Posted by JHyre in Ohio on May 05, 1999 at 13:07:34:
with some solid, classic tax planning. A few things to watch for: This strategy is less likely to work in Illinois because it is a “water’s edge” jurisdiction. They will look at ALL related US companies and treat seperate companies- NV corps included- as one big company and tax it as one company (more or less- I won’t go into the gory details). That’s why I intimated at overseas corps- exactly the same strategy, but you need to use a foreign corp. This avoids “water’s edge” states’ taxes.
Other states use different means to counteract any such scheme. For example, Ohio does not allow interest deductions, so you have to find another way to get money out of an Ohio corporation (maybe consulting fees or the like).
Also, if the state is not a “water’s edge” state, I prefer Deleware over Nevada. First of all, NV’s reputation attracts auditors from state and federal government. In addition, many states have “clawback” provisions designed to “get back” income moved to states that have no income tax, like NV. DE got smart- they have an income tax, but it tends to exclude interest and other similar types of income. So the clawback fails, because DE has an income tax, but the type of income (e.g.- interest) coming in is not taxed by any state. As I mentioned in my post- it very much depends on the state you are in and the state to which you are “exporting” your income. Generalities- mine included- are dangerous because each state (and combinations therof) is unique. People like Bud or me can set you in the right direction, but taking your exact facts to a professional is strongly recommended.
As to Roths & the like- be sure your state recognizes them. Most do, some don’t. Roth IRA’s are WAY cool, as Bud suggests.