CRYPTO – PPLI and EWP – Episode 4 – The EWP Stories Video Series

Cryptocurrency, Private Placement Life Insurance and Expanded Worldwide Planning

The Expanded Worldwide Planning Stories Video Series

Episode 4

Introduction

Welcome. Many investors in the crypto space have lost faith in some of our long-established institutions. These investors are looking for relevance in newer and more decentralized modes like the blockchain concept. At EWP Financial we embrace the six principles of Expanded Worldwide Planning, or EWP for short. These six principles are introduced in the opening paragraph of Wikipedia’s article on International Tax Planning.

This video will explain the six principles of EWP and how they help to safeguard your crypto assets and maximize them for tax efficiency, asset protection and privacy. A properly designed EWP Asset Structure can give you what no other asset structure can offer. These six principles are the key to the relevance you are searching for in your quest for financial security.

We include excerpts from an excellent article from Cointelegraph by Robert W. Wood that discusses some of the tax aspects of cryptocurrency.

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The major tax myths about cryptocurrency debunked

By Robert W. Wood
More crypto tax enforcement is coming, and many taxpayers are complying going forward, and amending prior returns if they have something to clean up.

Crypto and taxes may not be a match made in heaven, but taxes seem inevitable, and the United States Internal Revenue Service (IRS) has made it clear it is going after people who don’t report. With IRS summonses to Coinbase, Kraken, Circle and Poloniex, plus other enforcement efforts, the IRS is on the hunt. The IRS sent 10,000 letters in different versions asking for compliance, but all were nudges to encourage taxpayers to be compliant.

The IRS hunt for crypto has often been compared to the IRS hunt for foreign accounts more than a decade ago. Unfortunately, it is not clear if there will ever be a crypto amnesty program emulating the offshore voluntary disclosure programs the IRS formulated for offshore accounts.

Related: More IRS crypto reporting, more danger

The IRS made its first big announcement about crypto in Notice 2014-21, classifying it as property. That has big tax consequences, accentuated by wild price swings. Selling crypto can trigger gain or loss and be taxable. But even buying something with crypto can trigger taxes. Paying employees or contractors does too. Even paying taxes in crypto can trigger more taxes.

We are already seeing crypto audits by the IRS, and by some states (notably California’s Franchise Tax Board), and more are sure to follow. At least now, there are tracking and tax return preparation alternatives that can make the process easier than it was in the early days. Everyone is trying to minimize taxable crypto gains and to defer taxes where legally possible.

Still, it is easy to get confused about the tax treatment and take tax positions that may be hard to defend if you are caught. With that in mind, here are some things I’ve heard, that I’ll call crypto tax myths.
Myth 1
You can’t owe any tax on cryptocurrency transactions unless you receive an IRS Form 1099. If you did not receive a Form 1099, you can check the box on your tax return that says that you did not have any transactions with cryptocurrency.

Actually: Tax may still be owed, even if the payor or broker does not file a Form 1099. A Form 1099 does not create tax where no tax was previously due, and plenty of taxable income is not reported on Forms 1099. A Form 1099 might be wrong in which case, explain it on your tax return. But if you are audited and your best defense is that you chose not to report your transactions because you did not receive a Form 1099, that is weak.

Myth 2
If you hold your crypto through a private wallet instead of an exchange, you don’t need to report the crypto on your tax returns.

Actually: Private wallet or exchange, the tax rules are the same. The impulse to hide ownership by moving wealth to anonymous holding structures is not new. When Swiss banks began disclosing their U.S. accountholders to the IRS and U.S. Department of Justice, many U.S. taxpayers tried just about everything, but nearly everyone paid in the end, usually with big penalties. The cryptocurrency question on the IRS Form 1040 is not limited to cryptocurrency held through exchanges. If you say “no,” even though you hold crypto through a private wallet, you are potentially making false statements on a tax return signed under penalties of perjury. You might be betting that you will never get caught, but thousands of U.S. taxpayers who have Swiss bank accounts who can attest how poorly that bet can played out.

Myth 3
If you hold your crypto through a trust, LLC or other entity, then you do not owe tax on the crypto transactions and do not have to report. Besides (the myth continues), income generated through LLCs is tax-free.

Actually: Owning crypto through an entity may keep the income off your tax return. But unless the entity qualifies (and is registered) as a tax-exempt entity, the entity itself will likely have tax reporting obligations and may owe taxes. For tax purposes, LLCs are taxed as corporations or partnerships, depending on their facts and tax elections. Single-member LLCs are disregarded, so the LLC income ends up on the sole owner’s return. If your entity is a foreign entity, there are complex U.S. tax rules that can make you directly liable for certain income produced within the foreign entity.

Myth 4
If I structure the sale of my crypto as a loan (or some other non-sale transaction), I don’t have to report the proceeds.

Actually: Consider if you are loaning or selling the crypto. The IRS and courts have robust doctrines to disregard sham transactions. Are you getting the same crypto back that you are loaning? Are you charging interest on the loan, and paying tax on the interest as you receive it? Some loans may not hold water. And if you sell crypto and receive a promissory note, that may complicate your taxes further with installment sale calculations.

Myth 5
A crypto exchange is a type of trust since you can’t unilaterally change the policies of the exchange. So you do not own the crypto in your account for tax purposes and do not have to report transactions through an exchange.

Actually: The IRS has not said any of this. IRS guidance suggests that the IRS views taxpayers as owning the cryptocurrency held through their exchange accounts. It seems highly unlikely that the IRS would view crypto held through an exchange account as owned by the exchange itself (as trustee), rather than owned by the account holder. Taxpayers often own their assets through accounts held by institutions, such as bank accounts, investment accounts, 401(k)s, IRAs, etc.

In most cases, the tax law treats taxpayers as owning the money and assets held through these accounts. Some special accounts like 401(k)s and IRAs have special tax rules. And having an account treated as a trust is not necessarily a good tax result. Beneficiaries of trusts, and particularly foreign trusts, have onerous reporting obligations. Thus, before you consider crypto exchanges as trusts, be careful what you wish for. Calling something a trust does not mean income generated within the trust is exempt from income tax.

Myth 6
Congress’s amendment to Section 1031 of the tax code that limits like-kind exchanges to real property doesn’t make crypto-to-crypto exchanges taxable.

Actually: Section 1001 of the tax code provides that a taxable gain results from the “sale or other disposition of property.” The sale of any type of property for cash or other property can create a taxable gain. The IRS says crypto is property, so trading crypto for other crypto is a sale of crypto for the value of the new crypto.

Before the Section 1031 amendment took effect in 2018, a crypto-for-crypto swap might have been ok as a like-kind exchange under Section 1031. But the IRS is pushing back on this position in tax audits and has issued guidance that denies tax-free treatment for certain cryptocurrency swaps. That is not precedential and does not cover the waterfront, but it tells you what the IRS is thinking. In any case, now that Section 1031 has limited like-kind exchange treatment to real property, crypto-to-crypto swaps are taxable unless they qualify for another exception.

Takeaways
Every taxpayer is entitled to plan their affairs and transactions to try to minimize taxes. But they should be wary of quick fixes and theories that sound too good to be true. The IRS appears to believe that many crypto taxpayers are not complying with the tax law, and being careful in the future and doing some clean-up for the past is worth considering. Be careful out there.

This article is for general information purposes and is not intended to be and should not be taken as legal advice.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Robert W. Wood is a tax lawyer representing clients worldwide from the office of Wood LLP in San Francisco, where he is a managing partner. He is the author of numerous tax books and frequently writes about taxes for Forbes, Tax Notes and other publications.

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Conclusion

EWP Asset Structures are tailored-made for holding crypto and NFT assets. At EWP Financial we welcome you to enter our world of satisfied clients, and find out what our simple and straightforward asset structure can do for you.

Take a look to our first NFT COLLECTION.

If you found this video useful, please give us a Like, and click on the subscribe button below. We look forward to having you as a client. Thank you for watching.

To learn how the wealthiest families in the world conduct their financial affairs, please call +1 530 692 1007, or email us at info@expandedworldwideplanning.com.

At your convenience, we can arrange a call to discuss how our unique blueprint can vastly enhance your asset structure. Contact Us.

Disclaimer

The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

Tax Shield 4 – Episode 4 – Part 3 – The EWP Stories Video Series

Tax Shield Video 4 – The Expanded Worldwide Planning Video Series

 International Tax Planning

Introduction

Welcome. As advisors, we concentrate on the ‘shield’ aspect of the term Tax Shield. A Tax Shield is a main principle of Expanded Worldwide Planning, or EWP for short. We will now speak about the ‘tax’ aspect of our subject. What is the history of this thing we wish to shield? Here is a very brief history of taxation, mostly in the U.S. context.

We begin in the ancient world. There is recorded a system of taxation in Egypt around 3000 BC. Oddly enough, the United States was tax-free for much of its early history. This changed at the time of the Civil War, when large debts were incurred to fund the war against the South. In 1913, the 16th Amendment to the Constitution was introduced to pave the way to an income tax.

World War I led to three Revenue Acts that raised tax rates and lowered the exemption levels. The number of people paying taxes in the U.S. increased to 5%.

By 1940, the need for the U.S. to prepare for war and support its allies led to more aggressive taxation. People with incomes of $500 faced a 23% tax and the rates climbed up to 94%. The average annual income at this time was $1,000. By 1945 43 million Americans paid taxes and the yearly receipts were in excess of $45 billion. Today annual tax revenue in the U.S. is approximately $3.7 trillion dollars

In this video we find George Allbirght debating with himself on whether he should proceed with the conservation easement offered by the company, Conservation for Nature. A telephone call from his old college acquaintance Jay Edwards forces a definite decision from George.

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George had spent the last evening researching conservation easements, and concluded that they were a good thing. He had also reviewed his tax situation, and realized that the tax deductions that they offered would reduce his tax bill significantly. Perhaps he should work with Conservation for Nature? He had plenty of land, and they had the years of experience. A good combination, he thought.

Later in the morning, Jack telephoned. He spent nearly an hour telling George that the promoters at Conservation for Nature were crooks, and that George should definitely stay clear of them.

Now George was perplexed. He trusted Jack; they had been good friends ever since their time in Detroit. Jack was giving him very concrete reasons why he should not do business with this company. He decided to reevaluate.

A few minutes after his call with Jack, his cell phone buzzed noisily. He jumped up suddenly. He had survived serving in Afghanistan, that is where he learned to fly a helicopter, but loud, sudden noises were still a problem for him.

“Hello, George?”

“Yes?” George said in a wary tone.

“I am calling you back from Conservation for Nature. I heard in the office that you were interested….”

The voice was no longer polished and sophisticated. The caller was drunk, and George knew who it was. An old college friend of his, they used to go out drinking together. Jay could barely articulate his words.

He knew Jay well. Jay still owed him money. Jay was the kind of guy who would sleep with his best friend’s wife.

Jay was desperately trying to launch into his well rehearsed sales pitch about the company he was doing appraisals—Conservation for Nature, but was hardly intelligible. That was enough for George.

“Good bye, Jay. Don’t ever call me again.”

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Conclusion

In our next video, George is again aboard his state-of-the-art helicopter cruising over his 5,000 acre property. George was safe in the knowledge that he must find a simple and straightforward solution to his tax problem.

If you found this video useful, please give us a Like, and click on the subscribe button below. We look forward to connecting with you in part five of our Tax Shield story. Thank you for watching.

To learn how the wealthiest families in the world conduct their financial affairs, please call +1 530 692 1007, or email us at info@expandedworldwideplanning.com.

At your convenience, we can arrange a call to discuss how our unique blueprint can vastly enhance your asset structure.

Disclaimer

The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

Tax Shield 3 – Episode 3 – Part 3 – The EWP Stories Video Series

Tax Shield Video 3

The Expanded Worldwide Planning Stories Video Series

International Tax Planning

Introduction

Welcome. For real estate investors, there are very substantial benefits to using an asset structure that embodies the principles of Expanded Worldwide Planning, or EWP for short. This is true for U.S. persons and non-U.S. persons alike. A properly designed EWP structure both eliminates tax on rental income and tax on the sale of real estate. This is a very powerful result.

Our video details the disreputable methods used by Conservation for Nature’s appraiser, Jay Edwards. Jay’s inflated appraisals give investors unwarranted tax deductions, while the pressure to achieve these inflated appraisals exact an unhealthy influence on Jay’s life in the form of his increased consumption of alcohol and cigarettes. Jay also finds himself in trouble with the Department of Justice and the Tennessee state real estate appraiser board.

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Part 3

When Jay Edwards began a land appraisal project, he had a single goal—to produce the highest valuation possible. He had had 30 years to hone his skill of inflating appraisals. When he had done retail appraisals at the height of the refinancing boom in the early part of this century, his services were in high demand.

The promoters at Conservation for Nature, want a high valuation, because that in turn produces a large tax deduction for its investors. On one deal in South Carolina, they had acquired a property of 28 acres for $1M, then raised about $9M from investors who bought the property.

The investors made an easement donation based on a claimed value for what the land would be worth if developed as a multifamily resort. Jay’s appraised projection produced a tax deduction of about $39M. The tax write off for investors: $4.00 for every $1 invested.

Of late, the promoters at Conservation for Nature, were pressing Jay for higher and higher numbers. His increased consumption of cigarettes and alcohol was keeping pace with these higher numbers. A number that was going in the opposite direction were his hours of sound sleep. He could not remember when he had last had a restful night’s sleep.

Jay had become a character in an old joke; the one the Mafia hired. It went like this.

The Mafia needed a new accountant, so they interviewed three people. They asked the first interviewee, “How much is 2 + 2?”

“Four,” he answered.

“Sorry, that’s not right,” said the Mafia boss.

They asked the next candidate, “How much is 2 + 2?”

“Four, of course,” he said.”

“That’s not right,” said the Mafia boss.

They asked the third accountant the same question.

He responded, “What number do you want it to be?”

The Mafia boss said, “You’re hired.”

The joke was now becoming stale. Conservation for Nature was being investigated by the Department of Justice. The Tennessee state real estate appraiser board brought a formal complaint against Jay, after a detailed review of one of his easement appraisals found an inflated valuation riddled with errors and omissions.

Threatened with the loss of his Tennessee license, Jay voluntarily surrendered it instead. However, he continued to work for Conservation for Nature in states where the appraiser for a conservation easement was not required to be licensed by the state, and so continued to ply his disreputable trade.

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Conclusion

In our next video, we find George Allbright at crossroads on whether to do business with Conservation for Nature. George is able to firmly decide against doing business with Conservation for Nature after the appraiser, Jay Edwards, telephones George in a very drunk condition. George knew Jay from college days, and describes him as a guy who would sleep with his best friend’s wife.

If you found this video useful, please give us a Like, and click on the subscribe button below. We look forward to connecting with you in part four of our Tax Shield story. Thank you for watching.

To learn how the wealthiest families in the world conduct their financial affairs, please call +1 530 692 1007, or email us at info@expandedworldwideplanning.com.

At your convenience, we can arrange a call to discuss how our unique blueprint can vastly enhance your asset structure.

Disclaimer

The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

‘Home Is Where The Heart Is’

PPLI Brings You Home


Updated

Wealthy international families can create a tax compliant and enhanced privacy Home for their assets using Private Placement Life Insurance (PPLI). The concept of Home is a powerful one for all of us.

At this point in the digital age, you could consider a smartphone to be a type of Home for information. A smart phone can organize and personalize different elements of our lives to bring them to a place that gives us a sense of security much like a physical Home does.

We all like to arrange our contacts, notifications, sounds, and other features to suit our personal taste. The key word here is personal.

“PPLI can do the same for the assets of wealthy international families that are spread throughout the world.”

Our featured news article uses personal in another sense. We are widening our concept of Home to include ‘Home Is Where The Heart Is.’ For Kris Goldsmith what spurred him into action was misinformation that was being spread over Facebook about U.S. Veterans. This emotional element of Home can be a strong force in our lives.

“PPLI is a welcomed unifying element for the assets of wealthy international families.”

Let us review all that can be included in the assets of wealthy international families by visiting the Wikipedia page on Assets:

“In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent the value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

One can classify assets into two major asset classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment.

Intangible assets are non-physical resources and rights that have a value to the firm because they give the firm some kind of advantage in the marketplace. Examples of intangible assets include goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.”

“With proper structuring most all the assets mentioned above can be included in a PPLI policy.”

Let us return to ‘Home Is Where The Heart Is,’ by following the trail of Kris Goldsmith in his search for disinformation as it related to the Vietnam Veterans of America. Our source is The Wall Street Journal article, Army Veteran Wages War on Social-Media Disinformation,by Ben Kesling and Dustin Volz. If you change the subject matter, Mr. Goldsmith’s search could be ours.

We all have topics that compel us to act in one way or another, if what we see on Facebook or in the media strike the right emotional cord for us. This emotional cord is ‘Home Is Where The Heart Is.’

Kris Goldsmith’s campaign to get Facebook Inc. to close fake accounts targeting U.S. veterans started with a simple search.

He was seeking last year to gauge the popularity of the Facebook page for his employer, Vietnam Veterans of America. The first listing was an impostor account called “Vietnam Vets of America” that had stolen his group’s logo and had more than twice as many followers.

Mr. Goldsmith, a 33-year-old Army veteran, sent Facebook what he thought was a straightforward request to take down the bogus page. At first, Facebook told him to try to work it out with the authors of the fake page, whom he was never able to track down. Then, after two months, Facebook deleted it.

The experience launched him on a hunt for other suspicious Facebook pages that target military personnel and veterans by using patriotic messages and fomenting political divisions. It has become a full-time job.

Working from offices, coffee shops, and his apartment, he has cataloged and flagged to Facebook about 100 questionable pages that have millions of followers. He sits for hours and clicks links, keeping extensive notes and compiling elaborate spreadsheets on how pages are interconnected, and tracing them back, when possible, to roots in Russia, Eastern Europe or the Middle East.

“The more I look, the more patterns I see,” he said.

Facebook’s response to his work has been tepid, he said. Company officials initially refused to talk with him, so he used a personal contact at Facebook to share his findings. Lately, the company has been more active.

Facebook didn’t respond directly to a list of questions about Mr. Goldsmith’s research, but a spokesman said the company had 14,000 people working on security and safety—double the amount last year—and a goal of expanding that team to 20,000 by next year.

In a statement, the spokesman said the company relied on “a combination of automated detection systems, as well as reports from the community, to help identify suspicious activity on the platform and ensure compliance with our policies.”

About two dozen of the pages Mr. Goldsmith flagged, with a combined following of some 20 million, have been deleted, often coinciding with Facebook’s purges of Russian- and Iranian-linked disinformation pages—including a separate crackdown by the company last week on domestic actors.

The determination and persistence of Mr. Goldsmith reminds us of how at  EWP Financial, we pursue all available avenues to successfully place assets into a properly structured PPLI policy. The results include both a fully compliant structure, and one that also produces enhanced privacy for the family, as for reporting purposes, the owner of the assets inside the PPLI policy becomes the insurance company.

You have an open invitation to find ‘Home Is Where The Heart Is’ with us. We welcome your comments and questions on how to find the right Home for your assets with Advanced Financial Solutions, Inc. by using PPLI. Please contact us today for an initial consultation at no charge.

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by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

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Tortoises Have Strong Shells

PPLI’s Tax Shield Is Even Stronger

The tax savings element of Private Placement Life Insurance (PPLI) is impressive. We invite you to reflect on your own attitudes toward tax savings by offering two articles on tax that appeared this week in the media.

The tax codes of most countries are a maze of regulations that require professional assistance to extract the most salient tax saving points.  PPLI is at the forefront of structuring techniques that take advantage of maximum tax savings, and at the same time, full compliance with the world’s tax authorities.

How does PPLI become the “leader of the pack” when it comes to tax savings?

This is summed up mostly in two words: Life Insurance. The life insurance laws in most countries are very tax friendly–one receives tax deferral for the investment component of a life insurance contract, and at the death of the insured person(s), the death benefit is passed tax-free to the beneficiary.

With PPLI you couple the life insurance component with an open architecture platform. What does this allow? This allows assets to be located almost anywhere in the world, and to have asset managers located in most jurisdictions in the world. PPLI structuring is a very powerful tool for wealthy international families, and is difficult to achieve with entity planning only–creating trusts, foundations, corporations, etc.

Now for our news articles that reveal interesting attitudes towards wealth and taxes. The first is from Bloomberg, Top 3% of U.S. Taxpayers Paid Majority of Income Taxes in 2016.

“Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.”

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the chart below:

  • The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
  • The top 50 percent of all taxpayers paid 97 percent of total individual income taxes.”

 

 

Our next article is from The New York Times, How Jared Kushner Avoided Paying Taxes.

“Jared Kushner has a net worth of almost $324 million, and his company has been profitable. But Mr. Kushner, who is President Trump’s son-in-law and senior adviser, appears to have paid almost  no federal income taxes for several years running, according to documents reviewed by The New York Times.”

The article goes on to detail Mr. Kushner’s real estate investments, and how they result in a zero tax bill.

Ironic Fact

When one combines the salient points of these two articles, it is ironic to reflect that the wealthy are the ones who both pay the most taxes, and seek to save the most taxes. When anyone prepares their income tax return, wealthy or poor, do they seek to pay the most tax or the least? Many commentators criticize wealthy individuals and corporations for not paying their fair share of taxes. But what is this fair share? Who decides what a fair share is?

Thankfully, we don’t have to answer this question. Our goal is to maximize your investment gains through strategies that minimize your worldwide tax burden. Please send us your tax concerns and questions, so we can structure a plan that gives you all the tax savings elements of PPLI. You can share your experience and inquiries at the bottom of the page. Thank you.

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by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

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