Originally posted by Scipio2009
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You don't really understand the main issue, it has nothing to do with a "pass through," which are different structures, like an LLC. These structures have some tax advantages but are primarily about liability.
The issue is earned income which is visible and taxed at a high rate by the IRS. Deductions are important but, your deductions are not going to severely impact your tax rate with regard to earned income...this changes with other types of income.
Real tax sheltering starts with not taking in earned income if possible. When I sell my house its earned income and I pay tax, if I refinance my house its a mortgage deduction...even if I pull out the same equity...If I get a paycheck for a job I pay tax, if I am an independent contractor before I pay taxes I use deductions. Rich people and smart people use trusts...they put everything in trusts and don't own anything. Trusts allow one to never take the money and create a taxable event, if you need income you borrow from the trust.
You, like most people, confuse pass through type stuctures with trusts. LLC's, and other corporate structuring is designed to makd a corporate fictional self that bares liability... If you slip in the place I rent to you, you sue the LLC Pecan Park Grove (my LLC!) and I am not liable, the fictional entity is liable. Thats why many people have more than one pass through structure! several LLC's!
An athlete cannot hide their income. Its why most professional athletes wind up broke. Basketball players make the most in this country (the usa) and I thing the average in 5 years is that almost 80% wind up broke? As an athlete that travels you have to pay every state you play ball in with the team, income tax...look it up its a fact.
Anyhow, I like to be constructive...I like to share information that I had to learn about to survive in my business. I hope you take it in that spirit, regardless I know what I am talking about. If you want to do the best you can with earned income a trust is the only way to go because the rich made those structures to shield their estates...By law we can all use them.
Think of it this way: Do you believe most athletes are stupid? the myth that every ball player from the ghetto mismanages their cash? Some do, no doubt but there is a much more insidious process: If you really look at the actual amount of taxes athletes pay on their income it would amaze you...All taxes, from sales tax on. if those same athletes would get their income in small chunks over a larger period they would have considerably less problems because they would get more of their cash and give less of it away to uncle sam.
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