"The Doggy Bone"
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It's hot! Too hot for an old Viking like me. (I reserve the right to complain about the heat, as I did not complain about the winter cold...).
I have been knocked out of business for a couple of weeks. By forest fires. Forced evacuation with just a few minutes' notice before the smoke came down over the houses and made it impossible to breathe. We succeeded getting the computers and the most important business stuff with us - but not enough to carry on while we were gone. Some 32,000 people were evacuated, several hundred homes are so totally wiped off the map that you cannot even see where the cast iron stove once was...
Getting allowed back was a mixed blessing. It was a relief to see that the fire stopped with nothing more than the highway separating it from the gas station just 3 houses away... The smoke has been very tough to deal with, but it is finally now down at levels that do not make us sick any more. It wasn't really the kind of summer break I would want again...
Anyway - I hope you enjoy the summer under some more pleasant circumstances!
More real estate business
Remember Cindy and her house from last issue? There is more to that story, because Cindy turned her mortgage payments into a tax deductable business expense...
Here is how she did it: She established a corporation, registered with her local government. The cost of that was about $250. She did this with herself as the "initial subscriber" - which simply means "the first registered shareholder".
(You can form a corporation too - online - just click here! It is no big deal...)
When she got the papers, she sold all the shares in that corporation to her Trust. Price: $250. This way, she was no longer the legal owner of that corporation - and the Trust's ownership was not on any public records... Further: the transaction was tax neutral - no taxman could get upset because of this - at least not with any diligent reason.
Cindy now sold the house to the corporation for a price of $185,000 - a very good price, compared to the assessed value of $175,000! As a private person, she pays no capital gains tax on that. (Be careful here, though: the laws and the limits for this vary all over the globe.... know these rules in your state/province before you rely on this!) The local corporation pays no tax either, because it is a plain purchase of real estate. Now, it was still a good deal also for the corporation, because she accepted some extremely favorable terms on that sale:
a "subject to" clause that left the first mortgage in her own name, but payable by the corporation;
a second mortgage in the house of $35,000 on terms that were far from great for her (7% and 25 years), but very favorable for the corporation.
a third mortgage of $40,000, on the same terms.
Cindy's corporation would now let her rent what used to be her own house. She would not pay much in rent - she decided to make it just about what the term papers from the Trust would give her, which would be $247 of the second mortgage and $283 on the third, a total of $530 per month. (Yes, she would, in fact, be the only person making these decisions, but what counts in terms of tax liability is the ownership!)
Further, Cindy's corporation assumed the obligations to pay her $849/month on the first mortgage. Together with the second and third mortgage, the corporation now pays a total of $1,379/month, $849 to the bank and $530 to Cindy.
Cindy's personal net expense was now zero... She could also have made "break-even" by accepting a monthly rent to her new landlord of $849/month - which is what she paid in the past to the bank. But she decided to pay less and thus increase the corporation's tax-deductible loss...
Cindy's corporation would now have all the obligations of a landlord. Cindy would do some of the work and invoice the corporation for her time - and the corporation would reimburse her the expenses and pay her invoices for her time. The corporation would further have the first mortgage to pay and also the payments on the second and third mortgages to her. This would leave the corporation with a significant net loss on the property.
(Yes, there is a little income tax for Cindy to pay personally for the interest payments on the mortgages and for the invoices for her work, but that is peanuts compared to what she can save by working through the corporation. In fact, there are ways she could totally avoid also those taxes...)
In reality, Cindy created a tax deductible mortgage by making it a business expense for her corporation! By doing her consulting business through this corporation instead of doing it through her sole proprietorship, she could now make full use of those tax deductions from the losses incurred by the corporation.
Cindy's net tax advantage mounted to about saving $350/month. She paid a total of $1,800 for the Trust and the Corporation. That gives her an ROI ("Return On Investment") of 233%!
If you know of any better way of investing money, then I am sure there some subscribers to this newsletter that would like to know too...
Please note here, that Cindy does not own that corporation. But she controls it through her Trust. And she does not legally own the Trust either - she controls it... If Cindy were to own the corporation, the whole scheme would fall apart. The Trust is the instrument that will keep it together, without breaking any laws. Legally, the Trust hires Cindy to be President of its corporation!
On top of the whole thing, she got her home totally secured from any possible future creditor; she could, for that matter, file for bankruptcy tomorrow, and be sure to stay in the house, because she doesn't own it! No creditors can put any liens on the corporation's house for money they claim is owed by her when that corporation isn't owned by her!
So, what does it take to take advantage of this principle?
Really only this: you must be able to direct some income to the corporation that you would normally have to pay income tax on. Examples:
You do some consulting work and invoice your clients through the corporation, i.e. ask your clients to make their checks payable to the corporation, not to yourself personally. (This is what everybody will do anyway, when they operate their business as a corporation, so there is really nothing "fishy" in this, and if you are the President working for the corporation, the corporation has the right to do the invoicing - and you have a duty to perform making sure those invoices are sent out and paid. What the corporation pays you for that is a matter between you and the corporation, and you have no obligation to demand any payment at all!)
You use the corporation to earn commissions on deals you make for it.
You transact direct business with the corporation. You can sell your vehicle to the corporation - and let the corporation lease it back to you! By jiggling the numbers together with your accountant, you can most definitely create some additional tax advantages for yourself... (Remember, you determine the sales price, and you determine the lease payments! If you are in a situation where you need some cash, quickly, you might "have to accept" a very low cash payment and some pretty steep lease payments... Just don't go overboard and make it outrageous; they have to be somewhat realistic.)
Seriously, I do not understand why all creative business people are not doing this - except for the fact that they don't know about this being possible....
There is only one warning: If Cindy had lived in the USA, I would not want for her to have the Trust own the corporation directly. I would strongly recommend letting the Trust take ownership through an IBC. The reason is mainly to protect the assets from possible creditors, including "uncle Sam" himself. But I could establish an IBC for her Trust at a total price of $699, so her ROI would have been 168% instead.... still enough for most investors, I would say!
How much are you making on your passive investments? 12-15% on mutual funds? 20-25% on tax lien certificates? If you have money sitting in the bank, you are excused for revealing it... ;-)
Cindy got 233% ROI on establishing her Offshore Trust...
The key to the whole thing is your Trust and the fact that you do not own it.
Summer deal for the taxman...
I have been amazed at the response to my "Freedom Celebration Offer".... And I understand that the time line was too short for many.
So, I went over the numbers again in order to find out what I actually can do in terms of using the principles of having the taxman pay for your Trust. And we can do it! With some limitations. I just need to adjust the numbers a bit so I can stay in business also. I can do it this way:
You purchase my course "SETTING UP YOUR BUSINESS FOR FINANCIAL FREEDOM, Part I" through Canine Superior's Canadian sister company Novasol Judicare Inc. at a total price of US$1,597 (tax deductible education) and get a PIL Foreign Grantor Trust with an opening balance of $250 (tax-free and tax exempt) as a bonus.
Further, I will accept that you "refer yourself", so I will add another $250 to the opening balance of the Trust but only to the subscribers of The Doggy Bone!
Now, you can do your own tax calculations and see what you really pay for this $500 tax-free and tax-exempt money.... If you consider the numbers carefully, you will see that you get the taxman to pay almost entirely for your Trust! I know: you need to invest the cash first - but we talk about ROI's of hundreds of percent - and a complete tax write-off on top of it!!!
Is that a deal or what? If I had offered this to Cindy, her ROI would have been over 450%!
Here is the procedure:
Did you notice also how your privacy is protected here?
I must add that I will do a maximum of 7 of these package deals like this, and I will not promise that I will do them after September 30, 2003. So, if you want the taxman to carry most of the burden of getting your Offshore Trust established, you need to take action now.
If you don't do it, you lost your right to ever complain about the government controlling you, and you will, to eternity from now, pay all your income taxes with a big smile and never ever again say one negative word about your government's greed...
Did I hear your oath? :-)
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P.S. There is one more twist to Cindy's story you might want to learn from too:
Cindy wanted some cash out of this deal - without having to pay any money from herself to the Trust or the corporation first...
The bank did not want to increase the mortgage without charging her a penalty for early payment of the existing mortgage.
Instead, she came to me with the second mortgage and asked if I would buy it for cash.
I wouldn't - but I know someone who would!
She went to http://novasoljudicare.com/mortgages and filled in the on-line form there with the information about the property. I forwarded it to one of my mortgage investors. He was interested. He came back to Cindy in 3 weeks with a specific offer to purchase that second mortgage for a lumpsum cash. I don't know what exactly the offer was, but I would expect it to be somewhere in the neighborhood of $16,000-18,000 - about half the nominal value because of the not-very-favorable terms Cindy made for herself on that mortgage. But I know Cindy was happy: she got at least $10,000 more for the house than market value! So, she ends up making a darn good deal...
One more time, this builds on that mortgage being made between Cindy and someone else. This "someone else" just happens to be a corporation her Trust owns and operates. Because she does not own the Trust, it is a legally valid business transaction - no laws are broken or violated by doing this...
Although a Trust, considered in isolation, does not give you any formal tax benefits per se, reality is very, very different...
PPS. If you own a mortgage with a lien on a house you don't live in yourself, you might want to consider selling that mortgage for cash. If you use the link above and fill in the information, you will get a specific offer - it is free to ask! If you have any problems with it, you are welcome to contact me, and I will help you.
I cannot give you any guarantee on what kind of offer you will get for your mortgage, but I can guarantee that requesting and retrieving the offer will not cost you anything! If you don't like the offer, you have no obligation to accept it. If you like it, the cash can be yours in a matter of just a few weeks.
"The Doggy Bone" is exclusively sent to people who have expressed
an interest in Offshore Trusts and International Business
Corporations and the ways such financial entities can be used
to protect assets, secure financial privacy, and eliminate
tax liability, in full compliance with all relevant laws. An
overview of our services is available on our web site at