. Passionate?

I told her how I helped people to form companies and trusts in order to protect their assets, reduce their taxes and obtain greater financial privacy, provided her with some of my credentials, yada yada yada. Then I asked her what she did. Well, it looked like I avoided that one.

She answered me and explained to me what she was working on. Then she again asked me "what is it you are passionate about?" Damn. Well I am either going to have to totally ignore this and not respond, or try to come up with some way of answering that is not insulting.

You see, I do not think very highly of passion. Don't get me wrong, it serves a valuable purpose at times, but in business I don't see the value. I realize that this goes against all the recent self-help programs and gurus. I am just not into the "aspirational" culture and society.

This was my answer: "Every day I try to wake up early, I try to do what is right, I try live up to my obligations, I try to honor my principles, and at the end of the day I look back. And if I am not altogether happy with how I did that day, I go to sleep knowing I am going to have another chance tomorrow to do better."

That's it. No passion.

This week I read an interesting article that I think is somewhat related: "Don’t Bet Big. Little Bets Are The Ones That Turn Into Billion-Dollar Ideas". This articles discusses how some of the greatest entrepreneurial creations of the last 20 years have been "discovered" and not "created". They were discovered by persistent people:

"When I was in business school, one of the most common things I would hear people say was that they wanted to do something new—like start a company or take an unconventional career path—but that they needed “a great idea” first. That always surprised me a bit, especially at an entrepreneurial hub like Stanford, since most successful entrepreneurs don’t begin with brilliant ideas—they discover them."

The author points out that one of the biggest ideas in recent history was the result of a class project to improve library searches: Google.

I can just imagine the discussion between the two creators, Larry Page and Sergey Brin, as they discussed what they were going to do for their class project:

Larry: "Man that idea sucks. We have to come up with something better than that! Something exciting and revolutionary."
Sergey: "Well you come up with something then. That's all I can think of."
Larry: "What about 3D environments for computing?"
Sergey: "What do we know about that? Plus where will we get the equipment."
Larry: "But library search algorithm??? Can we get any more boring than that?"
Sergey: "Like I said, come up with something better."
Larry: "Ok, library search algorithms it is. It should be enough to give us a passing grade."

And so Google was born. Not in a passionate moment where someone cried, "Eureka!" but in a calm and plodding way.

Logic combined with Persistence, in my humble opinion, will beat Passion in much the same way the tortoise beat the hare. Not only is Passion a rather transient and unreliable motivation, but it also can be fickle; the same Passion that makes a man want to marry his wife will make him desire another. But more likely it is not the Passion that drives the cheating spouse away, but just fatigue. Passion gets old.

Of course behind the Logic and Persistence must exist Optimism. You must believe that after doggedly plodding on day after day well after the magic is gone, something out there will turn up that will dazzle you or at least give you a reason to keep going. That is true inspiration.

The Secret of Asset Protection Planning: Compartmentalization

2011-02-22T07:00:00.000-08:00

The secret of great asset protection is not secrecy or privacy, but "compartmentalization".

This means that your assets are separated and protected from your liabilities and risks.

The ultimate example of the successful implementation of compartmentalization can be found in the USS Missouri, one of the most powerful battleships ever created and based upon the powerful Iowa Class Battleship model.

The Iowa Class Battleship was designed during World War II to be fast and nimble yet tough and reliable. Too much armor would make the ship slow and cumbersome, so the US Navy focused instead on compartmentalizing the ship so that no single strike could cripple or sink the ship.

The ship was divided into separate compartments protected by fire walls limiting any damage to the particular compartment that was hit. It was designed to withstand multiple strikes from torpedoes and shells without sinking.

In 1989, this compartmentalization unfortunately underwent its ultimate test when an explosion in one of the gun turrets set off the magazine (ammunition supply) below the turret. This explosion was catastrophic and killed everyone inside the turret compartment, but the ship itself was able to survive the blast intact; a blast that would likely have obliterated lesser ships.

This was because the explosion and fire that occurred could not spread to the other compartments.

This same concept can be applied to your business and personal assets. You NEED to separate your liabilities from your assets. Protect the sources of your income and wealth from the dangers inherent in doing business and simply living.

For more information see: Building Your Wealth Preservation Fortress® -- Your Asset Protection Solution

The Best Country for Tax Simplicity — and the Worst

2011-01-28T09:11:00.000-08:00

From Newsmax (I wish I had the exact link)

The Best Country for Tax Simplicity — and the Worst

The typical small business in the United States might need to spend 187 hours a year to comply with the nation’s tax code. In the Indian Ocean nation of Maldives, compliance could take less than an hour — and in Brazil, 2,600 hours.

The World Bank and the PricewaterhouseCoopers accounting firm devised an analysis of the world’s tax codes based on a hypothetical company: a flowerpot maker that owns one building, two plots of land, and one truck, has 60 employees, and pays half of its profits to its owners.

The United States ranks 66th among the 183 nations in hours spent complying with tax regulations. At the top of the list, after Maldives, are United Arab Emirates (12 hours), Bahrain (36), Qatar (36), The Bahamas (58), and Luxembourg (59).

Maldives has no income, sales, property, or capital-gains taxes.

In Brazil, the flowerpot company would have to devote 2,600 hours to compliance.

That’s about 108 days of nonstop work, or 325 eight-hour shifts, Slate.com points out.

Other nations with arduous taxation systems include Bolivia (1,800 hours), Vietnam (941), Nigeria (938), and Venezuela (864).

In the United States, the tax code rose from 1.4 million words to 3.8 million between 2001 and February 2010, the Internal Revenue disclosed, and from 400 pages to about 70,000 since 1913.

According to the IRS, individuals in the U.S. take an average of about 13 hours to file their taxes — five hours for record-keeping, two hours for planning, three hours to fill out forms, one hour to submit the forms, and two hours for miscellaneous activities.

Is now the time for investing in Silver?

2011-01-20T12:22:00.000-08:00

I have been thinking a lot about silver lately. It seems to me that the time to invest in silver may be approaching, or has already arrived. Silver and Gold have a historic relationship. In ancient times the price of gold was generally between 15 and 20 times the price of silver. But today we see that gold is much higher than this?

I have read many times that there are 3 stages to a Gold Bull Market. It would seem that we are in Stage 3 of a the Gold Bull Market. I actually got into gold at stage 1. I bought gold at $250.00 an ounce, but needed to sell due to business problems. I sold at around $450.00 so I was pretty happy. The price actually went down a bit, but that is to be expected in Stage 1. In Stage 2 the price goes up again usually because of an ongoing financial crisis, and then settles. In Stage 3 the price goes through the roof.

Now where does silver come in? Generally speaking, silver lags behind Gold during Stage 1 and 2, but catches up dramatically in Stage 3, the last stage. As Gold goes up in stage 3, the price of Silver goes up even faster as new buyers enter the market for precious metals and look for a cheaper way to participate. Gold is perceived too pricey for them so they turn to the "poor man's" metal: silver. During this stage silver should actually rise faster than gold, and may even continue going up after gold levels off. Again, it is the late stage of the market when EVERYONE wants precious metals. Gold is what central banks, hedgefunds, Saudi billionaires, etc. buy. Silver is what mom and pop buys. After all at today's prices an investment of $1,000 will not even buy you a single one ounce gold coin, but will get you over two pounds of silver. That is a lot of silver in your bag, and as Stalin said, "Quantity has a quality all of its own."

I have been watching for a move in Silver for the last year, and I think it has happened. 4 months ago, silver to gold ratio was close to 70, now the price of silver has gone up 30% to 40% (higher than the rise in gold) and the ratio is around 48. I wouldn't be surprised to see the ratio go to 30 to 40 (the average ratio since 1970). If that is the case you could see silver go up another 30% to 50% from current prices and that is based on no significant increase in the price of gold, only a return to the historical ratio. If gold goes up, then you should see silver go up even more.

Now you may be asking, "Why is Alexander Hay, asset protection consultant and attorney, talking about the price of silver?" Well I am not in the business of buying or selling silver, and I cannot help you buy silver (darn it). But I can help you if you have a particular problem: Do you have money in an IRA that has been losing value year after year? If the answer is YES, I can help you transfer your funds from an IRA and create your very own company that can invest these IRA funds as YOU THINK BEST!. The program is called the IRA RESCUE PLAN and with it you can free the funds locked away in your IRA so that you can invest them as you see fit. In Silver, Real Estate, Collectibles, etc.

For more information see: http://www.rescueyourira.com/

Two Models for Startups: Microsoft vs Skype

2011-01-11T13:02:00.000-08:00

When it comes to starting a business, people spend a lot of time figuring out how to get the business, how to do the work, and how to make the money. But usually very little time is spent on how to organize the business. Even big companies that are now multi-billion dollar operations often show an initial amateurish structure that has cost them a lot of money over the years.

Case in point: Microsoft. Now don't start crying in your cornflakes for Bill Gates and his friends who first started the company up. They are doing ok I guess. But when they first started out, they thought very little about where to start the company, where to form the company, how to deal with taxes and management issues. They just started the company on a little seed money they got from a friend of Bill Gate's father, and off they went. And they did not do so bad.

But for a global company they could have done better. The way they are set up requires them to set up unpopular "offshore" subsidiaries and affiliate organizations, or pay the US corporate tax bill on income that was not earned in the US. The US has one of the highest corporate tax rates among the developed world, and paying it on income that was not earned in the US would make Microsoft much less competitive than its non-US peers organized in lower tax rate jurisdictions.

I think they should have set up the company offshore in a low or zero tax rate jurisdiction. That way they would only pay taxes to the US government on income earned in the US from US Source Income.

I have had many business people tell me, "You could never do that and still raise capital."

I say, "Bull Hockey!" That is outdated thinking.

Just look at SKYPE. Skype was established by Swedish and Estonian entrepreneurs to provide low cost telephone service over the internet. They chose to establish the company in a European "tax haven" (eeeh gads!), and have done quite well for themselves. EBAY bought the company in 2005 for billions of dollars, even though it was located in an evil "tax haven".

I would suspect today more and more up-and-coming start-up companies are using SKYPE as a business model rather than Microsoft, particularly in the global high-tech industries. It only makes sense. Current tax policy in the US punishes corporate success and virtually forces corporations to move to more friendly jurisdictions. The USA is simply not an ideal location to form your new start-up.

If you would like more information on how to establish your own "offshore" start-up business in a zero or low tax jurisdiction, contact me.

Bringing Cash Back to U.S. With Reduced Taxes

2011-01-05T08:58:00.000-08:00

The United States has one of the highest corporate tax rates in the developed world. As a result US companies are forced to operate in tax havens and perform extraordinary financial gymnastics in order to reduce taxes on world wide income in order to remain competitive with non-US companies that are located in more tax friendly jurisdictions.

Here is an interesting and illustrative article from the New York Times that describes the bizarre and complex efforts that US companies make to reduce their taxes. I don't really agree with the tone of the article, but the facts are all the same interesting. Note that the income that is being avoided is from non-US sources. These companies pay all their US Source Income as required, but must "go offshore" in order to compete with other countries with lower corporate tax rates.

Bringing Cash Back to U.S. With Reduced Taxes

Building Relationships vs Networking

2010-11-28T21:40:00.000-08:00

There is a huge difference between Networking and Relationship Building. I remember when I used to go to Networking breakfasts and such in an effort to develop my business, and there were always people whose only motivation seemed to be to count exactly how many business cards they could hand out. It seemed to be their only metric of success. I doubt they could remember any of the names of the people they had met, and the truth of the matter is no one remembered them, at least not in a positive way.

Now the Internet has created an entirely new forum for these mega-Networkers. Rather than measuring their progress by how many business cards they go through, they see how many Internet comments, tweets, etc. they can produce. Damn it all if anyone pays attention.

This seems to me to be no more productive now than it did twenty years ago. The technology simply makes it possible for you to waste more of your time in a much broader and more obvious way than it used to.

To me the secret is Relationship Building. I almost don't carry business cards anymore and even when I have one I usually don't give it out unless someone needs a piece of paper on which to write something unrelated. A single positive relationship is worth 10,000 tweets, so why should I waste my time and paper dealing with people who view me as nothing other than another tick on their contact counter?!

The other day someone from a "syndicate" I am part of got somewhat hostile when I shrugged off suggestions regarding my blog, and this and that and the other thing involving the endless crap involved in creating a web presence. It was all about building SEO, and Internet Footprint, and all that sort of stuff. I didn't really understand very much of what she was saying, and frankly as I look back I don't think I really want to. If the Internet can help me establish real, honest, productive relationships, then great. Otherwise to hell with it.

Now I do believe the Internet CAN help to build relationships, but only in getting someone to say "Hello!" so to speak. A useful icebreaker. The members of my "syndicate" do not seem to be very prosperous, and few seem interested in developing relationships. All they want to do is madly post tweets that no one reads, post blogs that no one pays attention to, make videos that no one SHOULD ever watch, and to add "friends" that they know and care very little about.

How sad. A relationship is so valuable. A client who considers me a friend and a valuable relationship will forgive me my mistakes and will still appreciate me, whereas the phony Internet "friends" will not even appreciate me if I perform miracles for them.

I will do my best to use the Internet to Build Relationships. To hell with all the rest of it. It is all meaningless without that.

Wealth vs Income

2010-11-22T09:08:00.000-08:00

I am a bit shy about talking about the issue of wealth, since there is clearly an argument to be said that I am trying to explain to a chicken how to lay an egg. Also, I remember my father telling me: "Never talk about money, politics and religion; you'll only lose friends.) But over the years, as I have attempted to help people to legally protect their assets, reduce their taxes and obtain great financial privacy, I have asked myself this question: "What is Wealth?"

In my opinion, the most obvious and destructive mistake is made when one confuses income with wealth. Although the two are related they are not synonymous.

Let us start with my definition of wealth: I believe wealth must be defined as assets which (1) generate income, and (2) that are relatively liquid, at least to the extent that they can be transferred to another party in exchange for some fair value.

Let us proceed with a simple review of what money can do. If you had one million dollars, and you invested those funds in prudent investments, you should be able to obtain an annual return of roughly $60,000.00 to $120,000.00 a year, or translated monthly, $5,000.00 to $10,000.00 a month. This is wealth (although depending upon your situation and needs, it may or may not be considered enough to make you “wealthy”). The funds produce income, and the assets which represent those funds can be transferred to others in exchange for fair value.

Now there are three things that are commonly confused with wealth:

1. A prestigious job with a high salary;
2. An expensive house; and
3. Ostentatious displays of wealth (i.e.; bling, expensive cars, clothing, consumer goods, etc.).

In the case of the high paying job, earning power is closely linked with the cost of living, so someone earning a “good living” in Houston, Texas, would most likely barely be able to survive on those same earnings in New York City. With that in mind, I think it is safe to say that someone who makes $20,000.00 a month would be considered “wealthy” almost everywhere.

And that would be a mistake almost everywhere since earnings from employment are not wealth, at least not according to my definition above. No matter how much you make from employment, since the job cannot be transferred in exchange for fair value, it cannot be considered a wealth building asset. That is not to say getting a high paying job is bad, only that it is not in and of itself something that can make you wealthy.

Another thing that is often confused as wealth is housing. People have a tendency to identify someone as wealthy because he or she lives in an expensive house in a nice neighborhood. Again, these people would be mistaken if the house was the only consideration. Buying a house may often be a safe and wise way of providing you and your family with shelter, particularly if the long-term cost of buying a house is less than the long-term cost of renting, but it is not a source of wealth. It is not wealth even if the property value of the house increases during the time in which you live in the house. This is because no matter how cost effective it may be to buy versus rent, and no matter how much the property appreciates in value, it cannot produce income for you while you are living in it. So, although it may be wise to put your money into buying a house instead of renting, and buying a house may result in the value of the asset appreciating, such an investment does not make someone wealthy per se.

Finally, the issue of ostentatious displays of wealth, often referred to as obscene consumption, clearly should not be confused with wealth, although often it is, if not on an intellectual level than on an emotional level. Who does not see someone driving a beautiful new car that costs more than the average house and shake their head thinking, “I wish I could afford that”? However, if there ever is something that is the very opposite of wealth, it is the barbaric display of wealth. In ancient times people would “invest” in gold and other movable items of wealth because of two reasons: the world was not safe enough for more permanent investments, and such displays could generate awe and admiration in others that would often translate into position and power. No doubt there are similar issues at the heart of ostentatious displays today, but I think it is fair to say the purpose of such displays have essentially disappeared, and as such they represent an anachronistic view of the world.

So, after all that, are we any closer to understanding wealth? And more importantly how to become wealthy? It is clear that earning a large salary will not in and of itself make you wealthy. It is also clear that owning a large and valuable home will not make you wealthy. And it should go without saying that ostentatious displays of wealth does not make you wealthy.

The answer is that the wealthy person possesses “wealth building assets”: assets which either generate “rents” (i.e., the money that is produced by the asset in question), or appreciate in value.

In the case of the person who makes $20,000.00 a month, if this persons converts that salary into an expensive home and ostentatious displays of wealth, then he or she will never be wealthy. Such a person may have a very nice lifestyle as long as the employment lasts, but nothing is being created that will create income or can be transferred in exchange for fair value. But this is exactly what most “wealthy” people do. A job will never make you wealthy since a job can never be considered an asset which generates income and can be transferred. If anything, it may be more akin to a form of slavery, particularly if the person becomes wholly dependent upon 100% of the earnings from the job to maintain a lifestyle. The only way a high salary can lead to wealth is if one of two things take place: the person lives on a percentage of the earnings and invests the rest in true “wealth building assets”, or if the person is able to convert the job into a significant equity position in the employer (i.e., a partner). Anything else is just a mirage of wealth.

Often people will assert that investing most of their free money in a house is a “good investment” since the long-term costs of buying is less than renting. In most cases this is true. However, this does not mean that buying a house creates wealth. It simply means it is better than renting. Now if you take the excess income that you earn at your job, and invest it all in a house that may be more than you really need for your purposes of shelter, then you are most likely never going to be wealthy. You may have a very nice house, but you will never be able to get anything out of the house until such time as you are willing to move out of it. And then, if you are like most people, you will want to take the money from the house you are selling and put it into another house in which you will move into. A house may be a wise use of funds as compared to renting. A house may be a safe place to store your money since it may actually appreciate with time. But a house will almost never make you wealthy since it cannot generate income, and requires you to abandon it in order to get your money out of it.

In order to become wealthy you must have “wealth building assets” that either produce income from the nature of the property, or which tend to appreciate over time, and of course these assets must be liquid to the extent that you can sell them at fair value. If the above three items are often mistaken for wealth, I suppose the real way of becoming wealthy involves saving money, investing wisely (in something other than your house), and living frugally within your means. And that is it.

RESCHEDULED -- FREE Telephone Seminar - Creative IRA Solutions

2010-11-19T07:54:00.000-08:00

FREE Telephone Seminar - Creative IRA Solutions

Hello! This is Alexander Hay and I am inviting you to a Telephone Seminar on how to free the funds in your IRA so that you can invest them the way you want to. Many times people are frustrated at the performance of their IRA but are unable to invest the funds as they would like. Here is a solution.

Please note I am not an investment advisor and I WILL NOT GIVE INVESTMENT ADVICE!!!!

Hope you can make it.

November 24, 2010, 7:00 pm CST

Dial-in Number: 1-219-509-8111
Participant Access Code: 366441

for more information see www.WealthPreservationFortress.com

FREE Telephone Seminar - Creative IRA Solutions

2010-11-13T10:01:00.000-08:00

Hello! This is Alexander Hay and I am inviting you to a Telephone Seminar on how to free the funds in your IRA so that you can invest them the way you want to. Many times people are frustrated at the performance of their IRA but are unable to invest the funds as they would like. Here is a solution.

Please note I am not an investment advisor and I WILL NOT GIVE INVESTMENT ADVICE!!!!

Hope you can make it.

November 17, 2010, 7:00 pm CST

Dial-in Number: 1-219-509-8111
Participant Access Code: 366441

for more information see www.WealthPreservationFortress.com

Advice to my soon to be 9 year old daughter

2010-11-08T10:01:00.000-08:00

I know I normally post on Asset Protection, Tax Planning, and Financial Privacy, however between the elections and all the stuff going on with the economy, I don't want to think about that right now. My daughter's 9th birthday is coming up, and I am trying to think of how to talk to her about guys. This is a proposed letter I was thinking about (or a basis to begin a discussion):

"One day you may find guys less yucky than now. And when that happens I thought I would give you some advice because I worry about your role models.

"If you want someone to grovel before you and kiss your feet, get a dog.

"If you want someone to cater to your every need, get a servant.

"Don't expect men to listen very much. Men are not very good at listening. At best they are good at doing. Find a man who will do what is right even when it is difficult.

"Muscles are nice, but character is the real strength that won't shrink over time.

"Avoid weak men who buzz around you with flattery and presents. They want something from you. After they have what they want, will they be there for you when you need them?

"A man should be there to lift you up when you fall, not be your foot stool.

"Beware of fantasies. You are not a princess; your father is no king. Most of the Prince Charmings out there aren't what they pretend to be. They have no kingdom, and they had to borrow the fancy pants and pointy shoes. Reality is not always so much fun, but chasing fantasies can be dangerous. There are trolls under bridges looking to hurt young girls, but they don't always look like that at first sight. They often have the sweetest of smiles and cute dimples... until they have you under their control. Only then do you see the real ugliness inside. Beware.

"First of all be strong and confident in yourself. You are wonderful! There are far worse things you can choose than to enjoy your own company. Your company should be a privilege you only bestow upon the worthy.

"And remember you are always your Daddy's little girl. Always."

*************************************

Any advice would be appreciated. This is unknown territory for me.

Corporate America uses Tax Havens, Why Can't You?

2010-10-25T16:35:00.000-07:00

Google, Like Microsoft, Saves Billions Through Tax Havens

also at

The Tax Haven That's Saving Google Billions

"Google pays only 2.4 percent in corporate taxes by shifting its income around the world, according to a report in Bloomberg Businessweek."

These are interesting articles that show how using tax havens is not only common but necessary in the global marketplace.

The details:

"Here's how it works. Payment for search ads purchased in Europe, the Middle East or Africa is sent to Google Ireland, where the corporate tax rate is 12.5 percent—but it doesn't stay in Dublin long enough to get taxed. Instead, the money is sent to Google Netherlands, a fellow EU country with a generous taxation scheme. Google Netherlands then sends "about 99.8 percent of what it collects" to Bermuda, the mother of tax havens."

And don't get mad at Google. Google pays all its taxes it owes on what it earns in the US, but it doesn't pay more than what it needs to pay. Its called transfer pricing and as long as you follow the rules its all ok.

Why should you pay more than what you need to pay????

The Next Big Thing in Asset Protection!!!

2010-10-18T09:07:00.000-07:00

Well doesn't that sound exciting?

Last week during my free telephone seminar, a caller asked the smartest question: What is the next big thing we have to worry about.

When most people think about asset protection, if they think at all, they think about a risk from some nameless evil lurking just beyond their view. In fact most risks to your wealth come from much closer: family, friends, business partners, long-time associates, etc. Those are the guys who end up sticking the knife in your back. Those are the folks you have to protect yourself from. Sad but true.

However, I was asked the above question, and I must admit it stumped me a bit. I had to think a bit, and what I came up with was this:

Governmental Shakedowns in the form of enforcements actions.

With the Federal, State and Local governments all facing budget crises new forms of revenue are desperately being sought after. New taxes are political suicide, and possibly counter-productive. So the scuttle-butt that I have heard is that government agencies are looking to beef up enforcement of various little-known rules and regulations with the sole intention of obtaining increased revenue through fines.

There are so many regulations out there it is not funny. Most contain terms that allow for the government to charge punitive fines to non-compliant businesses. In the past the various agencies have decided against fines in favor of providing helpful information and warnings.

Not any more!

An example that I was told about involves the various consumer protection rules that have been instituted to protect the private financial data of consumers. The laws were aimed at banks, credit reporting agencies, loan companies, etc. However, the terms are much broader than that and include virtually all companies with employees, and thus employee data. The rules require each company to perform various evaluations, reporting, preparation, appointment of special employee contact officer, etc. Most businesses I have talked to do not even know about these rules let alone how to meet the requirements they impose upon them. Failure to comply can result in stiff fines.

So I guess the next big thing is the growing Leviathon of government. Unable to feed itself from taxes, it will start fining companies to cover budget holes. Beware.

Wealth Preservation Fortress - Asset Protection Phone Seminar

2010-10-06T07:30:00.000-07:00

Time: Wednesday, October 13 · 7:30pm - 8:00pm
Location: by telephone

Hello! This is Alexander Hay and I am inviting you to a Telephone Seminar I am putting together next week. Hope you can make it.

Dial-in Number: 1-219-509-8111
Participant Access Code: 366441

The Philosophy of Learned Hand

2010-10-04T11:58:00.000-07:00

Learned Hand was perhaps one of the greatest legal minds in American History. Although not a Supreme Court judge, his analysis on and off the bench influenced a generation of legal scholarship. And what a fantastic name!!!!

In a famous ruling concerning the duty of the individual regarding the law, he clarified the traditional rule that people do not have a duty to go beyond the written meaning of the law. That is they should not have to guide their actions by any other rules than those laid out by the law, not by the unwritten intentions. In Helvering v. Gregory, 69 F. 2d 809, 810 (2nd Cir, 1934), aff’d 293 U.S. 465 (1935) he stated that:

"[A] transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade, taxation. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

"Over and over again Courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

In this ruling Learned Hand made it clear that the government has no right to expect taxpayers and citizens go beyond the mandates of the law and do what is best for the state. It is enough if what they do is within the technical boundaries of the law. The individual need not guide every action by the consideration of what is best for the government.

This was the basic sentiment that drove the American Revolution and the Founders: The Government is the Servant of the Citizens, not the Master.

Sadly, our sentiments have changed. Contrast Learned Hand's statement with the "sham transaction doctrine" as approved by the court in Jacobson v. CM, 915 F. 2d 832 (2nd Cir, 1990):

"Transactions that are entered into solely for the purpose of obtaining tax benefits and that are without economic substance are considered shams for Federal income tax purposes and purported indebtedness associated therewith will not be recognized…. [A] sham transaction [is] a transaction that is lacking in objective economic reality and that has no economic significance beyond expected tax benefits."

No longer is working within the law enough. No longer is it enough to dot every 'i' and cross every 't'. Now the taxpayer/citizen must act with subjective intention of doing what is best for the government; paying taxes. Now the government has the right to not only examine WHAT you did, but they can now examine WHY you did it!

As World War II was drawing to an end, and Learned Hand looked back on his generation and the terrible destruction that had taken place, he wrote:

"What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws, and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it; no constitution, no law, no court can even do much to help it. And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow." Learned Hand, P. 190, The Spirit of Liberty (1944).

The Attorney-Client Privilege

2010-09-27T16:12:00.000-07:00

I usually write about Asset Protection, Tax Planning and Financial Privacy, so I thought I would discuss a somewhat related topic; the Attorney-Client Privilege. The Attorney-Client Privilege is a legal concept that protects certain communications between a client and an attorney and keeps those communications confidential. This privilege is "owned" by the client, and it protects the communications even if the client is only a prospective client.

For a communication to be considered privileged (that is protected from disclosure) 3 things must be established:

1. The holder of the privilege is a client or a prospective client;
2. The communication is made confidentially with a licensed attorney or subordinate; and
3. The communication is made with the intent securing legal advice and/or representation.

This privilege is one of the most important concepts in Western legal studies. However, it is also one of the most misunderstood issues even among lawyers.

As with all rules, it is in the exceptions that we find the heart of the matter.

The communication must be with an attorney. There is no such thing as an Accountant-Client Privilege. If you describe a troubling situation regarding past tax returns with an attorney, the attorney will most likely be required to keep the communications confidential. Even upon subpoena the attorney would be required to refuse to answer questions. However, an accountant in the same situation may be required to report what client said to the authorities as the accountant's foremost duty is to the forum.

A communication is only privileged if it was intended to be confidential. Speaking in front of 3rd parties destroys the privilege, so attorneys and clients should avoid those elevator conversations. No one wants to hear what you are saying anyway!

The communication is privileged, not the facts. So if you toss a bloody knife onto your attorney's desk and ask, "What should I do if I just killed my wife with that knife?" the question is privileged as is the possible answer, but the fact that you had a bloody knife in your possession is not protected.

The privilege does not apply in the face of an ongoing or prospective criminal activity or conspiracy. Telling your attorney about your criminal activities in the past may be protected, but if you describe how you intend to continue with such activities the attorney may have a duty to the courts to inform the authorities. A very troubling situation to be in if you are an attorney. If the attorney is not careful he may be considered an accessory or even a co-conspirator to a crime if he fails to disclose the information, or he may be held in violation of his duty to the client if he discloses it inappropriately.

The privilege can also be waived by the client. Remember, the privilege is "owned" by the client. If the client chooses to disclose the content of the communication that is privileged, well it is not privileged anymore. Now this raises an interesting issue (at least to me): to what degree does a partial disclosure of privileged communications waive the remaining undisclosed communications? Under some rules partial disclosure by a client waives the entire privilege, and under other rules partial disclosure only serves as a narrow waiver regarding the exact facts that were disclosed. For instance, let us say that the client files a grievance/complaint against the lawyer. Obviously, the lawyer has the right to defend himself. In Texas, this waiver of privilege is limited to those communications that serve to defend the attorney's interests, and does not serve to waive the privilege in regards to other forums. However, if the client discloses confidential communications in open court before the Federal Courts, this disclosure may result in a broad and universal waiver of ALL communications between the client and the attorney. OUCH!

The Attorney-Client Privilege is a powerful right that gives people the ability to speak candidly to their attorney even if they do not end up retaining the attorney. But it is not as simple as some believe, and it certainly does not cover anything you say to an attorney. As always, caution is the rule!

"Web of Lies" or Just Good Tax Planning????

2010-09-16T06:09:00.001-07:00

There is a real danger in being "too" clever when it comes to offshore tax planning (I suppose the same is true for "onshore" tax planning as well). Your goal should always include asset protection as well as tax planning, and getting put in jail by the tax man does not help in that regard. One of the real advantages of going offshore is privacy, but if you cannot whip out your documents and show the details to the tax man, then you should think twice about what you are doing.

Case in point:

The story of Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46.

I don't know if this "web of lies" is anything more than prosecutorial blather to hide over-reaching by the authorities. It is possible to go offshore legally, but when you do so don't expect the tax man to be happy about it. In this case the father and son may have set up perfectly good offshore entities to take advantage of US tax loopholes that give preferential tax treatment to foreign investors. If done correctly I don't see the problem. What's good for the goose is good for the gander.

But it is often tempting to go far beyond what the law allows since most "offshore practitioners" know very little about the law of the country where enforcement will take place. They are usually local bankers, accountants or attorneys in the tax haven that have very little interest in learning the details of your situation. Most get paid a commission for every company they set up or bank account they open.

Caution should be the word of the day. However, I would not be surprised to see another Paul Hogan (Crocodile Dundee) situation where the tax man gets a black eye for being stupid, greedy, and abusive. Deep down I do hope that is what happens here!

FOLLOW UP 14 OCT 2010

Well it seems these guys were up to no good. They were convicted. I must admit I would like to know more and will be looking for more information. Did they structure it legally and the court set aside the structures on the “sham doctrine” basis? Or did they just do some amateurish shoddy “offshore planning” relying on some offshore bankers for advice. My guess is the later. From further reading it seems that these guys just got a little creative on their own. They decided they could sneak some US assets into offshore trusts, and then avoid paying taxes on he sales income. Not a good idea, and not to be confused with "good" offshore tax planning

How to Make Your Website Bullet Proof

2010-09-14T08:31:00.000-07:00

Most of the time I post on the importance of Asset Protection, Tax Planning and Financial Privacy, but today I thought I would post on something a little more technical: website security.

About 8 years ago I used to promote my business through seminars located in exotic places like Cancun, Playa del Carmen, Belize, Panama, Costa Rica, Latvia, etc. Yeah it was a tough job, but someone had to do it.

Well, at one seminar in Cancun I had an unusually large number of walk-ins to the seminar. I was curious where they were coming from and it turned out that they had actually come to Cancun to attend a competitor's seminar. They had heard about my seminar and decided to ditch the other guy in favor of me. They heard about my program based solely on word of mouth. Well I gladly took their money, and enjoyed the weekend enormously!

Until I arrived back in the Good Ole US of A. It was then that I discovered that my website had been closed down, and that my URL was being held hostage by my hosting service. It turned out that the competitor in Cancun found out about his attendees abandoning his seminar in favor of my seminar and took his revenge by accusing me of spamming him. He fabricated an email that I had never sent by lifting acceptable promotional material posted on a commercial site, and changed the headers to appear like an email. My hosting service shut me down without any further notice or explanation. I was shocked. How could this happen?

Luckily for me, my hosting service responded to my request for reconsideration, reviewed the claim of spamming, and in fact concluded that the charges were false. My website was reinstated, and I was back in business.

But this made me start thinking: How can I improve my website security so that no one can ever do this to me again? I started calling around and talking to friends. Someone referred me to a Russian hacker who was living in New York. He used to work for some odd agency of the Soviet Union during the Cold War commonly called by three letters. He agreed to show me how to bullet proof my website.

3 Steps to Making Your Website Bullet Proof

Step One: Separate your domain name (URL) from everything else. Do not set up your website at a one-stop shop that provides you with the convenience of registration, DNS service, and web hosting all in one location. Instead register your URL at one of those discount registration services. I use http://www.cheapdomainnamesdot.com/. They are cheap and efficient, and easy enough for me to use it. I would consider paying a little extra and getting the privacy option (no information regarding the registration of the domain name is publically available).

Step Two: Establish a DNS Service separate from your URL registration and your web hosting service. What is DNS? Domain Name System (DNS) is a database system that translates a computer's fully qualified domain name (URL) into an IP address. In other words, it is the service that directs your web browser to the proper computer site when you type "www.domainname.com". I use a free service called http://zoneedit.com/. This service will accept the registration of your domain name from a third party registration service, and then forwards the DNS to a web-hosting service of your choice.

Step Three: Find a good web hosting service. This can be just about any service out there, but make sure they make it easy for you to have your registration and DNS separated out like I described above. A good web hosting service understands how this works, and will help you do it. If they say they do not understand what you are talking about, or make it sound like you are stupid, just move on. There are literally thousands of good services out there. I personally use http://www.hostmonster.com/, but I also like a free service called http://www.memebot.com/ which provides totally free hosting and some very nice template services as well.

There are other things you can do with this system as well, and once you get familiar with the structure of things it can be quite liberating. Changing web hosting services will literally take no more than a few keystrokes in your DNS service website. No one will ever shut you down. Your website will be bullet proof.

Paul Hogan aka Crocodile Dundee Now Targeted by the Tax Man

2010-09-02T08:04:00.001-07:00

http://www.bbc.co.uk/news/entertainment-arts-11088372

This is an interesting story about a famous person being persecuted for offshore tax planning. Or is it? Australia has been promoting its efforts to stamp out "offshore tax haven abuse" for years. Much as the United States has been doing. Targeting famous people is always a good way to get the message out: Don't mess with offshore tax havens or we'll get you!!!!

It is too early to tell if Paul Hogan is really guilty of anything other than being a high profile target, or if he, like Wesley Snipes, decided to trust the wrong people in regards to tax planning. Remember Wesley Snipes? Sadly for Mr. Snipes (one of my favorite action stars) he decided to put his faith in a bunch of tax-protestor lunatics who promote a lot of complicated mumbo-jumbo about how you don't really have to pay taxes.

The truth of the matter is that you do have to pay taxes. Do not listen to people who claim to have secret knowledge about ways of avoiding your taxes. If the Queen of England shows up in the conversation RUN! The internet is sadly full of scams and crazies who know nothing about what they are talking about.

But there is hope. If you plan wisely you should be able to reduce your taxes, maybe even eliminate them. This may not be the case for everyone. If you make widgets in Australia, store them in Australia, transport them in Australia, and sell them to people inside Australia, you are are going to have to pay taxes on those profits in Australia. This is common sense; you can pretty much change "Australia" to any country and get the same results.

Now if you are making, storing and selling widgets outside of "Australia" there may be ways of reducing the taxes you pay in "Australia" but it may be highly technical. You need to understand why it is sometimes ok to "go offshore" and sometimes it is best to just pay the taxes and be glad you did.

If you would like to read more I discuss the concept of Jurisdiction for those who might want to explore offshore tax planning.

And for those who do not want to go offshore, there are some options for you as well: When "Going Offshore" Should be Avoided.

The most important thing to think about, in my opinion, is Asset Protection. It is very easy to lose everything you have worked so hard to acquire. Next comes tax planning, and finally financial privacy. All can be obtained in a legal and ethical manner. Contact me if you would like more information.

UPDATE 6 SEPT 2010

It would seem that the Australian tax man got a big black eye on this one. Crocodile Dundee is back "home" in Los Angles, CA. From all appearances the charges against him were unfounded, and rather than support "Operation Wickenby" (a program to attack famous Australians who practice "illegal offshore tax abuse") it seems to have backfired and discredited the program.

"How much money have they spent of taxpayer dollars? How much have they got back?" Hogan said.

I think the real problem here is that people confuse "illegal offshore tax abuse" with "legal tax planning". Often by people who should know better. It is one thing to make money in Australia and set up illegal bank accounts to hide money to avoid paying the taxes, but quite another to establish well structured legal entities to handle business that is outside the jurisdiction.

Way to go Crocodile Dundee!

FINAL UPDATE 1 DEC 2010

Crocodile Dundee's Paul Hogan gets early Christmas present

After spending millions of dollars investigating him, harassing him, and wrongfully accusing him, the Australian Tax Office abandoned its criminal investigation of him and his business manager for tax evasion.

Bahamas Judge Provides Traditional Common Sense Response

2010-08-24T07:33:00.000-07:00

http://www.tribune242.com/searchresults/08182010_Judge_business

Great Article. Some quotes: 'Noting that the financial services industry was the second most important to the Bahamian economy, in terms of its contribution to national employment and gross domestic product (GDP), Justice Adderley said:

"we must resist the temptation to pin a badge of fraud on persons who make legitimate offshore jurisdictions like the Bahamas.

"It has long been settled in English and international law that there is nothing wrong with a person so ordering his affairs to lessen his burden of taxes by lawfully avoiding (in contradistinction to evading) or otherwise making lawful use of offshore jurisdictions."'

This quote is very similar to a famous quote form Judge Learned Hand:

"Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands."

This basic common sense approach is sadly missing in most jurists today.

Woods may skip Ryder Cup over reluctance to pay 1 million pound tax bill

2010-08-11T09:48:00.000-07:00

Britain has decided to punish non-Resident athletes and performers who appear in Great Britain by forcing them to pay taxes on income earned outside of Britain. It appears to only be running off star athletes rather than bringing in tax revenue.

Will the tax and spend crowd ever realize that you just cannot force people to pay taxes because you want them to? Tiger Woods may choose to just skip an opportunity to play golf in the UK rather than pay taxes. That is what normal people do. It is called tax planning. When you force people to choose between being unproductive and paying outrageous taxes, many people choose to simply not be productive. Why should they produce when they do not get to benefit from what they produce?

http://sify.com/sports/woods-may-skip-ryder-cup-over-reluctance-to-pay-1-million-pound-tax-bill-news-news-kiknadcdbfd.html

The Myth (or Legend) of Anonymous Swiss Bank Accounts vs the Reality of US Banking Privacy

2010-08-08T06:56:00.000-07:00

Anyone who has watched movies or TV in the last 40 years KNOWS that Swiss bank accounts are totally anonymous, provide untraceable transactions to the most despicable of criminals, and that Swiss Bankers are humorless drones that only need your bank account number and your password. Thank goodness for our friends in Hollywood because otherwise we might get the wrong impression! Not surprisingly Hollywood got it wrong again.

In 1934, following a series of scandals where damaging and embarrassing private information about bank clients were released to French investigators, the Swiss government enacted the 'Banking Act' which codified strict rules regarding the disclosure of private client information. The idea that Swiss bankers did not know, or perhaps even more chilling didn't want to know, their clients, or that they issued totally anonymous bank accounts makes for a good plot twist in a mystery novel or movie, but really never existed. Swiss Bankers were always required to share information about criminal acts and tax fraud. Only under Swiss law failing to disclose income was not considered tax fraud, but rather tax evasion. Acts of tax evasion were not serious enough to share with the authorities.

Well this has all changed. Swiss bankers now share just about everything and anything about their clients, the Swiss distinction between tax fraud and tax evasion has been removed, and what little "anonymity" that may have existed is now dead.

Don't get me wrong! I am sure Swiss banks are still great places to put your money, and provide many legal and ethical ways of assisting their clients, but they no longer provide even a smidgen of the mythical all encompassing privacy shield that Swiss bankers encouraged people to believe, and Hollywood sold like a pack of cigarettes.

It is my considered opinion that some of the best banking privacy in the world is now found in the United States of America. As long as you are not "laundering money" (the vague definition does cover a lot of ground) or supporting national security threats, the US provides some of the most strictly ENFORCED privacy rules around. Notice my emphasis on the word ENFORCED.

There are many jurisdictions that have such amazingly draconian bank privacy laws that you wonder why anyone would ever take the risk of becoming a banker in those countries. I am thinking of one small country where even a minor disclosure released through mistake can result in jail time and fines for the banker, at least under the terms of its laws. Wow! That must mean that your money and your information is safe! Well let us look at how often these laws are enforced. After all no one is perfect. In the country I am thinking of there has never been, to my knowledge, a single banker prosecuted under the draconian bank privacy laws. Not even a slap-on-the-wrist or a probated sentence. Either bankers in that country never make mistakes, or the laws are never enforced. What good are bank privacy laws that are not enforced?

In the USA on the other hand bank privacy laws are enforced (to the chagrin of most of my banker friends) by a bevy of alphabet soup Federal, State and Local agencies whose only reason to exist is to enforce various consumer protection laws, banking disclosure rules and credit protection regulations. In addition to all the government agencies looking to enforce these rules (and levy punitive fines that go to fund their activities), the laws themselves almost always give the victim the right to sue the bank in civil court with punitive damages and attorney's fees awarded. I know a lawyer who specializes in class-action law suits against banks who violate these consumer protection rules.

In addition most states have enacted Deceptive Trade Practices Acts which provide treble damages plus attorney's fees to the victim of any Deceptive Act, disclosure of prohibited information being among them.

Because of these consumer protection laws combined with vigorous government enforcement along with civil court remedies for victims, US Banking has become some of the most private in the world in spite of the rather sinister reputation of the Patriot Act.

Contact me if you would like further information.

There seems to be a new Tax Haven in the making!

2010-08-06T14:42:00.000-07:00

Hungary. Hungary tax rate makes Hungary a Tax Haven.

Hungary has lowered its standard tax rate down to 10%! Wow!!!!!!

Shame on you Forbes - The Top 10 Non-Tax Havens

2010-07-16T11:02:00.000-07:00

World's Best Tax Havens - Forbes.com: http://www.forbes.com/2010/07/06/tax-havens-delaware-bermuda-markets-singapore-belgium.html

This was some very poor journalism. First of all it based virtually the entire premise of a Tax Haven on providing a location for "illicit" moneys to be transferred illegally/anonymously. So really the list is not about Tax Havens at all (which provide legal structures to non-residents of the Haven in question), but about where best to launder dirty money. The two are not even closely linked, and this article unfairly confuses the issues.

That aside, I think they got it right in regards to the USA being the number one Tax Haven. As long as you do not live here, and you are not a US citizen, the US provides the most beneficial laws and regulations that allow foreign entities and individuals to legally protect assets, reduce taxes, and obtain privacy. Our banking system is extremely secure if not always highly sophisticated, and our government and judiciary has traditionally been transparent and fair (in other words the USA respects the rule of law). There is nothing wrong with this.

A Tax Haven is ultimately a jurisdiction that caters to and encourages non-residents to use its laws and financial system to further their business purposes. If Tax Havens are bad, ipso facto, Non-Tax Havens must be good! The opposite of a Tax Haven would be a country that punishes and discourages foreigners from doing business inside its borders, lacks a stable government and respect for rule of law, and lacks a stable financial system. What would be the top ten NON-TAX HAVENS????? My sample list:

1 North Korea
2 Syria
3 Zimbabwe
4 Afghanistan
5 Saudi Arabia
6 Pakistan
7 Burma/Myanmar
8 Congo
9 Somalia
10 Russia

So let's all give a hand to the wonderful countries that made it onto my list of the Top Ten NON-TAX HAVENS!

And shame on you Forbes.

Transfer Pricing: The Good, The Bad, and the The Confusing

2010-07-01T06:33:00.000-07:00

“Transfer Pricing” refers to a business “transferring” some or all of it's profits or losses to another entity that is usually controlled by the business either as an outright subsidiary or as an affiliate relationship of some sort. This other entity is often located in another jurisdiction which sometimes results in beneficial tax treatment.

I suspect every global company practices “Transfer Pricing” to one degree or another, if only to insure that their subsidiaries are complying with local tax rules, regulations and agreements. In execution “Transfer Pricing” involves one company buying a product or service from or selling a product or service to another company that is either a subsidiary or an affiliate of the parent company. If a factory in Canada, owned by a Canadian subsidiary of the parent company, makes parts which are used to produce a finished product in a factory in Mexico, owned by a Mexican subsidiary of the same parent company, which is then sold in the USA by the parent company, it is only reasonable that the Canadian company makes a reasonable profit on the sale of the parts to the Mexican company, and that the Mexican company makes a reasonable profit when the finished goods are sold to the parent company. I would suspect anything else would result in severe tax problems with the Canadian and Mexican governments respectively since these government will expect the profits made by the subsidiaries to be taxed by those governments in which the subsidiaries are located. So the Canadian subsidiary pays Canadian taxes on the profits it made, the Mexican subsidiary pay Mexican taxes on its profits, and the parent company in the USA will only have to pay taxes to the USA on the profits earned as defined by the difference between the price the parent company paid the Mexican subsidiary and the final sales price in the USA.

Of course this example is a gross over-simplification. If you read anything technical about “Transfer Pricing” you are going to see some very confusing discussions about how to define “reasonable” profits. In the end the US taxing authority may still get its snout in the trough when the after-tax profits of the subsidiaries are repatriated or attributed to the parent company. All the same I believe it is a reasonable initial explanation of how “Transfer Pricing” can work. The subsidiaries are not necessarily set up to avoid or even reduce taxes, but merely to help clarify where and how to apportion profits in order to facilitate tax payments to the respective taxing authorities, and to avoid the possibility of double taxation of profits.

Now I am sure everyone who is reading this is already thinking of dozens of ways in which this simple mechanism designed only to apportion profits in order to more efficiently pay taxes on multinational transactions could be used to do more than just apportion taxes. “Transfer Pricing” can be and is used to significantly reduce the tax burden on multinational companies that do business globally. This is because taxation across national borders is not equal. Where to locate various transactions depends upon a number of factors, tax treatment being a significant consideration. The factory making the parts in Canada may have been located there because of a number of reasons: a reliable well educated workforce, access to raw materials, easy access to transportation networks, etc. But if the Canadian government offered tax incentives that resulted in significant tax savings, that must be considered as well.

Every country has its own rules regarding the taxation of business activities inside its borders. Some countries desire to lure businesses by offering tax incentives and other benefits. Other countries simply offer competitive advantages that are simply part of their regulatory structure. The companies themselves must take advantage of any benefit available since the competition will clearly do so. So there you have it. Governments competing with other governments to attract businesses that in turn compete with other businesses. A country or a company that ignores this global aspect of business competition is at a real disadvantage.

“Transfer Pricing” inevitably covers every aspect of the supply chain from sourcing of raw materials to final delivery of a finished good or service. Included within this structure is financing. Many large multinationals establish their own banking/finance operations in friendly jurisdiction which inevitably provide loans and/or factoring services to the various entities along the supply chain. The financing operations are almost always established in jurisdictions which either do not tax these types of transactions or tax them at a significantly reduced rate. And don't think for a minute that this involves only small “tax havens” in odd locations. Virtually every country on earth with a healthy financial sector competes for this business by offering tax loopholes to foreign companies that choose to park their money in its banks.

There are many myths associated with “Transfer Pricing”. One is that only large multinational firms can take advantage of this strategy. This is not true. There are many costs associated with establishing an effective and legal “Transfer Pricing” strategy from legal fees to added accounting burdens. For smaller firms the benefits may simply not justify the added costs. But for many small businesses the benefits do justify the costs, and failing to take advantage of them can prove even more costly since the competition will most likely take advantage and thereby reduce overhead and costs.

The best examples of smaller companies that can benefit from “Transfer Pricing” are businesses that are already involved in global transactions, sometimes without fully realizing the significance. The Internet has accelerated the growth of such situations dramatically.

Let us take as an example a small business I came across a few years ago in Arizona which hired software engineers located outside the USA to write programs which were then sold to end customers in the USA and in other countries. The business was structured as a US corporation and paid US taxes on 100% of the profits from all sales of the company. Under US tax rules, it was totally appropriate for the US company to establish a wholly owned subsidiary to manage the day to day issues regarding the production of the software by the non-US workers and the sales of the software to other countries. This wholly owned subsidiary was ideally located in a jurisdiction which did not tax these transactions, and the US company bought the product at a reasonable fair market wholesale price for resale inside the USA. The US company only had to pay taxes on income that was earned from sales inside the USA. The profits from the sale of software of the foreign subsidiary outside the USA was not taxed by the USA.

The USA can also serve as an ideal location to establish your subsidiary operation. I have represented a number of mid-size non-US companies that have used the USA as a jurisdiction for “Transfer Pricing”. The examples vary accordingly to the nature of the businesses, but not in the basic nature of the transactions. There are essentially two strategies that are employed: 1. The companies buy or sell a good or service for resale in their home market or abroad and use a US based company as a middle man, or 2. The companies finance their operations in their home country through loans issued by a US based company. If properly structured, the US companies pay no taxes on income that is not derived from “US Source Income”, and the foreign companies do not pay income in their home countries on the income that was earned by the US companies. All legal and ethical (I have had some people argue that these strategies are not ethical even though they are legal; I simply cannot understand this reasoning. How can it be unethical to structure your business in a way that legally reduces your overhead, in this case taxes. Would it be unethical to come up with a legal method of reducing your rent, or your cost of raw materials, labor costs, energy, etc.?)

On the one hand “Transfer Pricing” is as simple as simple can be, you attribute profits or losses to another company in another jurisdiction and reduce your own profit accordingly, but on the other hand the actual execution can be complicated if only because of the fact that every business is a little different, and each strategy must be tailored to fit the particular needs of the business. Ultimately it depends upon the business. Some businesses are very easy to structure, and for others it is simply not worth the effort.

I encourage those businesses that might benefit from legal and ethical business planning to contact me so that we can further discuss your options.

How to Use Your US Limited Liability Company to Buy and Sell Real Estate in the United Kingdom

2010-06-25T09:09:00.000-07:00

For the UK citizen who would like to reduce or eliminate the capital gains on investment properties owned in the UK, the US Limited Liability Company (hereinafter US LLC) is an ideal tool. For this purpose, the US LLC must be owned by a carefully structured International Privacy Trust. If structured correctly, the International Privacy Trust will act as an ideal asset protection and probate avoidance tool as well as a tax reduction entity par excellence. The International Privacy Trust is important because without it, there would be a risk that the UK tax authorities would consider the structure a sham or fraud established solely for the purpose of avoiding taxes. With the trust, it is simply a part of a valid and useful effort to protect assets and avoid probate. The fact that there are also tax benefits are “merely incidental”.

The primary benefit of the US LLC is in reducing and/or eliminating capital gains taxes in the UK. The combination of the UK tax laws and the tax treaty between the US and the UK means that the US LLC would pay no capital gains taxes, and would have reduced withholding requirements on real property owned inside the United Kingdom. Since the US LLC has no credit in the UK (or anywhere else) there will need to be some careful planning when it comes to arranging financing. There are essentially three ways of transferring property into a US LLC:

1. For a property that has been paid-off simply sell it to the US LLC at advantageous terms. (Remember not to be too greedy -- It is important that the price be a “reasonable” price.) Then when the US LLC decides to sell the property, the capital gains will be zero.

2. Properties that have a current mortgage lien will require a bit of extra attention. Most banks in the UK have “offshore” branches in various tax havens surrounding the UK (usually on a small island off the French coast!). You should contact your banker and let him know that you have a potential buyer who is from the USA. Let the banker know that you really want to sell the property, and ask what needs to be done in order to arrange a transfer of the loan or similar financing arrangements for the US company. Although every bank is a different, and some may simply say they don’t want to handle non-UK business, most banks will ask that you guarantee the loan, and, in turn, you will agree to do so in exchange for a vendor’s lien of your own on the property. This is a fairly common type of transaction when you have a highly motivated seller and a buyer with little or no credit. It is sometimes referred to as bank assisted owner financing. This will most likely need to be the mode of operation until the US company establishes its own credit and banking relationships.

3. When buying properties from unrelated third parties, it may be done more or less as described above in item 2 with the UK client buying the property, then flipping it over to the US company at a small profit, or you can agree to enter into a joint venture with the US company, and agree to own the property in joint tenancy. Again, your personal credit will be the anchor that secures the loan. Over time, you may be able to sell (at a reasonable price) your interest in the joint tenancy to the US company, effectively placing 100% of the property into the US company, and out of the capital gains tax. Even if it is never possible to have the US company buy out the joint tenancy interest, this system will still result in a 50% reduction in the capital gains tax.

As you can see, the use of the US LLC, when combined with the International Privacy Trust, as an owner of UK real estate can result in some very real capital gains tax savings. However, there may be other ways of using the US LLC to reduce the taxes on the operating expenses of the properties. Although the rental income of the real property in the UK will result in taxes being due regardless of who owns the properties, these rentals should be offset by the mortgage expenses. Also, it may be possible to further reduce these taxes by careful use of the tax treaty between the US and the UK by characterizing some of the income going to the US LLC with an eye to gaining the reduced tax treatment found in the tax treaty for some types of income. This will depend upon individual circumstances, and will vary from person to person, and project to project, but it is possible.

Using a US LLC to own property in the UK can dramatically reduce your capital gains taxes. It will also provide excellent asset protection, probate avoidance, and added privacy. No one needs to know that you have any relationship at all with the US company, or you can structure a relationship that satisfies you by having the US company retain you to perform management services as you like. The same company that helps you reduce your UK capital gains could also provide an excellent means of obtaining competitive insurance policies and other investments outside the UK.

NOTE: This system would NOT be appropriate for investing or doing business in the USA itself. Since the US taxing authorities would disregard the LLC, it would be the International Privacy Trust that would be treated as the ultimate tax payer, and the US tax treatment of offshore trusts would be inadvisable. For investments in the USA, it would be better to simply have direct ownership of the LLC by the UK citizen, in effect taking advantage of the same tax treaties described above, but in reverse.

Introduction to Connex International Services

2010-06-08T12:16:00.000-07:00

I would like to introduce you to Connex International Services. Connex International Services helps foreign individuals and businesses to legally and ethically do business in the United States of America. We establish companies, trusts, and bank accounts and assist in various methods of doing business in the United States of America. Over the years we have discovered many different methods to assist our clients depending upon their needs and resources. We can assist a small business person who simply needs to establish a bank account in the USA to the more complex needs of tax planning and asset protection for wealthy individuals and more complex businesses. Connex International Services is not an investment advisor.

We have developed various methods that use Limited Partnerships from the United Kingdom to establish effective global structures that assist in tax planning while avoiding the stigma associated with "tax havens" located in often backward third world nations.

We can also establish US Limited Liability Companies (LLCs) which are very effective when you need to establish full service bank and brokerage accounts and a business presence in the USA while avoiding unnecessary tax liabilities.

Finally, more recently, we have developed a method to establish a US bank account using a Bahamas Trust. This system has some limitations compared with the UK LP or the US LLC, but is less expensive and often provides adequate access to US banking and internet commerce sites such as Ebay, PayPal, etc.

Please go to http://www.connex-services.com/ for more information.

About the International Privacy Trust and Protectors

2009-05-23T07:52:00.000-07:00

I often advise clients to establish an International Privacy Trust from the Bahamas as part of their asset protection and tax planning plans. I get a lot of questions about this, and I believe there is a lot of confusion about it.

The International Privacy Trust is usually used to own another entity in a more private and confidential manner. It is also useful in establishing a separate taxable entity and to provide advanced asset protection if certain steps are taken to insure that the trust is not treated as an alter ego of the client. This is a real advantage since the Bahamas treats these entities as non-taxable as long as they earn no active income in the Bahamas.

The Trust itself is established by The Squire Organization, LLC, (or some other non-US entity) which serves as the initial Trustor, Trustee, Beneficiary and Protector of the Trust. Of the four positions, the Protector is the most important. The Protector has the power to remove and replace the Trustee, and, most importantly, change the Beneficiary. After the trust is established, the old Protector resigns and appoints a new Protector(s) . The Client has the option of naming himself or some other trusted individual as Protector, or name more than one Protector. He or she can also change the Beneficiary at that time or at a later date.

The new Protector is now effectively in control of the trust and the account, however the client is not listed anywhere in the Trust formation documents. The Client can maintain control over the Trust without becoming either a Trustor, a Trustee or a Beneficiary.

In order to maintain the advantageous tax benefits of the trust and the asset protection benefits, it is often necessary to appoint more than one Protector, particularly in the United States, the United Kingdom, and other jurisdictions which can trace their laws back to English common law. This is because in these jurisdictions the "power of appointment" (that is the power to name a beneficiary), and the power to remove and appoint a trustee creates an alter ego situation, and the courts treat the trust like a grantor's trust. In order to avoid this designation you need to have at least three Protectors with the client being one of the three. The other two cannot be immediate family, but can be trusted friends and associates. It is often wise to appoint a professional such as an attorney since attorneys often have a legal duty of loyalty to the client that is actually enforceable in court. In “Code” jurisdictions it may not be so important to name at least three Protectors since the “power of appointment” is considered an option contract that is not effective until exercised. All the same caution would suggest that naming three Protectors could be a wise choice even in “Code” jurisdictions.

It is also important to maintain a non-US Trustee since naming the wrong person as Trustee could have negative tax consequences, and would reduce the asset protection aspects of the Trust. Please feel free to contact us if you have any questions.

Yet another ridiculous ruling from the Peoples Republic of California

2008-08-11T07:55:00.000-07:00

I am not a big fan of noncompete agreements unless they really are entered into with consideration (that is both sides understood and receive adequate compensation for the terms, and there is no duress or unfair influence). California seems, according to Mr. Ha (no relation), to have not only invalidated this particular noncompete agreement, but to invalidate ALL noncompete agreements. Now it is not uncommon for a court to strike down a noncompete clause in a particular agreement as being unfair, entered into under duress, or without adequate consideration. But to simply declare that all such agreements are illegal.... well it just takes my breath away!!!! What an act of over-zealous judicial behavior that we have come to expect from the Supreme Court of the Peoples Republic of California. It would have been so easy to have declared this particular contract unenforceable without setting aside the entire legal precedent regarding employment contracts. But that is the wacky world of California jurisprudence! Expect the unexpected!

I advise all my clients TO NEVER DO BUSINESS IN CALIFORNIA!!!! It has become a communist anti-business jurisdiction where only lawyers and politicians can make a living (oh and I guess you have to include large corporations that believe they are still able to corruptly influence corrupt politicians). Go to Tijuana where the crooked police and politicians will at least stay bought (at least until they are gunned down in the street)! Best of luck to those of you who are stuck on the Left Coast. Clearly the clock is ticking and it is only a matter of time before some court in California changes the law in reference to something that effects your business to your profound detriment.

********************************

California Supreme Court says noncompete agreements are illegal
Anthony Ha | August 8th, 2008

California’s highest court has ruled unanimously that a common feature of employment contracts called a noncompete clause is illegal under state law and has been since 1872.

Basically, a noncompete says a company’s employees can’t work for or start a competing company, usually for a certain period of time. The rationale is that employees shouldn’t be able to take a company’s secrets and put them to use for someone else.

Apparently, the court’s decision, made yesterday, doesn’t just stop employers from including noncompete agreements in future contracts; it also applies to noncompetes signed in the past.

The ruling comes in a suit filed by tax manager Raymond Edwards II against former employer Arthur Andersen, an accounting firm. After Andersen shut down in 2002, Edwards tried to get a job with a subsidiary, but to do so he needed to be released from his noncompete agreement. Andersen would only agree to the release after Edwards signed away his right to bring future claims against the company; Edwards refused and filed suit. Now, the Supreme Court has ruled the noncompete was illegal.

This case is based on California law, so it doesn’t apply in the many other states that allow noncompete agreements. And since it’s a question of state law, this ruling is probably the final word.

One of the most prominent recent cases of a former employer suing a startup’s founding team was Iconix’s suit against former employees Lance Tokuda and Jia Shen, who created slide show site RockYou. In that case, which ended in a settlement, the allegations weren’t limited to a simple noncompete violation, but also included accusations of intellectual property theft.

Info on USB Backup Sticks

2008-07-24T07:59:00.000-07:00

I know this really has nothing to do with exciting business stuff, but if you are like me, technology is a fascinating but often confusing thing. Such as how to back up my computer? I don't want to back up everything. I just want to back up the good stuff onto a USB stick, and I would like to push one button to do it, not root through my file directory like some pig snuffling for truffles. Well USB sticks are so cheap that there is no reason you should not have a pocket full of them for various purposes. But for me I just wanted one that was big enough to hold my stuff, and a program that would sync my stuff.

I went to Micro-Center, a local computer warehouse, and bought a 4 GB stick for about $13.00. I then went to http://app-stick.com/ and found some fairly useful programs that I could load on the stick, and that would work from the stick. In theory these programs will work on any windows computer! I then found a really nice free sync program called Allway Sync 'n' Go (http://allwaysync.com) that gave me my push button
syncing/backing up.

Now I know people who have a back up stick for each file. I actually think that is a little overkill, and maybe even a security risk unless you encrypt everything. I know you can load self-booting Linux OS on a stick so that you can have a Linux computer without mucking up your Windows computer. This is actually quite handy at times because I like Linux apps for some things more than windows apps. But I need Windows
for some programs that simply do not exist in Linux. As the sticks get bigger and cheaper, I suspect it will be possible to build entire devices that essentially have plug and play operating systems. If you want Linux, you plug in your Linux stick. If you want Windows, you plug in your Windows stick. The computer itself will just be the hardware you need to get the stuff to work. That is about all a computer is now, but with less flexibility. I think it would be very cool to have a small light inexpensive device that used small modules to do what you wanted.

Take care.

--
Alexander J. Hay III
International Business Consultant

SKYPEIN (tel): 01-281-968-0764; SKYPE: alexanderhay
email: alexanderhay@post.harvard.edu
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blog: [http://squireorg.blogspot.com/]

ASSET PROTECTION, TAX REDUCTION AND IMPROVED FINANCIAL PRIVACY.

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Troubling Events

2008-05-21T08:13:00.000-07:00

I generally try to resist the temptation to use my blog as a soapbox to express my political beliefs and philosophical ideas (particularly since I doubt anyone really too much cares what I think). Instead, I prefer to use it as a tool of commercial exploitation and shameless self-promotion. All the same some events have occurred that simply will not leave me in peace. I hope that discussing them here (even if it is a monologue heard by no one) might in some way help to expunge the irritation from my psyche. That way I can get on with the important business of lining my pockets by assisting my clients to protect their assets, reduce their taxes and obtaining greater financial privacy (there I got the plug in!).

Snipes Hunting?

The first event that has troubled my consciousness is the Wesley Snipes affair. This sorry sham of justice has all the telltale signs of a Stalinesque Show Trial gone bad. From the results of the trial, it would seem that the judge and the prosecutor had already decided upon the guilt and punishment of Mr. Snipes before the trial had even begun. Only the jury did not cooperate.

Snipes was charged with numerous felony counts of tax evasion in addition to misdemeanor charges based upon his failure to file his tax returns, but the jury found Mr. Snipes innocent of the more serious charges and only guilty of the misdemeanor charges of failure to file. It would seem that the jury believed that Mr. Snipes was simply a good-natured knucklehead whose only crime was foolishly deluding himself that the silly arguments propounded by some very convincing tax protesters had merit. Although his actions were clearly not appropriate, the misdemeanor charges, for which Mr. Snipes was found guilty, are only slightly more serious than running a stop light, and clearly not as serious as driving under the influence.

Taking into account Mr. Snipes' spotless criminal record and outstanding reputation in the community, it is really very difficult to understand how the judge could sentence Mr. Snipes to three years in jail when such a sentence is usually reserved for people who are actually convicted of the more serious charges, not found innocent. It would seem that the judge simply did not want to stray from the predetermined script. So much for an unbiased and objective judiciary.

Gay Marriage in California

The next issue that I found disturbing is the recent California Supreme Court case "overturning" a ban on single-sex marriages, declaring that the "right to marry" must be extended to gay couples. Without getting into the complex moral and philosophical arguments about the effects (or lack thereof) that gay marriage might have on a society, I think the real shocking issue in this case is that the California Supreme Court overturned a fairly modest law enacted by the State of California through an authorized referendum of the people defining marriage to be only permissible between two consenting adults of the opposite sex.

Normally when a court overturns a law, there needs to be some basis other than the personal beliefs and prejudices of the judges, but it is very hard to find more than that in this case. By ruling that gay couples have a right to marry, the court is essentially stating that gays somehow have a special right to legal protections that non-gays do not deserve (polygamy based on religious convictions is still banned????). In addition, the court is essentially saying that the State of California either does not have the right to regulate who can and cannot get married under such cases, or that the State's right is simply insignificant and unimportant.

There is no valid precedent for a validly enacted law to be overturned in such an arbitrary manner on this issue. Comparing gay marriage to the civil rights battles of the 50s, 60s and 70s is silly and demeaning. The US Constitution, by and through various clauses, clearly protected people from racial discrimination, the USA fought a long and bloody civil war to remove the stain of slavery of the nation, and there is a long tradition of Western Thought that supports the proposition that "All Men are Created Equal" (it is in fact the basis of our national existence). No where is there even a hint of law or tradition that supports the idea that gays have an inalienable right to marry, and in the absence of a legislative decision on the part of the electorate to give them such a right, this decision is nothing more than an arrogant usurpation of the rights of a people to control their own society.

Now I have a question to ask: If the state does not have the authority to proscribe against non-Traditional gay marriages between consenting adults, does the state have a right to proscribe against polygamous gay marriages? On what basis could the State of California restrict more than two gay individuals from marrying each other? Since there is no historical, traditional, religious or philosophical basis to demand that two gays be given a right to marry above and beyond the legislative actions of the State of California prohibiting such union, how can the same court say that marriage must be limited to two gay individuals????? There is no record or tradition of gay marriages being sanctioned by the state or by religion. But many religions have at one time or another tolerated and approved of polygamy. How can the court impose a right to gay marriage over the wishes of the electorate, societal tradition and legal precedent, yet restrict gay polygamy??? I would suggest that it cannot.

Families or Freak Shows?

Finally comes a tale of tragedy as much as governmental abuse: The CPS raid taking over 400 children away from their families. Based on a fraudulent complaint of child abuse (a woman claiming to be a 16 year old girl impregnated by an older man and being held against her will), the Texas Children's Protective Services stormed into a religious group's compound and took away all the children living there.

As time goes by this story becomes more and more troubling. The only person who has so far been charged with a crime is the woman who made the initial charges of child abuse. It also seems likely that the authorities knew that the call was baseless prior to raiding the compound, yet they proceeded anyway. It appears that they knew that the man being accused of child abuse had not been in Texas for over 20 years. Some of the "minor pregnant girls" being held against their will turned out to be in their twenties. This however did not stop CPS from taking away the newly born infants from their mothers.

Recent comments by CPS suggest that the real issue has nothing to do with actual abuse so much as religious beliefs that the CPS finds unacceptable. The FLDS seems to believe that polygamy is a valid basis to form a family. However, it seems clear that they have gone out of their way to avoid violating the laws against polygamy. Perhaps they have relied on "mere technicalities" by not officially marrying their additional "wives", but it is just such technicalities that mean they are not guilty of any crime. It appears that they have decided that until such time as the law reflects and accommodates their religious beliefs, they will modify their actions to accommodate the law.

Time will tell what happens in this case. The State seems to be very reluctant to release any information on the case, and that information that is coming out is making their case look worse and worse. Psychologists retained by the state to evaluate the children concluded that they are well balanced healthy children, and that the only harm that has been done to them is to separate them from their families. These consultants were of course discharged. But evidence may yet emerge concerning child abuse, and criminal charges may yet be filed against perpetrators in the group. But in the absence of such evidence, a question must be asked: Is this really about "protecting the children" or just about religious persecution? No doubt these people are weird, and they have weird beliefs. But to take a family's children away because of its religious beliefs, not the actions of the individuals, is against everything that this nation has ever stood for.

Who Gives a Damn?

The thing that I find most troubling and discouraging is the utter lack of interest displayed by the American People. It is easy to blame the media, but the members of the Media are people who have to make a living just like the rest of us. Their job is to entertain the American People and sell advertising. If the American People do not care about Judicial Abuse and Illegal Governmental Intrusion, then why should the media be obliged to force it down their unwilling throats? Particularly when there is American Idol to watch, or something or other about bizarre suburban housewives, or even has-been celebrities dancing???

It is an old adage that people deserve the government that they get. If the inverse of that is true, the apathetic attitude of most Americans requires that the government Americans are going to get is going to only get worse and worse. But who cares? As long as they keep adding more channels to the cable system, everything is ok.

In Praise of PayPal

2008-05-20T03:46:00.000-07:00

I thought I would give you an idea of how PayPal can be of assistance to you. When most people think of PayPal, they think of Ebay, usually when they are paying for something on Ebay. This is because PayPal is owned by Ebay and is the method used to pay for what you buy there. Thus, PayPal is not only useful, it is indispensable if you are selling or buying on Ebay.

However, PayPal offers many other services that are quite remarkable. In addition to providing an easy and convenient way for buyers to pay you on Ebay, PayPal offers a very nice Mastercard Debit Card that can be issued in the name of non-US residents (if a proper structure is being used to set it up). This card is a real advantage because it acts like a regular credit card when used. This is nice if you are trying to reserve or check into a hotel; as you may have noticed normal debit cards will not work. Even if you never use PayPal for anything else, this feature can be very handy since it allows you to check into a hotel and then when you leave you can pay with any method you like.

Another very nice feature of PayPal is the ability to accept credit cards from clients. This feature is becoming more robust and professional all the time including sophisticated protocols that allow you to integrate the PayPal payment system with your website, or simply issue email invoices that are sent directly to the client. The best part is that the buyer does not need to be a Member of PayPal (although of course PayPal encourages this).

Finally, a feature that I have only recently discovered, PayPal gives the user the ability to manage and maintain numerous foreign currencies. For a long time now I have been searching for an inexpensive convenient option for my clients who wish to maintain balances in Euros, British Pounds, etc., but I have been unable to find such an option. But it turns out it was under my nose all the time.

PayPal is necessary if you are using Ebay to either buy or sell. It is incredibly useful if you want an additional credit card that is based in the USA, wish to accept credit cards, and want to maintain various foreign currencies. The best part about it is that it is free.

Well almost free. PayPal does not charge you anything for all these services, but I charge $150.00 to set it up properly so that everything is correctly linked to your asset protection structure!!! I decided to add this service because I had several clients try to do it themselves, and they made some rather modest errors that resulted in huge delays. I ended up having to get involved to fix these PayPal accounts, and it ended up taking much more time since it is always easier to do something right the first time rather than it is to correct something that was done incorrectly.

This month I am offering a small gift to new clients: For anyone ordering a new structure by May 31, 2008, I will throw in a fully functional PayPal account fully setup and linked to the new system.

Remember our goal is to protect your assets, reduce your taxes and provide you with greater financial privacy. PayPal, if properly integrated into your asset protection structure, can add convenience to your system. Please visit: http://www.squireorg.com/ or http://www.TaxHavenUSA.com/

2008-05-14T11:12:00.001-07:00

wpf.pdf

Little Time Left to Fix Your Belize Trust

2008-05-07T10:04:00.001-07:00

TO: Clients with Belize Trusts

Last year I notified you that I had bad news regarding a change in Belize trust law that will have a negative effect upon your asset protection and tax planning structures. Last summer Belize changed its trusts laws requiring that all trusts must now register with the Belize authorities by filing documents that disclose confidential private information about the trust, paying a one-time fee, and maintain a Registered Agent and Registered Office. One of the really nice aspects of Belize trust law was that the trust could remain private since it did not have to be filed with the Registrar, it was not necessary to incur any expenses in filing the trust, and there was no need to maintain a Registered Agent and Office. To make matters worse, Belize now made it a crime for anyone who was not registered with the Belize authorities as an International Financial Services Provider to participate in just about any aspect of trust formation and management.

There is some good news. You have one year from the date of the enactment of the law to either comply with the law or transfer your trust to another jurisdiction. We advise you to transfer your trust to another more friendly jurisdiction; The Commonwealth of the Bahamas.

If you wish to stay in Belize and comply with the new rules, then please contact us as soon as possible, and no later than May 31, 2008. Since The Squire Organization, LLC does not intend to register with the Belize authorities, and does not want to be in any way liable for violations of some of the most vague and poorly worded rules we have ever seen, we are gong to have The Squire Organization resign as trustee from any trust that intends to stay in Belize. We can forward you to a very competent firm that will be able to help you file the trust, pay the fee, appoint a Registered Agent and Office, and obtain a replacement trustee for your trust.

If you wish to take our advice and transfer your trust to the Bahamas the process will be very quick and easy. Every trust created by The Squire Organization, LLC contains terms that allow the Trustee to transfer the jurisdiction of the trust if the Trustee believes it is necessary. All that will be required is a brief amendment/supplement to the Trust by the Trustee changing the jurisdiction and the law of the Trust. Although the Bahamas does not require that the trust or even a copy be filed with the Registrar, it does require that a $50.00 fee be paid. That is it. Belize trust law used to be almost identical to the Bahamas (since Belize essentially copied its rules and regulations from the Bahamas and the British Virgin Islands, and then made rather modest improvements). Whereas recent changes in Belize law has made using trusts in Belize much less advisable, recent changes in the Bahamas actually serve to make the Bahamas a more friendly location for a foreign trust. The Bahamas has stated clearly that trusts of the type used by The Squire Organization are acceptable and appropriate by clearly stating that Protectors may have the power to appoint and/or change beneficiaries of a trust (in the USA and other “Common Law “ jurisdictions this is referred to as a 'power of appointment' -- in Belize this power was never stated in the law and as a result we occasionally found local Belize banks confused by these terms). In addition the Bahamas has clearly stated that foreign firms may act as trustees of foreign trusts as long as the trustee is not acting in the capacity of a “bank or trust” in regards to the day to day management of financial assets. There are other recent changes to the Bahamas rules and regulations that make the country more advantageous, but I suspect most would find these changes tedious and boring. All the same I find them very encouraging.

The Squire Organization, LLC will transfer your trust over to the Bahamas for a one time fee of $300.00 including all fees and expenses incurred in the transfer and registration; everything else will remain the same. I think this compares very nicely to the costs that will be incurred if you stay in Belize: $100.00 government fee, fees and costs for transferring and filing the original trust document ($100.00 or more), cost of Registered Agent and Office (perhaps $100.00 or more each year), cost of appointing a new trustee (probably $100.00 in documentation fees plus annual cost of $100.00 or more).

If you wish for us to transfer your trust please let us know by the end of this month. If we do not hear back from you by May 31, 2008, we will resign as trustee and await further instructions on what you need us to do regarding your trust. Unfortunately for those of you who have not responded to prior requests, you now have little time to make other arrangements since the deadline is in June of 2008.

All this aside, we still believe Belize is a good jurisdiction in which to form companies and we intend to continue to use Belize IBCs in connection with our various asset protection and tax planning strategies.

Thank you for your continuing patronage and support.

Sincerely,

Alexander John Hay
Senior Consultant

Government Power to Seize Assets -- Forfeiture

2008-03-11T04:13:00.001-07:00

Asset Forfeiture is the term that is used to describe how the government can deprive people of their property without giving the property owner full due process protection as is required by the US Constitution. This is done by attacking the nature of the property, not the property owner. If a piece of property is associated with some criminal activity (or more likely is SUSPECTED of being connected with a criminal activity) the piece of property can be seized by the government, and if the property owner does not prove bona fides of ownership, it is forfeited to the government. Please note that the property owner does not need to be charged with a criminal offense. The property itself does not even need to be linked to criminal activity by a preponderance of the evidence, let alone beyond a reasonable doubt. There needs only be a suspicion which then allows the government entity to seize the property. It is then the obligation of the property owner to prove a negative: that the property is not associated with any illegal activity. Not an easy job.

Sometimes these forfeitures have to do with cash and cars. But they can also involve more valuable properties like buildings. Several years ago a Federal Prosecutor in Houston, Texas, seized an entire hotel from the lawful owners because the hotel was being used by drug dealers and other "evil doers" to carry on their criminal activity. What did the hotel owners do (or fail to do)? They failed to raise prices to the point that the hotel would no longer be competitive. The Prosecutor stated, "We're not accusing them of participating in the illegal activity, we're accusing them of facilitating it by not taking steps to prevent it." Just think if you owned an apartment complex, and you suspected tenants of criminal activity? What are you supposed to do? You can't kick the tenants out for being "funny looking" or based on some other discriminatory practice. No no no! You'll be sued for that; maybe by the same Federal Prosecutor for violating someone's civil rights!

The problem I see with most of the recent changes in the laws (even those before 9/11) have to do with vagueness and breadth. When laws become so vague that it is difficult to define them, or when they cover such a broad range of activity as to include virtually everyone, you make everyone vulnerable to being defined as a criminal. When the law makes everyone and everything into criminals, the only real issue is DISCRETION IN PROSECUTION. That means the government can go after just about anyone and everyone if they really want to, so the only real issue is who the government wants to go after. As long as you are a good boy and girl, and follow the party line, you have nothing to fear. Just do what you're told, and you'll get to keep what you have... MAYBE.

Very frightening stuff.

But there are solutions that involve being pro-active. I like to compare the government to a bully. When a big bully is out to beat you up, there may be no one solution that will save you, but sitting quietly and waiting for the bully to come and beat you up never works. Running away is good, if you make sure you always have someplace to run. Defending and protecting yourself might work too if you are able to stand up for yourself, as long as you obey the law regarding weapons, etc, and don't get yourself beaten up even worse if you cannot effectively stand up to the bully. Getting others to stand by you side usually helps too; bullies hate crowds and attention. Maybe you need to think about being a little sneaky -- the bully can't beat up that which he never sees and cannot find. All these strategies can be translated into everyday life and business solutions.

Personally, I suggest being a little sneaky. If the bully cannot find your lunch money, he may lose interest in beating you up every day. I know that is the case with most plaintiff's lawyers, and the government attorneys are essentially the same; they are looking for a quick easy score. Bullies are notoriously lazy. They generally focus on the low hanging ripe fruit. Making yourself a little less obvious a target is an ideal way of avoiding the bullies. See Wealth Preservation Fortress® for a simple way to provide yourself with asset protection and privacy.

I hear a lot people who are so sheepish that they think that even taking legal steps to protect themselves and their property, to obtaining some modest level of privacy, and to making it more difficult for the bullies of this world to find you is somehow "illegal" or even worse "unethical". I really just don't know what to say to such people. How can it be wrong to thoroughly and carefully follow the rules set out for everyone, and as a result play the game a little better???? Isn't that just the losers and bullies of this world complaining about how the winners keep on winning???

Best of luck, and keep on fighting the good fight. Just remember that there are ways out of almost every problem if you are diligent and careful.

The End Is Nigh For Liechtenstein

2008-03-07T04:04:00.000-08:00

The End Is Nigh For Liechtenstein -- But the end of Tax Planning? I
doubt it. Merchants have been using clever (and hopefully legal) means
to reduce their taxes since biblical times, and probably earlier. But
this may mean the end of the somewhat dodgy methods Europeans have
used to avoid taxes. While the OECD countries (which include most Western
Countries) have been pointing their fingers at impoverished
islands in the Caribbean, they have quietly tolerated totally
fraudulent activities in their own backyards.

IT MAY BE TIME TO THINK ABOUT "LEGAL" TAX PLANNING!!!! Running to some
little principality in the mountains and setting up illegal accounts
is really not very smart. There are legal ways of reducing your taxes,
protecting your assets, and obtaining better financial privacy.

see:

http://www.TaxHavenUSA.com/

*******************
And now here is the article:

Tax Havens
The End Is Nigh For Liechtenstein
Parmy Olson 03.04.08, 1:00 PM ET
Forbes

Everybody else is doing it, so why shouldn't I? That's often been the
reasoning of the super rich for stashing their money into tax haven
countries.

But the idea of living in a country and not paying the same proportion
of tax as most other citizens, even if you're doing it legally, is
getting a bad rap, and not least because of what's happening to people
who put their money into Liechtenstein.

The tiny Alpine state sandwiched between Switzerland and Austria has
become the center of a media storm lately, after German authorities
began raiding the homes of citizens whom they suspected of using
Liechtenstein to funnel money to places like Switzerland to avoid
paying taxes.

Go to Liechtenstein, and you'll find little in the way of banking
infrastructure. On any given weekday, the mountainous principality can
seem almost dead with inactivity. Its allure to the super wealthy is
the promise to be one of the world's best keepers of secrets.

So secretive is Liechtenstein that it has become one of only three
countries that do not comply with information-sharing rules handed
down by the Organization for Economic Cooperation and Development
(OECD). But that reputation for secrecy is now under pressure from an
official German investigation into the activities of 1,400 people who
kept their money in LGT Group, one of Liechtenstein's biggest banks
and one that is also controlled by Liechtenstein's royal family.
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The probe was launched after a mole from the bank leaked client
details to German authorities: 600 clients were German, while close to
50 were from the United States. Relations between the two countries
are, not surprisingly, very tense at the moment. (See: "The Robin Hood
Of Taxes" ).

Now, at least 11 countries, including France, Britain and the United
States, are joining Germany to combat tax evasion through
Liechtenstein. And other tax havens, including Luxembourg and
Switzerland, are also being targeted, with the British government
reportedly targeting the Mediterranean tax haven of Monaco.

Some are saying that this is a tipping point for Liechtenstein, since
so much of its business is based on a perception of secrecy. "If
people lose confidence in banking secrecy in Liechtenstein, then
Liechtenstein is dead in the water," said Richard Murphy of Tax
Research, a British-based consultancy. "I believe it's very likely
that people will start pulling their money out."

How might someone put money into Liechtenstein in the first place?
Here's one dubious way: Imagine a company executive has just received
a bribe. In order to avoid getting found out or even paying taxes on
the bribe, he could set up an ultra-secret foundation in a
Liechtenstein bank like LGT Group. The trust would be established by a
local Liechtenstein lawyer who wouldn't be required to put the
executive's name down as the trust's owner.

The next step would be for the dodgy executive to register a "private
company" in another offshore tax haven like the British Virgin Islands
or the Cayman Islands, under the ownership of his new trust in
Liechtenstein. That new company would simply then have to invoice
something like "services with regards to consultancy" to the company
that originally paid the executive his bribe, giving it a veneer of
legality.

This is a classic backhand move that allows corporate corruption to
look like legal transactions. It's perhaps hardly surprising that,
while there are 800,000 companies registered in the British Virgin
Islands, only 10,000 actually trade there.

What brought on the sudden uptake by authorities from European nations
to crack down on tax evaders so suddenly and vehemently? Murphy of Tax
Research senses a change in the zeitgeist. Middle class citizens are
becoming frustrated that the wealthy are saving millions while their
own taxes seem to get frittered away by governments, and pension
investments are gambled away by collateralized debt obligation traders.

That is feeding through to politicians. Just take London. A large
number of non-British billionaires live there because they are legally
not required to pay tax on their earnings outside of the United
Kingdom. Yet Britain's reputation as a quasi tax haven is starting to
become a political liability, hence the government's recent decision
to crack down on non-domiciled, rich foreign residents who were
benefiting from this loophole. (See: "Britain: Bye Bye, Billionaires?")

Liechtenstein is adamant that it has not done anything wrong; its laws
on tax and disclosure are simply different from Germany's and
everywhere else's, and that is that.

But right or wrong doesn't really matter to those who want watertight
confidentiality. And with tax investigators now banging on the doors
of Switzerland and Luxembourg, it's likely that the most far-flung tax
havens--think Singapore--will come to benefit from all this.

On Laws and Corruption

2008-02-25T15:28:00.001-08:00

"Corruptissima re publica plurimae leges."
"(The more corrupt the state, the more numerous the
laws.)"
-- Cornelius Tacitus (55-117 A.D.)

"There's no way to rule innocent men. The only power
any government has is the power to crack down on
criminals. Well, when there aren't enough criminals,
one makes them. One declares so many things to be a
crime that it becomes impossible for men to live
without breaking laws. Who wants a nation of
law-abiding citizens? What's there in that for anyone?
But just pass the kind of laws that can neither be
observed nor enforced nor objectively interpreted and
you create a nation of law-breakers."
-- Ayn Rand
(1905-1982) Author "Atlas Shrugged"

When Going "Offshore" Should be Avoided

2008-02-07T10:26:00.000-08:00

Many people come to me saying that they want to go offshore to protect their assets and reduce their taxes, but are often not ideal candidates. I try to explain that I do not help people go "offshore". What I do is help people protect their assets, reduce their taxes, and obtain greater financial privacy, all in a legal and ethical manner. Offshore structures are just some of the tools that sometimes come in handy to reach these goals.

For many people, "Going Offshore" is not just the wrong tool to use to accomplish these goals, but for many it is a very dangerous and unwise tool. As I described in my prior article, "What is Jurisdiction?", the point of going "offshore" is to take advantage of another jurisdiction that may provide more friendly laws and regulations in regards to taxes, asset protection and privacy.

However, just setting up a foreign company and then doing business inside the old jurisdiction will not work. You need to be in a situation where some or all of your business can be successfully transplanted to that new more friendly jurisdiction. Examples of "offshore" friendly businesses are: importing/exporting, software design (particularly if you are already using offshore technicians or have significant offshore clients), Internet services, financial services, entertainment industry, and other types of intellectual property. If you do not have a business that lends itself to "going offshore" then it would be wise to focus on more cost effective domestic alternatives.

If what you are doing is entirely defined as "US Source Income" (that is you are making, providing, storing, and/or delivering a product or service inside the USA from resources located inside the USA) then there is very little reason to "go offshore". Setting up a foreign company that is going to do business inside the USA will require the foreign company to submit itself to the laws and tax regulations of the jurisdiction. Far from reducing taxes and protecting assets, this often results in some very negative tax consequences and subjects otherwise safe assets to US liabilities. It is for this reason that most non-US companies and investors usually establish US companies to act as affiliates and/or subsidiaries of the non-US structure.

So the bad news is that "going offshore" may be unsuitable for many if not most US taxpayers. The good news is that there are a lot of reasonably priced alternatives that can still help to protect your assets, reduce your taxes, and obtain greater financial privacy. The easiest and simplest of these is the good old tried and true "S Corporation" which combines limited liability protection with a convenient "pass through" tax treatment. A favorite of small businesses and investors for decades, the S Corporation provides adequate asset protection by segregating the liabilities of the business from the assets of the owners. Establishing an S Corporation is simple and even a Limited Liability Company (hereinafter an LLC) can be used for those like me who think the LLC is simply the greatest thing since sliced bread. In addition the S Corporation can provide significant savings in "self-employment" taxes (the 15.3% you have to pay for Social Security and Medicare). Instead of having to pay the self-employment tax on 15.3% up to the $97,500 cap (as of 2007), you can give yourself a modest salary, and take the rest of the profits as profit distributions. Although you will have to pay taxes on the profit distributions, the savings of 15% can add up very quickly and is a safe and secure way of saving taxes as long as you pay yourself a "reasonable" salary with withholding. For additional privacy you can use a Revocable Trust to own the shares and appoint a nominee officer to be named in any official papers, thus obtaining near anonymous treatment.

For most small businesses an S Corporation is all they need to protect their assets and significantly reduce their taxes. However, if the operations of the business require significant investment of capital and involve significant exposure to liabilities, additional efforts may need to be taken to insure necessary protection is in place. For such situations we have developed the "Advanced Corporate Fortress". This combines three (3) US entities that are used together to limit the exposure of the business assets to liabilities, and to maximize the tax savings of the owners. First a C Corporation is established that will stand alone as a taxable entity. All assets of the business will be placed into this C Corporation for protection. An LLC treated as a "disregarded entity" will be established to do anything that involves any exposure to liability. Although the LLC will be owned 100% by the C Corporation, it will have little or no assets that could be seized by a potential litigant. Finally an S Corporation is established to provide management and possibly employee payroll services for the LLC. In summary the C Corporation holds the assets of the business behind its protective wall, the LLC acts as a shield to protect the C Corporation since the LLC will be exposed to any and all liabilities but has no assets, and the S Corporation helps further protect the owner's interests and reduce the owners taxes as described above. There are also several other advanced strategies that can be used to take advantage of the fact that the C Corporation has a very low initial tax bracket, thus allowing you to place some income into the C Corporation at a reduced tax rate and then lending it out to the S Corporation which can then deduct the interest payments on the loan as deductible expenses thereby further reducing the taxes of the owners.

Now for some people, none of this is necessary. They have no business and are only concerned with protecting their assets. For these people the "Personal Preservation Fortress" is ideal. It is simple yet provides extremely powerful protection. The Personal Preservation Fortress uses two entities to provide the ultimate in asset protection. An LLC is established to hold all the assets of the individual(s). The individual(s) will receive 99% of the shares of the LLC. An Irrevocable Trust is established naming someone other than the owner(s) of the LLC as beneficiaries (this is usually children, grandchildren, pets, etc.). The Trust will receive a 1% interest in the LLC and nothing else. Here is why this system works: creditors can only take what you have. If all you have is a partial interest in an LLC, then the creditors can only take that. Now in most states creditors who seize an LLC interest of less than 100% receive only an "assignment" of that interest, not the interest itself. As such they cannot vote the shares, and they cannot demand distributions from the LLC. This is because the LLC is treated as a partnership and most states provide protection to the other partners from being forced to accept as full members involuntary additions to the partnership. Although the creditor cannot vote the shares and cannot demand a distribution of income or assets, the creditor may be liable for demands of additional capital. That is the creditor may be required to pay additional funds into the LLC in order to maintain its economic position. Finally, if the LLC produces taxable income this income does not need to be distributed to the members, but the members still must pay taxes on the income. So the creditor would have to pay taxes on income earned by the LLC which the creditor did not actually receive. Finally, the only remaining voting member of the LLC is the Trust, which is "influenced" by the owners who act as members of the Trust Committee. The Trust Committee can remove the Trustee if the Trustee fails to satisfy the Trust Committee. As you can see, this is a very unpleasant situation for a creditor to be in, and you can expect them to start negotiating on reasonable terms. The best part about this system is that it applies to all creditors including the dreaded Internal Revenue System.

Finally, there is a unique structure that combines the benefits of an Individual Retirement Account with a tax free entity:"The IRA Rescue Plan". This program was initially established to assist people with large amounts of IRA money earning low rates of return who wanted to invest in unconventional investments that would otherwise be prohibited or difficult with a traditional IRA. First, the funds in your current IRA must be transferred to a more cooperative Custodian (conventional Custodians like banks, brokers, etc. only make money when you trade or keep your funds in their institution). We then establish a LLC following the dictates of an important US Tax Court ruling and have the IRA Custodian buy 100% of the shares of the new LLC. The client is then appointed President of the LLC, and does whatever he or she wants to do with the money (subject to basic good faith business limitations). The IRS requires that certain rules be maintained regarding distribution of funds from the LLC to the client, but these rules essentially involve reasonable compensation to insure that the client is not "defrauding" the LLC and thus unreasonably avoiding taxes and penalties on the IRA withdrawal. The long and short of it is that the IRS does not want you to transfer the funds from your IRA to an LLC, and then raid the piggy bank and avoid paying the withdrawal fees and penalites. If care is taken, funds can be paid to the client. Now, not only do we have the IRA funds in an entity managed by the client totally free and clear of the IRA limitations as to investments, the LLC is also a tax exempt entity since all profits of the LLC "pass through" to the IRA which pays no taxes on interest, dividends and/or capital gains. Furthermore, the IRA is one of the few entities to withstand the recent changes to the Bankruptcy Code. Funds in an IRA are still safe from creditors, and the LLC, being owned by the IRA, is thus protected.

As you can see, there is an amazing number of options available for people who may find "offshore" planning too risky, or who simply do not fall into a category whereby they could benefit from "going offshore". If anything, the choice may be too much to deal with. But that is a good thing. Having plenty of options on how to protect your assets, reduce your taxes, and obtain greater financial privacy is a consumers dream come true. If you have any questions please do not hesitate to contact us.

The United Kingdom Limited Partnership -

2008-01-30T20:43:00.000-08:00

There are many characteristics that make a business structure attractive, but one of the most common is a “Pass Through” or “Disregarded” tax treatment. This means that the entity itself is not taxed, but that the owners of the entity are taxed on their share of the entity’s profits. This is often beneficial in that it avoids double taxation, but also because there are often exceptions to taxation for some owners which can result in zero taxation. The United Kingdom Limited Partnership (hereinafter the UK LP) provides just such a feature.

The UK LP legislation was established in 1907 and has remained unchanged since then. It is easy to establish, and once established requires zero reporting since it is a truly 100% "pass through" entity. The income from the partnership is attributed to the partners without the need to file a partnership return in the UK. If the partners are not in the UK and the income is not derived from UK business, there will be no UK taxes and thereby no reports that need to be filed. Now since the UK has some of the best tax treaties around, this income may also be tax exempt in the client's home country.

The advantages of the UK LP are profound since it makes UK and European banking available to "offshore" entities that might otherwise be on black lists. For instance, a US Limited Liability Company could be the General Partner with a 1% interest, a Bahamas Trust could be a Limited Partner of the UK LP with a 98% interest, and a non-resident individual could be a Limited Partner with a 1% interest. As long as there is at least one individual member/partner of the UK LP there will be no need to report anything to anyone, or to maintain audited accounts.

Now you may ask, why doesn't everyone know about the UK LP? The reason that the UK LP is not more commonly used is that it is really not the ideal entity to use if you are a UK resident or a UK business that is taxable under the UK tax system. The Limited Company or another corporate entity would probably be much better, and give you better tax treatment in the UK. As such it is used primarily by non-UK residents who do not make a lot of noise about it since it really is a nice little secret.

Now the above example is just one possible configuration that could be employed. It has many advantages since the use of the US LLC as the General Partner makes it easy to obtain access to US bank accounts. It is very common for the General Partner to maintain the accounts of a Limited Partnership in its own name, and because of this it is a simple way of using the UK LP while maintaining accounts in the USA. Under this system, if the client was a US citizen and owned 100% of the US LLC (another “disregarded” tax entity) the client would only be obligated to pay taxes on 2% of the income of the UK LP. This of course presumes that the remaining 98% Limited Partnership interest is owned by a PROPERLY STRUCTURED non-US entity that is not considered an imputed US resident entity for tax purposes and is not considered a “Controlled Foreign Company” under US tax laws. This presumption is not unreasonable since we are experts at handling these matters and can design the structure to avoid these circumstances and meet all the legal requirements. This configuration could very well be an advantageous structure for non-US clients as well. Another possible configuration would be to have the client act as the General Partner and have the properly structured offshore entity act as Limited Partner with a 98% interest in the UK LP. The advantages of this system could be an ease in obtaining access to European bank accounts. There are many different ways of configuring the UK LP, and each might provide specific benefits for different clients depending upon the circumstances. Please feel free to contact us to discuss your options.

For more information: http://www.squireorg.com/uklp.shtml

Hiding/Smuggling vs Legal Process

2008-01-23T10:23:00.000-08:00

I often get requests from people who live outside the USA on how is the best way to "smuggle" money out of their particular country. Like I would know!!!! I am not a smuggler or a pirate, I am an attorney and show people how to solve the same problems through legal methods!!!

I try not to get insulted because I believe a large measure of the attitude stems from a lack of knowledge and a true and profound fear that many people suffer under in their home countries. They fear that if they do not find a way to put aside money in a foreign currency (usually the US Dollar) if and when something bad happens they will be completely incapable of taking care of themselves and their families. They also fear that if their government discovers that they have been hoarding "black market" currency they will get into even more trouble. What to do?

There is a solution and it is a fairly simple one. Through the system created by The Squire Organization LLC and found at http://www.TaxHavenUSA.com/ it is possible to create a strong
freestanding entity that is not the alter-ego of the client that allows him to quietly accumulate money in secure and strong US banks in a totally private and confidential manner.

There are many ways to utilize this system, but the most common is "transfer pricing", a concept as old as commerce itself, and which I am sure annoyed the tax collectors of Sumer, Babylonia and Egypt. But no matter how much it annoys, as long as the formalities are followed,
it is legal.

This is how it goes: Let's say your company imports Truck Parts from the US, and each month you buy on average $10,000 in parts. You have to pay for those parts in US dollars so no matter how strict your country is in regards to currency controls, you get permission to convert your currency over to US dollars and then pay the bill. After all, business must go on, and the trucks must roll! Now what if you found another supplier (the company that you created in the USA) and this company sold you the same goods but at a slightly higher price. Say 20% higher. Each month you would average $12,000.00 a month. The extra $2,000.00 would be the profit that the US company made by selling to you the same things you would be buying anyway. This
$2,000.00 is now safe and secure in your bank in the USA. There is no tax on that amount. And if your goal is to get money out of your country, over a period time you will accomplish this goal in a legal, ethical and totally private manner. In effect you "transferred" $2,000 in profit from your home country, where you have to pay taxes and perhaps convert it into local currency, to the US company and bank which you privately control tax free. This is just an example and the
amounts may vary from one client to the next.

There are many other solutions and options, and much depends upon the needs of the client. If you have an emergency and you absolutely must get the money out of your country immediately and you do not have time to arrange a proper system and carry out the process over months, there are still things we can do to help, but it can get a little complicated. Please give us a call if you are unfortunate enough to be suffering under these circumstances.

Mao and the art of management

2008-01-11T10:40:00.001-08:00

A recent copy of the Economist had a great article on the 'Art of
Management' for utter failures!

(http://economist.com/business/displaystory.cfm?story_id=10311230)

As the author points out: 'Books on management tend to define success in the broadest possible terms - great product, happy employees, continuous improvement, gobs of profits, crushed competitors.'

It is all very fine for the successes of the world to talk about how great they are, but what about the miserable failures and wannabees??? What are they (and perhaps the rest of us?) going to do?

Well the author points us to the management skills of Mao. Here is a man who failed at virtually every task of management put before him, and yet died in office, and to this day continues to be an iconic image across the globe.

How did he do it? What were his secrets? The author suggests there are four rules to follow if you want to take advantage of Mao's ability to survive his own incompetence:

1. A powerful, mendacious slogan

'Born a modestly well-off villager, Mao lived like an emperor, carried on litters by peasants, surrounded by concubines and placated by everyone. Yet his most famous slogan was “Serve the People”.'

As the author points out, the slogan does not need to have anything to do with actual performance, but simply needs to describe what the you SHOULD be doing. People will understand a simple slogan that describes what you should be doing, and will most likely not understand the complex and complicated facts surrounding the fraudulent manipulation of your life and business actions.

2. Ruthless media manipulation

'Mao knew not just how to make a point but also how to get it out. Through posters, the “Little Red Book” and re-education circles, his message was constantly reinforced. “Where the broom does not reach”, he said, “the dust will not vanish of itself.” This process of self-aggrandisement is often dismissed as a “personality cult”, but is hard to distinguish from the modern business practice of building brand value.'

Although modern chief executives and business leaders are not in a position to obtain the level of control over the media as Mao could, all the same, 'the brand-building lesson is that a clear, utopian message, hammered home relentlessly, can obscure inconvenient facts. Great salesmen are born knowing this. Executives whose strategies are not delivering need to learn it.'

The author suggests following many of Mao's strategies: talk only to sycophantic journalists and hide facts that may be detrimental. De-list from the major exchanges if necessary.

3. Sacrifice of friends and colleagues

'Mao... did not want people too close to him, and therefore to power; so being Mao's friend often proved more dangerous than being his enemy.' Especially since friends might conceivably be seen as competent and useful, and thus possible replacements. The author describes how Mao allowed a doctor who had saved his life to die in prison under false charges. Mao already had other doctors, and past favors do not necessarily deserve reward. 'Mao's abandonment of friends and even wives and children seemed to be based on a calculation of which investments were worth maintaining and which should be regarded as sunk costs.' Thus friends must be viewed as useful only the extent of what they can do for you now, and must be quickly dispensed with once their usefulness has diminished (and their threat to your power base has increased).

Enemies on the other hand are very handy since they can be blamed for everything that goes wrong, regardless of fault. You must always keep a few around for emergencies.

4. Activity substituting for achievement

Mao avoided meetings and discussions, particularly since they would likely result in criticism. Instead, Mao focused on Action Plans:

'From the Anti-Rightist Movement of the late 1950s to the Great Leap Forward, a failed agricultural and industrial experiment in the early 1960s, to the Cultural Revolution in the late 1960s, Mao was never short of a plan.'

Indeed, under Mao's supervision China was launched into one disaster after another with never a moment left for thought or contemplation (or recrimination): 'Policies were poor, execution dreadful and leadership misdirected, but each initiative seemed to create a centripetal force...'

Business can emulate this strategy by constantly undergoing "corporate restructuring":

'if you can't do anything right, do a lot. The more you have going on, the longer it will take for its disastrous consequences to become clear. And think very big: for all his flaws, Mao was inspiring.'

This was really a great article which I hope gets transformed into a little red book.

What is Jurisdiction?

2007-12-05T09:31:00.000-08:00

I thought I would discuss the important issue of “Jurisdiction”. This is because I have been hearing a lot about some countries enacting “draconian” anti-offshore rules and regulations. I thought I would explain how and why most of these stories are rather apocryphal and mostly just propaganda to scare people into submission.

Here is a fairly good definition of jurisdiction:

In law, jurisdiction (from the Latin ius, iuris meaning "law" and dicere meaning "to speak") is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility. (Wikipedia)

Now if, let’s say, Australia (or the USA, or the UK, etc.) says in its propaganda literature produced by the tax authorities that new laws are being enacted to do away with “illegal offshore tax dodges”, I want to explain why people should not be too terrified. If done properly, systems can be created that will legally remove the transactions from the jurisdiction of that country making the hyperbole meaningless.

I would like to try to explain what Jurisdiction is by using an allegory.

Let us pretend that there is an odd little country named OustMuensterMark. No one really knows quite where this place is, but it is a fairly backward place. It is ruled by a rather mad Baron named Ruprecht the Red. Ruprecht recently enacted a series of tax laws which require any company doing business in OustMuensterMark to pay roughly 150% of its net profits in taxes, and require the officers to submit their eldest children hostage to the Secret Police. Although the taxes are punitive, there are so many loopholes and exceptions to the tax rules that business manages to limp along in the country, but the place is far from prosperous.

Now let us further pretend that you have a little company chartered and operating out of Florida. Your company’s name is “Wingnuts R Us, LLC” and you sell wingnuts. Every month the Museum for the Science and History of Torture and Decapitation of OustMuensterMark orders $5.35 in wingnuts to be used to tightly enclose their numerous and ever growing display cases. Are you now bound by the laws of OustMuensterMark? Should you be forking over all your money to either Ruprecht’s Tax Collection and Torture Agency or to tax attorneys in OustMuensterMark? Perhaps you should hand over your eldest child to the Secret Police? I think it is fairly clear that your sale of wingnuts to the Museum does not bring you under the jurisdiction of Ruprecht the Red. Have no fear!

One day, Ruprecht wakes up and leaps out of bed stark naked and starts running through the palace screaming, “The British are coming! The British are coming! To Arms! To Arms!!!!” The only British that are found are a few nannies on their way to work at the Royal Orphanage. After directing the thorough interrogation and torture of the unfortunate nannies to no effect, Ruprecht collapses on the floor, a victim of his own hysterical energies. His attendants put pants on him, his doctors put a straight-jacket on him, and the Thingamajig, the Legislature of OustMuensterMark, meets and finally declares Ruprecht the Red to be unfit to rule, and appoints Waldwak the Wise, an adopted child of one of Ruprecht’s distant cousins, to become the new Baron. Luckily for the unhappy state, Waldwak does not suffer from any of the mental infirmities so common in Ruprecht and his other relations. Waldwak completely abolishes the tax code and torture (putting thousands of tax attorneys and tax collectors out of work). Instead of the confusing tax code of Ruprecht, a simple 10% sales tax on goods sold inside the country is imposed and things start to change for the better. Business booms, tax receipts grow, and the Thingamajig votes to rename the country OustWaldwakMark (hereinafter OWM).

One day you get an email from an enterprising tax attorney from OWM offering to establish a Limited Liability Company for you. The email explains that your taxes will be next to nothing, and that you will be able to keep the rest of the money for your pet project of saving orphaned giraffes. You sign up and immediately notice the dramatic increase in your cash register since you are no longer paying Florida and US taxes, and you only have to pay $0.54 cents in taxes a month for the sale of wingnuts to the Museum.

At least until the State of Florida and the US IRS impound your bank accounts, factory, warehouse, cars, house, furnishings, inventory, and dental work. Although you were in complete compliance with the laws of OWM, you were under the jurisdiction of the State of Florida and the USA since your factory, warehouse, distribution center, headquarters, house, car and bank accounts were all located there. Just as the repressive and illogical laws of Ruprecht the Red had no effect upon you when you sold a few wingnuts to the Museum, neither did the enlightened actions of Waldwak the Wise protect you from the jurisdiction of the location where you are located and doing business. And simply establishing a company in OWM did not change that since the new company simply came under the same jurisdiction for the same reasons.

If only you had better understood the concept of jurisdiction! You see, the idea was not so bad, it was just the sloppy, perhaps greedy, execution of the system that was flawed. It was possible to take advantage of the benefits of an OWM Company, but you needed to structure things very differently. First of all, the Florida company should not have been terminated, but should have been kept for the purpose of managing the domestic production and sale of wingnuts. The OWM Company should have been used to manage your considerable foreign sales. The Florida Company should have sold wingnuts to the OWM Company at a reasonable profit based on wholesale prices (not retail), and then the OWM Company would have sold the wingnuts around the world out of their modest offices in OWM. If only $5.35 in wingnuts were sold in OWM, then the tax would remain at $0.54, but if $10,000,000 in wingnuts were sold elsewhere (except the USA) these sales would be tax free. Although the US tax authorities may or may not like such a transaction, as long as the initial wholesale transaction from the Florida Company to the OWM Company was legitimate and resulted in reasonable taxable gains, the additional profits earned by the OWM Company in global sales are simply outside the jurisdiction of the USA. This system is legal, ethical and completely acceptable.

Now on a more philosophical note...

How can jurisdiction be established?

1.A nation has jurisdiction over you because you were born there and you are forever subject to its whims; or

2.Jurisdiction is based upon an agreement between the individual and the governing entity.

In the first case, jurisdiction seems to be based upon some strange power that is imputed to a location. Rather like the saying that you can pick your friends but are stuck with your family. But this seems irrational and unreasonable. Why should an individual be subject to the jurisdiction of a particular place merely because of an accident of birth? The second choice seems more logical. You are subject to a particular jurisdiction because you “agree” by your actions and/or your presence. The agreement may be far from voluntary, but it is an agreement to submit to authority all the same. If someone holds a knife to your throat, holds your family and all your property hostage, and deprives you of the ability to go elsewhere, although it may be morally repugnant, accepting this person’s authority is all the same a choice you made even if under duress.

History suggests that most agreements regarding jurisdiction have been formed in just such coercive ways. In a way it is only logical, since authority is something that must be imposed to one degree or another. Only in recent history has the concept of jurisdictional agreement been treated as a matter of true choice which a “free” person can choose to accept or reject. In point of fact, this right to reject a jurisdiction is the basis of most of Western Political thought. But this is still mostly philosophical. The fact of the matter is that you are bound by a jurisdiction simply because you are within the grasp and power of the authorities, and it would be foolish to ever expect such authorities to willfully relinquish that which gives them power.

What can we make of this? In most modern democratic countries it is possible to take advantage of different jurisdictions in order to protect your assets, reduce your taxes, and to obtain greater financial privacy. This is because even as they complain about the loss of tax revenue, these nations still acknowledge the ancient concept of jurisdiction. However, this must be done with attention to the laws and with proper execution. If you wish to take advantage of the low tax rates of a “tax haven” you must make sure that the transactions which you are imputing to the “tax haven” do not fall within the jurisdiction of another more rapacious government authority. Simply getting a company from another country and waiving it around like a magic wand will only make you look foolish and cause you great harm when the trick does not work.

What is Wealth?

2006-10-10T10:45:00.000-07:00

What is Wealth?

I thought I would discuss some ideas about wealth since there is so much confusion about the subject. In my opinion, the most obvious and destructive mistake is made when one confuses income with wealth. Although the two are related they are not synonymous.

Let us start with a definition of wealth: I believe wealth must be defined as assets which generate income that are liquid, at least to the extent that they can be transferred to another party in exchange for some fair value.

Let us proceed with a simple review of what money can do. If you had one million dollars, and you invested those funds in prudent investments, you should be able to obtain an annual return of roughly $60,000.00 to $120,000.00 a year, or translated monthly, $5,000.00 to $10,000.00 a month. This is wealth (although depending upon your situation and needs, it may or may not be considered enough to make you “wealthy”). The funds produce income, and the assets which represent those funds can be transferred to others in exchange for fair value.

Now there are three things that are commonly confused with wealth:

1. A prestigious job with a high salary;
2. An expensive house; and
3. Ostentatious displays of wealth (i.e.; expensive cars, clothing, consumer goods, etc.).

In the case of the high paying job, one must note that earning power is closely linked with the cost of living, so someone earning a “good living” in Houston, Texas, would most likely barely be able to survive on those same earnings in New York City. With that in mind, I think it is safe to say that someone who makes $20,000.00 a month would be considered “wealthy” almost everywhere. And that would be a mistake almost everywhere since earnings from employment are not wealth, at least not according to my definition above. No matter how much you make from employment, since the job cannot be transferred in exchange for fair value, it cannot be considered a wealth building asset. That is not to say getting a high paying job is bad, only that it is not in and of itself something that can make you wealthy.

Another thing that is often confused as wealth is housing. People have a tendency to identify someone as wealthy because he or she lives in an expensive house in a nice neighborhood. Again, these people would be mistaken if the house was the only consideration. Buying a house may often be a safe and wise way of providing you and your family with shelter, particularly if the long-term cost of buying a house is less than the long-term cost of renting, but it is not a source of wealth. It is not wealth even if the property value of the house increases during the time in which you live in the house. This is because no matter how cost effective it may be to buy versus rent, and no matter how much the property appreciates in value, it cannot produce income for you while you are living in it. So, although it may be wise to put your money into buying a house instead of renting, and buying a house may result in the value of the asset appreciating, such an investment does not make someone wealthy per se.

Finally, the issue of ostentatious displays of wealth, often referred to as obscene consumption, clearly should not be confused with wealth, although often it is, if not on an intellectual level than on an emotional level. Who does not see someone driving a beautiful new car that costs more than the average house and shake their head thinking, “I wish I could afford that”? However, if there ever is something that is the very opposite of wealth, it is the barbaric display of wealth. In ancient times people would “invest” in gold and other movable items of wealth because of two reasons: the world was not safe enough for more permanent investments, and such displays could generate awe and admiration in others that would often translate into position and power. No doubt there are similar issues at the heart of ostentatious displays today, but I think it is fair to say the purpose of such displays have essentially disappeared, and as such they represent an anachronistic view of the world.

So, after all that, are we any closer to understanding wealth? And more importantly how to become wealthy? It is clear that earning a large salary will not in and of itself make you wealthy. It is also clear that owning a large and valuable home will not make you wealthy. And it should go without saying that ostentatious displays of wealth do not make you wealthy. The answer is that the wealthy person possesses “wealth building assets”: assets which either generate “rents” (i.e., the money that is produced by the asset in question), or appreciate in value.

In the case of the person who makes $20,000.00 a month, if this persons converts that salary into an expensive home and ostentatious displays of wealth, then he or she will never be wealthy. Such a person may have a very nice lifestyle as long as the employment lasts, but nothing is being created that will create income or can be transferred in exchange for fair value. But this is exactly what most “wealthy” people do. A job will never make you wealthy since a job can never be considered an asset which generates income and can be transferred. If anything, it may be more akin to a form of slavery, particularly if the person becomes wholly dependent upon 100% of the earnings from the job to maintain a lifestyle. The only way a high salary can lead to wealth is if one of two things take place: the person lives on a percentage of the earnings and invests the rest in true “wealth building assets”, or if the person is able to convert the job into a significant equity position in the employer (i.e., a partner). Anything else is just a mirage of wealth.

Often people will assert that investing most of their free money in a house is a “good investment” since the long-term costs of buying is less than renting. In most cases this is true. However, this does not mean that buying a house creates wealth. It simply means it is better than renting. Now if you take the excess income that you earn at your job, and invest it all in a house that may be more than you really need for your purposes of shelter, then you are most likely never going to be wealthy. You may have a very nice house, but you will never be able to get anything out of the house until such time as you are willing to move out of it. And then, if you are like most people, you will want to take the money from the house you are selling and put it into another house in which you will move into. A house may be a wise use of funds as compared to renting. A house may be a safe place to store your money since it may actually appreciate with time. But a house will almost never make you wealthy since it cannot generate income, and requires you to abandon it in order to get your money out of it.

In order to become wealthy you must have “wealth building assets” that either produce income from the nature of the property, or which tend to appreciate over time, and of course these assets must be liquid to the extent that you can sell them at fair value.

The first step in becoming wealthy depends upon you creating a source of disposable income which you can use to obtain “wealth building assets”. Disposable income is that portion of your income that is available after you have provided for your “basic” necessities. For some, disposable income may be more difficult to come by than for others. If you make $20,000.00 a month, but tie up all your income in a mortgage and in ostentatious displays of wealth, then you will likely never become wealthy. On the other hand, no degree of thrift will make up for true penury. You need to be able to have some money to set aside so as to be able to invest for the future. In this regard, the safest and surest method is to simply get a job, and to work very hard to inspire your supervisors to trust you with greater authority and thereby obtain a higher salary. There is of course the option of becoming an entrepreneur, but frankly entrepreneurship is a trait that very few people possess. Most people confuse a profound dissatisfaction with their current employment with a desire to be an entrepreneur. Few things will cure this malady other than going out and starting your own business. I recall the story about the woman who hated her job, but loved making pies. She started a business making pies, and she did quite well. Soon she had to expand her kitchen, hire cooks, get a bookkeeper, deal with the health department, the state and federal regulators, etc. Eventually, the burden of the business got to the point that she could not stand the sight of her pies. Such people would be better off finding a better job whatever those efforts may involve. (I often wish I had followed this advice myself, but it is too late for me!) If you cannot get a better job, and you cannot (or should not) start your own business, there is still hope: work a second job. You would be surprised how many millionaires are where they are because they were willing to moonlight and set the extra money aside for long-term investments. Whatever, you do though, you need to be able to make more money than you spend.

The next step is to put that excess money to good use. You need to invest the money into assets that will either appreciate on their own (and remember the assets need to be liquid and/or transferable), or generate income. This is not as easy as it sounds, or some people want you to believe. Libraries are filled with books that profess to teach you the “easy” way to invest your money. Whether you select to invest in stocks, real estate, commodities such as gold and silver, or baseball cards, understand it will require a great deal of knowledge on your part, and there is no easy way to acquire that knowledge other than hard work or hard knocks. If you are not willing to do what it takes to become an expert in a particular area of investment, be conservative with your money until you are confident that you know what you are doing. If you are going to invest some portion of your funds in “risky” investments, and that is often a wise thing to do, make sure you can afford to lose the investments that you are making that are risky.

The final step is to be modest and frugal in your needs, even after your income starts to increase and your assets build up. My father used to say, “Things are only expensive if you don’t have the money.” For some people a new car is a luxury they can easily afford, for others it may destroy their ability to create true wealth by draining their disposable income. Guard yourself against your own foolish desires. No one can destroy your ability to obtain wealth more thoroughly than yourself (although friends and family are always willing to lend a hand).

IRA Rescue Plan Update

2006-10-03T07:31:00.000-07:00

IRA Rescue Plan Update

Several years ago I began structuring something that I called the IRA Rescue Plan for people who have an unusually large amount of money in an IRA plan and want to legally invest it in non-traditional (or perhaps even barred) investments.

www.squireorg.com/ira.shtml

With it, you can invest your IRA money in almost any manner you like without having to pay early withdrawal penalties. Also, you can arrange things in such a way as to reduce some of the negative tax consequences of having a large IRA.

This is done by establishing an IRA account with a custodian that will accept non-registered investments, establishing a new company that meets the 'Swanson' requirements, and then giving total control of the funds to the client. That is it.

There have been two issues that have made clients unhappy and/or nervous:

1. The company structure which was used initially was a C Corporation which had to pay taxes on income earned, and then could pay dividends to the IRA (which would not have to pay taxes on the dividends). Although C Corporation "taxation" can often be avoided with clever accounting, it is still there and some wanted to avoid any taxes whatsoever.

2. The company was limited in how much compensation it could pay the client for acting as officer and/or employee. The rule is vague and requires that the company only pay "reasonable" compensation to interested parties; whatever that means. When asked what does the IRS consider "reasonable" the traditional response is, "Perhaps you should consider not taking any compensation since that is what the owner in 'Swanson' did." Not a very logical or 'reasonable' answer, but very SAFE! And that has been the answer I have unfortunately been giving.

In regards to #1, I am glad to say that time has provided a better solution. The idea of using a pass through LLC to accept the investment has been around for awhile (almost since the Swanson ruling came out), but I resisted the idea since it was unproven, and struck me as very risky. As time has passed it seems that the IRS has decided that a pass through LLC is no worse than the C Corporation as long as there is no fraud. This means that funds from your IRA can now be invested as you like without any taxes being paid as long as the business is legitimate and there is no fraud or embezzlement taking place. Since the LLC is structured as a pass through entity, and the IRA is the sole owner, there will be no taxes on otherwise acceptable transactions (again no fraud).

In regards to #2, the news is also good, although not so clear cut. Again the rule has been that interested parties can only accept "reasonable" compensation from a plan or affiliated company. The fear has always been that the IRS might just decide nothing was reasonable and fight everything. However, it appears the IRS is taking a more 'reasonable' view of the issue, and as long as compensation is within the industry norms, "reasonable" should mean just that.

Now again with the caveats and warnings: Don't do an ENRON on the company and think the IRS will accept it. Don't pay yourself grossly out of proportion with what the industry norms suggest. And as always, there is always a possibility that the IRS will change its position and reverse itself.

Finally, there are some advantages to using a C Corporation for the IRA Rescue plan, although they are few and far between, so this option is still part of the package, although I doubt many will want to use it.

Let me know if I can ever be of service.

What to do until the Revolution???

2006-08-02T07:09:00.000-07:00

An interesting quote I found recently:

"America is at that awkward stage.
It's too late to work within the system,
but too early to shoot the bastards.
On the road to tyranny, we've gone so far
that polite political action is about as
useless as a miniskirt in a convent."
-- Claire Wolfe, Source: "101 Things To Do 'Til The Revolution"

I think we spend too much time talking about which backward idiot in the Middle East needs to be bombed, and not enough time thinking about why and what we actually need to defend. I consider myself a patriot. But I do not believe there is single gram of dirt that is worth killing for. It is not a territorial defined area that I believe is important, but the ideals that were built into the system that is worth defending. And unfortunately those ideals are being ripped apart piece by piece by internal enemies. So I find it very difficult to be a Patriotic American when I see the ideals that made America a great country being thrown out the window.

We may need to fight wars in the Middle East to protect ourselves, our friends, and our way of life (yes that means oil). But I fear these constant wars are being used to deaden our senses to the real threat of having our liberties stripped from us. At that point what difference does it really make which direction we are forced pray? Or who holds the knife to our throat?

Why Form a Company in Texas?

2006-04-11T08:47:00.000-07:00

http://www.texasformations.com/

Why Texas?

When considering whether or not to form a company, one of the most important decisions is "where" to form it. Traditionally, Delaware has been the jurisdiction of choice. The most commonly stated reason is that Delaware law is more mature and developed. This may have been the case 50 years ago, but is no longer the case. Delaware law is primarily defined by court cases, and no longer has any real advantage over other states. In many cases it has a real disadvantage since it involves subjecting a business to often vague and unclear court rulings. Over the past 25 years, the Texas Legislature has committed itself to codifying Texas business law, and has made great efforts to simplify and clarify Texas business law to be more business friendly. The commitment of the Texas Legislature to resolve important business issues by statute rather than by lawsuit is a significant advantage.

Another significant advantage of Texas is size. Texas is one of the largest states in the USA in both land mass and population. In 2003, the populations of Texas reached 22,118,509. Texas has a large, vibrant and broad based economy. Texas Gross State Product (GSP) is estimate to be $924.55 billion US dollars for 2005. If Texas was an independent nation, it would be one of the richest and most prosperous in the world. There are more operating businesses in existence in Texas than perhaps anywhere else on earth.

Texas is pro Business. Texans pride themselves on a reputation of "rugged individualism" and do not believe that the government should get involved in anything other than the most basic of issues. There is no income tax in Texas. Businesses face a much lower level of regulation than in other states. Texas is a "right to work" state which means it does not tolerate actions by unions or businesses that interfere with the right of an individual to work where and when he or she wants to work. Annual reporting requirements for companies are minimal. Most importantly, Texas and Texans have an attitude that is open to new ideas and change, and is open to outsiders. There is a saying in Texas: "I may not have been born here, but I got here as soon as I could!"

Texas laws and business climate also promote Privacy and Asset Protection. As stated before the Texas Legislature is pro business, particularly when it comes to enacting laws that allow individuals and businesses to limit their liabilities and to protect their assets. Texas does not require companies to disclose the names of individual shareholders, and never requires disclosure of individual tax identification numbers. Another perhaps more subtle issue has to do with environment and atmosphere; and perhaps a certain amount of philosophy. When trying to obtain privacy there are only two real options: invisibility and camouflage. Invisibility, such as when you attempt to obtain total anonymity, poses real problems. Imagine you saw a car driving down the street, but the driver was invisible. You would be more likely to remember that particular vehicle BECAUSE of the invisibility of the driver. Invisibility such as this may not be appropriate since it tends to attract attention. Camouflage on the other hand is a natural process. It is the method that most creatures use to survive: blending in with their surroundings. In Texas it is easy to obtain privacy through "corporate camouflage" due to the large number of companies in existence, the many and varied businesses that trade in Texas, the exposure to international trade and cultures, and the numerous business transactions that take place daily. There is nothing wrong with obtaining such privacy. It simply involves establishing your business interests in such a way that draws little or no attention to yourself, and avoids unnecessary disclosure of private information to parties that have no legitimate right to the information.

The United States as an "Offshore Tax Haven"

2006-02-10T19:51:00.000-08:00

Most financial experts agree that the United States is a primary location for international business. The presence of good banks,advanced infrastructure, a consistent legal system and a stable government are all characteristics of the United States that are taken for granted. However, many people do not realize the enormous tax benefits given to "non-resident aliens" making passive income in the United States, or earning income outside the United States and simply using the US banking system as their own personal "offshore tax haven." The United States does not tax non-resident aliens for any interest income or dividend income derived from the United States. There is zero capital gains on profits from investments. There is zero tax on income earned outside the USA. Only active United States derived income is taxed. Also, various tax treaties give a United States company certain tax advantages when doing business outside the USA.

The Definition of "Resident"

One of the most important issues is that of maintaining a"non-resident" status. Unfortunately many people confuse the immigration definition of resident with the tax definition of resident.Under the immigration laws of the United States, a resident is only someone who has been given a permanent residence visa. But under the tax laws a resident can also be someone who has maintained a "substantial presence" in the United States regardless of immigrations status. There is a specific formula as to when someone meets the"substantial presence" test based upon the number of days they have been present in the United States for a given year and the two prior years, but to be safe, the non-resident should stay in the United States no more than 182 days in any given year.

The "Pass Through" or"Disregarded" Tax Entity

The best way for a non-resident alien to take advantage of these tax benefits is to use the Limited Liability Company (LLC). A Limited Liability Company is an entity that has the same limited liability characteristics as a corporation, but the ease of management characteristics of a partnership. If properly structured,the Internal Revenue Service (I.R.S.) views the LLC as a "disregarded"tax entity which means that the I.R.S. disregards the existence of the LLC and treats the income as if it were earned by the members or share holders. If there are two or more members of the LLC, then it is treated as a partnership and must file a partnership tax return. If it has only one member who is an individual then it is treated as a sole proprietorship. For a non-resident alien, this means that the LLC is disregarded by the I.R.S. and income of the company is taxed at the more beneficial non-resident rates, and unless it earns active income derived from U.S. source income there is no reason for the LLC to even file a Federal tax return. Yet for all other purposes the LLC will be treated as a "domestic" entity. As far as banks and other parties are concerned, the LLC is a US domestic entity.

There are many states in which you can form an LLC, but we suggest the use of an LLC in a "low" tax state such as Texas. Traditionally, Delaware has been the jurisdiction of choice. The most commonly stated reason is that Delaware law is more mature and developed. This may have been the case 50 years ago, but is no longer the case. Delaware law is primarily defined by court cases (case law), and no longer has any real advantage over other states. In many cases it has a real disadvantage since it involves subjecting a business to often vague and unclear court rulings. Over the past 25 years, the Texas Legislature has committed itself to codifying Texas business law, and has made great efforts to simplify and clarify Texas business law to be more business friendly. The commitment of the Texas Legislature to resolve important business issues by statute rather than by lawsuit is a significant advantage. Texas is pro Business, and Texans pride themselves on a reputation of "rugged individualism". Texans do not believe that the government should get involved in anything other than the most basic of issues. There is no income tax in Texas, and businesses face a much lower level of regulation than in other states. Annual reporting requirements for companies are minimal. Texas laws and business climate also promote Privacy and Asset Protection. Texas does not require companies to disclose the names of individual shareholders, and never requires disclosure of individual tax identification numbers. However, there are circumstances where it is advisable to use other states. For instance if you are looking to obtain financing from “venture capitalists” you should first find out what is their preference. In some cases Nevada can provide some unique (but sometimes overstated) benefits regarding privacy. We can establish a company in virtually any state within the United States of
America.

How can a U.S. LLC Help You?

There are a lot of ways a non-resident alien can benefit by using a US LLC:

*An investor looking to invest in stocks,bonds or other types of investments in the US will pay no tax on the income earned, and will also avoid withholding.
*Investments in U.S.real property can be done with no capital gains, and with careful treatment, no withholding.
*An investor can use the LLC to do business outside the USA since it will be outside the jurisdiction of the I.R.S., yet gain valuable tax reduction benefits that may accrue to U.S. entities.
*An investor may be able to reduce non-U.S. taxes since the U.S. has tax treaties that often give very favorable treatment to U.S. entities. (An example would be the US LLC owns land or other property in a jurisdiction with a tax treaty with the US - this will often reduce capital gains to zero.)
*Some investors are able to obtain tax benefits by using "transfer pricing" strategies that transfer otherwise taxable income from a high tax jurisdiction to the no/low tax US LLC. (An example would be a non-U.S. buyer of goods and or services using the US LLC as a middleman for purely export purchases – as long as the US LLC avoids certain pitfalls there will be no taxes on income earned from such transactions.)
*Finally, the US LLC may just be a very nice way of protecting assets in a private and secure manner by simply depositing funds into a US bank account, brokerage account,or insurance policy.

Advanced Planning Techniques

There are other more advanced ways of using the US LLC, often with other entities, that can further enhance privacy, asset protection and tax reduction. One method is to have a specially designed International Privacy Trust serve as the owner of the LLC. If properly structured and maintained (and depending on the jurisdiction of the client), the International Privacy Trust will act as a bullet proof asset protection and probate avoidance vehicle (two very reasonable goals that will defend against “sham entity” accusations) while at the same time serving as a very strong tax reduction strategy (the Trust’s jurisdiction is a “No Tax” jurisdiction). Also, because of the way in which the International Privacy Trust is structured, without court order it will be very difficult to discover the true ownership of the US LLC (and even then it will probably need to be a court order from the jurisdiction of the trust).

In some Jurisdictions, particularly those whose legal systems is based on European Code, the International Privacy Trust may not be enough. For those clients it is important to have a corporate entity own the US LLC, since the Code does not treat trusts in the same manner as British based Common Law systems. In these cases we advise our client to utilize an International Business Company (IBC) formed in a friendly jurisdiction like Belize which acts as the ideal intermediary for the structure, and is readily accepted in Code Jurisdictions as a separate entity apart from the client. Then the International Privacy Trust owns the IBC to add additional asset protection, tax reduction, and privacy to the structure.

Please feel free to contact us if you would like to discuss these matters further.

NOTE FOR US CITIZENS/RESIDENTS:

There has been a growing number of individuals who reside in the USA or who are US citizens contacting us asking, “How can this system work for me?” It is possible to arrange the system in such a way as to give residents and citizens of the USA the same benefits as those described herein. However, it is very important that the system be established with great care. Only The Advanced World Commerce Package is appropriate for residents and/or citizens of the United States of America, and even then special care must be shown to insure that the structure meets stringent criteria, much more so than for individuals from other jurisdictions. Furthermore, the system will only prove effective in regards to “non-US Source Income” and/or certain types of “Passive Income” which are highly technical issues. If you are a resident or citizen of the USA, and you are looking to establish a system that will allow you to use US banks while benefiting from non-resident status, please contact us for further information.

Erasmus

2006-02-04T09:19:00.000-08:00

"In the country of the blind the one-eyed man is king."
-- Desiderius Erasmus

Has the Islamic World Declared War on the West??

2006-02-04T08:52:00.000-08:00

I know most of my posts are either geared to business issues, or philosophical issues, but the recent election of Hamas in Palestine has brought my interest to international relations for the world economy is so closely linked to the Middle East that it would be foolish to ignore something so serious. I also studied about Middle Eastern oil economics and history in college, studied Arabic, and traveled throughout the Middle East, and feel I have a few points of view that might be useful in light of recent events.

I know it is very fashionable to blame the United States and Israel for everything that is wrong with the world, and I suppose both parties, at least in hindsight, have made enough mistakes to make such arguments worth considering. But in truth, in order to accomplish this argument a great deal of historical revisionism has to take place.

To better consider this issue, I would propose you look at the "world view" of the Arab World. You will find it is very different than what you hear from our fellow Western Left Wingers, and very different from what you see on the media.

First of all, the Arab world is obsessed with one question: "What went wrong!"

One thousand years ago the Arab world was the embodiment of everything advanced and civilized. If you wanted to study advanced science, philosophy, math, medicine, etc., Latin and Greek was nice, but Arabic was a must. Then something went wrong. There are no historians who takes a more hardline and unforgiving take on this than the Arab Historians. In most of their views, the Arab world has accomplished nothing of value since Saladin recaptured Jerusalem in the 12t century (and even this has some problems since Saladin was a Kurd and most of his elite troops were Turks). Since then, history has seen nothing but a sad decline (which the Arab Historians desperately want to reverse).

Of course this is horribly unfair, and few Western historians would be so hard on the Arab world. This argument effectively relegates the Turkish Empire (which was primarily based in Europe) and the growth of Asian Islam to insignificance. It also unfairly suggests that because Arab armies failed to dominate the world, the Arabs failed to influence the world. Totally untrue. History is filled with patterns, and one common pattern is the growth of the barbarian to civilization, and in turn to civilizer. Whereas the early Arabs came out of the desert as savage barbarians driven by a holy zeal to conquer, by the 12th century they became the primary source of civilization in the world even if their military prowess was no longer dominant.

But modern Arab Historians are in many ways more egocentric than Western historians. Since the "power" of Islam was no longer under the direct control of Arab armies and leaders, Arab historians have tended to minimize non-Arab Islamic influences such as the Turks and the other Asian Moslems, and to fail to recognize the significance of Arab culture on the rest of the world.

Why should you care??? Because it is this sense of historical inferiority that is feeding the current struggle, and warping the true causes of the problem. The radical Islamic fringe are trying to portray everything as if the current struggle is akin to battles of the 12th century, with Israel serving as a pseudo-Crusader state, and the West, with the USA in the lead, serving as infidels bent on the destruction of the Islamic world.

This is what they think, and it needs to be understood. However, if you accept these arguments you are falling into a trap that can only lead to ruin. By accepting that everything is the fault of the USA and Israel, without doing just a little bit of research into what really happened leads to mistakes, even if they are very fashionable, and get big pats on the back.

First of all, the Jews as foreign invaders and infidels (and of course the source of everything that is wrong with the Middle East). This requires you to ignore the facts. Most of the Jews were escaping European oppression, and were welcomed by the Arabs like long-lost neighbors. It was not until the 1930s that there started to be anti-Jewish feelings, and most of this was among the leadership of the region which favored the Nazis over the Allies. When the Axis lost, the Arab leadership was slow in reversing its stand, and decided to unwisely follow the policies of the defeated Nazis in the name of Arab Nationalism. It was this fascist defined Pan-Arabism that took control of the Arab World and led it to make horrible mistakes (just as fascism had done in Europe).

Although there is no question that the infusion of millions of European Jews into Palestine was a problem that could have been handled differently, it really is foolish to just ignore the many stupid things the Arab leaders did that resulted in the West turning against them. At any time, the Arab world could have moderated its behavior and reverted to its classical open-minded attitude. But the Arab leadership was committed to a fascist Arab Nationalism that resulted in the calamities (at least for the Arabs) of 1948, and persist to this day. As a famous Jewish leader stated, "The Palestinians (and perhaps the Arabs) never miss an opportunity to miss an opportunity."

As to the US being the cause of all evil, this really does require that one just ignore everything else. True, the USA world view was dominated by the Cold War, and everything was viewed in the context of the Soviet threat, and much of the decisions the US made had to do with the Cold War and not regional issues. But again, the Arab world was not mere puppets. The Arab leaders made choices too. Some of those choices was to turn to the Soviets who were willing to turn a blind eye on the fascist tendencies of the Arab leaders, since the Russians were also obsessed with Cold War thinking. This made the USA an enemy in many cases. But the US has no interest in dominating the Middle East, and certainliy not the culture there. Rather is has allowed itself to be sucked into a struggle that has very little to do with US interests (other than oil - a big interest thought not necessarily as big as some may think).

What to do???? Blame the US and Israel for everything that is wrong, and ignore the terrible state of political thought in the Arab world??? Listen to fanatical maniacs that have created a false history more disturbing that the false history created by Hitler and the Nazis?

Modern Islamic Fundamentalism has nothing to do with restoring Islam to its proud heritage. It is the heir of the fascist Pan Arab Nationalists, and more resembles the movement of the Nazis to reshape history in order to justify all manner of abuse and outrage. It is a terrible evolution of Arab Nationalism (which was centered around fascism) with Islam replacing Arab Nationalism as the basis for a new fascist state. And as with all fascist states, there must be "enemies" both internal and external that must be destroyed, and those enemies must be vilified as sub-human and deserving of not even the smallest hint of human dignity.

Whether we like it or not, this is the situation we find ourselves. We are facing a situation that is very similar to what the world faced int he 1930s. I hope we do a better job now than we did then.

American Slavery vs. Communism???

2005-12-09T09:17:00.000-08:00

This is really a fascinating argument. In essence, White Slave Holders are being defended on the basis that they are providing the ultimate Communist system of support and protection for the slaves/proletariat, and that slavery is superior to free market operation that results in workers being "enslaved" to a salary. If you read your Marxist dogma, and compare the reality of the theory (not even the reality of the practice), it is difficult to conclude anything other than that Southern Slavery does indeed compare very favorably to Modern Socialism/Communism. Does the opposite conclusion also apply: If Southern Slavery was essentially equal to Communist Theoretical Societal Structure where the Proletariat works on an egalitarian basis of communal support and the direction of the group is motivated by non-competitive social input, does Communism therefore equal Slavery by the very definition of Communist rhetoric?

*********

"Southerners did not stop with an open defense of slavery. They went on to attack northern society for its 'wage slavery' and 'exploitation of workers,' using arguments repeated by socialist critics of capitalism. The southern writer who developed these arguments most extensively was George Fitzhugh, a Virginia planter and lawyer. His two books were provocatively entitled Sociology for the South: Or the Failure of the Free Society and Cannibals All! Or Slaves Without Masters. In them, Fitzhugh defended slavery as a practical form of socialism that provided contented slaves with paternalistic masters, thereby eliminating harsh conflicts between employers and allegedly free workers. 'A Southern farm is the beau ideal of Communism; it is a joint concern, in which the slave ... is far happier, because ... he is always sure of support.' ... 'The best governed countries, and which have prospered the most, have always been distinguished for the number and stringency of their laws,' he wrote; 'liberty is an evil which government is intended to correct.'"
-- Jeffrey Rogers Hummel
Source: Emancipating the Slaves, Enslaving Free Men: A History of the American Civil War (Chicago: Open Court, 1996), p. 23

To Kill an American

2005-11-28T20:28:00.000-08:00

I don't know if this is true, but...

To kill an American?
Written by an Australian Dentist...

To Kill an American
You probably missed it in the rush of news last week, but there was actually a report that someone in Pakistan had published in a newspaper an offer of a reward to anyone who killed an American........... any American.
So an Australian dentist wrote an editorial the following day to let everyone know what an American is so they would know when they found one. (Good one, mate!!!!)
"An American is English, or French, or Italian, Irish, German, Spanish, Polish, Russian or Greek. An American may also be Canadian, Mexican, African, Indian, Chinese, Japanese, Korean, Australian, Iranian, Asian, or Arab, or Pakistani or Afghan.
An American may also be a Comanche, Cherokee, Osage, Blackfoot, Navaho, Apache, Seminole or one of the many other tribes known as Native Americans.
An American is Christian, or he could be Jewish, or Buddhist, or Muslim.
In fact, there are more Muslims in America than in Afghanistan. The only difference is! that in America they are free to worship as each of them chooses.
An American is also free to believe in no religion. For that he will answer only to God, not to the government, or to armed thugs claiming to speak for the government and for God.
An American lives in the most prosperous land in the history of the world.
The root of that prosperity can be found in the Declaration of Independence, which recognizes the God given right of each person to the pursuit of happiness!
An American is generous. Americans have helped out just about every other nation in the world in their time of need, never asking a thing in return.
When Afghanistan was over-run by the Soviet army 20 years ago, Americans came with arms and supplies to enable the people to win back their country!
As of the morning of September 11, Americans had given more than any other nation to the poor in Afghanistan. Americans welcome the best of everything...the best products, the best books, the best music, the best food, the best services. But they also welcome the least.
The national symbol of America, The Statue of Liberty, welcomes your tired and your poor, the wretched refuse of your teeming shores, the homeless, tempest tossed. These in fact are the people who built America.
Some of them were working in the Twin Towers the morning of September 11, 2001 earning a better life for their families. It's been told that the World Trade Center victims were from at least 30 different countries, cultures, and first languages, including those that aided and abetted the terrorists.
So you can try to kill an American if you must. Hitler did. So did General Tojo, and Stalin, and Mao Tse-Tung, and other blood-thirsty tyrants in the world. But, in doing so you would just be killing yourself. Because Americans are not a particular people from a particular place. They are the embodiment of the human spirit of freedom. Everyone who holds to that spirit, everywhere, is an American.

America Bashing

2005-11-08T21:00:00.000-08:00

Lately it seems that all anyone can do, inside and outside the USA, is talk bad about America, Bush, the American People, Walmart, etc. Although I find myself in agreement with some of the things that are stated, I find myself in the dilemma of asking, "What is your proposed solution?" The problems generally revolve around political power, economic resources, freedom, liberty, education and culture, and the problems are not isolated to the USA, and frankly are much worse elsewhere.

From the tone and content of most of the America Bashers, I must assume they find Europe to be vastly superior to the USA, and also I must assume that the European solution is what desired (more socialist government involvement in everything...) -- I have used the word assume twice here and that troubles me but...

So I will address the issue of Europe.

I love Europe, but Europe is not some kind of Garden of Eden. Europeans have profound problems; cultural, economic, military, political, etc. You just don't see the problems when you are admiring the fabulous tourist stops. And why would you??? The last thing I want to do when I am in Paris, or Amsterdam or Rome, is to go to a slum and find out the attitudes of the unemployed immigrants who can barely speak the language of the country, and have no interest in ever doing so.

Europe has real problems. The birth rate is so low among most ethnic Europeans that within 1 to 2 generations, there just won't be any more Europeans to admire. Their countries are being taken over by immigrants who on the whole have no interest in the fabulous accomplishments of Europe, and as often as not have utter contempt for those cultures and accomplishments. Perhaps the immigrants will keep a few Europeans around to attract the tourists, but from the looks of things that may not be likely. Europe is simply not a cultural Melting Pot like the USA.

And economically, the dreams of a borderless European prosperity have been slow in coming. In fact there is a tremendous amount of unhappiness about how inefficient the unification has been, and how frustratingly slow new job creation and economic growth has been.

I am an optimist, and I believe that people who are faced with problems find clever and interesting ways to solve them. But that is the American Way of thinking. It is not the European way of thinking, and it would be arrogant to believe that Europeans will dramatically change their entire society in order to solve the many crises they are facing. I hope they find a way of solving their problems without reverting the old tried and true formula of Jack Boots and Bullets, but remember that every major war in the last 200 years has been caused by European social/political/cultural problems in whole or in part.

American culture is flexible and has been able to change dramatically to accommodate new people and ideas. Sometimes those changes have been troubling and dangerous. But America has always come out stronger and better because of the challenge. Europe on the other hand has traditionally resisted change, culturally, politically, and economically, but change has happened all the same. And the problem with not embracing the change is that when it comes, it comes as an unexpected jolt. Often it comes at the point of a bayonet, or with treads of a tank.

Now America is not perfect. Far from it. And it would seem that Americans have decided to ignore the lessons of history and common sense which only means that we have to relearn the old lessons, usually at a horrible price.

But if I had to bet which culture would be more likely to learn from its mistakes, America or Europe, I would put my money on the Americans.

I hope someone learns. Regardless of how fashionable it is to talk bad about the USA (the Lord knows I do), when you look at the world, and the reality of the risks we are facing, the solutions are looking pretty grim without a strong USA to back them up. If the USA fails to do what is right, for whatever reason, the rest of the world will have no one to help them defend themselves from the Barbarians who are at the gate. The Europeans have essentially given up, the Chinese are frankly more of a threat than a solution, and the tired old cliches of the Socialists will do nothing to restore order and prosperity if the USA collapses from some sort of Curse. Indeed I think the real curse would be felt if the USA decided to go back to its old fashioned isolationism, which has a tremendous amount of quiet backing in the USA. What would happen if the USA suddenly decided to pull back to its borders, and leave the rest of the world to its own devices??? I know which side of the border I would want to be on.

The USA for all its flaws and mistakes makes it safe for the rest of the world to be smug, lazy and careless. But beware: It is very dangerous to get what you want. Americans are growing very tired of hearing about how horrible we are as we bleed in defense of the rest of the world. If the USA ever decided to pick up its toys and go home, the world would be a much more dangerous place.

2005-11-07T08:18:00.000-08:00

"What we have to remember is that not everything is under our control. If people are free in any meaningful sense of the word, that means they are at liberty to foul up their lives as much as make something grand of them. That's a gamble we all take. That's the risk of liberty. Nobody wants others to screw up their lives, but each must be free to do so for themselves."
-- Joel Miller
Source: his book, Bad Trip: How the War against Drugs Is Destroying America, 2005

2005-10-31T05:58:00.000-08:00

"The individual has always had to struggle
to keep from being overwhelmed by the tribe.
To be your own man is hard business.
If you try it, you will be lonely often, and sometimes frightened.
But no price is too high to pay for the privilege of owning yourself."
-- Rudyard Kipling
(1865-1936)

Something Silly from Russia...

2005-10-29T07:21:00.000-07:00

October 27, 2005

'Manipulated’ Hurricane Makes Mexico Pay Dearly For Challenging United States As US Military Preparations for South American Invasion Continue

By: Sorcha Faal, and as reported to her Russian Subscribers

There are many times when reports from the various Russian Ministries we read, and relating to the United States, border on the absurd, but rarely do we find one that can be called surreal, one of which we have received today about the events related to the latest Hurricane Super Storm Wilma that has devastated large areas of the Americas, none more so than the nation of Mexico.

As reported by Russian Military Analysts though, there appears to be strong circumstance that the Military Leaders of the United States have utilized their weather manipulation technology to ‘augment, steer, [and] control’ one of the latest Super Storms to hit these areas in what they are describing as their worst hurricane season on record, and to which just today another storm has formed, and as we can read as reported by the Reuters News Service in their article titled "Tropical Storm Beta gathering force off Nicaragua" and which says:

"Tropical Storm Beta formed off the Caribbean coast of Nicaragua on Thursday and was forecast to strengthen into a hurricane and drench Central America with potentially flooding rain, the U.S. National Hurricane Center said. Beta was the 23rd named tropical cyclone of the unrelenting and record-breaking Atlantic-Caribbean hurricane season. No. 22, named Alpha, broke the record for the number of storms setin 1933 and made 2005 the most active hurricane season since records began 150 years ago. Weather forecasters switched to the Greek alphabet for storm names after using up their annual list of 21 names for the season with Wilma, which was at one point the most intense hurricane ever recorded in the Atlantic basin."

To the exactitudes of the United States being able to technologically manipulate hurricanes has long been suspected as the technologies for achieving such goals is attainable, and to which one American dissident group has reported on, and as we can read as reported by the CuttingEdge.Org News Site in their article titled "A Terrifying Look at the Control of Weather Warfare: A Look at HAARP" and which says:

"In a nutshell, this is the nucleus of the expertise just recently acquired to control the weather. By pouring measured energy that has been focussed into certain parts of the ionosphere, scientists can create all kinds of storms like hurricanes, thunderstorms, floods, tornadoes, and drought. In NEWS1198, "U.N. Treaty Proves Weather Control Is Real", we report news articles that Malaysia actually contracted with a Russian Weather Modification company to create a hurricane that would be directed close enough to clear the smoke and smog from Malaysia's cities without actually coming on to land to create devastation. This Russian company delivered, and Malaysia had clear skies.

Our information also tells us that, not only can hurricanes be created, they can be dismantled should scientists so desire. And, they certainly can be driven on the ocean much like we drive our cars on roadways. Therefore, one has to ask why American scientists have allowed unprecedented hurricanes, like Andrew, to ever come on shore. Why are American scientists allowing extensive damage and lives lost to recent unprecedented storms, since they have the capability to keep these storms away from us?"

To the United States current confrontation with Mexico we can read as reported by the Knight Ridder News Service in their article titled "U.S. aid threatened by global court pact" and which says, "Mexico's declared intent to join the International Criminal Court is setting up a potentially critical showdown with the Bush administration, which refuses to subject U.S. personnel to the ICC's powers.

Washington has informed Mexico that joining the ICC would lead to the cut of an $11.5 million program to help its justice system deal with drug trafficking, according to human rights groups that support the Dutch-based court, designed as the prime venue for trying war crimes. That amounts to almost 40 percent of the U.S. economic aid Mexico receives.

Mexico could avoid the loss if it signs an immunity agreement with Washington, but has so far refused to do so. Widely known as an Article 98 agreement, such a deal bars a country from handing U.S. nationals to the ICC without U.S. permission. Mexico is hardly alone. Washington already has cut aid to 11 Latin American nations for refusing to sign the immunity agreements, making it the region of the world hardest hit by ICC-related sanctions.

But Mexico's ratification of the court is being monitored especially closely by human rights groups and members of Congress because the country is so critical to Washington's strategic interests. It ranks as the second biggest U.S. trading partner and the biggest entry point for illegal migrants and cocaine. A growing number of U.S. defense and congressional officials fear such a move will cost Washington influence in a region already vulnerable to politicalinstability and are pushing President Bush to issue a first-ever waiver of the sanctions.

Human rights activists say most nations probably would agree to Article 98 deals if they covered only U.S. military personnel, but reject the broader pacts the State Department is pushing to cover all U.S. citizens and even third-country foreign contractors working for the U.S. government. ''We respect the right of other nations to become parties to the Rome Statute, but ask other countries (to) respect our right not to do so,'' said a State Department official who asked for anonymity in keeping with department rules.

So far, 101 nations have inked such deals, including Colombia and the Dominican Republic. But other Latin Americans have responded angrily to the U.S. pressures. Costa Rican Foreign Minister Roberto Tovar last month called the U.S. immunity proposals ''offensive'' and added: ``One can be poor, but dignified.''

Following Mexico’s refusal to bow to the pressure being exerted upon them by the United States Military Leaders there ‘appeared’ this most strangest of Hurricanes, Wilma, and which became the strongest such storm to ever form in the Atlantic and Caribbean Regions and intensified at a rate never before seen by research scientists and defied all normal behaviors of storms of its type, even to the point of being noticed by many American researchers themselves, and as we can read as reported by one such organization called Open Source Energy Network in their report titled "Wilma the Super Storm and Energy from the Vacuum" and which says:

"Of course the current forecasts show it going directly into Mexico for a time. (Who knows?) My guess for now is due north for 24 hours or so. At the current rate, it should move about 200 nautical miles (nm) or so in that time frame. This is very slow for a hurricane. It is piling up an astronomical storm surge. The pile of water under this storm is probably close to the largest on record. The mass here is probably a mound of water something like 30 feet high and covering an ellipse about 200 by 500 miles or more. That weighs a lot. Moving it around is going to break a lot of things. Whoever gets hit is going to hurt. Moving this much water in the narrow Yucatan Channel is going to be spectacular.

A "dry tongue" is part of what a hurricane is. It is a short circuit between the polar jet and the subtropical jet, allowing arctic air to jump over the mid section of the country and fall directly into the eye of the hurricane – causing the equal of a combustion-chamber function over the hot water. (Fuel is hot, adding cold is like feeding in the Oxygen) A strong dry tongue is required to feed a strong storm. A stable dry tongue allows the powerful "Outflow" the weathermen talk about. Under a strong north wind, which is typically very dry, the Midwest (Misssouri, Arkansas area) is expecting frosts in about 3 days. Dropping a cold blast of this strength into the hot water north of Cuba and West of Florida is like dropping a thousand hydrogen bombs."

And to ‘a thousand hydrogen bombs’ being dropped upon the nation of Mexico there is not doubt, as over one third of their nations entire revenue from tourism was destroyed, and as we can read as reported by the Financial Times News Service in their article titled "Wilma damages Mexico’s economic growth" and which says:

"The paralysis of Mexico’s world famous tourist resorts on the Yucatan peninsula caused by the devastating passage of Hurricane Wilma may slow the country’s economic growth in 2005 by up to a quarter of a percentage point. The region, which accounts for 35 per cent of Mexico’s income from tourism, will take at least three to four months to recover, according to hotel owners. Local government officials estimate that 98 per cent of the tourist infrastructure and 75 per cent of the population of the state of Quintana Roo, which includes the resorts of Cancún, Cozumel, Playa del Carmen and Isla Mujeres, has been damaged."

In an even greater humiliation to the Mexican Nation by the US Military Leaders has been the United States refusal to assist with the humanitarian evacuation of thousands of mostly American tourists, and even though Mexico was one of the first countries to rush aid to America after Katrina had struck, and as we can read as reported by the Associated Press News Service in their article titled "Tourists frantic to leave Cancun" and which says:

"Thousands of desperate tourists stranded by Hurricane Wilma besieged airports and tour offices Wednesday as officials faced the challenge of evacuating 22,000 visitors with only 6,000 airline seats available out of Cancun. Though most of the flooding had receded and electricity was slowly returning, frustrated tourists who had gone nearly a week without showering said they could relate to those who survived Hurricane Katrina.

"Now I know how those people in New Orleans felt," said Angela Benites, 48, Mexico City. "Several days of desperation is no way to live." As Cancun's half-million people struggled to clean up their flooded and wind-smashed homes and workplaces, crowds of tourists surrounded airline offices. Some wept for joy when told they could leave."

To the question of if these latest events will be changing the position of the Mexican Government it is not to our knowing. What is to our knowing though is the United States Military Leaders continuing plan to fend off the growing power of China in their South America Regions by the planned invasion of many of that Regions sovereign nations, one of which, Bolivia, has reported yet another outrage by American Military Forces destruction of their air defense capability, and as we can read as reported by the Prensa Latina News Service in their article titled "Doubts Persist on Removal of Missiles from Bolivia" and which says:

"[Bolivian] Military experts, who asked not to be identified, denied Gen. Marcelo "Antezana´s assertion that the missiles were obsolete, and maintain that the weapons are similar to those used in present conflicts, including by US forces in Iraq and Afghanistan, and were the only ones of this type to defend Bolivian airspace.

Presidential candidate Evo Morales, of MAS (Movimiento al Socialismo), Evo Morales, declared he had been informed by patriotic soldiers about the removal of the missiles by air to the United States on October 2, in what he denounces was an illegal operation with US troops in violation of national sovereignty and dignity. The missiles were supplied by the People’s Republic of China in 1993, with other materiel at a cost of four and a half billion dollars, which still has not been paid.

MAS has demanded clarification of the case from Defense Minister Gonzalo Mendez, who met Wednesday with Antezana and President Eduardo Rodriguez before the general’s press conference. Morales declared this could result in an eventual treason trial against the president in his condition as Captain General of the Armed Forces, whose approval should have been necessary for withdrawing the missiles.

Evo Morales said the operation directed by the US Embassy is a provocation and threat against MAS, which leads the polls for the December elections. Bolivia’s major union (COB) leader, Jaime Solares, went further, warning of the danger of a military coup to prevent progress of social forces. A few days ago news commentator Amalia Pando revealed premature changes in army units and staffing, which she said was worrying given the serious national-political situation."

Long has it been known that the United States preferred plan for South American nations not bowing down to them has been to use the tactics of assassination of popularly elected leaders and the installation of puppet dictatorial regimes, but to which the nation of Venezuela has stopped with the help of both Russian and Chinese Intelligence sources, even to the capturing of American backed Columbian rebels, and as we can read as reported by the United Press International News Service in their article titled "Venezuela sentences Colombian conspirators" and which says:

"Venezuela has sentenced 27 Colombians to six years in prison for conspiring to overthrow the Venezuelan government, El Nacional reported Wednesday. More than 100 Colombians were arrested last year at a farm outside Caracas, where they maintained they were there to work. However once they got there, the defendants claimed, they were forced to take part in an anti-Chavez plot. The Venezuelan leader has repeatedly accused the United States of trying to usurp his authority by aiding ant-Chavez opposition groups. The White House has denied the accusation."

As events from the United States show their peoples attention once again riveted to those events inside of their country, they remain not knowing, or even not caring, about the most important events critical to their future. For as history has often shown to those who see, a brutal Fascist Military Regime such as exists in the United States is never more dangerous, to the world or its own people, than when it is wounded. And today the Military Leaders of the United States are indeed wounded, who knows where they will strike next?

© October 27, 2005, EU and US all rights reserved.

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The True Value of Liberty

2005-10-28T04:41:00.000-07:00

"The natural effort of every individual to better
his own condition is so powerful that it is alone,
and without any assistance, not only capable
of carrying on the society to wealth and prosperity,
but of surmounting a hundred impertinent obstructions
with which the folly of human laws too often encumbers its operations."
-- Adam Smith
(1723-1790) Scottish philosopher and economist

2005-10-17T05:10:00.000-07:00

"We enjoy freedom and the rule of law on which it depends,
not because we deserve it,
but because others before us
put their lives on the line to defend it."
-- Thomas Sowell
(1930- ) Writer and economist

The Importance of Legal Tax Planning

2005-10-14T09:27:00.000-07:00

I receive a certain amount of negative response from self-righteous zealots who consider it somehow immoral to arrange your affairs to lower taxes as much as possible. I have found efforts at trying to convince these people to be time consuming and futile and I try to avoid it. They simply are beyond reason.

One of my favorite legal minds and proponents of true liberty once said:

"[A] transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade, taxation. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase ones taxes.

"Over and over again Courts have said there is nothing sinister in so arranging ones affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."
Honorable Learned Hand, US Appeals Court Justice, Helvering v. Gregory, 69 F. 2d 809, 810 (2nd Cir, 1934), aff'd 293 U.S. 465 (1935)

The heart of this decision rests on the idea that laws are rules to be obeyed, and if you can operate inside the rules then you have nothing to worry about. The government could not create rules that were vague and designed to trap you (or give the government some kind of unreasonable leverage to be able re-interpret things on the fly). This simple philosophy used to be at the core of everything that happened in the USA. Although the case law no longer supports this view as thoroughly as I would like, there is still a strong element of Learned Hand's thinking in many aspects of the law, particularly tax law.

This is because Tax Law is important!!! When I went to law school I avoided tax courses like the plague. Not only were they boring, but to be associated as someone interested in tax law had a very negative connotation in law school. You just were not "cool" anymore. But as I have aged and grown wiser, I have found tax law to be more and more important. When you consider that it often consumes up to 45% of the profits of a business operation, tax law becomes increasingly dominant.

That is why I am always amazed at how people simply shrug at the concept of reducing taxes. If you run a business and you can find a way to reduce your rental expenses, or your employee expenses, or your raw material costs, you would be a pretty poor business person not to go after those savings. Yet with taxes too many people tend to ignore the possibility of obtaining dramatic savings that translate to bottom line results. And they do so not out of ignorance, but out of intentional disregard for the consequences. Ignorance is forgivable. As they say, ignorance is the absence of knowledge and can be educated, but stupid is forever!

Ignoring tax law is a very dangerous business. First of all, if you are extremely conservative, and pride yourself on paying more than what is owed, the tax laws are so intricate as to lead to dangerous situations where you end up getting yourself in trouble because you refuse to organize yourself in the proper manner. Many people go out of their way to avoid forming corporate entities, and fail to structure and plan their businesses in a truly "business like" manner. They seem to think that they are doing some favor to world by not protecting their assets, not reducing their taxes, not maximizing their deductions, etc. But ironically, I have found that this sort of person ends up being more likely to unintentionally violate tax laws. Tax laws are not made up of common sense issues that can be sorted out with a "reasonable review" of the issues. They can be very technical, and can often ensnare the unsuspecting.

But the more damaging situation can come about when you ignore tax law, but your competition does not. You are then at an extreme disadvantage. We are living in an increasingly competitive market place, where businesses from across the globe can compete in the farthest and narrowest markets. If you are unable to obtain your raw material at a price at or below your competition, they will be at a real advantage if all other factors are equal. If their labor costs are lower, their costs of government regulations less, and their access to capital easier, your competitors will be able to undersell you yet make a higher profit. Most businesses recognize this fact, but when it comes to taxes, a great wall of anxiety clouds otherwise business-like thinking. If your competitors can obtain raw materials at the same price, labor costs are equal, and they operate under similar regulatory code, then all that is really left is taxes. If your competitor has found a legal way of reducing his effective tax rate from 45% to 25%, then that competitor will be able to lower prices without reducing profits. He will undersell you regardless of what you do. You are finished.

This is the posture that most US small businesses take, and it disturbs me to no end. Some of them reject the possibility of reducing their taxes due to the self-righteous attitude that I described above, and for these I don't try to evangelize. They are too set in their fanaticism to be moved. They believe that those who use the tax system wisely (that is understand the rules and follow them) are competing unfairly, and they seem to think that as a loser they should have the right to go back and change the rules to punish the winners. However, most of those who choose to ignore tax reduction opportunities are not imbeciles, but are rather cowed by fear. They have had fear of the IRS and tax law so etched into their thinking that they don't want to do anything that could risk being associated with anything that could get them in trouble. And as such they have an unthinking aversion to the topic. And so they expose themselves to risks of being destroyed by those who are willing to face theirs fears and face the "unknown mysteries" of the tax laws!

For indeed, it is no accident that knowledge of the tax law is painted as some kind of occult occupation that is dominated by "high priests" of knowledge. Those who are knowledgeable about tax law, whether they work in the government or in private practice, usually enjoy a certain fear and awe that comes with dabbling in dangerous knowledge. Often they are socially shunned by others. Who invites a tax lawyer or IRS agent to a cocktail party?? (Maybe someone who is facing bankruptcy from ruthless competitors who are not averse to finding legal means of lowering their taxes, and thus increasing their profits???)

But the tax laws are not really that mysterious. They are just a set of rules that all parties are supposed to follow. Admittedly the rules are often vague, and sometimes confusing, and sometimes even contradictory. Sometimes a rule says that 'green companies' must pay X taxes, and that 'blue companies' pay no taxes. But then another rule defines 'gray' companies in such a way that some 'green' companies can be defined as 'gray'. And there may be further rules that make it possible for even the lightest of 'gray' companies to be defined as 'blue' under certain circumstances. Tedious? Yes. Mysterious? No. Immoral??? I frankly do not understand the question (or implication) of how it can immoral to obey the rules, and in so doing obtain an advantage over those who fail to obtain the same knowledge that is open to all, and thereby win the game. It strikes me a bit like "sour grapes" when the losers complain that the winners "only won because they used some unethical 'tax dodge'..."

There is no question that in the modern global economy, competition involves all aspects of your business, and those who fail to maximize every cost saving opportunity, will most likely not survive the competition. However, just because you do not own or operate a business, don't think for a second that your situation is different. You are competing whether you know it or not. You are competing to see who can save more for their retirement; whose division can outperform the other; whose budget comes in below estimates; etc. Without an understanding and appreciation of the consequences of tax planning, you will be at a disadvantage no matter what you do. Ignoring the tax laws is like ignoring a poisonous viper in your midst: It can bite you and kill you before you know what even happened. But ignoring tax laws can also cause you to miss out on prime opportunities to improve the bottom line. Either way, you may not be around to understand why you lost the game.

Respecting the Law

2005-10-13T08:04:00.000-07:00

"Do what thy manhood bids thee do,
From none but self expect applause:
He noblest lives and noblest dies
Who makes and keeps his self-made laws."
-- Sir Richard Francis Burton
(1821-1890) English explorer, linguist, author, and soldier

Issues and Concerns about Offshore Trust Integration

2005-10-13T07:39:00.000-07:00

Recently I was asked a question by a prospective client that troubled me. We had exhaustively gone over the details of the proposed system we were developing for him, and as a prudent act of due diligence, the prospective client sought a second opinion. He approached someone who claimed to be a US tax lawyer, and the tax lawyer said something to the effect, "You better be careful! The IRS is really cracking down."

Boy that was helpful. The comment sends the proposed client into a state of panic.

I told him, "The IRS is always 'cracking down', and that is their job. That is why you need to hire someone like me to make sure they have nothing to crack down upon!!!!"

This was my response to him, with certain changes to protect the innocent. I hope you find it helpful if you plan on doing any offshore asset protection planning:

************

As for your friend's comment, it may be based on ignorance. Not saying stupidity. Just ignorance since he has no knowledge of the structure in question, and may have little experience in offshore asset protection planning. What he stated was probably something on the line of, "You better be careful because the IRS is cracking down..." The IRS is always cracking down. I know many tax attorneys whose attitude is that you can never do anything that might offend the IRS, and that the best thing to do is to pay 110% of your taxes. There is nothing wrong with this theory, but it one that I do not subscribe to. In some cases, when you are representing high level public figures, large corporations that are under government scrutiny (and perhaps want to obtain government contracts) this is often a very wise attitude. And in fact the IRS is cracking down on tax shelters developed by the big accounting companies who have essentially continued doing business as usual since the Enron/Arthur Anderson fiasco with only a small nod to those complaining of corrupt corporate governance in the US.

Now to a brief description of this system.

The heart of the system rests on the Belize Trust (whether or not you use a Texas LLC or a Belize IBC). Now there are as many ways to design a trust as there are to design a snowflake. But to begin with the basics: A Belize trust has 4 primary parties: the Trustor (establishes the trust), the Trustee (manages the trust), the beneficiary (who benefits from the trust), and the Protector... The Protector is a very special office and is unique to Belize and a few other jurisdictions. The Protector, pursuant to the Belize Trust Code, has the power to fire the Trustee, oversee fiduciary matters, and appoint new and/or additional Protectors. In addition to the statutory powers, the trust instrument can give the Protector additional powers. This is dangerous but often worth the effort. We don't want the Protector to be imputed with the powers of a Trustor, Trustee or Beneficiary for reasons of asset protection, and tax planning. However, if we can strengthen the powers of the Protector without crossing those lines, the Protector becomes a very important officer, yet one that does not have to declare a controlling, beneficial, or ownership interest.

In my particular flavor of Belize Asset Protection Trust (every lawyer seems to have his ideas concerning these) the Trustor, Trustee, Protector, and Beneficiary are all the same non-US, non-UK, entity. The entity resigns as protector appointing the client as successor Protector. This is where it gets tricky. The Protector in my trust has a "power of appointment" giving the protector the power to change the beneficiaries and decide who will receive beneficial treatment of the trust. This is a very dangerous power since in the hands of a single individual, it would give complete and total control over every aspect of the trust, and destroy the argument that the trust is not the alter-ego of the client. For this reason I strongly encourage my clients to have three Protectors. That way they can be one of the protectors, and all they need to do is select 2 trustworthy individuals to be the other 2. As long as 1 of the other Protectors is agreeable, you have control. You can remove an uncooperative Protector if necessary and replace him with another.

The 'power of appointment' is not something that can be partially imputed. You either have the power or you don't. With a committee of 3 protectors, the committee has the power, and the client no longer has total control over the assets, the trust, or the beneficiaries (although in effect he or she does). This system is very similar to the European or Panamanian Foundation which is very popular, but also very cumbersome to operate.

Now, once you have avoided the pitfalls of trust formation and activation, we establish a Belize IBC to handle all business matters. This is important since having direct control over assets of a trust can often be used to impute control over the trust. In this case, if we placed assets directly into the Trust, and you showed effective control over the assets, those facts could be used to attack the trust. However, if the trust owns a company, and you are not the director or controlling officer, but merely an "asset manager/employee/agent" who is fairly compensated by the company, your control over the assets cannot be used to impute control over the trust, since such actions cannot even be used to impute control over the company (since corporate entities are designed to accommodate exactly such activities -- trusts are not). Now the company formation and management needs to be carefully managed, but is not as tricky as the trust. Courts have not set aside corporate structures because related parties operate in some capacity inside the company to the same extent that they have set aside trust structures (although here too there is a risk that if the corporate formalities are not observed the corporation's limited liability can be pierced -- but this has to do with liabilities of the corporation and not tax matters -- at least for now -- I like to be cautious and observe all formalities), whereas some courts have set aside trusts for such activities not carefully and scrupulously circumscribed.

I could go on, but you now have a stronger knowledge of how an effective "offshore" asset protection structure would work than most tax "experts" out there. There are obstacles to overcome and pitfalls to be wary of. And it is important to observe formalities and not be lazy. But those rules apply to every aspect of human activity. The real question is whether or not you want to do it. Doing it correctly is something I am confident I can do. (Advising politicians and corporations on their tax liabilities are not areas which I profess any knowledge -- indeed I am ignorant -- and I do not attempt to impose my uninformed opinion on others in those areas.)