HOUSTON BUSINESS REVIEW

Offshore Tax Planning
By Gary Cooper

GARY N. COOPER, C.P.A., C.V.A., is managing partner of Cooper, Bergman & Company, L.L.P., certified public accountants which was formed in 1991, assisting small businesses and individuals with accounting, consulting and income tax planning and compliance. Services provided include medical practice consulting, business valuation, assistance with buy/sell transactions, development and implementation of policies and procedures, accounting services and tax compliance and planning. The Company has offices in Plano and Houston, Texas.

Offshore Tax Planning:

This will be the first of several articles on offshore asset protection and tax planning.

For asset protection and tax planning you should consider an offshore private placement life insurance policy as part of your portfolio.  The primary areas of importance are as follows:

1. Asset Protection – placing the ownership of your assets in a foreign grantor trust whose trustee is not required to honor U.S. judgments.  The grantor will become the beneficiary and a trustee and protector will be appointed.  You should select a jurisdiction where there is a high certainty of asset protection. Areas of importance may include:
1. Does not recognize U.S. judgments
2. Must use admitted legal counsel
3. Has court system – bonding
4. Has flight provisions
5. Statute of limitations from transfer of assets
2. Tax neutral – international life insurance strategies.  Sections 72, 7702 and 817h of the IRC provide the opportunity to hold your U.S. investments in foreign insurance structures.
3. Tax free loans – you can take out tax free loans from an international life insurance policy.
4. Captive insurance – Section 162 of the IRC provides some significant tax deduction possibilities.  Tax savings may be achieved through carefully selected risk management resulting in low claims from the purchase of first party coverage’s.

A U.S. compliant offshore structure may be a legal and effective way to reduce risk of loss due to litigation and taxation if you report all transactions to the IRS and U.S Treasury Department.  As a U.S. citizen, you are taxed on worldwide income.
It is illegal to hide money offshore.  You need to use IRS approved structures to bring about tax savings.  Cooper, Bergman & Company, LLP has established a relationship with a company that focuses on strong compliance, superior customer service, and great follow through relating to asset protection and tax savings.

The only offshore tax strategies supported by the tax code are insurance strategies.  This outline shall be expanded on in subsequent articles.

Advantages of Foreign Insurance Structure

1. Will eliminate the taxation on your investments
2. Investment gains may be withdrawn tax-free
3. Security of “Segregated Accounts”
4. Greater Investment Flexibility
5. Payment of Premiums “in kind”

Offshore Captive Insurance Strategies

1. Provides significant tax deducible possibilities
2. Tax savings come about through carefully selected risk management resulting in low claims
3. Coverage available
1. Excess professional liability
2. International travel
3. Tax audit defense
4. IRS perspective
1. Legitimate ordinary and necessary business expense
2. Premiums actuarially arrived at
3. Competitive premiums
4. It is the risk you already have
5. Tax saving can be substantial

This area of interest will also be expanded on in future articles.

I hope this article will catch the reader’s interest.  We plan to expand on this article in future weeks to provide the reader with the opportunities that exist in offshore accounts.