Tax Tip

by | Aug 5, 2003 | Archives

Mountain winds whisper through giant hemlock and pine. A fresh tang of cut grass drifts buoyant with the promise of a sunny day.

What a day! Up at dawn, writing, then harvesting fresh lettuce and tomatoes. Wearing shorts. Enjoying the afternoon sun. Hot, jumping into Little Horse Creek. Sitting in cooling pools. Relaxing under the old Black Walnut tree. Drying in the grass. August is a wonderful time, but one part that is not my favorite is that summer means it's time to work on our corporate tax. Ugh.

So as this I on my mind here is a tax tip from tax attorney, Carlos Kepke, that shows a powerful way to gain tax benefits through overseas structures. Carlos says:

"A perfected foreign trust can assist in the minimization of United States income tax on the contemplated sale of an existing business. If, for example, one were to re-capitalize the share structure of an existing business into common and preferred shares with the preferred shares having a liquidation preference in an amount equal tothe fair market value of the existing business, and such preferred shares were to be sold by the business owner to a foreign trust at some point prior to the sale of the business (as much in advance of such sale as possible), then the following results should attain."When the business is ultimately sold the buyer will purchase the common shares and the preferred shares with the common shares representing the fair market value of the business at the time of the prior re-capitalization and the preferred shares representing any appreciation in value of the business since the date of the re-capitalization."The sale of the preferred shares by the foreign trust will be non-taxable if the foreign trust is a perfected foreign trust. This is a tremendous strategy, known in the business as an 'asset freeze'. If the re-capitalization is done significantly in time before the business is sold then all of the appreciation will be tax free rather than subject to capital gains tax."

This strategy assumes the existence of a perfected foreign trust and you can learn more about such trusts at and

You can get more data on this from Carlos at

Merri and I hope to meet you for one of our next courses here at the farm. Details are at

Until then, we hope that none of your life is taxing!