A Scary Disconnect

 Legend holds that in 1494, an Italian friar named Luca Pacioli was sitting under an apple tree when an apple bounced off his head. In a flash of insight, he invented the "double-entry bookkeeping" system where each entry has a corresponding and opposite entry to a different account. Those entries, called debits and credits, help accountants avoid headaches — if the debits and credits don't balance, there's a mistake somewhere. (Some of you may be thinking that was Sir Isaac Newton with the apple inventing gravity, but this is our story and we're sticking to it.)

Double-entry bookkeeping has ruled accounting for over 500 years. We see it everywhere today, including in our tax code. Revenue flows in, balanced by expenses flowing out. Anything left over eventually winds up in the "taxable income" account.

Sometimes, with taxes, that balance breaks down, and many of those disconnects spell opportunity. Real estate investors, for example, can depreciate the price of their properties over time. (We can help you with "cost segregation" strategies to do it even faster.) In the IRS's ideal world, you'll repay those breaks by "recapturing" them as income when you sell. But with tax-free exchanges, stepped-up basis, and other strategies to avoid that reckoning, most of those depreciation deductions never get recaptured at all.

Now it's Halloween: America's second-favorite, and second-priciest, holiday. The National Retail Federation reports we dropped $9.1 billion on the spooky season last year, including $2.7 billion on candy. (Fun fact: Halloween candy is cheapest exactly four days before the 31st.) How does all that fit into Luca Pacioli's neat little boxes? Well, it gets scary the minute the greedy little trick-or-treater on the other side of your door goes running down your sidewalk with their loot!

Here's the disconnect. The candy company sells sweets to a retailer. That's a taxable transaction. The retailer sells them to you. That's another taxable transaction. But then you just give it to the little goblins, pirates, and princesses on your porch. No deduction for you, no income for them, no 1099s for the IRS. (Ugh. Can you imagine the 1099s?) That removes everything from the IRS's world of debits and credits. Seriously, if the IRS taxed kids on their Halloween candy, they could collect millions of dollars to cover free dental care for everyone.

It's all very ironic because, as any parent knows, Halloween is an exercise in managing the waste of assets. Your kids come home with bulging bags of candy and dreams of sugar highs lasting until Thanksgiving. But pretty soon the good stuff is gone. No more Kit-Kats or Snickers! They're left with a couple of "fun-size" Milky Ways, some of those Jolly Ranchers nobody really likes, and a few stale candy corns. At that point, you "charge off the goodwill" by throwing out the dregs while they're at school and hoping the kids don't even notice.

Today, your average accountant or tax professional focuses their effort on making sure the debits match the credits. But we don't just stop there. We take the time to look for those tax "disconnects" that can rescue thousands in taxes. There's nothing scary about it at all. So call us when you're ready to pay less. You'll think the savings are pretty sweet!

The Taxpayer Who Never Was

Life is full of ups and downs, and sometimes the downs can be so low that it doesn't feel like there's ever going to be an up again. How many people have dreamed of faking their own death and disappearing under a new identity, never to return to their problems again? It's called "pseudocide," and it's popular enough that novelists have a field day writing thrillers about it. John Grisham pulls some variation of that stunt in half a dozen books, and J.K Rowling, Tom Clancy, and Gillian Flynn (Gone Girl) have all joined him in that theme.

Faking your death doesn't always work. In sixteenth-century Verona, a young nobleman named Romeo tried it with a deathlike potion, and we all know what happened to him. But that doesn't keep the occasional scammer from trying. Most famously, rock-and-roll legend Elvis Presley faked his death, and supported himself by entering Elvis impersonator contests. (He always laughed when he didn't win.) And if you have really valuable information on a really bad guy, the witness protection program will even establish your new identity for you!

There's no law that says you can't fake your death to go ride off into the sunset. But we got to wondering . . . what would our friends at the IRS think about that plan?

Let's start with your life insurance benefits. Code Section 101 says gross income doesn't include amounts your beneficiaries receive "if such amounts are paid by reason of the death of the insured." We're splitting hairs here, but wouldn't they still owe the tax if you aren't really dead? Or would they be safe because the insurance company paid them by reason of your death, even if you're not? (You can be sure that somewhere in America, there's an underemployed lawyer ready to bill by the hour to answer that question!)

Next, let's look at estate tax. Assuming your gross estate is over $11.18 million, and the rest of the world really believes you're dead, at some point your executor will file a return and pay 40% of the taxable amount above that threshold. What's for the IRS to complain about? But come on, folks. While it's true that money can't buy happiness, it can solve a lot of the problems that cause unhappiness. So how many people with $11.18 million are really going to fake their own death in the first place?

(While we're on the topic of estate taxes, it's worth mentioning that the current threshold means that the IRS gets only a couple thousand returns per year now anyway. As recently as 1997, when the threshold was just $600,000, they got 90,000 of them. That's one perk of working in the trusts and estates field: just because the client dies doesn't mean you have to stop billing them.) 

Finally, let's talk about anything you make after you pull your David Copperfield act. You'll earn it under a new name and social security number . . . but as long as you've set up your new identity properly, the IRS should be happy getting their usual share. Of course, there's that whole "identity fraud" problem. But hey, nobody said this would be easy!

Look, if life throws you a beanball, we understand the temptation to start fresh. But you will wind up crossing the line into fraud at some point. So if you're having a really bad day, can we suggest an easier (and perfectly legal) alternative? Come to us for a plan to pay less tax, and see if we can give you more reasons to enjoy the life you already have!

Don't Let These Guys Catch You Paying Taxes!

Streaming TV services like Netflix have changed how we watch television, dropping an entire season of a series at once for us to binge on. They've even breathed new life into "quality television," a phrase that used to provoke laughs from that insufferably smug type of person who used to brag that they didn't even own what we all used to call the "idiot box."

Netflix has mined TV gold from all sorts of settings. Orange is the New Black explores life inside a women's prison. Stranger Things is a love letter to classic 1980s sci-fi/horror films. And Bojack Horseman takes us inside the world of a half-man, half-horse, has-been TV star who drinks too much. It was only a matter of time before we'd see inside the upside-down world where the IRS unleashes investigators to chase business owners for . . . wait for it . . . paying their taxes.

Ozark introduces us to Marty Byrde, a frugal Chicago-area financial advisor and family man who drives a 10-year-old Honda and resists moving his firm to flashy new downtown offices. (Prudent, right?) One night, he takes an emergency meeting with his partner, where we discover his real business is laundering cash for a Mexican drug cartel. Then Marty learns his associates have stolen millions (spoiler alert: bad move) and watches the boss's sicarios slaughter them and nonchalantly stuff their bodies in barrels.

Marty, played by the always-slightly-oily Jason Bateman, survives by promising to repay what his partners stole and launder another $500 million. He moves his family to Missouri's Lake of the Ozarks, meets a colorful cast of local characters, and searches for businesses he can use to ply his trade. Meanwhile, investigators have found the bodies from the massacre and connected them to the partner who split town. Adventure and hilarity ensue for 20 episodes, and just like that, your entire weekend is gone.

As for the IRS, they don't get all judge-y about how you make your money. They just want their slice of the pie. (Pie is delicious.) But they do get judge-y when you try to pass off cherry pie as apple. That's a real problem for drug cartels. Their business generates cash, and lots of it. They can't just take suitcases full of Benjamins to the bank without raising red flags. They need to turn that dirty cash into legitimate funds they can use to buy things like jet planes, islands, and tigers on a gold leash.

That's where financial alchemists like Marty earn their keep. They find legit businesses (like a struggling restaurant and a skeevy "gentlemen's club") to hide behind. They run the cash through the legit business's books and deposit it in the legit business's bank. They even pay tax on it. Presto, no more narcodollars! It may not be the kind of business they teach in fancy MBA programs. There aren't any glitzy national conferences, or PR-minded professional associations with continuing education and ethics requirements. But hey, it's a living. (Until suddenly one day it's not.)

IRS agents who target Marty and his ilk are experts in following the money. They partner with agencies like the FBI and DEA to stop crooks from hiding their loot, even when "hiding" means paying taxes on it like anyone else.

Sadly, we can't help if you get mixed up with a Mexican cartel. But we can help you stop wasting money on taxes you don't have to pay. So call us when you're ready for a plan, and have fun binging on the savings!

Something to Fight About!

  Fall is officially here, and that means whiskey season is back. Most drinkers probably don't think much about taxes when they visit their favorite bar or spirits shop. Liquor levies are generally based on volume, not price, so you pay the same amount of tax on a $4 fifth of Olde Ocelot as the swells pay for their $269 Pappy Van Winkle. But did you know that whiskey played a central role in our country's first tax protest, which took place around this same season 224 years ago?

Turn the dial on the Wayback Machine to 1791. The fledgling U.S. government was struggling to pay off $79 million in Revolutionary War debt. (Today that wouldn't cover a single F-35, let alone win independence from the greatest empire on earth.) Congress had already hiked tariffs as high as Treasury Secretary Alexander Hamilton felt they could go, so they were forced to tax domestic products. Americans loved liquor, in part because alcoholic drinks didn't spread disease (and also because it dulled the pain). So, naturally, Congress slapped a tax on it.

In western Pennsylvania, many farmers distilled their surplus grain into whiskey. Some even used it in lieu of currency. So naturally, none of them exactly raised a toast to the new tax. Out there on the edge of civilization, it sounded a lot like "taxation without representation," and we all know what happened the last time that was a rallying cry. Resistance began immediately, with area gangs tarring and feathering local tax collectors. By 1794, organized militias were battling federal marshals delivering subpoenas and warrants to distillers not paying the tax.

On September 25, 1794, President Washington federalized 12,950 troops (including future explorer Meriwether Lewis) to put down the rebellion. Then he rode out from the capital to lead the troops himself. Apparently his desk job running the country wasn't exciting enough! Fun fact: it was the only time a sitting U.S. president led forces in the field until President Thomas Whitmore (played by Bill Pullman) led a force of plucky jet fighters in a desperate sortie against alien invaders in the 1996 popcorn epic, Independence Day. (Don't bother with the 2016 sequel.)

Washington and his 12,950 troops proved to be maybe 12,900 more than the rebels could handle, and they fled before firing a single shot. Two of their leaders were convicted of treason and sentenced to hang, but Washington pardoned them. (No word on whether they made "dark-money" contributions to the President's PAC.) Opponents kept fighting the tax at the ballot box, helping Thomas Jefferson defeat John Adams in 1800 and repealing the tax. Still, historians agree that Washington's success in quelling the rebellion helped establish the legitimacy of the new federal government.

Today, of course, leading troops is an entirely different matter. If the president wants to target, say, terrorists in Yemen, he gives the word to the Joint Chiefs, who pass word down the ranks to an Air Force officer manning a joystick connected to a drone halfway around the world. The whole thing is about as antiseptic as visiting the dentist, at least on our side of the drone. Can you even imagine Barack Obama or Donald Trump saddling up a mighty steed, raising a sword, and leading a colonnade of troops into battle? We'll wait while you finish laughing. (Now that we mention it, maybe Dubya would have enjoyed that?)

Today, of course, there's an easier way to pay less tax. You don't have to assemble a militia or challenge government forces. You just need a plan. So call us when you're ready to save, and raise a toast to progress! 

All Fun and Games

Some of the world's most popular board games give players the chance to live out professional fantasies. Aspiring property sharks can cheat each other with the classic Monopoly. Would-be Sherlock Holmeses can track down killers with Clue. Armchair generals can settle down to an evening of Risk. But until today there's never been a game to let aspiring tax planners outwit the Internal Revenue Code. Shouldn't that be at least as much fun as figuring out it was Colonel Mustard in the Library with the candlestick?

Well, that all changes in the form of a new board game called "Transfer Pricing: The Game."

Transfer pricing is the process for setting the value of transactions between businesses under common ownership and control. Let's say Amalgamated Widgets owns a subsidiary that makes parts in, say, Macedonia, then puts them together here in the U.S. How much should the parent pay for the parts? That may sound boring and technical (because, yeah, it is). So what difference does it all make? Let's say the corporate tax rate in Macedonia is 10% and the rate here is 21%. Naturally, it makes sense to allocate as much of the profit as possible in Macedonia where the rate is lower. 

Of course, tax collectors everywhere are on to the game. So you have to be able to show them you're transferring at an "arm's length" price — the same price a disinterested buyer would pay from a disinterested seller. The Organisation for Economic Cooperation and Development sets out rules for pricing all sorts of transactions, including tangible items, intellectual property, and even loans. 

Now you're excited to try it yourself! Too bad you don't own a foreign subsidiary. That's where "Transfer Pricing: The Game" comes in. The publisher describes it as "the card game that decides who has the most substance. Now available, with an arm's length price of only $30." The goal? "You run a subsidiary of Orchid Enterprises and build a substantive value chain, grow income, destroy your corporate rivals, and defend your accomplishments against various Tax Authorities, legal challenges, and business pitfalls. Prove once and for all who is the greatest transfer pricing professional of all time!"

The game is designed for 2-8 players, ages 12 and up. Open the box and you'll find three sets of cards. "Function" cards represent basic business functions like marketing. "Action" cards drive game play. And "defense" cards provide power you need to defend your actions against various challenges from tax authorities. There's no board, so technically it's not a "board game," but if you're not comfortable with technicalities, this really isn't the game for you.

The contest starts when the first player draws an action card and follows the directions (like "audit an opponent"). Once you complete them, you'll draw another function card and trade it for one of your existing function cards or discard it. To finish a turn, draw a defense card and attach it to a function card or hold it for future play. Look, who are we kidding? The whole thing sounds about as much fun as a group project for an MBA class. Maybe that's why it recently ranked just #178,162 in Amazon's "Toys & Games" category.

Here's all you really need to know. Overpaying your tax is no fun, and tax planning isn't a game. So call us when you're ready to play, and get a serious plan to pay less. Then pass GO and find something fun to do with your savings!

R-E-S-P-E-C-T the Plan

Aretha Franklin left this world with a musical legacy for the ages. The Queen of Soul started singing for her father's "gospel carnival tours" at 12, cut her first record at 18, and scored her first hit a year later. She went on to record 112 hit singles, including 20 #1s, and won 18 Grammies. She performed for presidents and even sang for a real queen (of England). When word broke of her death last month, many questioned who on earth could possibly sing at her funeral? (Answer: Stevie Wonder, Jennifer Hudson, and many more.)

Unfortunately, Franklin didn't leave behind a will. This is especially ironic considering how rock steady she was with her money during her life — even downright paranoid! She demanded payment on the spot, in cash, then kept a handbag with stacks of hundred-dollar bills with her security team, or even right on her piano where she could see it. She had seen colleagues like Ray Charles and B.B. King get ripped off, and she was notabout to join them!

Franklin died in her longtime hometown of Detroit, and had been divorced since 1984. Michigan law holds that when an unmarried person dies "intestate," or without a will, their assets go equally to their children. Franklin's four sons have stepped forward as "interested parties" in court papers and nominated Franklin's niece as the natural woman to be the estate's personal representative. But that's no guarantee that a chain of fools won't show up with their hands out, especially with an estate valued at $80 million or more. (Not bad for a tenth-grade dropout, right?)

Franklin is hardly the only music icon to spend more time planning their next performance than their financial legacy. When Prince died intestate two years ago, the bitter fighting that erupted among his six heirs set the doves crying. Last year, the estate announced a distribution deal with Universal Music Group valued at $31 million. But five months later, a Minnesota judge let Universal back out after accusing the estate's representatives of fraud. The judge himself described the situation as "personal and corporate mayhem," which is something you never want to hear a judge say about you.

Estate planning may be more important for musicians because so many die young. When Doors frontman Jim Morrison reached the end at 27, he left his estate to his common-law wife, L.A. woman Pamela Courson. She died intestate three years later, so it went to her parents. But Morrison's parents argued his will was invalid because he wasn't competent to write it. (For some reason, they thought he was under the influence of drugs. How could that be?) Oh, and Morrison had married a previous girlfriend in a pagan ritual that included walking on fire and drinking each others' blood. Shouldn't that count for something?

Even proper planning can't guarantee preventing complications down the road. Michael Jackson left a valid will and revocable living trust. But his executors are locked in a Tax Court thriller, battling the IRS over how much to value his name and likeness. The estate pegged them at $2,105, reflecting the damage Jackson had done with his generally weird and scandalous public behavior. The IRS pegs those rights at $161 million because, well, he was the "King of Pop." At least he didn't leave it all to Bubbles the Chimp!

You may not earn your money performing for the Queen. But you probably still work hard for it. So show it some respect, and don't waste anything on taxes you don't have to pay. Call us for a plan to pay less, and we'll give you something to sing about!

Floating Palace, Indeed!

This week's story is a briny chowder of petty vandalism, tax avoidance, partisan posturing, and flat-out misinformation. There's probably something in here to offend everyone. So buckle your seat belts and get ready for a ride!

Education Secretary Betsy DeVos has been one of Donald Trump's most controversial cabinet officials since barely surviving Senate confirmation thanks to the Vice-President's tie-breaker. It doesn't help that she's also one of Trump's wealthiest appointees. She and her husband Dick, son of Amway founder Richard DeVos, are worth an estimated $1.3 billion. And the DeVos clan, befitting their place on the Forbes 400 list, enjoy the usual collections of homes, jets, and ten (ten!) yachts that you would expect a family of billionaires to maintain.

Last month, news broke that someone had untied Betsy's 164-foot yacht Seaquest from its dock on Lake Erie. That's maybe newsworthy on its own — the vessel cost $40 million, which means damage could have been significant, and Lake Erie isn't exactly known for random drifting superyachts. But what really drew fire was the news that DeVos, who of course serves a President dedicated to "America First," was flying a Cayman Islands flag on her vessel. The partisan outrage machine instantly kicked into gear, howling that DeVos had avoided over $2 million in tax with the move.

Why would a Michigan billionaire, whose husband actually ran for Governor of that state, register her floating palace on a tiny flyspeck of an island 1,700 miles away? If she registers Seaquest in Michigan, she's potentially subject to the Wolverine State's 6% use tax, or $2.4 million. She's subject to U.S. safety and inspection standards. And her crew is subject to U.S. labor requirements. Registering the yacht in the Caymans lets her meet a considerably less-demanding set of standards. (Think "island time," but apply that concept to maritime rules and regulations.)

So DeVos is a high-class hypocrite, right, exploiting loopholes to save millions and cheat the kids she's sworn to serve? Well, if so, she's hardly alone. Sailing under a "flag of convenience" has a long and sometimes-even-honorable history. Early American merchantmen flew under the British flag to avoid Barbary pirates. And if you've ever taken a cruise, you've done it yourself. Take Royal Caribbean's brand-new $1.4 billion Symphony of the Seas. She's the world's largest cruise ship, with robot bartenders, 22 restaurants, 24 swimming pools. And she sails under a Bahamas flag.

What's more, it turns out the headlines blaming Betsy for registering "a fleet of yachts" outside the country are, to use a loaded term, fake news. For one thing, it turns out Seaquest isn't even Betsy's boat. It's actually owned by a company called R.D.V. International Marine, a subsidiary of the DeVos family office. And the family's other nine yachts — the Blue Sky, Quantum Racing, Delta Victor, Reflection, Attitude, Sterling, Windquest, Zorro, and De Lus — are registered to ports in Michigan, Delaware, and Florida.

What's our bottom line for this week? (Besides "don't believe everything you read"?) The DeVos family may be a little showy with their money. But they didn't get to be billionaires by wasting money on taxes they didn't have to pay. So call us when you're ready to start building your fleet, and see what we can help you buy!

Awwww, He Has His Daddy's. . . Tax Break?

Mother Nature knew exactly what she was doing when she made babies cute. In fact, evolutionary biologists at Oxford University recently concluded they evolved that way to survive by encouraging the rest of us to look after them. "This is the first evidence of its kind to show that cuteness helps infants to survive by eliciting care-giving, which cannot be reduced to simple, instinctual behaviours," says professor Morten Kringelbach. (And couldn't Oxford have found something less obvious to study?)

Half the fun of meeting a new baby is looking to see what features they inherit from their parents. Daddy's bright blue eyes? Mommy's adorable button-nose? (Hopefully not the next-door neighbor's goofy jug ears!) But did you know that some babies inherit more than their parents' physical features? In California, some babies inherit their parents' tax breaks!

Back in 1978, a group of Californians led by a cranky retired reporter named Howard Jarvis passed a ballot measure called Proposition 13. That law capped property taxes at 1% of a property's assessed value andlimited increases to 2% per year — regardless of how much its value actually goes up — until the owner sells. The goal was to keep inflation from raising taxes so high that they pushed owners, especially retirees living on fixed incomes, out of their homes.

Eight years later, Proposition 58 juiced that break by letting parents pass along their valuations, along with their houses, to their kids. The goal was to make it possible for them to keep living in the family home. But since then, we've discovered some unintended consequences. Supreme Court Justice Harry Blackmun even said it's created "sort of a class of nobility in California." His colleague, Justice Stevens, said it “establishes a privilege of a medieval character: Two families with equal needs and equal resources are treated differently solely because of their different heritage.â€

Last month, the Los Angeles Times reported how this can pay off for heirs who don't even live in their houses. In 2009, actors Jeff and Beau Bridges, along with their sister, inherited a Malibu house that their father Lloyd bought in the 1950s. And you can rent it today for the bargain price of $15,995/month! Yet the annual tax on the property, which Zillow estimates is worth $6.8 million, was just $5,700. The carryover valuation has saved the Bridges heirs more than $300,000 since they inherited it. In total, the Times reports it's cost Los Angeles County $280 million last year.

California is the only state that dangles that particular property tax goodie. But Uncle Sam offers a similar break when Mom and Dad move to that great nursing home in the sky. It's called "stepped-up basis." Let's say Mom and Dad paid $12,000 for a house in San Jose, back when you could do that. Now they're smack in the middle of Silicon Valley, and developers are salivating to pay $2 million for the place. If Mom and Dad sell today, they'll owe beaucoup tax on that gain. But if they hold it until death, you'll avoid tax on any of the run-up in value before you inherit.

There's good news here for everyone, even if you didn't inherit a house on Malibu Beach. The federal and state tax laws are full of similar deductions, credits, loopholes, and strategies to pay less. You just have to go out and find them. That's where we come in. So call us today, while there's still time to plan for 2018, and see how much you're overpaying. Than start planning for your next beach vacation

Can You Imagine the Smell?

Last year's Tax Cuts and Jobs Act added a new red light. Specifically, it capped deductions for state and local tax deductions at $10,000 per year. That's an obvious blow to the states that reach the deepest into their residents' pockets. In New York, for example, one-third of taxpayers claimed the deduction, averaging more than $20,000. In Alabama, just one-fourth claimed it, averaging just $6,000.

Of course, human nature being what it is, we don't always want to stop at those red lights. So society has developed an entire profession, called "the law," dedicated to finding ways around them. (Even Pope Francis, when he announced the church's opposition to capital punishment, left exceptions for people who drive the speed limit in the left-hand lane or bring Popeye's fried chicken on an airplane.) 

Of course, our friends back in the Home Office in Washington aren't stupid. Last week, the Treasury Department issued proposed regulations effectively eliminating charitable deductions for gifts tied to state tax credits. But will that be the end of the story? Not if the states have their way, and they're sure to take the Treasury to court. Round and round it goes . . . and now you know why tax lawyers drive Jaguars!

IRS Loves "New" Math

  Parenting is full of all sorts of milestones. Some of them are precious, like your child's first steps, their first words, and their first day of school. Some of them are less welcome, like a first broken bone, or a visit from the law. But there's one milestone that takes some parents by surprise, and that's the day they realize they can't help their kid with math homework anymore. This is especially jarring when the kids come home insisting their teacher taught them 2+2=5. The "new" math can't be that different from the "old" math? It's still just math, right?

  Last week, a California lawsuit involving Monsanto Corporation's flagship product, Roundup weed killer, reveals how the new math of last year's tax law changes the rules. A San Francisco-area school groundskeeper named Dewayne Johnson, who sprayed up to 150 gallons of the pesticide at a time, sued Monsanto, claiming it gave him cancer. The jury agreed and awarded him $289 million, including $39 million in compensatory damages and $250 million in punitive damages. 

  Unfortunately for Johnson, he's not going to get to keep anywhere near that whole $289 million. He's going to run into some new math and wonder if maybe 2+2 doesn't somehow equal just one. 

   Here's the first problem: legal fees. Lots of attorneys go to law school because there's no math. But there's one calculation any ambulance chaser can do in his sleep, and that's take a third off the top. (The next time you meet one at a party, throw out an 11-digit prime number, and be amazed how fast you get back a response. Try it, it's fun!) We'll assume for this discussion that Johnson's lawyers take 40% in fees and expenses, or $115.6 million. That leaves him with $23.4 million net compensatory damages and $150 million in punitives. 

   That leads to the second problem: taxes. Compensatory damages are tax-free, so Johnson keeps his full $23.4 million there. And under the "old math," he could deduct the remaining $100 million in legal fees before paying tax on his $250 million in punitive damages. He'll be in the top 37% tax rate, meaning $55.5 million goes Uncle Sam. As a California resident, another $18 million goes to Sacramento. That leaves $95 million. That's a lot less than $289 million, of course. But it's still a pretty nice result, although we're guessing Johnson would rather get to "live" than "be rich." 

   Now here's where the "new math" upends those numbers. Last year's Tax Cuts and Jobs Act eliminates the deduction for legal fees related to punitive damages. So now Johnson pays the same $100 million to his lawyers, but still pays tax on it. That launches his tax bill up to $122.5 million and leaves him with just $50.9 million — less than 18% of the original award! 

  Of course, the IRS is delighted. They get to collect tax on that $100 million in legal fees for the punitive damages twice: once from Johnson who wins them and again from the lawyers who earn them. What's not to like from their perspective? 

  Now finally, here's the good part, at least for you. You don't have to know the first thing about new math to pay less tax. Our tax planning service gives you a pesticide that eliminates wasted taxes, with no unpleasant side effects. So call us when you're ready to save, and we'll see how "green" your garden grows

Love Stinks. Yeah, Yeah

The best marriages, so they say, age like fine wine. They gain richness, and color, and depth. They ripen and mellow as experience piles upon experience, bonding the couple and deepening the intimacy as husband and wife stroll hand-in-hand through the majestic tapestry of life. (Cue the rainbows, and unicorns, and George Harrison lyrics.)

Fortunately, not all accounting ninjas bill millions. Take us, for example. We can help make sure you aren't paying more tax than you legally owe. And we promise not to bill you seven figures unless we save you millions more. So call us when you're tired of overpaying, and we'll even let you decide how to share it with your spouse!

Mark's Terrible, Horrible, No Good, Very Bad Day

When Mark Zuckerberg was 19 years old, he launched Facebook from his Harvard University dorm room. (Some cynics might say "stole" is a better word than "launched," but who wants to start that debate?) Since then, he's made Facebook one of the internet's most valuable brands. And as he's done it, his net worth has climbed as high as $81.6 billion, making him the world's third-wealthiest man behind Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates.

At least, that was the case until July 25. That day, just after the market closed, Facebook released its second-quarter earnings. Revenue was up — but not as much as investors had hoped. When the market opened the next morning, investors unfriended the stock big-time. Zuckerberg saw $16.8 billion of his stash evaporate in the first hour of trading. (Shareholders as a group lost $120 billion.) That's roughly the total salaries of all 1,696 players in the National Football League. (Not a football fan? It's also enough to buy the Yankees, Dodgers, Cubs, Giants, and Red Sox combined.)

So at this point, Zuckerberg is hardly even rich anymore. But while he and his wife are tightening their belts, scrounging for change in the couch cushions, and debating whether to keep the HBO, we got to wondering what our friends at the IRS think of the news. The answer, not surprisingly: "it's complicated."

Zuckerberg owes tax on his regular income as soon as he earns it. But his salary is just a dollar a year, which doesn't leave much for Uncle Sam. Of course, he also gets some nice perks. Facebook spent $7.3 million on Zuckerberg's security last year. (Fortune 500 companies can't just hire a bunch of knuckle-dragging goons to trail their CEOs. Top bodyguards, who come from federal agencies like the State Department or FBI, command six-figure salaries, and Facebook's security chief served on former Vice-President Joe Biden's Secret Service detail.) That protection is taxable, too.

But the real action, for a tech entrepreneur like Zuckerberg, is in the stock. Facebook announced last September that Zuckerberg plans to sell 35 to 75 million shares — worth between $6 billion and $12.5 billion — to finance his charitable limited liability company. He'll owe tax on those sales, but he'll get corresponding deductions for much of the cash he donates. In fact, last year's Tax Cuts and Jobs Act made those gifts even more valuable, raising the deduction limit from 50% to 60% of his adjusted gross income.

The IRS gets another whack at the rest of Zuckerberg's stock at his death. Considering he's just 34, that probably won't be for a while. But at that point, at least under current law, they'll download 40% of his taxable estate over $11.18 million. Now, unless Facebook implodes like MySpace, Zuckerberg should still be worth billions at his death. But — Zuckerberg and his wife have announced plans to leave 99% of their fortune to charity. Charitable bequests aren't subject to that 40% tax, which leaves the IRS scrounging for crumbs from whatever table scraps the pair leave for their kids.

The bottom line here is that the IRS had no reason to regret Zuckerberg's terrible, horrible, no good, very bad day, because his smart tax-planning means they wouldn't have gotten into a relationship with the stock anyway. The good news for you is that you can put the same sort of planning to work for yourself. And you don't even have to lose $16 billion in a day to do it! Just direct-message us when you're tired of paying more than you have to. We're sure you'll "like" the savings!

Now That's Shelter

Classic rock fans celebrated a milestone birthday on July 26: Rolling Stones front man and rock legend Mick Jagger turned 75! If that doesn't make you feel old, try these on for size: Aerosmith's Steven Tyler is old enough to collect maximum Social Security benefits. Cyndi Lauper still just wants to have fun, but now she's on Medicare. And 80s icon Madonna can finally take money from her IRA without paying a 10% penalty on early withdrawals.

In 1969, Jagger and the Stones scored one of their biggest hits with "Gimme Shelter," a bleak, brooding meditation on the war and violence that characterized the late 60s. But did you know that "Gimme Shelter" describes the band's philosophy on taxes, too?

The Stones' troubles with taxes go back nearly as far as their troubles with the police. Starting in 1968, British authorities had accused the bandmates of taking a certain laissez-faire attitude to controlled substances laws. Later, reports surfaced that they had taken a similarly lax approach to tax laws, too. As Jagger recalls, "So after working for eight years I discovered at the end that nobody had ever paid my taxes and I owed a fortune. So then you have to leave the country. So I said &@#& it, and left the country."

At that point, guitarist Keith Richards paid $2,500/month for the 16-room Belle Époque-style Villa Nellcôte overlooking the Mediterranean on the French Côte D'Azur. (He should have bought it — in 2005, a Russian oligarch dropped $128 million for the place.) There, the band hosted a summer of legendary debauchery: drinking, smoking, snorting, and injecting anything that didn't move. Somehow along the way, they also managed to record Exile on Main Street in a makeshift basement studio they had soundproofed with cheap carpet and (probably) more drugs.

Running from the law has a wonderful way of concentrating the mind, and the Stones vowed not to repeat their financial mistakes. (The drugs were another story.) Jagger put his London School of Economics education to work, and the band started jamming with some top-notch tax planners. They eventually set up a series of Dutch corporations and trusts which helped them pay just 1.6% in tax over the last 20-odd years. More recently, they established a pair of private Dutch foundations to avoid estate taxes at their deaths. 

"Mick would come and visit me occasionally in Switzerland and talk about 'economic restructuring,'" Richards wrote in his 2010 autobiography, Life. "We're sitting around half the time talking about tax lawyers! The intricacies of Dutch tax law vis-à-vis the English tax law and the French tax law. All of these tax thieves were snapping at our heels . . . Mick picked up the slack; I picked up the smack." (It's worth mentioning that Richards — now heroin-free for 40 years — makes his home in decidedly unglamorous, but, relatively speaking, low-taxed Connecticut.)

As for us, we may not be able to make beautiful music. But our tax planning rocks. And we think paying less beats fleeing the country. So call us for when you're ready to pay less and see how much you're wasting right now. We're here for you, and your bandmates too!

It Came From Under the Ground!

Earlier this month, archaeologists digging in Egypt unearthed a 2,000-year-old black granite sarcophagus 16 feet below the surface. Pretty cool, right? But then they announced they were going to open it. What a terribleidea! Have they never seen The Mummy? When the lid came off, they found three skeletons rotting in some dirty water that had probably leaked in from a nearby sewage trench. But that doesn't necessarily mean an ancient undead presence didn't manage to escape, too. It's not like they could actually see it!

Here's something even scarier than unleashing an ancient mummy's curse: wasting money on taxes you don't have to pay! Fortunately, you don't need to dig 16 feet down to discover the solution. All you need is a plan. So call us when you're ready to stop running from the undead beast, and see how much you can save! 

Here's to Your Health!

When Congress raises the hood on the tax code, they're usually working to raise money to pay for government. But sometimes they're more interested in nudging us to behave in ways they can't legislate directly. Take the mortgage interest deduction, for example, which "cost" the Treasury $69.7 billion in 2013. That deduction encourages millions of Americans to spend billions of dollars buying homes, building homes, renovating money pits, and keeping their homes looking spiffy — all of which returns billions more through our overall economy.

Here's the catch. Everyone knows that medical and dental expenses are "deductible." But look a little closer and you'll see that code section 213 lets you deduct them only if you itemize, which leaves about 90% of Americans sitting on the bench. And even if you itemize, you can only deduct the amount of expenses over 7.5% of your adjusted gross income. So, on its face, the new deduction won't mean much.

It turns out, however, that millions of Americans who can't itemize can still benefit from tax-advantaged flexible spending accounts, medical expense reimbursement plans, and health savings accounts. The bill lets you reimburse PHIT expenses from those accounts. 

The Congressional Budget Office estimates the bill would cost the Treasury save taxpayers $3.5 billion over the next decade. That's enough to get special interests interested. The Wall Street Journal reports that "Fitbit, Inc., the American Heart Association and the American Sports and Fitness Association have all lobbied for the bill." And Planet Fitness stock climbed more than 4% the day the bill passed.

Don't Cry 4-3, Argentina

Americans love a champion, and every year, sports fans get to see new champions crowned. We've got a World Series, a Super Bowl, and NBA finals that drag on for months. We've got the Kentucky Derby, the Indianapolis 500, and the Nathan's Famous National Hot Dog Eating Contest. And every even-numbered year, the Olympics bring us more exotic champions in curling, synchronized swimming, and dancing horses.

But prosecutors insisted on penalty kicks, and in 2016, a court found Messi and his father guilty on three counts of fraud. (Clearly not Messi-ing around, right?) The court imposed a 21-month prison sentence (which was automatically suspended under Spanish law) and fined the pair another €3.1 million.

Not to be outdone, Messi's arch-rival Cristiano Ronaldo, who plays professionally for Real Madrid, just announced he would pay Spain €18.7 million to settle tax charges centered on his endorsements. Now, fans who bicker over who's the better player can start bickering over who's the better tax evader.

What kind of football do you prefer, the kind with headshots or the kind with helmets? Either way, we're sure you'd rather follow your favorite team than spend time looking for missed opportunities on your taxes. That's where our team comes in! So call for a plan, and see where in the world you can go with your savings! 

Don't Drink the Kool-Aid

Cryptocurrencies like Bitcoin, Bitcash, and Ethereum rest on a foundation of "blockchain": a continuously growing public transaction ledger consisting of records called "blocks" that are linked together and secured using cryptography. Blockchain bulls see the new technology revolutionizing all sorts of transactions, like real estate sales and medical records. Skeptics dismiss the whole effort as fool's gold, suitable for speculation but nothing more. (Hedge fund tycoon T. Boone Pickens recently tweeted that, "at [age] 89, anything with the word 'crypt' in it is a real turnoff for me.")

Here's one thing blockchain won't ever change — the pain you feel when you waste money on taxes you don't have to pay. So call us today for a plan to pay less, and you'll have more to donate to whatever organization you want to support!

More Important Than Taxes?!?

salmonella, e coli, and campylobacter jejuni sneaking into the burritos. (Hard to taste the viruses under all those seasonings, right?) Partly because of these incidents, founder Steve Ells resigned as CEO in late 2017.

In February, Chipotle hired former Taco Bell CEO Brian Niccol to run the company. (Most would agree that moving from Taco bell to Chipotle is a step up: Taco Bell describes their food as "Mexican-inspired," rather than authentic, but some critics pan it as merely "food-inspired.") Last month, Chipotle announced they're moving their headquarters and 400 jobs from Denver to Niccol's hometown of Newport Beach, CA. The move should actually mean less highway time for Niccol, who used to waste 20 soul-crushing minutes commuting to god-forsaken Irvine every day.

So here's where it gets perplexing. Colorado's personal income tax is a flat 4.63%, which seems like a fair price to pay for those 300 days of sunshine per year that civic boosters promise residents. But California has the highest state tax rate in the country — a genuine millionaire's tax of 13.3% on income over the two-comma mark. The recent Tax Cuts and Jobs Act of 2017 makes that top rate even harsher by limiting federal deductions for state taxes to $10,000. 

Logic suggests that any rational business would move the other way. And thousands of companies have fled California, citing taxes and regulations. But California's job growth since 2011 has "easily outstripped" the rest of the country, and the Golden State's economy is growing faster than low-tax states like Texas and Florida.

In 2016, Stanford sociologist Cristobal Young looked at tax returns showing million-dollar incomes over a 13-year period. His study showed that millionaire tax flight is occurring, but "only at the margins of statistical and socioeconomic significance."

What do you think? Would high state taxes be enough to make you move? Or do the quality of your life and breadth of opportunity mean more than mere taxes? Either way, we're here to help you pay less. So call us when you're ready for a plan, and see where your wasted taxes have kept you from visiting!

Manly Men Doing Manly Things in Manly Ways

Back in the early 80s, a group of Democratic legislators decided to room together to cut the cost of staying in Washington for the three nights or so per week that Congress is in session. The motley crew included Representative George Miller of California (owner of the blue-gray house in Southeast DC), Senators Dick Durbin and Chuck Schumer, future Defense Secretary and CIA chief Leon Panetta, and others. We can only imagine whose phone numbers they posted on the refrigerator in a house like that. Pizza delivery? Of course! Liquor guy? Oh yeah. Exterminator? Maybe not a bad idea . . . .

IRS Scuttles Tax Breaks for Pirate Victims

It\'s 1715 in the Caribbean and the Golden Age of Piracy is at its peak. The War of Spanish Succession is over, and thousands of privateers are left without gainful employment. From bases hidden away in the Bahamas, buccaneers like \"Calico\" Jack Rackham, \"Black Sam\" Bellamy, and \"Black Bart\" Roberts gather those sailors under new commands to terrorize the seas. (Edward Teach, better known as Blackbeard, ties burning fuses into his hair to look more fearsome.) While there are never more than a few thousand pirates active at any given time, their legend will live on for centuries. What do you call a pirate with two arms, two legs, and two eyes? Rookie! Historians generally agree that the Golden Age of piracy \"walked the plank\" by 1730. At that point, European nations could deploy their navies to protect merchants, rather than fight each other. But pirates never fully disappeared. And our federal tax code â?? which some foes attack as its own form of piracy â?? may be making recovery even harder for the victims. (We all know auditors wear suits and skirts to the office. But don\'t you think at least a few of them would rather raise revenue by donning a pirate sash, grabbing a cutlass, and swinging from the nearest yardarm?) Does it strike you as odd that the \"Pirates of the Caribbean\" DVD comes with anti-piracy warnings? Last month, the nonprofit group Oceans Beyond Piracy released their 2017 State of Maritime Piracy report. They found 71 pirate attacks in the Caribbean â?? a staggering 163% increase over 2016. 59% involved robberies on yachts, while the rest involved commercial vessels. There were 40 robberies, 17 failed attacks, 13 armed robberies, and 1 hijacking attempt. The pirates made off with $692,000 worth of ship stores and equipment and $257,000 worth of personal effects. Sadly, the report doesn\'t tell us how much of that loot wound up buried in wooden chests or identified on maps with \"X\" marking the spot. Why do pirates read playboy? For the arrrticles! The tax code has always allowed itemized deductions for personal casualty losses, including shipwrecks. However, the Tax Cuts and Jobs Act of 2017 limits those losses to casualties resulting from federally-declared disasters. The new law doesn\'t change the theft-loss rules. But it essentially doubled the standard deductions, which should cut the percentage of taxpayers who itemize from about a third to about a tenth. (Of course, taxpayers who can afford a yacht large enough to attract a pirate\'s attention probably aren\'t suffering from a shortage of tax breaks!) How do pirates talk to each other? With an Aye Phone! Here\'s the good news, matey. You don\'t have to settle for letting the scallywags at the IRS take more of your doubloons than the law allows. And you don\'t need a man-of-war to stop them. You just need a plan! So call us when you\'re ready to pay less, and let us help you make your treasure grow!