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Dear ,
Rotten Apple or Good Stewardship?
You be the judge. One of the big stories of the weekend seems to be this one.
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Here is a synopsis of the strategies complied by Barry Ritholtz at The Big Picture.
* Apple's federal tax bill was $3.3 billion on reported profits of $34.2 billion last year, a tax rate of 9.8%;
* Apple allocates 70% of its profits outside the U.S. note that the value is created in the US, but the low end manufacturing is overseas.
* A Nevada shell company let's Apple's U.S. business sidestep California state taxes. California corporate tax rate = 8.84%, while Nevada = 0%.
* California gives tax credits to Apple for conducting R&D in the state worth more than $400 million since 1996;
* The "Double Irish With A Dutch Sandwich" routes royalties and profits through Ireland and the Netherlands and the Caribbean. On paper, Ireland "generated" one-third of Apple's revenue last year.
* Salespeople working in high-tax countries are employed by subsidiaries in low-tax countries.
* iTunes sales "happen" in Luxembourg -- a tax dodge with local incentives. In 2011, iTunes S.à r.l.'s revenue exceeded $1 billion
For those of you wondering what the heck a "Double Irish with a Dutch Sandwich" is, you can click on this graphic to read all about it. It is a tax reduction strategy that is so complex that you have to diagram it to really understand it.
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So here's the question.
Is this appropriate behavior on the part of a U.S. Corporation?
If you were an investor in Apple which you may well be if you own any of the major stock mutual funds, would you want them to use all of the tools legally available to them to minimize the taxes they pay so that they maximize your profits as a shareholder? Remember, Uncle Sam is going to turn around and tax you, the investor, a second time on that money anyway.
Let's take it a step further. As a publicly traded company, isn't it the fiduciary responsibility of management to act in the best interest of shareholders? Yes it is. Wouldn't maximizing shareholder value be one of those primary responsibilities? Yes it would. In fact I would argue that the company has a legal and a moral obligation to do all it legally can to maximize shareholder value including minimizing taxes. To do less opens the company up to lawsuits from shareholders.
Now we may disagree with the aggressiveness of one company's efforts vs. another but I don't see anything evil or wrong with what they are doing. After all, how many of us turn down the tax deductions we are legally allowed to claim? When's the last time you didn't take the per person deduction that is allowed for everyone? You know all of that mortgage interest that you pay if you have a mortgage? When was the last time you told your tax preparer "that's OK, I don't want to claim that, I'd rather pay more taxes"?
It's simple common sense that we use the tax code to our own advantage and why would we expect anything less from our companies?
You, Inc.
In fact I would argue that it would serve most of us well if we started treating our own lives more like a business when it comes to taxes. Here's what I mean. Companies have well thought out strategies to control and minimize their tax situations well into the future. How much effort does the average American put into tax planning? The sad answer is "not much" Most of us just roll along and pay our taxes year by year and don't put any thought into it beyond that.
Why do I say sad? Because the fact is that for most Americans, the majority of their investable wealth is in their retirement accounts. The reason it is sad is that most Americans biggest asset is a tax time bomb waiting to explode!
 | | (Click to view on Barnes and Noble) |
Would you like to avoid taxes like the big guys?
If so then let us help you. As the second part of Ed Slotts book says "and how to diffuse it." If your biggest asset was about to blow up would you simply watch or would you call the bomb squad and have them try to diffuse the bomb?
Ed's book offers a 5 step action plan and for you do it yourselfers it might work for you. But let me ask you this. Is one of your biggest assets the kind of thing that you want to practice your Tax Bomb diffusing skills on? What if you screw it up? What might the consequences be? Well for one thing, you could accidently cause part or all of your retirement accounts to become taxable. KaBoom!!!
Folks, we're the bomb squad. If you don't know how to diffuse the tax threat to one of the biggest assts that most of you own then give us a call. We're here to help, that's what we do!
Until next week , Protect Your Wealth!
Sincerely,
  
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