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> Here's one site, for example, that claims tax-free investing:
> http://wwww.floathouse.com/legal/
> Would love to see someone poke some holes in their strategy.
As long as the funds are under the control of the foreign entity,
it's true you owe no tax on any profits. The profits aren't
yours.
However, the instant you take control of the funds (i.e. to spend
the profits), you owe taxes on it.
See e.g. http://www.floathouse.com/legal/FAQ.html#faq10
Some of these places will try to sell you a scheme to get at the
money without paying taxes on it, e.g. using a debit card that
draws on the foreign account. It might be harder for the IRS to
track it that way, but if they catch you, you're in big trouble.
They tend to toss people in the slammer for things like that.
There is also the small problem that in order for you to not get
taxed on the money, you cannot own or even control it. Which
means there is really nothing to keep the trustees from walking
off with it. You "gave" the money to the trust, so you have no
legal rights to it. If you have some amount of control over it
so the trustees can't take it, then the IRS says it's yours and
you owe taxes on it.
I believe there was also a tax-court ruling that essentially said
there was no sane reason to give your money to a trust, so the
court assumed anybody who did that was doing so to illegally
evade taxes.
Gary
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