Tax-Free Spinoffs Could Be Much Tougher Under Proposed New Rules

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Many U.S. companies take advantage of lower foreign taxes by creating tax-free spinoffs of their parent companies. It’s a great and legal way to lower their corporate tax bills. However, some lawmakers have long pressed for changes to these rules and it appears that changes could be coming.

The U.S. Treasury Department recently proposed some new rules that would make it more difficult for companies to create certain kinds for spinoffs. In order to avoid capital gains taxes on the transaction 5 percent of the amount of a spin-off must be an active trade or business.

The new proposed rules also aim to clear up the factors that determine when a spinoff cannot be used for distributing profits and earnings to shareholders. If the new rules pass, the transaction would be deemed a device if there was a large enough gap between the amount of the company that is made up of nonbusiness assets while the other company had a lot less.

At this point the new rules have only been proposed and they will not take effect unless the Treasury Department makes them official. Even at that time they still wouldn’t affect any transactions that were already planned before approval even if the transaction was finalized after.

http://www.wsj.com/articles/new-treasury-rules-would-make-it-harder-to-complete-tax-free-spinoffs-1468500481

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States to Avoid when Retiring

painted ladies sf

Are you on the verge of retirement, or perhaps just a few more years away but you’re ready to start making some retirement plans? There are many things to consider when it comes time to retire, not the least of which where you choose to call home. For many people, the choice is easy; they just stay put where they’ve always called home. However, there are a lot of factors that go into this choice including children, grandchildren and of course taxes.

Speaking of taxes, if saving money is one of your top priorities, or the top priority, then you might want to consider closely where you live after you clock out for the last time. According to a report from Kiplinger you may want to avoid these 15 states if you want to save money and avoid more retirement expenses. These locations are not necessarily a bad place to live, but their tax and health care bills lack something to be desired, which is never easy for retirees.

15. Minnesota

14. West Virginia

13. Maine

12. Kentucky

11. Indiana

10. Wisconsin

9. Vermont

8. Montana

7. Rhode Island

6. Massachusetts

5. Illinois

4. Connecticut

3. California

2. New Jersey

1. New York

For most retirees, taxes are just one factor when it comes time to choose a place to live, but if you are serious about keeping your tax bill and your health care costs down then perhaps consider some other locations than the 15 states listed here.

http://www.kiplinger.com/slideshow/retirement/T006-S001-worst-states-for-retirement-2016/index.html

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How Frugal Entrepreneurs Avoid Excess Spending and Taxes

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Getting a business off the ground is never easy. It takes a lot of blood, sweat and tears, but smart entrepreneurs know that it also takes a lot of fiscal responsibility and the ability to say no. Most startup companies have to always be considerate and careful with their money. So what are some of the best moves to make to avoid overspending and to save on taxes?

It seems like such a simple thing, but a lot of companies end up spending much more than they need to on meal expenses. It’s great to buy your employees lunch on occasion, but don’t go crazy because it adds up fast and your business can only cover about half of your meal expenses.

Having a good credit card with positive rewards is another way to save. It can be a sky miles card or just a card with rewards points. If you put everything on that card the rewards add up and you can end up earning enough points or money to pay for other business expenses.

You can also use your business to pay for continuing education expenses, which is a much better option than taking out a student loan that you’ll be paying off for years to come. Another smart way to save is to hold onto proof of all your bad debt. If a customer doesn’t pay you for goods or services that you’ve fulfilled or completed keep the invoice and use it to show bad debt, which will lower your income and reduce your taxes.

It’s tough enough to start a new company, so make sure your entrepreneurial spirit equals your spirit of frugality. You’ll save money and have more resources to put back into your business.

 

http://www.forbes.com/sites/moiravetter/2016/06/27/the-pragmatic-entrepreneur-5-ways-to-reduce-taxes-or-avoid-wasting-money/#5154bdf02543

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How to Ignite Your Inner Spirit to Pursue Your Passions

ignite your passions

We are all made up of a body and a spirit, or a soul. It’s our soul or spirit that really drives us to do everything we do. Our body is just the tool we use to carry out the desires and passions of our spirit. Many people think of a spirit only in religious terms, while others don’t believe in religion at all. However, whatever your beliefs there’s no arguing that we all have a spirit within us that motivates us to think, feel, act and live. Some people have no trouble finding the necessary passion or motivation to pursue their goals and dreams, while others find it much more difficult to find the drive it takes to be successful. So how can people ignite their inner spirit, which allows them to follow after their own passions and desires?

Don’t Let Logic Stop You

I asked this question to Prasad Kaipa when he joined me as a guest on my radio program, American Dreams. Among his many titles, Prasad is an executive coach, mentor, author and founder of the Centre for Leadership, Innovation and Change at the Indian School of Business. “When we are dreaming, when we are envisioning, we do not look at abstractions in making them happen. So first we need to learn to dream.” Prasad said that many times people let logic or certain data or statistics get in the way of having big dreams. He also pointed out that people should ask themselves not only what are they dreaming about, but also who they are dreaming them for? He said that being able to look outside of the box and not just focusing on one’s self, but rather expanding one’s horizon as far as possible, can be very powerful. That is the first step.

Follow Your Passion

The second step, according to Prasad, after you have been able to dream and envision what you want to create and why you want to create it is to passionately go after it. However, Prasad said you have to go after it the right way. “Don’t look it at like my project and it is all for myself, but keep remembering to enroll other people into your ecosystem to be part of it. You help them to make their dreams come alive and they will help you to make your dreams come alive.” That is where the enlightened self-interest, according to Prasad, will create significant results for both you and them.

Keep You Focus on the Passion Not the Outcome

Lastly, Prasad emphasized the importance of not getting too wrapped up in the outcome and the results. It’s important to detach yourself from the outcome and what the outcome means. Instead, he said you should focus on the passion, the process and the people. Do not get emotionally tied up with what you will do if you achieve the dream. “Detached engagement will give your role clarity and also make sure your ego gets out of the way.”

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Estate Planning for High Net Worth Foreigners

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While the U.S. is considered by many to be a place where the wealthy move their money away from, there are also many wealthy people from other countries that are moving more of their money into our country. So what’s behind this big increase of foreigners shipping their wealth to the U.S.? America has never really been considered a tax haven, but thanks to an increase demand in multinational estate planning, the country is seeing an unprecedented number of immigrants either keep or shift their money to the U.S.

One of the biggest reasons for this increase is that U.S. tax law has almost completely eliminated estate transfer taxes. As more and more wealthy families from other countries want their children to receive an education in the United States, American colleges and universities continue to see an increase in the number of international students enrolling for classes.

Many of these students come to the U.S. and end up staying here for work, and many of them end up marrying a U.S. citizen. With their children and grandchildren now living in the U.S. many of these wealthy families are choosing to move more money to the U.S. in the form of trusts, which allows them to plan for their families and save on estate taxes.

Additionally, with the number of foreign students enrolled in U.S. educational institutions increasing to a record high of about 975,000 in 2104-2015, this trend is likely to continue.

 

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Windy City Tax Burden Will Hit NBA Star Hard

nba

So how much is $47.5 million really worth? The answer is it all depends on where you live. Most of the NBA’s top free agents recently signed their new contracts, many with new teams, including former Oklahoma City Thunder Star Kevin Durant, who is now a member of the Golden State Warriors. No doubt all NBA players are very wealthy, of course, some more than others.

However, concerning free agent deals, the numbers aren’t always what they seem. Take for example the case of former Miami Heat star Dwyane Wade. Wade wanted a two-year $50 million deal from his former team, while the Heat offered a two-year $40 million contract. Ultimately, Wade decided to take his talents to the Chicago Bulls for a two-year $47.5 million deal. It’s a no-brainer right? That’s $7.5 million more than the Heat offered.

However, in choosing to move to Chicago Illinois, Wade will now be subject to a much higher tax rate. For starters, Florida has no state income tax. Illinois on the other hand has a 3.75 percent income tax, which means, Wade will owe close to $900,000 of his annual salary to the state. Additionally, Illinois does not give tax credits to resident athletes that pay taxes to other states for games played on the road. That means he will be double taxed for income earned in those games.

The city of Chicago also has some additional taxes that Wade will be subject to, all of which means his take-home pay could actually be about the same as it would’ve been had he signed for less total money with the Heat. So in the world of NBA contracts and taxes, the numbers aren’t always as they seem.

http://www.rebootillinois.com/2016/07/13/editors-picks/joe-kaiser/a-pricey-homecoming-dwayne-wades-890000-illinois-tax-bill/61516/

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How to Save Money on Your Social Security Taxes

saving for retirement

Most people look forward to the day when they start to receive the rewards for putting all their hard-earned money over the years into social security. However, some people end up with a lot less than they had planned on because they end up paying more taxes on those benefits than they had expected. So what can you do to help lower the tax bill on your Social Security benefits?

For starters you need to know what tax table you fall into. It all depends on how much provisional income you make, which is determined by adding your adjusted gross income, your nontaxable interest and half of your Social Security benefits. If you earn less than $25,000 as a single or $32,000 for a joint return then you won’t have to pay taxes on your SS benefits.

However, as much as 50 percent of your benefits could be taxable if your provisional income is between $25,000 and $34,000 for singles and $32,000 and $44,000 for joint filers. If you surpass those figures as much as 85 percent of your benefits could be taxed.

So in order to avoid these taxes you have a few options. You can give as much as $100,000 tax free a year to charity from an IRA if you are 70.5 years or older. You can also put as much as $125,000 into a Qualified longevity Annuity Contract (QLAC). This amount does not count against you when your required minimum distribution is calculated.

Another move you can make is to withdraw money from a tax-free Roth IRA or you can roll money over from a traditional IRA to a Roth many years before you start collecting SS benefits, which will help you reduce taxes in retirement. Of course, for high net worth individuals it might be very difficult to get below the 85 percent threshold, which is why it’s important to have an overall tax-efficiency plan instead of simply focusing on saving on Social Security taxes.

http://www.kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html

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How to Identify and Utilize Your Core Competencies

man looking at board

Over the years that I’ve been working for GROCO and doing my radio program, American Dreams, I have met with a lot of people, many of whom are counted among the most successful and wealthiest individuals in the world. Most of my guests are also great leaders in their own right and they understand that being a leader isn’t about coming from a position of authority, it’s actually about learning to love those that you work with. To that end, I want to talk about identifying and keeping your core competencies within an organization. At the end of the day in order to implement any leadership strategy or any process, the person giving the process has to know his or her organization very well. He or she has to know the employees and they have to understand what it takes to motivate those individuals.

Identifying Your Core Competencies

When someone is looking to start a business the first thing they need to do is look at their core competencies. That means those in charge have to determine what advantages they have and what strengths they have to offer. They have to decide what their company is all about. So how do you go about identifying your core competencies? You need to look at whether or not it will have potential access to a wide variety of markets. Another question to ask is whether or not it makes a significant contribution to the perceived customer benefit of the end product? Is it something that will be difficult for your competitors to imitate?

Take Full Advantage of Your Core Competencies

It’s also important to understand that competencies are not the same as capabilities. You might have 20 or 30, or even more capabilities, but that doesn’t mean those are all core competencies. If you are about to launch a company you must be able to identify your core competencies, those things that you do well or better than anyone else. The business world is always changing, new technologies come and go, so it’s imperative that your core competencies are built on a rock solid foundation or your business will likely fall. You should be focused on building up the base of your core competencies and not get too focused on the outside sources and forces affecting you. You need to use those core competencies to your utmost advantage.

Building Your Business on a Solid Foundation

One of the most common debates that takes place in the corporate world is whether or not you should grow your company holistically or go out and buy other organizations and merge them in to acquire different customers? Both of these strategies have their pros and cons but if you prefer to have stronger core competencies that are built on a rock-solid foundation then building your company holistically is the better method. So as you prepare to launch a business, make sure that from the very first day you understand what the business is all about, what are the core competencies, know how build a vision and a mission statement off this competency and determine if the competency is actually scalable to the markets that you intend to serve.

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What’s the Real Motivation Behind Philanthropy?

philantrhopy-is-love

According to its definition, philanthropy is the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes. Many of the world’s wealthiest individuals and companies are involved in all kinds of philanthropic activities and endeavors. Some of the most famous and wealthiest Americans have already donated much of their wealth to different causes and others have stated that they will do the same later on down the road. Bill and Melinda Gates, Warren Buffet, Paul Allen and Mark Zuckerberg are just a few of the well-known individuals who have made philanthropy a top priority. However, although philanthropy involves the giving of money or goods with nothing in return, philanthropy is so much more than just giving away money.

Universal Giving

Pamela Hawley was a guest of mine on my radio program, American Dreams, and we discussed the topic of philanthropy. Pamela is the Founder of Universal Giving, which is an online nonprofit organization based in San Francisco. It focuses on raising money for international charities through its web-based marketplace, and on matching volunteers with global opportunities. Universal Giving is a resource for people who want to give, but might not be sure how to do it. The organization uses a venture capital approach to vetting charities that appear on their site, vetting all opportunities through their unique Quality Model. In addition, Universal Giving doesn’t take any share on the donations made through their site.

Philanthropy Is Love

According to Pamela, the way society looks at philanthropy in this day and age is incorrect. Most people just think of philanthropy as giving money away to a good cause. However, Pamela feels strongly that philanthropy is really the love people have for other people and for humanity. “What I love about this real definition of philanthropy is that at every moment we can be philanthropists. I think that is super powerful.” Pamela said that anyone who is looking for a mission in life could be a philanthropist. It doesn’t matter where you are or what situation you are in you can be a philanthropist. “If you’re in Safeway and you’re at the checker, you’re not just checking out your groceries. You’re asking the grocer ‘how are you doing today’; you’re connecting with them. It’s the same with your dry cleaner or another person waiting at the bus stop. It’s about the love of people.”

Using Philanthropy to Change People’s Hearts

Of course, philanthropy is about money, too but according to Pamela the money is really just the vehicle to change hearts. “When you give, your mind is changed, your heart is changed…your compassion is changed. That’s what we want to see long-term with Universal Giving.” Pamela’s organization isn’t just about giving and volunteering, it’s really about creating a great sense of connection, peace, community and understanding between people with very different backgrounds. Universal Giving aims to help people understand and cherish those different backgrounds that each person comes from.

 

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How Each Presidential Candidate Plans to Handle Corporate Taxes

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If you follow this blog then you know that corporate taxes are a regular topic discussed in this space. A couple weeks ago we shared some comments from Disney Chief Bob Iger regarding the country’s corporate tax policies. This is a topic that continues to get a lot of airtime in the media as the three candidates still running for president continue to push the issue.

One of the reasons this continues to be front and center is that income from corporate taxes keeps falling. While it still remains a huge source of revenue for the government, over the past several decades that revenue has been declining sharply. In fact, whereas in the 1950s corporate taxes accounted for 30 percent of the country’s tax revenue, in the year 2015 corporate taxes accounted for a mere 11 percent of the total tax base.

There are several reasons for the decline, including corporate tax breaks, a lower corporate tax rate, more profits coming overseas and many loopholes that allow corporations to cut their tax bills legally.

As mentioned, each of the three remaining candidates running for the nation’s top office have their own ideas on how to solve the problem and just as one would expect they differ greatly. In a nutshell, republican Donald Trump wants to cut the corporate tax rate down from 35 percent to 15 percent.

Hilary Clinton, on the other hand wants to close loopholes so corporations can’t avoid their taxes, which increase corporate tax revenues for the government substantially. At the same time she has not made any proposal to cut the corporate tax rate. Bernie Sanders wants to increase the corporate tax revenue by increasing the tax rate even higher and by taxing overseas profits, among other things.

Time will tell who wins the election, and when that person does, whether or not he or she will be able to implement his or her plan.

http://www.reuters.com/article/us-usa-election-taxes-idUSKCN0YS0C7

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