1LessTax3_Tax_Alternatives

1LessTax.com PayNoTax.biz LegacyChange.com

Ken Wheeler Jr.'s experience includes 15 years as a commercial contractor constructing buildings and agriculture business facilities in the Midwest. 25 years was as a business broker and financial advisor including 37 years as a real estate broker involved in assisting business and property owners to sell, merge or acquire (mergers and acquisitions) and fund (investment banking). Consistently had challenges to transfer ownership and maintain wealth. The end goal challenge generally included an efficient tax and estate plan. Not a CPA, but work with CPAs and tax attorneys for asset plan. A CPA and attorney are much like a doctor. Unless one can tell them where it hurts many can volunteer little. What CPAs, tax advisors and attorneys tell us is within the scope of their practice that generally does not work extensively with property transfer tax code. Experience here is with transferring property and keeping our money, i.e. saving tax money within the tax code. A CPA/tax advisor generally knows their client’s tax details best. We can be an assistant to tax advisors, real estate professionals and a client to minimize taxes when it is a goal.

We do not market annuities, insurance or list real estate or businesses. We may, with client request or permission, refer to those who do.

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Documents for I-Meets

2020 Tax Brackets (limited) 25 Tax Efficiency Methods Non-Disclosure Agreement

5 Tax Efficiency Methods 6 Tax Efficiency Methods Executor Duties

LegacyChange Plan Summary Stop Your Inheritance From Being Stolen

LegacyChange Worksheet QSBS Worksheet Capital Gains Tax Brackets

2020 Tax Brackets for Single/Married Filing Jointly/Head of Household

Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)	Taxable Income (Head of Household)
10%	Up to $9,875	Up to $19,750	Up to $14,100
12%	$9,876 to $40,125	$19,751 to $80,250	$14,101 to $53,700
22%	$40,126 to $85,525	$80,251 to $171,050	$53,701 to $85,500
24%	$85,526 to $163,300	$171,051 to $326,600	$85,501 to $163,300
32%	$163,301 to $207,350	$326,601 to $414,700	$163,301 to $207,350
35%	$207,351 to $518,400	$414,701 to $622,050	$207,351 to $518,400
37%	Over $518,400	Over $622,050	Over $518,400

For current & past USA Taxable Income Brackets go here.

IRS "Stealth Tax" is result of less common income moved with all income to a higher

tax bracket. Reduce the "Stealth Tax" with one's own "Tax Bracket Monopoly"

Capital Gains Tax Brackets in more detail

Go to Summary outline of six tax methods to increase efficient affluent client activity.

Go to 2020 Federal Estate Tax Rates Go to Senior Delights

25 Tax Reduction Alternatives Summary for Tax Efficiency

Step up Basis at Death - The Ultimate Death Tax Exclusion Real estate and most property of value advantage the step up basis transferring to beneficiaries at current value at death of owner. In many situations beneficiaries can sell and owe no tax. Note: Annuities, qualified plans (as IRA, 401k, SEP) and non-qualified (annuities) plans are not included. CPA recommended.
****Internal Revenue Code (IRC) §199A also known as the “Pass Thru Deduction” for QSI (Qualified Business Income). There is Now a Deduction for up to 20 Percent of the Qualified Business Income of Pass Through Entities. The Act establishes a new deduction for owners of pass through entities that may enable those owners to deduct up to 20 percent of their qualified business income. This deduction is effective for taxable years beginning after December 31, 2017, but expires in taxable years beginning after December 31, 2025. CPA recommended. Avoid the Stealth Tax See more at 1LessTax
**IRC §121 Residence Gain Tax Exclusion allows two year plus owner occupancy of residence a $250,000 gain exclusion. If married spouse can add another $250,000 exclusion for maximum $500,000 gain exclusion. Over the $250k/$500k gain exclusion may consider the Energy Rehab Acquisition or Exchange as an IRC §1031 replacement property to tax defer balance of gain. CPA recommended.
IRC §1031 Tax Deferred Exchange Updated as of 2018, relinquished real property (real estate) only. IRC §1245 (personal property) now not exchanged. Exchange Accommodator/Intermediary is necessary. Guided by time limit, replacement property & other significant rules. CPA recommended. Avoid the Stealth Tax www.1031FEC.com
IRC §1033 Tax Deferred Exchange is for Government acquisition of real estate by eminent domain. Exchange Accommodator/Intermediary is not necessary. Guided by two year time limit and other significant rules. CPA is recommended. www.1031FEC.com
IRC §721 Tax Deferred Exchange also known as the UPREIT. For an Real Estate Investment Trust acquisition, one §1031 exchanges into a qualified replacement property owned by a REIT then into the REIT in an unspecified time. The transfer into the REIT converts to REIT shares that may be sold in partial with deferred tax due. CPA recommended.
IRC §1045 Qualified Business Stock Exchange (aka business §1031 but better) Qualified Business is key. Exchange stock or into qualified business stock. Business must qualify, is not publicly traded, is not a finance, real estate, bank, hotel, restaurant, medical with doctors, attorney or insurance company. Can be an affiliated service business. Manufacturers, distributors, retail and service companies are popular candidates when owned over six months from date business or part of business acquired. Specialized Attorney and CPA recommended. Bloomberg Article American Bar Association 1202 Article
IRC §179 has been amended to include types of building improvements. Ceiling was increased to $1,000,000 for tax years beginning after 2017, with the phase-out beginning at $2,500,000 of qualifying assets placed in service. Avoid the Stealth Tax. CPA recommended. See more at 1LessTax
*IRC §1245 & §179 new or rehab special building acquisition Generally Agriculture, horticulture and other single purpose buildings. (advantageous tax code opportunity for any property including ordinary income) IRC §179 (§168) new/used equipment Potential 100% immediate deduction of any proceeds. CPA recommended. www.PayNoTax.biz
IRC §469 Managed Passive Investment Tax Exclusion - Energy Rehab Acquisition (an advantageous tax code for including ordinary and all incomes). 100% deduction for deferral. Potential 90% immediate deduction of any proceeds. Potential IRC §1031 sale tax deferred to qualified replacement property. CPA recommended. Avoid the Stealth Tax. www.PayNoTax.biz
IRC §453 Installment Contract Sale (for some property one can delay paying capital gains, not always depreciation recapture tax) over a period of time (deferral). Any amount acceptable as efficient to parties. Attorney and CPA recommended.
IRC §453 TDCO contract for most property and businessses; reinvest in all assets or keep proceeds. Depreciation recapture is a challenge. $1M+ minimum gain or acceptable proceeds to owner. Tax Deferred, Cash Out. Energy rehab for potential recapture tax deferral. Specialized Tax Attorney & CPA recommended.
IRC §1202 QSBS Qualified Business Stock Sale Creating Small Business Jobs Act of 2010 (improving 1993 Act) increased the gain exclusion to 100% of the total gain for all QSBS issued after September 27, 2010. Each investor $10M or 10 times the aggregate adjusted QSBS limit. Two million corporations. Some qualify. Combine with QOZ? Trusts? Estate Plan? Specialized Attorney & CPA recommended. American Bar Association 1202 Article Bloomberg Article
Sales Proceeds Trust SPT Monetized IRC §453 Contract Sale requires third party trustee-for most property. Must reinvest in business investment (the goal is to place proceeds into insurance securities products continuing inflexibility). Depreciation recapture is a challenge. $1M+ or acceptable to owner. Specialized Tax Attorney & CPA recommended. KW does not recommend.
Deferred Sales Trust (Legacy Plan Contract) DST Similar to above. Proceeds to a managed trust paid out over time. Included in estate. Avoid probate for all property-assets. Prevent beneficiary conflict or heirs challenged at handling money. Specialized Tax Attorney & CPA recommended. KW does not recommend unless insured as Legacy Plan Contract. See www.LegacyChange.com
Health Savings Account (HSA) Better than an IRA? Medical, dental, vision care are deductible before taxation. Maximum contribution is up $50 to $3,550 for individuals and $100 to $7,100 for families. Maximum catch-up contributions for people over age 55 remain at $1,000. Health account options: HSA (Health Savings Account); FSA (Flexible Spending Account/Arrangement); HRA (Health Reimbursement Arrangement). HSAs are tied to high-deductible health plans (HDHP). HDHPs are defined as those plans that have a minimum deductible of $1,350 for individuals or $2,700 for a family. Avoid the Stealth Tax. www.PayNoTax.biz & www.LegacyChange.com
Individual Retirement Account (IRA-ROTH IRA, SEP, Individual (Solo) 401k-ROTH 401k, Solo or full Defined Benefit & more) Move Qualified Retirement Plan into real and personal property. Learn how to enhance most highly taxed and popular supposedly tax deferred and conservative savings products with tax reduction. (Energy rehab deferral and §1031 tax deferral has death step-up valuation and estate asset advantages). Stretch IRA gone. Misses the death tax exclusion. CPA recommended. Avoid Stealth Tax www.PayNoTax.biz & www.LegacyChange.com
Non-Qualified Retirement Accounts Includes various annuities and variable annuities for tax deferral ranging from low risk to extremely high risk tax deferred plans. Highly taxed at any transfer including death. Misses the death tax exclusion. Avoid Stealth Tax We do not market insurance or annuities. CPA recommended. www.PayNoTax.biz & www.LegacyChange.com
LegacyChange IRC §453 + More IRS Code for Immediate Tax Deduction. Income shifting. Insured guaranteed income LegacyChange Plan. Immediate tax deduction relief with insured income stream. Change illiquid assets as land to income. Partial gifts to your favorite causes. Avoid probate for all property-assets. Prevent beneficiary conflict or heirs challenged at handling money. Somewhat as an economical, simplified Charitable Trust or Deferred Sales Trust but with guaranteed income. Generally for property-asset holders $100k-$20M+/-. CPA recommended. Avoid the Stealth Tax. www.LegacyChange.com
Tax Deed*** with IRS Gifting Code Tax deed at auction can legally transfer ownership to the buyer of a property that has been sold due to delinquent taxes. In a tax deed sale, the property itself is sold. Unwanted property can be valuated and gifted for tax deduction. CPA recommended. Avoid the Stealth Tax. See more at 1LessTax
Opportunity Zones QOZ New program allow one to defer, reduce and eliminate capital gains taxes. Invests in areas where locations are deemed challenged for business growth. May be in a fund. 10 years to maximize deferral. Combine with 1202? Estate plans? Trusts? CPA recommended.
Revocable Trust with Pour Over Will 2/3 of us have no will or plan. Financial Power of Attorney, Health or Living Will verses will or no will. With will. you, probate and government jave estate control, or out of control time and expense. Testamentary trust inside of will? Stirpes verses per capita? POA, Living Will? LLC, C Corp, S Corp, Life estate, land trust advantages, popular titling errors. Attorney & CPA recommended. PPL-LS? Combine with?....
Irrevocable Pure Grantor Trust as a revocable living trust, you are the creator (grantor) and the person in control of the property (trustee). One is a lifetime beneficiary to income only or living in a trust property. Other people one names, are lifetime beneficiaries of the assets plus are usually death beneficiaries. Anything one transfers into the trust is immediately protected from creditors and predators. After five years, trust assets are invisible to Medicaid. Assets at your death are included in your estate. Your beneficiaries receive stepped-up cost basis. Estate attorney recommended.
Life Insurance Irrevocable Trust Bypass estate tax limits tax free to fund estate tax owed over Federal or state limits or other goal. Experienced Attorney and CPA recommended. www.LegacyChange.com
Eternal or Perpetual Trust, Self-insurance, Real Estate Easement Plans with Advanced Tax-Estate Planning. Irrevocable. For Affluent, Married $23.16M, Individual $11.58M or as acceptable to owner. Specialized Estate/Tax Attorney & CPA recommended. www.EternalLegacyTrust.com

Avoid the Stealth Tax! Have proper Tiltling! Be aware of Death Tax Exclusion

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*Note: An IRC §1245 "storage facility" differs from a non-Section §1245 building in that the latter may contain a work area in addition to its storage function and may reasonably be adapted to other uses. Qualifying §1245 structures cannot contain work areas except as necessary to care for the livestock, plants or their produce or to maintain the structure and equipment. For example, having a cash register inside a greenhouse for handling sales to the public would disqualify the structure as a §1245 single purpose structure.

**Note: IRC §121 $250k/$500k gain exclusion may choose to use the Energy rehab exchange or acquisition for the balance of the gain.

By the end of 2019, over $15 trillion worth of inheritance will pass through the probate courts in America. The #1 asset sold first is the real estate. We inform and can assist for efficient transfer of asset ownership.

Currently three trillion $ in annuities in USA. 95% are left to heirs. Gain is taxed ordinary income (now 37% top bracket) plus any state/city tax. Spouse is not excluded so is taxed at one's death or transfer. Consider energy rehab acquisition.

Your personal and business CPA/Tax Adviser is always recommended for your primary tax consultant.

Recommend an experienced tax and legal advisor who can know you and your specific situation, local to your property area and jurisdiction. If one does not have a personal business legal adviser we can recommend attorneys in all 50 States.

Other common business considerations could include inexpensive comprehensive liability insurance umbrella and other life and disability protection.

Senior Delights

2020 rules push retirees into higher tax brackets, resulting in many having 85% of their Social Security benefits taxed as well as many being penalized by tax for higher Medicare premiums.

Deduction of Medicare Premiums for the Self-Employed; Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan. This deduction is available whether or not you itemize and is not subject to the 10% of AGI test that applies to itemized medical expenses. One caveat: You can't claim this deduction for premiums paid for any month that you were eligible to be covered under an employer-subsidized health plan offered by either your employer (if you have a job as well as your business) or your spouse's employer (if he or she has a job that offers family medical coverage).

A College Credit for Those Long Out of College; College credits aren't just for youngsters, nor are they limited to just the first four years of college. The Lifetime Learning credit can be claimed for any number of years and can be used to offset the cost of higher education for yourself or your spouse . . . not just for your children. The credit is worth up to $2,000 a year, based on 20% of up to $10,000 you spend for post-high-school courses that lead to new or improved job skills. Classes you take even in retirement at a vocational school or community college can count. If you brushed up on skills in 2019, this credit can help pay the bills. The right to claim this tax-saver phases out as income rises from $58,000 to $68,000 on an individual return and from $116,000 to $136,000 for couples filing jointly.

Social Security Tax; if you're self-employed and have to pay the full 15.3% tax yourself (instead of splitting it 50-50 with an employer), you do get to write off half of what you pay. Plus, you don't have to itemize to take advantage of this deduction.

General Business Operating Procedure

When someone asks for personal information of any kind please keep in mind you can ask the same of the person or entity who is asking you, and should do so. Why would one do business with an unknown?

Have you had people ask for your financial statement? Ask for their current financial statement.

Especially when anyone is asking for your funds or any business transaction that could affect your funds, this should be a common response by you along plus ask for references from past business clients and associates. Then one checks the references that have a known legitimate presence.

Otherwise, it is as purchasing anything without proof of title or proven position from an unknown person or entity.

After business people are proven legitimate and doing business in a proper and legal manner, then there is the normal risk of doing business.

If anyone does not wish to prove their qualifying business existence that is the first big flag to move on.

Recommend one purchase a subscription to a background checking service. There are many online.

For one who qualifies with real property real estate we have replacement properties for 1031 tax deferral. Some are rehab commercial property. Some are new 15-20-year absolute leased high-end income properties leased to tenants with positive inflation and recession resistance. This is accomplished by location and type of business.

Rehab (rehabilitated, improved or reworked properties generally have the option or plan to divest within two-three years rolling into another wealth building property. They may or may not have an option for deferred income.

The energy rehab properties are with known management and rework operators. As with any venture recommend new associates have references for experience and integrity. For energy rehab my choice is a CPA firm that has a business end with consulting and actual rehab projects they manage. Former Deloitte CPAs, they have decades experience in oil & gas operations and taxation. This can be the resource for clients and CPAs to advantage the most prolific tax advantages in the US tax code. Their experience includes years of alternatives to be tax efficient.

The energy rehab property minimum entry income properties are $100k and more. The property is producing oil & gas. The goal is to buy low, improve the production and income rolling into another or 1031 out to different qualified property. One receives recorded ownership document allowing divesture when desired with a two-three divest year goal. There can be sheltered income options. Each associate has their personal tax plan and goals. One can build with one’s own tax protected annuity with periodical tax-deductible contributions. Up to $5M or more of acquiring an energy rehab property one potentially deducts 100% of any income, gain, depreciation recapture, investment or ordinary, personal, real estate or business asset proceeds with a 15 year loss carry forward.

We include a non-disclosure confidentiality document for doing business. We are searching for long term integrity associates with common goals. Look forward to knowing you and your goals.

Confidentiality-Non Disclosure Agreement

1LessTax.com – Ken Wheeler Jr. Sample Tax Scenario

Avoid the Stealth Tax.

Funding of property or asset (BASIS): $200,000.00

Divest or sell for: $300,000.00

Gain or Profit $100,000.00

TAXABLE $100,000.00

For an energy rehab $100,000.00 is the prime amount to deduct so is the first amount to consider to transfer to the energy rehab property.

One does not have to transfer the complete amount as in a 1031 qualified exchange or other defer/deduct methods.

The energy rehab property is real property so when one divests one can choose any other business property to defer tax with the 1031 rule or refund into another energy rehab property with or without basis, deducting all.

With the right people one can have as an energy property annuity to receive and deduct most income and proceeds from any transaction.

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Go to Summary outline of six tax methods to increase efficient affluent client activity

Types of income

Active Income

Income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation.

Passive Income

Most types of passive income are derived from real estate/property, while other types of passive income are derived from royalties from patents or license agreements.
An income stream falling into this category is one where money is received usually on a regular basis, where no additional effort has taken place. Most passive income streams require great effort to start with.
Some examples: Interest Income paid from bank deposits, rental income from real estate/property., royalties from writing a book, dividends from shares holding.
Another example of passive income come from network marketing.’
Passive income flows to you or your family whether you are sick, or vacationing, or dead. Passive income streams allow you to make money without having to be there. Note: §469 only exception below.

Portfolio Income

Portfolio income is income from investments, including dividends, interest, royalties, and capital gains. I would say that portfolio income is a subset of passive income.
1031FEC/1LessTax Property Exchange & Asset Tax Planning
Many owners wish to sell from management intensive property to fully managed and less risk foundation income property that is held for the step up basis allowing beneficiaries to sell with no tax.

Note to owners of real estate in different states may have estate and /or income tax
for property in a state other than the state of residence that may have no estate (inheritance) tax or state income tax. DST investments owned by an out of state owner hopefully are located in states without estate tax and gain tax capture or owner in for a surprise. The U.S. states that collect an inheritance tax as of 2020 are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Each has its own laws dictating who is exempt from the tax, who will have to pay it, and how much they'll have to pay.

TDCO

QSBS

Rules

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****IRC Section §199A aka the “Pass Thru Deduction”

There is Now a Deduction for up to 20 Percent of the Qualified Business Income of Pass Through Entities

The Act establishes a new deduction for owners of pass through entities that may enable those owners to deduct up to 20 percent of their qualified business income. This deduction is effective for taxable years beginning after December 31, 2017, but expires in taxable years beginning after December 31, 2025.

The special Code Sec. §199A deduction is available not only for individuals but also for trusts and estates. In combination with the reduction in individual income tax rates, taxpayers eligible to claim the full 20 percent deduction will face an effective maximum marginal federal income tax rate of 29.6 percent (plus, the Medicare tax on unearned income, to the extent applicable) on their eligible pass through entity income.

In calculating qualified business income, capital gain income is excluded. As a result, no material deduction would be available to a taxpayer owning rental real estate if there is little or no net income generated over the property’s holding period and the only material income is the gain recognized on the disposition of the property.

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IRC (Code Section) §179 was amended to make the following types of building improvements

These building improvements are not normally within the definition of qualified improvement property because they are a structural component of a building — eligible for Code §179 expensing: (i) roofs, (ii) heating, ventilation, and air-conditioning systems, (iii) fire protection and alarm systems, and (iv) security systems. The Code §179 ceiling was increased to $1,000,000 for tax years beginning after 2017, with the phase-out beginning at $2,500,000 of qualifying assets placed in service.

It is always time to remember important year-end planning. One has to take action before year-end if one wishes the "de minimis safe harbor election" (one probably wants it) in place for 2020 to "expense" assets costing $2,500 or less.

The following are four benefits of this safe harbor:

1. Safe harbor expensing is superior to §179 expensing because you don’t have "recapture" (i.e. - the need to "pay back" the expense if you stop using the asset).

2. Safe harbor expensing takes depreciation out of the equation.

3. Safe harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books.

4. The safe harbor does not reduce your overall ceiling on Section 179 expensing.

Safe harbor example: One has a small business that elects the $2,500 ceiling for safe harbor expensing and purchases two desks costing $2,100 each. The invoice states the quantity “two” at the total cost of $4,200, plus sales tax of $378 and a $200 delivery and setup charge, totaling $4,778.

Before this safe harbor, one would have capitalized each desk at $2,389 ($4,778 ÷ 2) and then either Section 179 expensed or depreciated it. You would have maintained the desks in the depreciation schedules until disposed.

With the safe harbor, one expenses the desks as office supplies. This makes the tax event easier.

To benefit from the safe harbor, one and tax preparer do a two-step process as this:

Step 1.
For safe harbor protection, one must have in place an accounting policy—at the beginning of the tax year—that requires expensing of an amount of your choosing, up to the $2,500 or $5,000 limit.

Step 2.
When preparing your tax return, one chooses the election on your tax return to use safe harbor expensing. This requires attaching the election statement to your federal tax return filing the tax return by the due date (including extensions).

If one wishes to use this safe harbor for next year, Step 1 needs to be completed in the current year.

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***Tax Deed Purchase Can Have Tax Advantage When Property Owned Deemed Unwanted

A tax deed can legally transfer ownership to the buyer of a property that has been sold due to delinquent taxes. ... In a tax deed sale, the property itself is sold. The sale which occurs through an auction has a minimum bid of the amount of back taxes owed plus interest, as well as costs associated with selling the property.

The highest bidder now has the right to collect the liens, plus interest, from the homeowner. If the homeowner can't pay the liens, the new lien owner can foreclose on the property. In a tax deed sale, a property with unpaid taxes is sold in its entirety, at auction.

When you buy a tax lien certificate, you're buying the right to receive a debt payment, not the deed to the house. The homeowner is still the legal owner of the home. If he does not pay the tax debt, then you can foreclose. But you cannot buy a tax lien, turn around and foreclose on the property the next day.

Tax Liens do not eliminate the mortgage(s) attached to the property. Tax Sales do not remove Assessment or IRS Liens (government liens), if they are attached to the property.

Investors buy the liens in an auction, paying the amount of taxes owed in return for the right to collect back that money plus an interest payment from the property owner. ... Ownership of the property rarely happens: The taxes are generally paid before the redemption date. The interest rates make tax liens an attractive investment.

When tax deed purchase lead to clear deed ownership, property can have development advantages. Environmental situations are to be considered if only land or land with improvements.

If one wishes to have a professional valuation of an owned deed from a tax sale, the valuation could be valuable if one contributes the deed to a charity, government or entity who will accept title. The valuation could be much more than the purchase and valuation expense allowing a tax deduction for the contributed valuation.

20191223 Consolidated Appropriations Act of 2020

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Top 5 Limitations of a Tax Deferred 1031 Exchange vs Tax Attorney Solution

Additional Disadvantages of a 1031 Exchange

Multiple procedures, rules and regulations to follow through a §1031 intermediary - time limited

One's relinquished and replacement properties must qualify for a §1031 exchange

Meeting the IRS rules and regulations is stressful and inflexible

Tax basis on the new property acquired is reduced or eliminated for maximum income taxation

Losses cannot be recognized

§1031 only provides tax deferral that may or may not be best exit strategy

§1031 Exchange Process

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PowerPoint Presentations

Tax Reduction To Enhance Annuity, IRA and 401k Ownership For IRA, 401k, annuity and other retirement plan owners. Most plan owners do not realize retirement plan and annuity ownership transfer is subject to the highest Federal and state tax rates. Annuity taxation is immediate unless in qualified plans. Learn how to enhance most highly taxed and popular supposedly tax deferred and conservative savings products with IRS tax codes for tax reduction. Maintain the tax deferral plus add tax deductibility, as a LegacyChange plan and other available tax advantages to this conservative savings instrument.

We do not market or sell annuities or insurance products. Our goal is to assist to

significantly reduce the massive taxation of these assets. Contact us

Avoid the Stealth Tax

ANNUITIES

How Long Will Payments Last?

A major consideration is if one wishes risking losing a significant portion of your investment to the annuity company if you die before receiving enough payments to justify the annuity purchase. There are options.

These options include:

Single Life/Life Only
Lifetime of payments but no survivor benefit.

Life Annuity with Period Certain (Fixed Period/Guaranteed Term)
Minimum period of payments - even after death of buyer - with remaining payments to beneficiary.

Joint and Survivor Annuity
Payments last life of both spouses.

Lump-Sum Payment
Entire annuity paid at once with heavy tax burden.

Systematic Annuity Withdrawal
Amount and frequency of payments customizable.

Early Withdrawal
Withdraw before 59 1/2, pay 10 percent in taxes. 72T

IRA Withdrawal Rules have minimum required distributions after 72 with a10 year disbursement requirement for beneficiaries receive all.

Limitations Some annuities limit choices.

Single Life/Life Only

Also known as a straight-life annuity, this choice allows you to receive payments your entire life. Unlike some other options that allow for beneficiaries or spouses, this annuity is limited to the lifetime of the annuitant with no survivor benefit. The risk is you will die before getting all or most of your money back. You can limit the possible loss here by choosing a life annuity with period certain.

Life Annuity with Period Certain (Fixed Period/Guaranteed Term)

Period certain annuities are the same as a straight-life annuity, but it includes a minimum period the payments will last – say 10 or 20 years – even if the annuitant dies. If the annuity holder dies before the end of the period, the payments for the rest of that time will go a beneficiary or the annuitant’s estate. Adding the period certain will cost you, lowering the amount of your monthly payments.

Joint and Survivor Annuity

Also known as a joint-life annuity, a joint and survivor annuity guarantees payments will last the lives of both the annuitant and another person, typically a spouse. This choice reduces the amount of each payment you receive with a life annuity or a life annuity with period certain. You can also elect to include a period certain with a beneficiary receiving payments if both you and your spouse die before the end of the period.

Lump-Sum Payment

This option allows the annuitant to receive the entire worth of the annuity at one time. This can increase the tax burden substantially by requiring taxes all be paid in that year.

Systematic Annuity Withdrawal

In this method, you choose the amount of the payments and how many payments you want to receive. This option does not include a guarantee it will last your entire life. It is entirely dependent on the amount of money in your annuity account.

Early Withdrawal

If you elect to withdraw money from your annuity before you reach the age of 59 ½, you will have to pay a penalty of 10 percent to the government, in addition to whatever taxes you owe on the money. If that withdrawal is within five to seven years of purchasing the annuity, you may also owe the annuity provider a surrender charge of as much as 20 percent, depending on how much time has passed since the purchase.

Death Benefit

Your annuity contract may include a provision for a death benefit for a beneficiary you designate. Usually, the payout for the beneficiary will be the contract value or the amount of the premiums that have been paid.

TIP

If you are the non-spouse beneficiary or spouse beneficiary of an annuitant who has died, you have a few different options to receive payment from a nonqualified, deferred annuity unless the annuitant has arranged otherwise.

Five Year Rule

One involves invoking a requirement that all the money in the annuity must be distributed within five years of the annuitant’s death.

Beneficiary Life Expectancy

The beneficiary may also choose to have the money distributed according to his or her life expectancy. The life expectancy is used to calculate the minimum amount the beneficiary must withdraw each year.

Survivor Annuitization

And finally, the beneficiary may choose to annuitize the funds. This means the annuity becomes a guaranteed stream of income for the beneficiary. This can use the single-life or term-certain options described above.

Do Annuities Have Declared Dividends?

Annuities are different than stocks and do not have the same structure. With stocks, you have public corporations with boards of directors that decide to declare a dividend for payments to shareholders from company profits. Annuity payments are either fixed ahead of time or tied to the performance of an index or stock portfolio.

We do not market or sell annuities or insurance products.

Significantly reduce the massive taxation of these assets.

Avoid the Stealth Tax.

About Life Insurance Settlement Contracts

Minimum policy benefit $500,000 (preferably $1M+) No maximum policy benefit 60 Years of age + with impairments 70 Years of age + without impairments All types of policies Less than 12 Years life expectancy The amount paid into the policy (the tax basis) is tax-free. Proceeds greater than the tax basis, but less than the cash surrender value, are taxed at ordinary income rates. Any remaining amount is subject to capital gains tax. CPA & tax attorney recommended!

Contact us

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We do not market annuities, insurance or list real estate or businesses.

We may, with client request or permission, refer to those who do.

What is a 529 Plan?

A 529 Plan is a savings vehicle designed specifically for higher education expenses. The name “529” comes from Section 529 of the federal tax code, which authorizes states to offer the plans. There are two types of 529 Plans – Prepaid and Savings, and both Prepaid Plans and Savings Plans are authorized 529 college savings plans. Earnings in 529 Plans are tax-free when they are used for Qualified Higher Education Expenses. In general, qualified expenses include tuition, fees, room and board, and the cost of books, supplies and equipment required for the enrollment or attendance at an Eligible Educational Institution, including undergraduate, graduate, and vocational/technical schools.
What is the difference between a Prepaid Plan and a Savings Plan?

A Prepaid Plan is basically a prepackaged college savings plan covering specified college costs in the future. Prepaid Plans simplify saving for future college costs. You do not have to worry about how much to save, when to save or how to invest with a Prepaid Plan. Simply pick a plan, make your payments, and when your student is ready for college, the plan pays for the costs covered by the plan. The Prepaid Plans offered by the Florida Prepaid College Board are guaranteed by the State of Florida, so you can never lose what you’ve paid toward the plan.

A Savings Plan allows you to develop your own plan to save for college. You decide how much you want to save and when you want to save. You also get to choose how you want to invest your savings using the investment options offered by the plan. When it comes time for college, you use your savings to pay for actual college costs at that time. Savings Plans are not guaranteed, so the value of your investment is subject to market fluctuations.
Can I enroll in both a Prepaid Plan and a Savings Plan?

Yes. Prepaid and Savings Plans work well together. For example, you could use a Prepaid Plan to cover up to four years of tuition and fees and a Savings Plan to pay for books, a computer, room and board. If you don’t want to use a Prepaid Plan to save for all four years of tuition and fees, you could purchase a 2-Year Florida College Plan or one or more 1-Year University Plans and also open a Savings Plan.

When deciding how to save, focus on your investment preferences. For example, do you prefer guaranteed investments (Prepaid) or investment control (Savings)?

Also, consider what you can afford. You may want to, but you don’t have to save for everything. Parent surveys suggest that most parents anticipate paying 40% of their child’s higher education expenses.

How does a 529 Plan compare to other college savings vehicles?

Savings vehicles like 529 Plans offer distinct advantages over traditional checking or savings accounts, namely the opportunity for tax-free earnings. Here is how 529 Plans compare to other college savings vehicles.

	529 Plans	Coverdell Education Savings Accounts	Qualifying U.S. Savings Bonds	UGMA/UTMA
Federal Income Tax	Contributions made with after-tax funds; earnings excluded from income for federal tax purposes when used for qualified college expenses	Contributions made with after-tax funds; earnings excluded from income for federal tax purposes when used for qualified college and K-12 expenses	Certain “EE” and “I” bonds may be redeemed tax-free for college expenses	First $1,050 is tax-exempt; unearned income over $2,100 for certain children under age 24 is taxed at parent rate
Federal Gift Tax Treatment	Contributions treated as gifts; annual and 5-yr… federal exclusions apply	Contributions treated as gifts; annual federal exclusions apply	Not considered a gift	Contributions treated as gifts; annual federal exclusions apply
Federal Estate Tax Treatment	Value excluded from contributor’s estate; included for death during 5-yr.. election period	Value excluded from contributor’s estate	Value included in owner’s estate	Value excluded from contributor’s estate
Maximum Investment	$418,000 per Beneficiary in Florida	$2,000 per Beneficiary per year (all sources)	$10,000 face value per year, per owner, per type of bond	No limit
Qualified Expenses	Tuition, fees, books, computers and related equipment, supplies, special needs; room and board for minimum half-time students	Tuition, fees, books, supplies, equipment, special needs; room and board for minimum half-time students; additional categories of K-12 expenses	Tuition and fees	No restrictions
Change Beneficiary	Yes (member of family)	Yes (member of family)	Not applicable	Prohibited
Time/Age Restrictions	Prepaid: Enroll before 11th grade, 10-yr.. benefit period Savings: None	Contributions before Beneficiary reaches age 18; use of account by age 30	Bond purchaser must be at least 24 years old at time of bond issuance	Custodianship terminates when minor becomes adult
Income Restrictions	None	Contributions limited for incomes approx. $100K and above	Interest exclusion for incomes approx. $77K and below	None
Federal Financial Aid	Asset of parent if owner is parent or dependent student	Asset of parent if owner is parent or dependent student	Counted as asset of bond owner	Counted as asset of the student
Use for Non-Qualifying Expenses	Withdrawn earnings subject to federal tax and 10% penalty	Withdrawn earnings subject to federal tax and 10% penalty	No penalty; interest on redeemed bonds included as income	Funds must be used for benefit of the minor

https://www.myfloridaprepaid.com/resources/529-basics/

For specific information about your situation and options, please consult an investment adviser or certified public accountant.

2020 The estate tax exemption amount is $11,580,000 per person.

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