KNOCK YOURSELF OUT - RESUSCITATING TAXPAYERS WITH BUYER'S REMORSE!

A thousand apologies to the generous readers who have put up with me! I was largely out of writing commission during the month of December largely from the dignity (or indignity) of having to make a living rather than waxing poetic articles or pontificating on one thing or another. Those of you who read my blog and articles know that I am a huge Tower of Power fan. In my youth, I played the baritone horn and trombone in band and orchestra without much or any fanfare. On my best day, I was a mediocre musician at best. Nevertheless, I have loved all of the horn bands - Blood, Sweat and Tears, Chicago, and Tower of Power (TOP). However, TOP is special. They do soul and funk like Earth, Wind and Fire and Soul Brother #1, the godfather himself, James Brown. TOP has supplied horns for Santana, Elton John, Huey Lewis, and many other performers. Sting said that he always aspired to be in a band with a sound like TOP. The Berklee College of Music has a course and student ensemble that studies the TOP. If TOP has not been on your playlist, it is a "must add" in 2021. It may be the only thing that you remember about me!


One of the feelings that all of us who are living on the Planet and those who walked before us, experience is the remorse for actions taken or sometimes not taken, i.e., buyer's remorse. Individual taxpayers report their income on the calendar year (January 1-December 31). Normally after December 31st, the year is closed, and it is too late to implement a qualified retirement plan. Thanks to the Secure Act, any profit sharing or pension plan has up to the tax filing date (April 15th) plus filing extensions to be adopted. Consequently, any taxpayer has until September 15, 2021 if a company's normal filing deadline is March 15, 2021.


On one level, it appears obvious that a taxpayer with a business still has time to adopt a qualified retirement plan. What is less obvious is the possibility of “Chip”, the investment banker from Goldman Sachs who has W-2 income from Goldman of one million dollars and outside investment income of another one million dollars, adopting a new qualified retirement plan featuring a cash balance defined benefit plan, profit sharing and Roth 401k plans, and a 401(h) post-retirement medical plan, allowing Chip to offset the entire amount of the investment income with a tax-deductible contribution into a qualified retirement plan sponsored by his personal investment holding company. It does not matter that Chip thought of this after the fact in 2021! This scenario can be replicated at any level of income. I have outlined these concepts in my Accidental Entrepreneur series.


On a personal level, I had a taxpayer (client) with $2 million with short term capital gain trading income. He is a smart guy with a Harvard MBA except his name isn't Chip. He never imagined a planning scenario, and solution that could reduce his taxable income by the same $2 million dollars. The miracle is that a taxpayer who never thought he had a solution, now has a solution after the fact and after the close of the tax year. This solution fits every size. What are you waiting for?


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While this website provides information, it does not constitute legal advice.  The best way to get guidance on your specific legal issue is to contact a lawyer.  To schedule a meeting with Gerald, please call or complete the form above.