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Law Offices of Givner & Kaye Newsletter | December Issue
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Greetings!
December is the time for year-end income tax planning. If you have not yet done so, there are still 11 business days left to put in place structures to reduce the tax that you will owe on your return due April 15, 2014. Two large deductions are available for businesses: a deductible contribution to a defined benefit pension plan and a deductible premium paid to a captive insurance company. The pension deduction might be as much as $400,000 for the owner of a closely held business , and the premium for a captive might be as high as $1,200,000. See our "Featured Article" to find out how a pension for a business with as many as 50 employees might still be attractive to the owner-employee. Note: a captive can also benefit the owner of rental real estate even though rental real estate is not, itself, an operating business.
There are also various attractive charitable techniques available to individuals. Here's one: contribute $100,000 to a trust; get an immediate deduction for the $100,000; $2,000 per year for 14 years goes to your favorite charity; in the 15th year $100,000 goes to your favorite charity and another $100,000 goes to you or a trust for your children. That requires earning 6.5% on the money in the trust.
So, it's not yet too late! Contact Us Today.
Best Regards, The Law Offices of Givner & Kaye
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Featured Article: Defined Benefit Pension Plans - Attractive Even With "Too Many" Employees
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You may be told that you have "too many" employees, making a pension unattractive, and therefore you are better off paying the tax and pocketing the difference. That advice is usually wrong. Here's why:
The Internal Revenue Code permits a pension plan to discriminate, for example a plan need not cover those under age 21 and those who have worked less than a year. The most powerful example of this, found in Section 410(b)(2)(A), was described in my very first article - published in November, 1980, in TAXES magazine - "Using The Nondiscriminatory Classification Technique In Designing Qualified Plans." In March, 1981, U.S. Tax Court Judge Arthur L. Nims III cited my article in his opinion in Fujinon Optical, Inc. v. Commissioner. Judge Nims disqualified Fuji Film's U.S. pension for failure to cover enough employees. He noted that the plan might have qualified had it used the nondiscriminatory classification technique as described in my article.
How does it work? Assume your company has 49 employees. Divide the employees in 7 groups of 7, starting with the highest paid (you) at the top and ending with the lowest paid at the bottom. In each group of 7 at least 3 must be covered. Which ones do you think will be covered?
There are exacting details, of course, in applying the technique. But that should give you the idea of why you need the best professional helping you. People run to an actuary when it comes time to think about a defined benefit pension plan. However, it takes a skilled pension lawyer to help you achieve the best possible result.
For more information, check out the Income Tax Planning Case Result on our website, which features a defined benefit pension plan, or request a copy of the materials from our Seminar, "How Can A Defined Benefit Pension Plan Protect Liquid Assets?" As always, feel free to contact us directly if you have any questions!
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YouTube Videos
We post new videos on YouTube each week filled with advice and tips. For more, click here.
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| If you have a pension plan that is overfunded so that you cannot make any more deductible contributions, but would like to do so, give us a call. There may be more than one way to achieve that result.
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 Upcoming Thursday Insights Series Seminar: Captives & Cash
Jan. 16th Stuart Katz and Stacie Jacobsen from Bernstein Global Wealth Management will discuss how captive insurance companies and cash balance plans can be used as powerful tools to build wealth and provide other advantages for business owners.
Call (310) 207-8008 or sign up online to join the seminar in-person or via webinar! |
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Attorney Spotlight: The Intersection of Tax Law And Murder!! Example 1.
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On a Friday in 1981 I was meeting with a CPA from Whittier to discuss establishing a pension plan for one of his clients, a man who owned a plumbing firm with 40 employees. Let's call the client John Jones. On Sunday I was glancing through the L.A. Times and at the top of page 2 there was a photo of the police fishing a man from the harbor off of Long Beach. I glanced at the name, which on a Sunday morning when I was still waking up, struck me as vaguely familiar: John Jones.
On Monday morning our paralegal, Marilyn Feinberg, rushed up to me first thing and excitedly asked "Did you see the paper yesterday? The story about John Jones?" Just as I was starting to put her questions together with what I loosely recalled, the phone rang. It was the CPA from Friday. He said, "We need to talk."
To shorten a story that played out over many years, our client had, on Saturday night, been enjoying a lovely "meal" of Magic Mushrooms with his girlfriend. Apparently she started having convulsions and our client did what anyone would do to try to save her: he stabbed her 36 times with a knife, following which he jumped into the ocean. I helped set up a conservatorship so that the CPA was able to visit John in the California Men's Colony in San Luis Obispo and help him operate the business from prison.
Oh, one more thing. The first time I went up to the California Men's Colony at San Luis Obispo to visit John was the occasion for the second date with my lovely and long suffering wife who agreed to accompany me on the trip. Surprisingly, one year later she agreed to marry me (December, 1982).
For more on the "Intersection of Tax Law and Murder," stay tuned to future Newsletters. You'll read about some good ones including some celebrity murders that you may enjoy.
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 For over three decades, our experienced Los Angeles estate planning, asset protection and expert tax attorneys have met each client's unique planning needs by collaborating with our longtime partners - attorneys, accountants, business managers, financial planners, stockbrokers and insurance professionals. Contact Givner & Kaye today! |
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