Gangsters at the Fed: What do Vito Corleone and Ben Bernake Have in Common?

“Give this job to Clemenza. I want reliable people, people who aren’t going to be carried away. I mean, we’re not murderers, in spite of what this undertaker thinks…”

- Vito Corleone

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For decades, “organized crime,” “la cosa nostra,” “the mafia” whatever you call it has been romanticized in media and pursued and prosecuted by law enforcement. And for what?

Their business model.

Think about it. That’s all it really was…an extremely aggressive business model.

First they’d give you access to your most lascivious desires. Then, being the full service type business they were, they’d lend you the money to indulge yourself.

And in exchange for this service, they expected you to pay them back and shut the hell up.

At times their terms could be a bit draconian. If you didn’t pay, or worse challenged their right to collect…well, let’s just say “things” could happen…

Things like fire, bombs, bullets, “significant harms that could befall not only private companies, but the economy as a whole…”

…significant harms…? Wait a minute! That’s not from the gangster playbook!

Oh right. That was from an appeal by the Fed sent to Judge Loretta Preska of the U.S. District Court in Manhattan. The judge who ruled in favor of Bloomberg in their Freedom of Information Act suit. The one who ordered the Fed to release the names of the banks who got a piece of taxpayer money in the 50-something lending programs the Fed offered.

“It’d be a real shame if something “happened” to these nice green shoots you got sproutin’ up…”

Let’s be frank here. Since 1913, the Fed, and whatever “Don” has occupied the seat at the head of the table of our central bank (originally dubbed the “Federal Reserve” due to the stigma attached to the term “central bank”), has employed the mafia business plan.

They’ve done it for many years, and quite successfully. They’d offer you access to money to buy things you deeply desired but otherwise couldn’t afford. And they expected you to pay them back and shut the hell up.

But as time went on, I guess success makes fools of us all.
Because it got to the point where times were so good and everyone was in so deep that the unthinkable happened. NOBODY could pay anybody back. (At least loan sharks on the corner would know when to tell you to “take a walk.”)

So in a way, Alan Greenspan and Ben Bernanke – with all their formal degrees and letters behind their names – ultimately weren’t quite as smart as Carlo Gambino or Tony Accardo.

But a good business plan always has recourse for just such problems. A “backup plan” if you will. And so the treasury on behalf of the Fed, implemented yet another mafia business practice. In financial circles its called “raising capital.” In less reputable ones it’s called “collectin’”

In legal circles it’s called “extortion.”

The way this process typically works is quite simple. It’s sold as sort of an “insurance policy” against bad things happening to you or your place of business. You pay me, and nothin’ happens to you.

Just like…. Hank Paulson asking for $700 billion from Congress just a year ago. “You gotta pony up dis taxpayer money Congressman, or bad tings is gonna happen to yer stock markets and such…” (FYI, I’m paraphrasing there. I don’t have his exact testimony in front of me.)

And so they waved the threat of “systemic risk” at the American taxpayer, and the “protection” was paid.

Now, in “street level” of business, if you stayed current on your payments, generally the protection was pretty good. But if you fell behind, well isn’t that how it always goes? You miss a payment, your policy lapses and something just awful happens to you?

But we taxpayers have been current and current and current.

So far, so good.

But then something happened that never happened in the mob business plan. Someone – namely Bloomberg – demanded to see the books. Now the Fed was stuck.

They couldn’t implement the mob’s solution to this eventuality. After all, making the questioner “disappear” wasn’t legal. Nor was it practical, as it was an entire news service.

So they sent enforcers to the plate. A group called The Clearing House Association. A banking group who would confirm that indeed “…bad tings is gonna happen.”

Actually I have their exact language… “Survival can depend on the ephemeral nature of public confidence…. Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow.” (Written like a true Harvard grad whose seen one too many Scorsese films.)

Interesting.

Now I don’t have a theory about what the outcome of this might be. Never happened before. But in the long run, perhaps another end could result…

After years of public exposure and dogged pursuit by law enforcement, the presence and dominance of organized crime in the country today is decidedly on the decline.

We can only hope for a similar result for these central banksters….

Sincerely,

Chuck Dolce,
Guest Writer for The Sovereign Society

Editor’s Note: If you think the Fed’s mafia-style business plan is bad…then how about a Ponzi scheme that’s 1,000 times the size of Bernie Madoff’s shenanigans? It’s all here, in Chairman Pugsley’s special “Liars” report

This article is being reposted in its entirety from The sovereign Society. It’s a well run organization and highly recommended.

Are You In Jail Right Now?

Below is a fascinating story from NY Times Best Selling Author, Tim Ferriss, of “The 4-Hour Work Week”.

Becoming a world citizen isn’t a luxury…it’s a necessity.

ST. KITTS, EASTERN CARIBBEAN

In a few days, I’d be committed to an expense of over half a million dollars, which was more money than I had.

And what was it all for? Symbolic paper. A passport, which is just a teeny little booklet that means nothing to the universe. Realistically, the world wasn’t likely to end in my lifetime. And if it did, everyone on St. Kitts would be just as dead as everyone in America.

If there were a smaller-scale world disaster, things would probably be even worse on an island in the Caribbean, where I was more likely to be a victim of food shortages, droughts, hurricanes, blackouts, and tsunamis. There’s nowhere to run and nowhere to hide on an island—especially one in the smallest country in the Americas. I’d become so focused on my search for a passport—so consumed with escaping the blowback of American politics—that I’d forgotten the survivalist lessons I’d learned on Y2K and 9/11.

Soon, the whole endeavor began to seem like the biggest travesty ever. If something horrible happened in America, would a St. Kitts passport even get me out during a state of emergency? What if it was confiscated by customs agents? Or what if Victor, Maxwell, and Wendell were in collusion and just ripping me off? I didn’t have anyone to protect me here.

Once I’d ridden out that wave of anxiety, a new one formed. I began worrying that I’d blabbed my name and occupation to too many people. If they Googled me and saw the filth I’d written, they might not sell me the apartment or give me a citizenship. And then I’d be stuck in America if anything bad happened.

And so it went, all night, one wave of anxiety after another—half of them spent worrying that I wouldn’t get a passport, the other half spent worrying that I would.

I fell asleep around dawn for a few fitful hours, until I was woken by my cell phone. AIG Private Bank was finally returning my call.

Every day, my small savings were dwindling as the dollar dropped relative not just to the euro, but even to the Caribbean currency here. I never thought I’d see the day when Eastern Europeans came to the United States for the cheap shopping.

“I’d like to inquire about opening a private banking account,” I told the woman.

“Great,” she said, with barely a trace of a Swiss accent. “Let me ask you a few questions.”

“Sure.”

“Are you an American citizen?”

“Yes, I am.”

“We don’t deal with American citizens for a few years now.”

“But my friend Spencer Booth is American, and I think he has an account with you.”

“It’s likely an older account. We don’t do business with American citizens anymore. Sorry, good-bye.”

Before I could respond, she had hung up. I felt like an outcast. I couldn’t believe a bank wouldn’t take my money solely because I was American.

I’d noticed that many of the banks I’d researched had special policies for dealing with United States citizens. Even some of the online companies selling vintage travel documents said they no longer shipped to America because U.S. customs agents were opening and confiscating the packages. The government seemed to be sticking its nose everywhere.

In the meantime, I’d discovered a few other interesting facts: according to a report issued by Reporters Without Borders, the United States was ranked as having the fifty-third freest press in the world, tied with Botswana and Croatia. According to the World Health organization, the United States had the fifty-fourth fairest health care system in the world, with lack of medical coverage leading to an estimated 18,000 unnecessary deaths a year. And according to the Justice Department, one in every thirty-two Americans was in jail, on probation, or on parole.

Rather than having actual freedom, it seemed that, like animals in a habitat in the zoo, we had only the illusion of freedom. As long as we didn’t try to leave the cage, we’d never know we weren’t actually free.

That phone call was all it took to let me know I was doing the right thing.

Before going home, I had dinner with Wendell at a restaurant called Fisherman’s Wharf [in St. Kitts, not San Francisco] and thanked him for his help.

After the meal, he patted my shoulder and smiled. “Next time I see you, you’ll be a citizen of St. Kitts and Nevis just like me,” he said. “When you get married, your wife will be a citizen. And when you have kids, so will they.”

He stepped into his SUV, started the engine, then unrolled the window and concluded his thought: “One day,” he said, beaming, “when you come back to America, no one will recognize you. You’ll be a Kittitian.”

At the St. Kitts airport the next morning, I felt like I was returning not to a country but a fortress. “Your country is so tough to get into,” the ticket agent complained as she checked my documents for the flight home. “They make it so hard for us.”

She looked up at me and said it louder, almost with venom, as if it were my fault. “They make it so hard for us.”

She wasn’t alone in her opinion. A survey released the previous month by the Discover America Partnership had found that international travelers considered America the least-friendly country to visit.

“That’s why,” I told her, with the newfound pride that Wendell had instilled in me, “I’m moving here.”

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That is ALSO why thousands of wise and cautious Americans are heading to Belize and other tax-havens around the globe.

I love my country and am wary of my government. For more information on establishing offshore trusts, bank accounts, and other global and political diversifications, contact dcrowe@themayanislands.com.

Own Part of Our Beach Club!

In the past 18 months, nearly 100 investors (including me) have moved some of their money OFFSHORE and realized equity gains of 200-400%. Not bad considering the decline of the US real estate and stock markets. The “global” recession that is talked about daily certainly hasn’t affected our project in the slightest. In fact, we’ve seen HEALTHY growth because of the fear of the credit and equity markets in the US-based, over-leveraged economy. There are still terrific areas of the world where prosperity, security and opportunity abound.

This is one of them.

Our private island project consists of over 45 acres of debt-free land less than 5 minutes from San Pedro, on Ambergis Caye, in the country of Belize. What makes THIS island so special is not only the fact that it is debt-free, pristine, and perfectly suited for an island resort. What makes is extra special is the fact that it is a secluded private island WITH the proximity to over 300 restaurants, 80 dive shops, windsurfing, kite surfing, shopping and all the amenities of a medium sized town.

Seclusion PLUS proximity to civilization! What a combination. Additionally, we have been dredging THOUSANDS of tons of sand transforming the raw island into a jewel of a resort! (Click on the photos to the right to see our construction!)

BEACH CLUB
In late summer of 2010, we are opening up the country’s most exciting and diverse beach club. The club will boast:

• Over 2,000 feet of ocean front property
• Professional Volleyball courts
• Infinity pool w/swim up bar
• Full health club with personal trainers
• 100 cushioned chairs and cabana huts
• Concierge service for tours and snorkeling
• Seaplane service to out islands and diving
• Gourmet restaurant and bar

The islands were all purchased without any debt years ago. In keeping with the spirit and frugality of a zero-debt project, we have elected to offer shares in our club with a VERY special 110% money back guarantee and some very healthy projected returns upwards of 35%.

After restoring houses, converting apartments to condominiums, and running real estate operations in the Midwest for 20 years, you would think that any new project I would be involved with would just be “another project.” Ho-hum…

WRONG.

This project has got it ALL. We are building a 1/2 mile long beach club on a private island and allowing average people to SHARE in that revenue in an offshore, tax-haven with a 110% guarantee is simply unheard of! You owe it to yourself to find out more about this opportunity and how it can fit into ANYONE”S portfolio.

Send me an email and I will be happy to give you information on this project and answer all your questions. dcrowe@themayanislands.com

Obama-Proof Your Money

For any reasonably intelligent person, the idea of going “offshore” is sexy, but the risks of the unknown make over 90% of the people frozen in fear.

Adding fuel to their fears are websites like the one I found today that talk gibberish when it comes to offshore entities, structures and money.

The gist of the article says that a “new method” of “Disguise or obscure the fact that the structure was designed for the purpose mentioned”. Um..HELLO! Do they really think that “disguising” your corporate structure is ethical, legal, or not subject to the power of the US government?

Going offshore is smart…very smart.

Going to jail or paying massive penalties because you tried to “hide” isn’t.

When looking at establishing a financial foundation outside of the USA, there are severeal guidelines that are required.

1. USE The IRS rules to your favor. Trying to “go around” them with complicated corporate structures is a recipe for disaster.

2. GROW your money offshore. Instead of trying to hide your money (you can’t). It is better to file the proper forms, abide by the rules and focus on assets instead of cash.

3. The IRS taxes income, not assets. Growing your assets safely, securely and ANONYMOUSLY should be your goal.

Trying to hide assets, cash and setting up complicated structures will cost you…either in sleepless nights, assets lost, or worse.

If you want to see how it SHOULDN’T be done, click here.
If you want honest advice and information on how to become a world citizen, establish political diversification in your portfolio without the risk of “hiding” then drop me an email.

Doug is an international real estate developer, author, speaker and investor. His project, mayanislands.com has helped people create political and geographic diversity in their portfolios.

What is Your Financial Health?

Money, credit, and living…it seems that there are seasons in our lives where there is often more debt than income. This can create stress, anger, indecision, and sometimes poor decisions. If you find yourself in a situation where there is more debt than income, you may be headed for trouble. It is never too late to fix some of your challenges. However, time is NOT on your side. The more you do to attack the situation early on, the better for you in the long run. Take a look at the three stages of financial trouble, assess where you are and take ACTION NOW!

The checklist below will help you to take an unemotional look at where you are and where you are headed. Financial challenges are a major cause of stress, divorce, and heartache. Your situation, while unique to you, is not uncommon. Millions of Americans are one or two paychecks away from bankruptcy and the skyrocketing foreclosure rate is at its highest point since the great depression.

While these statistics might not shed any light on YOUR living needs for today, the following checklist and action steps might help to delay or even cure your financial woes. Remember, above all else, you cannot solve a permanent problem with a temporary solution. All financial struggles relate around three simple issues:

· Income (How much you earn or bring in)

· Expenses (What you spend and how you manage those expenditures)

· Credit (Your ability to borrow and REPAY your obligations)

INCOME
How much you earn is often viewed upon as a decision by an employer. You can ask for a raise, work more hours, but for most people, “the man” determines how much you earn, where you live, what kind of car you drive, and where you vacation (If at all). For many people, this is simply an accepted fact of life. For others with an entrepreneurial personality, they have more control over their income. If an entrepreneur wants to earn more money, they can do more work, roll out a new product, or otherwise try to affect the level of their income. They are called entrepreneurs because with this variable income stream comes risk. Employees normally don’t have the risk of wide swings of income, and with that security comes limitations on income. Sales professionals who work for companies also share the risk/reward curve of entrepreneurs and have a greater degree of control for their income.If you are an employee, you should continually ask yourself WHAT you can do to get a raise, promotion, or get more hours in to create more income for yourself. There are many books on this subject and it behooves most people to reflect and review their job and career at least on an annual basis. Taking control of your income can be frustrating, liberating, or downright exhilarating. The operative phrase is “taking control.” Without control, you will always be at the whim of the economy, the company or your boss.

EXPENSES
When it comes to expenses, studies have shown that most people do not have a formal or even an informal budget that they live by. Most Americans simply spend what they earn (or for many, they spend MORE than they earn!). The attached budget should be filled out by anyone who wants to get a handle on their expenses. By tracking ALL of your expenditures, you can find areas for savings. Many people use their budget skills as a hobby. Clipping coupons and shopping for bargains not only makes fiscal sense, but it can be fun, too!Use the budget process to understand your spending habits and take ACTION on what habits you can modify, replace, or cancel. Not knowing where you are is a fatal mistake most people make when trying to affect any change in their financial health. Just as it is impossible to plan a trip without a starting point, planning to create and stick to a budget is fruitless without an honest evaluation of where you are today.

CREDIT
The largest “double edged sword” on this list is your credit. For those people who have mastered their credit, they can live a bountiful life by paying off consumer debt and carefully employing asset-based debt. Knowing the difference and being judicious with both of these instruments can easily make or break a family fortune. Simply stated, consumer debt is any debt that used borrowed funds to purchase items that are expendable or depreciate in value. This includes food, rent, vacations, consumer goods, automobiles, utilities, etc. When a person borrows money for an asset that depreciates or disappears, depending on the rate they are being charged, end up paying 1.5 to 2.5 the value of the goods or services. Look at any financial statement on a car loan and you can easily see how that $20,000 vehicle cost you over $40,000 during the life of the loan. With items that are consumed, the price is infinitely higher. Cut back or eliminate all debt associated with consumables or any item that depreciates in value. From a pure mathematical point of view, it can save you hundreds of thousands of dollars.

PHASE I
“Financially I’m not feeling very well”
Symptoms

• No savings
• Living paycheck to paycheck
• Using one credit card to pay off another one
• Credit scores have dropped recently
• Large unexpected expense arose

PHASE II
“Financially I’m very ill”
Symptoms

• I’m late with a rent or mortgage payment more than 30 days
• I have recently had service (phone, utilities, other) turned off temporarily
• All my credit sources are tapped out (credit cards at maximum)
• Credit scores are so low, I cannot establish new credit lines
• Large lapses in income

PHASE III
“My finances are on life support”
Symptoms

• Notice of default or behind on payments 3 months or longer
• Feelings of hopelessness
• Thoughts of drastic solutions (lottery, arson, etc.)
• Illogical denial of the situation

Treatment & Cures
Save some amount of money each month. Start with $10 and lock it away. Do this every month and develop a HABIT of saving some amount of money. While the amount may not affect your situation immediately, the habit can. Next year increase that amount by $10 more dollars and before you know it, you will have a savings account worth thousands of dollars.

When living paycheck to paycheck, people find the strategies of savings and budgeting extremely difficult. By developing the savings habit, you will be forced to give up $10 of expenditures. The choice of that sacrifice will be yours. It could be 2 packs of cigarettes, a lunch or taking a walk once a week instead of driving a car. The effect will be small, financially, but the habit of reducing your expenditures will become one of control. Your first few months may be painful, but eventually, you will embrace the habit and use it as a force to grow your financial intelligence. Earning a raise, maneuvering for a promotion or getting new training for a new position will also help to set you up for an increase in pay, of course. However, most Americans spend every increase they get, so be sure to develop the budget, start the savings plan, and manage the expenses before and during your journey to increasing your income.

Paying off credit card debt should be a crucial goal for everyone. When that debt is associated with consumables or depreciating assets, the objective should be to:

1. Restructure high-interest debt to low-interest debt
2. Pay off that debt entirely
3. Use a debit card OR develop the habit of paying off your cards EVERY month
4. If you are unable to develop either habit in #3, you should lock away your cards and use them only for emergencies

Understanding and improving your credit scores takes time, patience and perseverance. Prompt payment is a sure way to keep your scores high and your ability to borrow healthy. If you think you will have to be late with any payments, the best time to notify the creditors is BEFORE you are late. Often times, creditors can defer payments for you. But, they almost never do this after the fact. Open communication and responsible, honest communication is the key to success.

Improving your scores can be done over time. Visit the following sites and get a FREE credit report from each of the three agencies; www.experian.com, www.transunion.com and www.equifax.com. Get help from your banker, accountant, or other trusted advisor to understand and interpret what is on there. The key to improving your scores is to get the bad information off of your report. Check for inaccuracies, old data, and wrong addresses. Identity theft is rampant nowadays and reviewing your history is important. You can dispute any bad or negative information to the bureaus. The fair credit reporting act states that a creditor must respond to your inquiry and prove the information is valid within 30 days. A clever trick often used by consumers is to dispute EVERY piece of bad information the day after Thanksgiving. Since the 30 day period between Thanksgiving and Christmas has many people taking time off, and the postal service often slows, many negative items on reports get deleted simply because the creditors can’t respond in a timely fashion.

When it comes to the psychology of financial trouble and foreclosure the devastation can be tremendous. A majority of divorces occur because of financial issues and the tension caused by these woes spill over into nearly all areas of life. Most experienced business owners will tell you that life is not about the ups and downs, but how you manage the frequency and pace of change. It is never a matter of “if” a challenge will show up…it will. All that matters is the attitude and plan you have in order to cope with those issues. Ask anyone who has recovered from cancer about financial stress and they’ll tell you, “I thought I had problems when I lost my house, but when I recovered from a major illness, my perspective changed and nothing else seemed as important anymore.” Indeed, money comes and goes. Fortunes are made, squandered, and created again. Your situation may be bad and it may get worse. The fact remains that as long as you have your health, you can ALWAYS recover financially. Over 70% of self-made millionaires in this country have been broke at least once in their life. Their ability to recover and THRIVE in the face of adversity is the ammunition they use to win the financial battles in their life. The book, “How to stop worrying and start living” by Dale Carnegie has been credited with changing and pacifying the anxiety of millions of people.

In summary, prevention is the best cure for any illness (financial or physical). Below are the steps you need to take to prevent, treat, and cure your financial illness forever.

1. Start a savings program TODAY. It doesn’t matter how much. Start with any amount and stick to it. Increase it each year and NEVER touch the account.
2. Create a plan to increase your income. Train for a better job, become invaluable at work, work more hours, start a part-time business, and continually strive to earn more. You are worth more than you are paid by most employers-it is up to you to become difficult to replace.
3. Budget your household. Use the household budgetizer to understand WHERE you are and where all that money goes. You cannot plan a trip to financial prosperity if you don’t know where you are today.
4. Cut back on unnecessary expenses. Use the budgetizer as a game! Have fun saving money and use your financial goals of savings to help you in other areas of your life (health, environment, etc.)
5. Be proactive in your communication. Don’t let bills slip by without contacting your creditors. It doesn’t guarantee they will be any more pleasant, but you’ll feel better knowing you were professional, responsible, and polite. Ask for help if you need it.
6. Restructure bad debt. Transfer balances of high interest cards to low interest cards. Start and stick to a plan of reducing and eliminating all consumer debt forever.
7. Monitor and improve your credit scores. Contact the bureaus and initiate a credit repair program right away.
8. Read about success. Every month read a story of someone overcoming adversity. It will not only inspire you, but you may get an idea that you can use to make lemonades out of the lemons in your life!

Doug took a 22 year career as an investor, developer, author, speaker and radio personality to build his fortune and experience. He now writes part time and is developing the largest private island resort in the Western Caribbean. For more info, contact him at dcrowe@themayanislands.com.

Developing Prosperity Consciousness

In order to BECOME prosperous, we must think, act, and believe we are prosperous.  Anyone who is successful, rich or famous didn’t get there by accident.  While their actions dictated their outcome, it was their thoughts that preceded that action.  Both poverty and riches are a result of a state of mind.  Therefore, the single most important and first step toward success is to change, direct, and create the thoughts that go through your mind on a daily basis.  You must be able to impress upon your mind an unshakable belief that you can and will achieve your financial goals.  These thoughts must occur prior to any action taken.  The results of your actions will, of course be a tangible marker as you look back upon the success (and failures) you have in your life.

Nothing New
Many people have been fascinated with stories of success, super wealth, fame, and fortune.  Entire libraries, television shows, and networks have been dedicated to showcasing that which all human beings crave-success.  In the book, Think & Grow Rich, by Napoleon Hill, a great secret is talked about over and over again in the book.  It isn’t until I read it for the 2^nd or 3^rd time that I realized the secret was on the cover of the book!  That’s right…it’s the title!  Notice it doesn’t say “Sell and Grow Rich” or “Invest and Grow Rich.”  The first and most important word is the first one.  Think.

Results Begin Here
The primary principle of success is that ALL causation is mental.  This means that everything you are or will ever be is a result of how you use your mind.  This doesn’t mean that you can “think yourself thin” of course.  Action MUST follow your thoughts.  Conversely, action cannot precede your thoughts.  It is impossible to take any action (with the exception of involuntary muscle movement) without thinking about it first.  Indeed, not only is your life the result of your thoughts, but the entire world we live in is the direct result of the thoughts of millions of people.  

In the movie, The Matrix, an individual’s reality is entirely a state of mind.  This movie connects with us because we all have dreams and most times, during the dream, it feels as real as our daytime reality.  Our thoughts are always with us, and like the movie, our thoughts become a manifested reality if our belief is high enough (in the movie, if you die in the dream world, you die in reality because your mind cannot tell the difference).

Two Beliefs
The secondary principle of success is the law of expectation.  This means that “thinking” success isn’t enough.  Just because you think of a pink elephant doesn’t mean that one will manifest itself.  A person’s belief in their thoughts is equally important.  The law of expectation states that whatever you expect with confidence, positive or negative, becomes your reality.  If you confidently expect to succeed, it will become your reality.  Confident expectation of failure produces exactly what you fear-failure!  Changing our belief systems can be one of the most challenging tasks imaginable.  For those people who have had a larger share of “bad luck” than average, it can be an even larger battle to win.  Remember, however, that those people who seem to “have it all” have always thought they should and believed it would happen.  Their thoughts, expectations and resultant actions are what caused their success.  Luck had nothing to do with it.

What To Do
No matter what your life is like, regardless of your position, successes or failures, you can start a new life and expect different outcomes today.  Your plan of action is simple, but hardly easy.

1. Change your thoughts.  Try not to think about a pink elephant!  Didn’t work-right?  Your mind is the most powerful device ever created on the planet.  You have more ability, capacity and speed than the world’s largest supercomputer.  Use your brain.  Pick up a positive attitude book today.  For a recommended list, visit his Doug’s blog at www.dacrowe.wordpress.com.  Your thoughts will create your reality, so you might as well put GOOD thoughts into your head. 
2. Change your expectations.  For many of us, the idea of expecting prosperity after a life of struggle is inconceivable.  For every story of failure there is a story of success.  Movies like The Rookie and Rudy are true biographies of men who overcame impossible realities.  Their achievements have given hope to those who have lost their hope.  Watch them.  Read a good book like Dave Dravecky’s When You Can’t Come Back about losing his pitchers arm to cancer or any story about anyone who has overcome the odds and succeeded.  Most likely, your struggles’ will pale in comparison.
3. Take SOME action.  When we look at our goals they should inspire us.  If our goals are too large and we expect them too fast, they tire us.  Break down your goals into bite size pieces.  It not only makes them easier to achieve, but your expectation will increase as they become more believable.  As you now know, your belief is paramount to achievement, so by sorting out large goals into small objectives, you automatically improve your chances of success in action and in thought.

 

Prosperity consciousness is more than just positive thinking.  It is the purposeful re-training of your beliefs, values, and actions.  The tasks outlined above are not easy, but they are required for success.

 

“It doesn’t matter if you think you can or think you can’t…in either case, you are right.”

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Doug Crowe is an author, former radio show host, and founder of the Springboard Academy, which was the nation’s leading school for real estate investors.  He has been investing since 1986, and semi-retired from the media and teaching in 2008 to develop a 350 acre private island resort and 300+ slip marina in Belize www.mayanislands.com. He can be contacted at dcrowe@themayanislands.com or 630-890-3998.

Best Books for Success, Wealth & Real Estate

It has been said that who we are is largely determined by the people we associate with and the books we read. What about the books you read? What is your favorite? How did it influence you and why?

I am listing a few of my favorite books here, along with author and ISBN number. Each of these books has had a direct, measurable and significant influence on my business, personal, and social life. I am adding a few comments after some of the books, others are good, but I didn’t want to spoil the ending!

Seriously, I could write an entire article on each one, professing the millions I’ve made because of the information or the incredibly rich relationships I’ve created because of how it impacted my life. In any case, I hope you make the time to pick up one or two of these, give it a read and equally important, pass it on to your child or someone else…a book on the shelf is useless. 

How to Win Friends & Influence People  Dale Carnegie  0-671-72365-0

This book helped to shape my personality at an early age. I went from being a shy, nerdy guy to the high school homecoming king! Thanks Mr. Carnegie! 

Endless Referrals  Bob Burg  0-07-008942-6

If you only have time to read 2 books, make sure this is one of them. I have had Bob come out and speak to my group, and I can honestly tell you, his stuff works! When I was in the wireless business, I cold called for 3 weeks. After reading his book, I was the #2 salesman at the company for 3 YEARS! (Without making another cold call the rest of my life) 

How to Have Confidence
& Power in Dealing w/People  Les Giblin 0-13-410671-7

If you or someone you know is ever a bit insecure in negotiations, public speaking or just needs a boost, this is a terrific, older book.

You Were Born Rich Bob Proctor  0-9656264-1-5 

Maybe out of print….check www.half.com it is the predecessor for “The Secret” LOVE IT!

The Magic of Thinking Big  David Schwartz 0-671-64678-8

A must for anyone. This book can do more to create prosperity consciousness than any other book I’ve read. A terrific book that you and your kids simply must read at least once. 

High Probability Selling  Werth & Ruben 0-9631550-3-2

If you are a salesperson who appreciates fresh ideas, this is it! So many sales books are written at a time where advertising actually worked! Networking, connections and creating the proper environment are so much more important than “closing techniques.” Give this to your sales staff and watch your numbers soar. 

Think & Grow Rich  Napoleon Hill   0-87980444-0

A classic. The secret is in the title!

Rich Dad, Poor Dad  Robert Kiyosaki   0-96438561-9 

I’ve interviewed Robert on my radio show a few times. His stuff isn’t loaded with detail, but is a good, fresh perspective on common misconceptions and beliefs about finance, money, and business. 

Cashflow Quadrant   Robert Kiyosaki    0-9643856-2-7

A good follow up to his first book.  

The Millionaire Next Door Thomas Stanley 0-671-01520-6

Not the easiest read, but the concepts are important (especially if you have teenagers!)  

How to Negotiate
Successfully in Real Estate Tony Hoffman 0-671-49775-8 

Spin Selling     Neil Rachham   0-07-051113-6 

How to Manage
Residential Properties     John T. Reed  0-939224-25-9

How to Manage Real Estate
Successfully-in Your Spare Time   Albert J. Lowry   0-671-24829-4

Landlording       Leigh Robinson  0-932956-16-5

Nothing Down for the 90s     Robert G. Allen  0-671-72558-0

Tips & Traps When Selling a Home  Robert Irwin  0-07-141830-X

How to Make Big Money in Real Estate  Tyler G. Hicks  0-7352-0116-1 

Fix It and Flip It   Hamilton & Hamilton   0-07-142148-3  

Real Estate Loopholes   Kennedy & Sutton   0-446-69135-6 

Why Aren’t You Your Own Boss?   Edwards & Economy  0-7615-1537-2

Nickerson’s No-Risk Way
to Real Estate Fortunes   William Nickerson  0-671-55143-4

Personality Plus    Florence Littauer  0-8007-5445-X

106 Mortgage Secrets
All Home Buyers Must Learn    Gary W. Eldred  0-471-26395-8

There are dozens and dozens of other books that I have read, applied and truly enjoyed. I hope you pick one of these up at your library or bookstore this week. dcrowe@themayanislands.com

“To Know and Not to Do, is Not to Know”
-Anonymous

7 Surefire Tips to Selling a Home FAST!

IF YOU’RE LOOKING TO sell your home in a matter of days rather than months, you might want to take some tips from 32-year-old Mona Ross Berman.

To get her Washington, D.C., townhouse ready for sale, the interior designer went through every room, sweating the details. She rearranged furniture, added sophisticated coffee-table books and strategically placed vases and throw pillows to create a cozy environment. She then organized every closet to showcase her ample storage space. Finally, she removed all personal items, including her wedding photos, so potential buyers wouldn’t associate the house with someone else. She made the property ‘Q-tip’ clean (meaning that every nook, cranny, and air conditioning vent was cleaned and polished. “I think that if you can get a home to show well, it can get you [better results] than it really should,” Berman says. Her strategy worked. Within four days of placing her property on the market, she had five offers in hand.

Long gone are the days when you can simply throw some cookie dough into the oven and get an offer for your house. Thanks to the Internet, home buyers are more sophisticated and demanding than ever before. Over 80% of buyers now pre-screen their selections, neighborhood, and pricing online before viewing a property. Your ability to convey the property through words, pictures, and value are imperative. At a bare minimum, would-be sellers need to dispose of clutter and make any necessary repairs. But to really make a property stand out from the crowd and sell quickly, sellers might need to do the following.

1. Hire an Interior Designer
A well-decorated home will sell faster and for more money than one that looks frumpy. That’s why more and more sellers are hiring interior designers to do everything from rearrange furniture and paint walls a neutral color to rent artwork. This service, known as “staging,” can cost anywhere from a few hundred dollars for a small job to several thousand dollars for high-end properties, says Patricia Dugan, a realtor with The Corcoran Group.

Experts across the country agree that the investment is worthwhile for most properties. According to recent data from Coldwell Banker, staged homes in the San Francisco Bay area spent just 25.3 days on the market and sold at the asking price, while “non-staged” homes languished on the market for 48.2 days and sold for 2% below the asking price.

2. Hire an Organizer
A lovely décor will get you only so far. To really get the buyers chomping at the bit, you need to highlight your home’s storage space as well. That means everything should be clean and organized — closets, bathroom vanities, the garage and basement. It might sound trivial, but your home’s sale really could rest on whether your linen closets can comfortably store your towels.

If you identify more with Oscar Madison of “The Odd Couple” than with Felix Unger, it might make sense to hire a professional organizer for $75 to $100 an hour. This is especially helpful for those who’ve lived in their homes for many years and don’t know how to dig themselves out of the mess. Some organizers will even help run a yard sale that could end up paying for their services. If you’re not sure how to find this type of service, ask your realtor. Most have a list of pros at their fingertips. As with all of these “extra” services mentioned, don’t be cheap. You are probably selling a property worth hundreds of thousands of dollars! Trying to save a few hundred could easily cost you a sale and add months to your payments!

3. Hire a Photographer
Up to 74% of home buyers start their search online, according to the National Association of Realtors. Indeed, the Web has become such an important marketing tool that all the realtors we spoke with encourage their clients to hire a professional photographer, which can cost as little as $100, for their online snapshots. Think of it this way: If someone doesn’t like how your home looks on the Web, he or she won’t bother to make an appointment to see the property in person. Is that a risk you’re willing to take?

While putting photographs online isn’t exactly new, there are some emerging trends. Six years ago it was OK to have one outside shot of the house. Now, some potential buyers want to see up to a 10-picture slideshow detailing multiple rooms before they commit to a walk-through, she says. Dare to post small, grainy pictures, and risk little foot traffic in your home.

4. Try Marketing Gimmicks
Despite impressive national home-sale figures, some local markets are starting to soften. For example, homes in the western suburbs of Boston are languishing on the market for 90 days and more after previously selling in just 15 to 30, says Nelson Zide, co-owner of ERA Key Realty Services, a Framingham, Mass.-based real-estate brokerage. Zide recently started implementing marketing gimmicks to increase the number of potential buyers to walk through his clients’ homes. “I haven’t done this in 12 or 13 years,” he says.

What strategies does he use? Rather than slash the asking price, he might encourage condo owners, for example, to pay the maintenance fees for a full year, or ask home owners to provide buyers with a cash rebate that’s marketed as a decorating allowance. Nine times out of 10, such gimmicks cost less than it would to drop the asking price enough to attract a buyer with a smaller budget, says Zide. It’s just one more way to get a potential buyer excited about your home.

5. Hold Open Houses
The benefits of an open house are debatable. Industry experts agree that they tend to benefit realtors more than home owners. (After all, it’s a great way for realtors to get new clients.) But that doesn’t mean that they can’t work. The key is to hold them at various times of the day and week so that folks with busy schedules can squeeze in a viewing. Real Living’s Rogers says her company’s agents make sure to schedule open houses on Saturdays, as well as in the evenings so people can stop by after work.

Another technique more people are implementing is to hold open houses at the time of day when their house shows the best. If you have a beautiful garden, show it off during the morning before the flowers start to wilt. If you have a stunning view of the sunset, make sure people get to see the late-afternoon light. In other words, if there’s one thing that you love most about your home, be sure to share it with potential buyers.

6. Price it right
Most people have over-inflated views of their homes value.  Be honest.  Check with RECENT comparable sales.  When properties were appreciating at double-digits in 2004 and 2005, you could get away with pricing yourself a bit high.  Those days are gone.  Take a reality check and see what the real market will bear.  If you need to sell fast, you should be prepared to give up a bit of equity for a faster sale. Using comps from 2007 or 2008 is also a bad idea. If you can’t get comps from the past 6 months, take the most recent and subtract a healthy percentage.

7. Treat it like a Business
With average home prices in the mid $200’s it is curious that many realtors and homeowners, for that matter, take the subject of sales and marketing so casually. Many privately held small businesses have revenues that are in the mid to high six figures and they spend WAY more dollars to generate that revenue than the average realtor. But it’s not just the money. Doug Crowe, author and speaker said, “It is more about the attitude. When you treat your property like a business, you are now open to hundreds of more marketing tactics and strategies than conventional home owners aren’t doing.” He cites strategies such as cross promotions, highly focused networking, and industry-specific referrals as strategies that 99% of home sellers don’t even consider. In a recent case, one of his homes sold in less than a day because he hyped up the property and location at a church. The “mystery house” rumor was flying for a full 3 weeks before it even hit the market. “The buzz about this deal was so strong, we had a ‘stalker’ come by the house before it was ready to sell and offer $30,000 more than what a realtor said it would sell for,” quipped Crowe.

Sure, we all know the market is soft or downright depressed. However, it is not at a standstill. Only those home sellers who are standing still are not getting their houses sold. The aggressive, creative, patient and honest sellers are the ones who are moving property. Price it right, be hugely aggressive, and don’t dismiss any idea that will bring in one additional buyer. After all, that one new prospect may be the future owner of that property.

###

Doug Crowe is a freelance writer, developer and marketer. He semi-retired from a 22 year career to develop a private island resort in Belize. He lives in FL, IL and Belize and is a father to 3 children.

Doug Crowe
dcrowe@themayanislands.com
630-890-3998

President Obama’s Tax Proposal’s

Faced with growing pressure to close the rapidly increasing budget deficit, President Obama outlined a series of proposed changes to the international tax system. The plan is touted as ‘leveling the playing field’ and filling tax loopholes that allow U.S. corporations operating overseas to avoid U.S. income tax. The following is a discussion of some of the more important aspects of the proposals and the effects of the plan in a policy context.

Author Professor Byrnes writes:  The following is a survey of some of the more important aspects of President Obama’s tax proposals, firstly applicable to corporations and secondly to individuals that will impact deferral and international financial centers (tax havens)… [T]his survey does not address the reduction of U.S. withholding tax pursuant to equity swaps referencing U.S. equities.

(1) Deny immediate deductions on foreign investments when profits are deferred… The proposed change follows Congressman Rangel’s from 2007 (H.R. 3970) to not allow a business to take these deductions until it pays taxes on the offshore profits. Interestingly, President Obama is seeking a major tax incentive carve-out for research and experimentation expenses, allowing these to be immediately expensed. Ironically, this tax incentive will be a boon to the tech and pharmaceutical companies whose use of deferral is a substantial driver for closing down the deferral loopholes.

(2) Revise the check-the-box rules to hamper foreign tax avoidance… President Obama’s proposal would amend the check the box rules so that U.S. companies that establish certain offshore subsidiaries must treat them as corporations rather than as disregarded entities for U.S. tax purposes, effectively eliminating this technique for reducing foreign tax without triggering US taxation.

(3) Further limit the deductibility of interest payments by expatriated parties (earning stripping)… The proposal is that debt between related inverted parties may not claim the debt-to-equity safe harbor of 1.5 to 1, and that any interest deduction corresponding to this related party debt be reduced to a maximum 25% of adjusted taxable income, from 50%…

(4) Limit the shifting of income to a tax haven through the transfer of intangible property…To mitigate future controversy, President Obama proposes that for IRC Sections 482 and 367(d) workforce in place, goodwill and going concern will be included when determining the value of intangible property, and that such value will be determined at the standard of its highest and best use…

(5) Close loopholes in foreign tax credit (FTC) application… The first loophole occurs when corporations use the FTC to claim FTCs for foreign tax paid on profits that are not subject to U.S. tax… President Obama’s proposal would not allow this splitting of foreign taxes from foreign income. A second loophole occurs when a U.S. parent controls several foreign subsidiaries and manipulates which of the foreign subsidiaries repatriates dividends based upon which among the subsidiaries has incurred substantial levels of foreign tax…President Obama’s proposal requires that the FTC be calculated on a consolidated basis of all the foreign subsidiaries’ income, both high and low taxed… 

(6) Eliminate special tax treatment of U.S. companies with 80% foreign revenue… A U.S. company (80/20 company) with at least 80% of its gross income over a three-year testing period arising from foreign source active trade or business is not required to withhold on dividends and interest paid to foreigners… President Obama proposes to eliminate this federal withholding tax exception. 

(7) Prevent tax avoidance when repatriating tax-deferred earnings via cross-border reorganizations…

(8) Revise Qualified Intermediary (QI) program… The Obama administration proposes [that]… 1) U.S. financial institutions must withhold 20-30% of all payments of U.S. income to non-QIs with the burden on the underlying income recipient to seek a refund by providing her identity and foreign bona fides; 2) QIs may not have any affiliates that are non-QIs; 3) QIs must file a 1099 form for each U.S. customer, just as U.S. banks must;…

(9) Bolster IRS’ ability to promote international reporting compliance. President’s Obama’s plan would include hiring 800 new IRS staff to increase international enforcement and increase the IRS’s enforcement budget by nearly $400 million. The statute of limitations would be increased on international tax enforcement to six years after the taxpayer submits required information…

Draft Legislation to Implement Proposed ChangesPresident Obama was a cosponsor of The Stop Tax Haven Abuse Act (S. 506) (STTHAA) while he was in the Senate. The bill was initially introduced on February 17, 2007. On March 2, 2009 a revised version of the bill was introduced by Senator Carl Levin. This bill is the first piece of the puzzle to implement President Obama’s proposals…

 

Will the Plan have the Desired Policy Effect?

…[W}hy should corporations operating in foreign countries have the option of deferring a portion of their income until a time that’s convenient for them to repatriate the funds?

Under this view of deferral, President Obama’s plan does nothing more radical than bring taxation of the multinational in line with taxation of the carpenter’s paycheck and of the mom and pop hardware store’s modest revenue. But while it may be difficult to argue with the emotional appeal of this call to fairness, fairness is only one part of the analysis. Other principles and additional economic analysis must inform any examination of tax reform.

Of primary importance to the debate is an analysis of the economic consequences of foreign investment by domestic companies. Answering the clamor for fairness is an equally vociferous reply that in today’s global village, U.S. economic welfare and leadership are dependent on the tax benefits provided to domestic companies operating overseas. The argument is made that limitations on deferral hurt U.S. global competitiveness and reduce the U.S.’s economic health and growth…

In addition to the fairness and convenience principles, the principle of neutrality should play a primary role in evaluating the wisdom of tax reform. Neutral tax reform does not distort the economy by influencing behavior in the marketplace. Adam Smith addressed neutrality as part of his efficiency principle. His efficiency principle stated that tax policy should strive to do two things: (1) minimize the costs of securing compliance and (2) allow citizens to hold onto as much wealth as possible. Smith believed that an inefficient system of taxation would artificially direct entrepreneurs away from otherwise productive engagements.

Evaluating deferral reform under the efficiency principle, limiting or eliminating deferral of tax on foreign profits will discourage U.S. companies from operating overseas…

While reforming deferral may motivate some nascent companies to form overseas and some existing companies to leave the U.S., low tax rates as an incentive to domicile in a jurisdiction are more important for smaller economies than for the world’s larger economic powers. Tax rates are only one factor informing a company’s decision as to residence. Infrastructure, ready access to markets, political stability, and compliance costs other than taxation are significant factors determining desirability of a particular jurisdiction as a corporate residence. So while taxation is a significant factor affecting corporate residency decisions, it is not the only factor.

Posted by William H. Byrnes IV

Associate Dean, Walter H. & Dorothy B. Diamond International Tax & Financial Services Graduate Program

Blogger’s note:
“Fairness?” How does that term create growth, prosperity and encourage innovation? You want an argument for “fairness?”

Easy.

 Leave emotion out of the equation. The amount of new jobs, products, and services created by companies IS the engine that has a chance to keep our country the envy of the world. It seems that the government looks at companies as their private ATM. Doesn’t anyone know the purpose of starting, growing and running a company? It doesn’t matter if it is a hardware store or a billion dollar public conglomerate.

Companies do NOT exist to provide jobs or pay taxes. They ONLY exist to provide a good or service and to deliver a profit to the owner. The MORE goods and services they produce, the better everyone fares. (Including employees and the beneficiaries of the taxes derived)

Increased tax burdens are a strain to an individual as much as it is to a large company. The LESS we add stress to either one, the more growth and prosperity will occur. This isn’t rocket science. This is logical. Don’t believe it? Do you think “Reaganomics” was just a phrase? Then take “fairness” to its logical extension. The more you tax and burden people or companies in ANY form, the less they will have to spend, invest, and expand-right?

If there were FEWER burdens on us all, then creating tax loopholes wouldn’t be necessary. People and corporations would NOT be going beyond our borders to defer their taxes if their taxes weren’t so burdensome.

 To escape the insanity of overwhelming taxes and discover the lifestyle of international living, contact me at doug@themayanislands.com.

Pay NO Taxes

President Obama has announced a further “crack down” on individuals trying to illegally avoid taxes in the USA by moving their money offshore.

No PROBLEM!

The fat cats and special interests are sure to have loopholes designed “just for them.” Luckily, with information available so FREELY, these loopholes aren’t difficult to find if you are looking!
(Post below is “re-blogged” from bestarticlesmanagement.com)

5 trillion in assets worldwide is held “offshore” in tax havens the IRS writes on their website: “It is difficult to quantify the amount of assets being held offshore or the rate at which the industry is growing. But it has been estimated that some $5 trillion in assets worldwide is held “offshore” in tax havens. Presumably transfers from the U.S. Represent a large share of this wealth. One authority has estimated the annual revenue loss to the U.S.  at a minimum of $70 billion.”

Prior to the 1960’s, US taxpayers could purchase real estate located outside the United States and that property would not be included in his estate for purposes of US estate taxes. Today, all assets owned by a US taxpayer (wherever situated) are subject to both Federal estate and Federal income taxes – the same as his/your US real estate holdings. But, there is “financial planning” US citizens can take to avoid and mitigate these federal taxes.

Revocable foreign trust and underlying company
Assets held in a revocable foreign trust are considered by the tax code to be owned by the entity that has the power to revoke the assets – or a power under Code/Section 671 through 679.

For example, John Detroit (a US citizen) buys a waterfront home/condo in the British Virgin Islands (or Antigua or St. Barts) for $1,000,000. He rents the home to another US citizen half of the year at $8,000 per month.

Under the US tax code, John Detroit is considered the owner of the rental property and must put the $48,000 rental income on his US tax return.

But, suppose John Detroit holds the offshore home in a revocable foreign trust (with himself as the trustee), and suppose the foreign trust is revocable to an Anguilla International Business Company ( IBC ) instead of to a U.S. settlor (I.e., John Detroit ).

“One of the most effective applications of offshore trusts is in an ownership combination with a limited company.”
- Richard Graham-Taylor – partner Ernst & Young – Grand Cayman (January 1990)

But, suppose John Detroit holds the offshore home in a revocable foreign trust (with himself as the trustee), and suppose the foreign trust is revocable to an Anguilla International Business Company (IBC) instead of to a U.S. settlor (I.e., John Detroit). Under the US tax code, the owner of the offshore property is considered to be the Anguilla IBC; because the foreign trust is revocable to the foreign company. Under the US tax code when a grantor trust power under sections IRC 671 – 679 exists (called a “general power of appointment” in the tax code) , the tax liability is shifted to the settlor of the offshore trust (I.e., the Anguilla company), not the beneficiaries of the trust or the trustee. While any “power of appointment” will satisfy the tax code requirement, the “POWER to REVOKE” the assets is best when using “ordinary” Commonwealth Discretionary trusts – used by offshore barristers and trust companies, whose discretionary trusts are anything but “ordinary”.

How it’s done? Here’s one possible scenario:

Example #1: John Detroit buys $1,000,000 in bonds/debentures from Anguilla IBC X. Anguilla IBC X forms a revocable Anguilla trust, and moves the $1,000,000 into a bank account of the trustee (John Detroit) in an offshore bank.

There are no US beneficiaries named for the Anguilla trust.

John Detroit (as trustee) thereafter buys the B.V.I. home for $1,000,000 – and title is held in John Detroit ’s name (as trustee). Assets held in Offshore Commonwealth trusts are traditionally held in the name of the trustee of the trust.

In 2009, $48,000 in rental income is collected by John Detroit. Under the US tax Code, neither the offshore Anguilla trust nor John Detroit (as trustee) is considered the owner of the offshore property/real estate – the offshore company is the “owner”.

John Detroit does not have to put the $48,000 in rental income on his U.S. tax return (1040).

If the Anguilla IBC does not carry on any business “within the United States” or have an office inside the US, it does not have to file any US tax return or information returns.

Compliance is critical!

John Detroit should file a TD F-90.22.1.
http://www.irs.gov/pub/irs-pdf/f90221.pdf

Read the instructions for this Treasury Form TD F-90.22.1 at the link above. The instructions are only two pages long. Note especially, the definitions for financial interest and signature authority in Form TD F-90.22.1.

Note, if John Detroit is not a “beneficiary” of the Anguilla trust and does not have a beneficial interest of “more than 50% in the income or assets of the trust”, than he is not considered to have a “financial interest” in the offshore real estate. The instructions for Form TD F-90.22.1 also say John Detroit must own “more than 50% of the shares” in the offshore company for him to be considered to have a “financial interest” for purposes of Form TD F-90.22.1.

In the case of John Detroit, he would have a signature authority over the foreign bank account not a financial interest. The distinction is important not only for tax liability purposes, but for filing the TD F-90.22.1 form itself.

Example #2: John Detroit, as trustee of the Anguilla trust, sells the real estate in 2015 for $2,000,000. There is a capital gain of $1,000,000, but the offshore company does not have a US tax liability, and Anguilla does not have a CGT. The $1,000,000 capital gain goes untaxed.

But, if John Detroit owned the offshore home in his own name (I.e., not as trustee); he would have a CGT of about $150,000 (15% of the $1,000,000 in appreciation). He would also have to put the annual rental income ($48,000) on his US tax return and pay US taxes on this income.

Under the US tax code, rental incomes from property located outside the United States would not be subject to inclusion as “Sub-part F” income under the US Controlled Foreign Corporation provisions (See Code sections 951 thru 958). There would be no US tax liability for John Detroit under the CFC legislation.

“One of the most effective applications of offshore trusts is in an ownership combination with a limited company.” – Richard Graham-Taylor – partner Ernst & Young – Grand Cayman (January 1990) 2005 revenues for Ernst & Young worldwide were $19 billion.

(BLOGGERS NOTE: The Cayman Islands recently signed transparency treaties with the US. The countries of Nevis and Belize are still havens that have no transparency guidelines with the US. As of July, 2009, even Switzerland has caved to US pressure to report the identity of account holders. See my previous blog)

Asset Protection
In the financial plan above John Detroit would have good asset protection against creditors (including the IRS). US judgments are not enforceable in any of the offshore tax havens. To seek a judgment in an offshore financial center, actions have to be initiated in the offshore jurisdiction.

This proves to be very difficult, became US trained and licensed attorneys cannot practice before the courts (for example in the Bahamas). Moreover, only a citizen of the Bahamas can become an attorney in the Bahamas. In other words, the US attorney or plaintiff needs to hire an additional Bahamian attorney.

Even when such actions are initiated, they are often futile, and the local courts almost always side with defendants. This is especially true in (IRS) tax litigation – which understandably the IRS (or State) courts NEVER initiate. An exception would be activities which involve drug money laundering and other criminal behavior.

Placing liens on offshore property is not the domain of the US judicial system.

To the extent this document constitutes tax advice subject to Circular 230 this tax advice was not intended or written to be used and it cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice).
Article Source:
http://www.bestmanagementarticles.com
http://asset-management.bestmanagementarticles.com

About the Author:
The author has been domiciled in a tax haven (Nassau, Bahamas) since 1990. Tom is currently an overseas agent for the Anguilla registrar (since 2001) – a UK overseas territory in the eastern Caribbean like the Cayman Islands, Bermuda and the B.V.I.