Well the easy way to do this is to start a foreign corporation (say Dubai) As long as companies are doing business with the foreign corporation (which you are an employee of), you won't have to pay taxes on that amount- you will only pay taxes on the salary that your Dubai corporation pays you.
However, if you ever try to move the money to the United States, you're screwed. The moment you transfer the money from Dubai Bank and Trust to Bank of America, you'll owe taxes on it.
So, the easy way to avoid paying taxes is to have the foreign corporation, and make everything you purchase overseas a business expense.
This doesn't work. You still have to report your holdings in the company to the IRS as a CFC, regardless of whether the company generates a profit / pays you income / etc. This, of course, puts a red flag on you, which leads to a higher chance of being audited, which thus would cause the IRS to go over each and every transaction from which you benefited (meaning, if the company bought a car and you used it for personal use; if the company bought a plane ticket which was for a trip for which a portion of time was spent on non-work-related leisure, etc) to see where it can be counted as income for which you are liable.
You can, of course, keep a foreign company, file the CFC with the IRS, and keep an accountant on hand to keep the balances separate; there are plenty of people who do this. If done properly, however, it is somewhat of a pain in the ass, and only enjoyable if you're an obsessive-compulsive tax-avoider like John Malone. Remember, life is short, time is money, and money is meaningless once you have enough of it.
so essentially, your argument is that it DOES work, but it's just a huge pain in the ass.
I agree whole-heartedly with that- but the bottom line is it does work- you just have to keep everything separate (which is really not that big of a deal).
And the easy to avoid reporting it as a CFC is to not have it be a CFC. If you have a brother/relative from another country, you can each have 50%, and voila! it's not a CFC.
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Well the easy way to do this is to start a foreign corporation (say Dubai) As long as companies are doing business with the foreign corporation (which you are an employee of), you won't have to pay taxes on that amount- you will only pay taxes on the salary that your Dubai corporation pays you.
However, if you ever try to move the money to the United States, you're screwed. The moment you transfer the money from Dubai Bank and Trust to Bank of America, you'll owe taxes on it.
So, the easy way to avoid paying taxes is to have the foreign corporation, and make everything you purchase overseas a business expense.
This doesn't work. You still have to report your holdings in the company to the IRS as a CFC, regardless of whether the company generates a profit / pays you income / etc. This, of course, puts a red flag on you, which leads to a higher chance of being audited, which thus would cause the IRS to go over each and every transaction from which you benefited (meaning, if the company bought a car and you used it for personal use; if the company bought a plane ticket which was for a trip for which a portion of time was spent on non-work-related leisure, etc) to see where it can be counted as income for which you are liable.
You can, of course, keep a foreign company, file the CFC with the IRS, and keep an accountant on hand to keep the balances separate; there are plenty of people who do this. If done properly, however, it is somewhat of a pain in the ass, and only enjoyable if you're an obsessive-compulsive tax-avoider like John Malone. Remember, life is short, time is money, and money is meaningless once you have enough of it.
so essentially, your argument is that it DOES work, but it's just a huge pain in the ass.
I agree whole-heartedly with that- but the bottom line is it does work- you just have to keep everything separate (which is really not that big of a deal).
And the easy to avoid reporting it as a CFC is to not have it be a CFC. If you have a brother/relative from another country, you can each have 50%, and voila! it's not a CFC.