You would not be able to get around taxes on dividend income - it doesn't matter if you touched this money or not - as long as these amounts are not in the tax deferred account - it is taxable income.
However if you hold your shares long enough - that would be qualified dividends and they will be taxable at reduced rate - not more than 15%. Please be aware that reduced rate will only be in effect till 2010 and would be 20% thereafter unless the law would become permanent that is doubtful...
You may think to restructure your investments - for instance - purchase tax free municipal bonds, purchase long term investments - shares that do not pay dividends, but are expected to appreciate in value over the time, etc.
You may sell each two years your primary home and the gain (up to $250,000 for single) will not be included into your taxable income. If you purchase the second home - you will be able to deduct property taxes and mortgage interest, but if you sell the second home - the gain will be taxable.
If you have children - you may "shift" some income to them.
You will not avoid taxation by shifting the income to your business or trust. Single member LLC is disregarded tax entity - any income and deductions are passes through to the owner and are reported on the individual tax return schedule C. You will not save any taxes but will have additional overhead.
C-corporation is good if you want to keep the money in the business and not to distribute - however if you would decide to distribute the income - you would end up paying taxes twice.
Generally - 15% taxes on qualified dividends - that is not bad at all. I do not think that you should worry.
Your question was sitting in the legal category for long time without any response and it is likely that administrator decided to move it into Tax category based on the nature of the question.
If you insist that only an attorney may address your question - I will opt out.
Trusts are created mainly for estate planning purposes - because properties in the trust are not subject for probate. There are some other reasons as well, but none would reduce or defer taxes. The trust either distribute the income to beneficiaries and beneficiaries would pay taxes the same way as they receive the income; or trust pays taxes on its own. Usually beneficiaries pay less taxes than trusts, but sometimes it is better for beneficiaries to have less taxable income to be eligible for other benefits (for instance for Medicaid, housing assistance, etc)
There are two types of trusts - revocable and irrevocable. properties in revocable trust are treated as owned by the grantor and are not protected from garnishment. The irrevocable trust is treated as a separate legal entity - and if you move a property or funds into the trust - you may not simple to pull it back - such transaction may trigger additional tax obligations.
LLC is created mainly to separate business and personal activities and for some level of legal protection. Yes - you may defer some of your tax liability of self-employment income - but you need to have this income at first place. Please see some contribution limits for different plan types and how they relate to income. - http://www.irs.gov/retirement/article/0,,id=96461,00.html - consider taxable self-employment income at your regular tax rate - there is no any meaning to treat your investment income as self-employment income from tax liability prospective.
Again - if you insist that only an attorney may address your question - I will opt out.
Separate legal entities - like LLC are created for separating business activities from personal and for some level of legal protection - so in case of malpractice LLC would be sued and your personal property would be protected.
Let's put aside issues how good that protection is - none of these are your purpose. You are putting your personal assets into LLC - so in case LLC would be responsible - these assets might be garnished.
Assuming you would go into the business and your LLC would produce $100,000 net income. Generally - you would be responsible for self-employment taxes - but because your wages are above the limit set for social security taxes - you will be a subject only of 2.9% self-employment taxes. In additional - single member LLC is not taxable entity - so all income and expenses are passed through to the member and should be reported on your personal tax return. LLCs that have several members are treated as partnerships - they file partnership income tax return, but do not pay any tax - tax liability is passed to members who in turn report in on individual tax returns. Nevertheless to say that income from business is generally taxed at your regular rate - that is with your income 25% and more - in additional to self-employment taxes.
yes - you are correct - you may deduct some expenses and reduce the tax base - but the issue is that (1) you need to have such expenses (2) expenses should met the IRS definition of being both ordinary and necessary. (An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business). (3) you may not deduct your personal expenses as business expenses unless you are looking for some experience dealing with the IRS...
As you do nothing to produce investment income - I do not see any expenses you may deduct - you do not use any part of your home for business, you do not travel for business, etc - so unless you "make up" some expenses and expose yourself for the IRS - there is nothing or almost nothing you may deduct.
There are some items you might consider for deduction - for instance health insurance premiums - but you are likely covered on your job; additional retirement plan contribution - you maxed employee's contribution - but your employer likely did not may its contribution - traditional small-business retirement plans — such as a profit-sharing plan, Keogh or SEP — allow annual deductible contributions equal to 25% percent of your compensation (if you've set up your business as a corporation) or 20% of your self-employment income (if you're a sole proprietor), with a maximum dollar cap of $46,000 for 2008 - your employer's matching - my wild guess is 3% of your wages or ~$4000 + your contribution is $15,500 - so there is some room to defer taxes of the income from your business - from $100,000 additional income you may put aside additional $20,000 - but $80,000 would be taxable as your regular income.
Eventually you might be able to come down to 15% overall tax liability that you currently have without all these headache.
I would suggest to look into some other items suitable for your situation.
Appreciate you for accepting the answer and for very interesting question.
Let me know if you need any clarification. I wish you the best.