The World’s Favorite New Tax Haven Is the United States – Bloomberg 01-27-16

Salient to Investors:

The US is emerging as a leading tax and secrecy haven for rich foreigners because it is resisting new global disclosure standards. The US is one of only a few countries left actively promoting accounts that will remain secret from overseas authorities – with Bahrain, Nauru, and Vanuatu.

Andrew Penney at Rothschild said the US is effectively the biggest tax haven in the world.

Confidential accounts that hide wealth protect against kidnappings or extortion in their owners’ home countries.

Gabriel Zucman at Berkeley said Swiss banks hold $1.9 trillion in assets not reported by account holders in their home countries.

The UN estimates at least $1.6 trillion in illicit funds are laundered through the global financial system each year.

Read the full article at http://www.bloomberg.com/news/articles/2016-01-27/the-world-s-favorite-new-tax-haven-is-the-united-states

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Fareed Zakaria GPS – CNN 04-12-14

Salient to Investors:

Fareed Zakaria said:

  • Kenneth Pollock says Iran’s foreign policy has been rational and prudent over the years.
  • China has less than 5% of the vote in the World Bank and less than 4% of the vote at the IMF.

Larry Summers said:

  • The US has lost its role as the underwriter of the global economic system.
  • US diplomacy has proved a disaster

Malcolm Gladwell said:

  • Americans are the most honest taxpayers in the world, with only Switzerland even close, yet the penalties for cheating are lower than almost anywhere else, the IRS audits a smaller number of taxpayers than almost any other developed country.
  • Americans perceive their tax system as legitimate.
  • Power is perceived as legitimate if it is respectful of those who are under its purview, if it is fair and trustworthy.
  • If you raise a child in comfort, the path to it doing something extraordinary is more difficult.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1504/12/fzgps.01.html

Americans Give Up Passports as Asset-Disclosure Rules Start – Bloomberg 08-07-14

Salient to Investors:

  • Matthew Ledvina at Anaford said Fatca and the Swiss bank disclosure program has intensified the search for US nationals beyond all measure.
  • The US is the only OECD country that taxes its citizens abroad.
  • Almost 9,000 Americans living overseas have surrendered their passports over the past 5 years.
  • Americans with a net worth above $2 million and an average income tax of at least $157,000 over the previous 5 years must pay an exit tax on unrealized capital gains when they renounce US citizenship.

Read the full article at http://www.bloomberg.com/news/2014-08-06/americans-give-up-passports-as-asset-disclosure-rules-start.html

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Tax Break for IRA Conversion Lured 10% of Millionaires – Bloomberg 01-03-14

Salient to Investors:

The IRS said conversions from regular IRAs to Roth retirement accounts increased more than nine times in 2010, rising to $64.8 billion from $6.8 billion in 2009, and the first time Roth conversions were greater than contributions. More than 10 percent of IRA holders with annual incomes exceeding $1 million converted.

A 2006 law set 2010 for ending a $100,000 income limit on Roth conversions, with no ceiling on conversions if an investor has multiple IRAs and no cap on the amount that can be shifted.

Thomas Rowley at Invesco said wealthy investors could better manage their tax liability in retirement and pass the Roth accounts to heirs free of income tax – it is the cheapest estate planning you can find and you are paying the taxes for these beneficiaries.

Read the full article at http://www.bloomberg.com/news/2014-01-03/tax-break-for-ira-conversion-lured-10-of-millionaires.html

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The IRS said conversions from regular IRAs to Roth retirement accounts increased more than nine times in 2010, rising to $64.8 billion from $6.8 billion in 2009, and the first time Roth conversions were greater than contributions. More than 10 percent of IRA holders with annual incomes exceeding $1 million converted.

A 2006 law set 2010 for ending a $100,000 income limit on Roth conversions, with no ceiling on conversions if an investor has multiple IRAs and no cap on the amount that can be shifted.

Thomas Rowley at Invesco said wealthy investors could better manage their tax liability in retirement and pass the Roth accounts to heirs free of income tax – it is the cheapest estate planning you can find and you are paying the taxes for these beneficiaries.

How Wal-Mart’s Waltons Maintain Their Billionaire Fortune – Bloomberg 09-11-13

Salient to Investors:

Lawrence Summers estimated in December that estate and gift taxes raised only $14 billion in 2102, or 1 percent of the $1.2 trillion passed down in America each year, mostly by the very rich, suggesting our estate tax system is broken.

Jerome Hesch at Berger Singerman said the very rich pay very little in gift and estate tax: at the Waltons’ numbers, the savings are unbelievable.

The richest Americans have amassed at least $20 billion in trusts like those used by the Waltons.

Charitable lead annuity trusts, or “Jackie O” trusts, allow a donor to lock up assets for say 20 or 30 years, set the amount given away each year to charity, and whatever remains at the end goes to a beneficiary, usually the donor’s heirs, without any tax bill.

With the type of Jackie O. trust used by the Waltons, if the trust’s investments outperform the benchmark rate determined by the IRS, then the extra earnings pass to the designated heirs free of any estate tax. John Anzivino at Kaufman Rossin & Co. said such trusts are attractive only to the wealthiest families because the assets are locked up for decades.

Wealthy families held a record $20.9 billion in Jackie O. trusts in 2011, almost twice the amount they held in 2000. The historically low U.S. interest rates since 2009 are making Jackie O. trusts more popular and spurring tax planners to develop variations designed to squeeze out even more tax savings.

Charles J. McLucas at Charitable Trust Administrators said this time will probably go down as a unique opportunity to transfer assets out of an estate at the lowest cost.

Individuals can claim that the value of a stake in such holding companies is far less than that of the underlying shares, even if the family can liquidate the stock whenever it wants. The Waltons have held their Wal-Mart stake in a family limited partnership or similar structure since 1953. Typical discounts are 20 to 30 percent.

Wendy Gerzog at the University of Baltimore said the discounts create a world of unreality.

Grantor retained annuity trusts, or GRATs, pays an annuity back to the person who set up the trust, rather than to a charity. The “Walton GRAT” has become a common estate-planning technique for people with large amounts of liquid assets, such as CEO’s of publicly traded companies. The current low interest rates make it all the more likely that a GRAT bet will be a win rather than a tie. Users of GRATs include the Coors brewing family and Nike founder Philip H. Knight.

Read the full article at  http://www.bloomberg.com/news/2013-09-12/how-wal-mart-s-waltons-maintain-their-billionaire-fortune-taxes.html

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Secret Swiss Accounts Said No Longer Safe for Tax Dodging – Bloomberg 09-08-13

Salient to Investors:

Kathryn Keneally at the Justice Department said taxpayers who still believe they can hide secret Swiss bank accounts from the IRS are beyond foolish, and Switzerland is no longer a good place to hide assets for tax reasons.

Fourteen firms, including Credit Suisse, HSBC, and  are under criminal investigation.

A US Senate report estimated in 2008 that secret offshore accounts used to evade  taxes costs the Treasury at least $100 billion annually.

Bryan Skarlatos at Kostelanetz & Fink said that when the US seeks information from Swiss banks, it is fair to assume that Swiss bank secrecy has been largely compromised, so US taxpayers cannot take any comfort that their information will be protected by bank secrecy.

Ed Robbins at Hochman, Salkin, Rettig, Toscher & Perez said the purpose of secret Swiss accounts was to hide assets from creditors, business partners, spouses or the government, and US taxpayers cannot count on having that secrecy anywhere in Switzerland. Robbins said the Swiss are hemorrhaging bank records on American taxpayers at all levels, and the Swiss bank voluntary disclosure program is just another way of disclosing information on American taxpayers. Robbins said the US program is a very clever idea.

Read the full article at  http://www.bloomberg.com/news/2013-09-08/secret-swiss-accounts-said-no-longer-safe-for-tax-dodging.html

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Why Joint Filing Is a Dinosaur – Bloomberg Businessweek 07-16-13

Salient to Investors:

The tax code option for married couples joint filing is both a social and economic anachronism. Anne L. Alstott at Yale Law School said joint filing is really outdated and does not reflect the new normal.

Edward McCaffery at Gould School of Law said in a nutshell, the bias of the tax system is against two worker marriages with children, less about marriage penalties and marriage bonuses and more about a bias against secondary earners.

45 percent of US households are headed up by unmarried men and women. Nearly 70 percent of all married women worked in 2009 versus 40 percent in 1970, and almost 62 percent of mothers with children under the age of 6 worked in 2009 versus 30 percent in 1970.

Francine Blau and Lawrence Kahn at Cornell said in 1990 the US women’s labor force participation rate was 74 percent, 6th in the world, and in 2010 was 75 percent, 22nd in the world, due to the expansion in family friendly policies overseas, compared to the US.

Adam Smith in “The Wealth of Nations” had four maxims with regard to taxes in general: equality, certainty, convenience, and economy.

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California Pension May Ask for 50% Boost to Close Gap – Bloomberg 04-15-13

Salient to Investors:

Calpers is 26 percent short of meeting its long-term commitments. The state and cities contributed $7.8 billion in the last fiscal year, almost 4 times more than a decade earlier.

California taxpayers may see their municipal pension contributions rise as much as 50 percent under a plan to fill $87 billion in unfunded obligations.

The median funded status of state pensions fell to 72 percent in 2011 from 83 percent in 2007.

Read the full article at http://www.bloomberg.com/news/2013-04-16/california-pension-may-ask-for-50-boost-to-close-gap.html

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Camp Floats Biggest Tax Shift to Partnerships in 60 Years – Bloomberg 03-21-13

Salient to Investors:

Congress is debating the biggest rewrite of US partnership rules in 60 years, which may increase taxes for real estate and finance businesses or prompt them to restructure operations to avoid new costs.

The Camp proposal would change the rules for businesses such as partnerships that don’t pay taxes at the corporate level and pass their income through to their owners’ individual tax returns.

Victor Fleischer at University of Colorado said pass-through entities have increasingly been used to facilitate aggressive tax gamesmanship.

CBO says pass-through entities accounted for 38 percent of business receipts in 2007 versus 14 percent in 1980. The IRS says 48 percent of partnerships in 2010 were in real estate, rental and leasing industries, and finance and insurance partnerships reported 48 percent of net income.

James Brown at Willkie, Farr & Gallagher said the proposal leans too far toward pushing people into an S corp structure that growing businesses don’t often use and make partnerships look too much like S corps, with their disadvantages.

Andrea Whiteway at McDermott Will & Emery says the transition rules will be absolutely impossible and crazy, and crazy for S corps.

Karen Burke at University of San Diego said if you get rid of special allocations, people would have to recreate them in other ways.

Read the full article at http://www.bloomberg.com/news/2013-03-21/rewrite-of-partnership-tax-rules-could-shake-real-estate.html

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