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How Can I Tell You? - Part II

In my last installment, I introduced you to the best singer you've never heard of - Lani Hall. She made her fame singing in Portuguese (Sergio Mendes and Brasil 66) and Spanish (beautifully I might add!) while being unable to speak either language. She won two Grammy awards singing in Spanish. The duet with Spanish singer Camilo Sesto Corazon Encadenado is a great romantic ballad. She still performs on occasion with her husband of fifty years, Herb Albert. Of course, Herb Albert is famous for his Herb Albert and the Tijuana Brass and co-founding A&M Records which he sold for over $500 million.

Last week I reintroduced the management company ("Company"), a regular corporation with a fiscal year end. The management company provides services to the taxpayer's operating company - financial, administrative, procurement, marketing, and sales, as well as investment management. The management fee is a tax deductible expense for the calendar year business owner’s operating company. The management company taxed as a regular corporation has a fiscal year (Say November 30) that does not end until November 30, 2023. The company's tax return assuming an extension is not due until August 15, 2024. Assuming the business owner did nothing else, the strategy represents a meaningful deferral of eighteen months. However, the goals of the taxpayer should not be satisfied with tax deferral solely.

The business owner can create a corporate employee and fringe benefit that can further reduce the amount of taxable income to the Company before its year end. The company may create a qualified retirement plan - 401(k), profit sharing, cash balance defined benefit and 401(h) Post-Retirement Medical Expense Plan. Contributions are tax deductible to the Company and tax deferred to the participant (owner of the Company).

The business may also sponsor a health reimbursement arrangement which would allow the Company to pay medical expenses not fully covered by the taxpayer's health insurance - co-payments, deductibles, etc. These payments are fully deductible to the Company and non-taxable to the Employee. These benefits are meaningful to the taxpayer who no longer files Schedule A or whose expenses do not meet the AIG threshold (7.5%). A range of lesser known fringe benefits such as educational assistance, qualified transportation and commuting, car, meals, adoption assistance, dependent care, and lodging on business premises are tax deductible to the Employer (Company) and non-taxable to the employee (taxpayer).


If you are a business owner or an executive with high income coming into the last two months of the year, what do you have left in your "trick bag" to reduce your federal and income tax exposure? Unless you feel a personal responsibility to reduce the federal deficit on your own, you owe it to yourself and your family to explore your options to avoid your hard-earned money's one-way trip to the Nation 's Capital. These ideas are somewhat "outside of the box" are legal and work incredibly well. How can I tell you? Call me or schedule an appointment on my calendar. Do not wait until the week after Christmas!

Best Regards,


How Can I Tell You - Part II blog
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