How can C.Y.A help you avoid paying taxes?

We all know that C.Y.A. stands for Cover Your Assets. What that means is simply to protect what you have from liability and taxes. One of the most common ways to C.Y.A. is having insurance. One way to control how much taxes you pay is using legal entities.

I just read an article in the New York Times, written by David Cay Johnston, about how a private equity firm has found a way to "effectively avoid paying taxes on $3.7 billion." What the partners will pay in taxes is $553 million. The craziest thing is that they will be able to deduct $1.1 billion over 15 years.

What does this all mean? They pay $553 million in taxes. They get back $1.1 billion in deductions over 15 years. In today's dollars, that's $751 million. From simple math the partners get back $198 million. Pretty sweet, huh.

How did they do it?

1. Using the best tax lawyers money can buy.

2. The $3.7 billion was considered goodwill. So it's deductible.

3. Using a "blocker" corporation. The deductions are taken out of the corporation.

MAJOR ACTION:

This is major league "covering your assets." If you'd like to start legally paying less taxes, then here are your first steps.

1. Education:

What is a corporation and how can I use it to pay less taxes?

What is good will? do I have any of it?

What is a deduction? How can I get some?

2. Planning:

Get with a CPA. If you can afford it, get with a tax attorney.

Find out what you need to do to legally pay less taxes.