Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Im coming into a large sum of cash ($6 million plus) from

I'm coming into a large...
I'm coming into a large sum of cash ($6 million plus) from an investment, hopefully by years end. My wife and I are looking for as many places as possible to invest this money to lower our tax liability. I am 43 and self employed. My wife is 33 and employed with another company. We have 2 children. Any suggestions?
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 hours by:
11/1/2010
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,354
Experience: Retired (mostly)
Verified
Investing cannot lower your tax liability, unless your investment produces large immediate expenses, and you materially participate in the business.

If you open a restaurant and you are the Maître d', then your expenses will reduce your income, and that will produce a tax deduction on your return.

But, if you're simply buying stocks, bonds, and CD's, then you won't lower your taxable income at all.

So, unless you're planning on starting a business venture and materially, you really cannot reduce your tax liability in any meaningful way.

Hope this helps.
Ask Your Own Tax Question
Customer reply replied 7 years ago
What about investing in Roth Ira's, setting up a couple of 401K's, buying tax free muni bonds, etc?
A Roth IRA does not reduce your current taxable income -- it may reduce future taxable income.

Contributions to an IRA or 401(k) must come from "compensation," as defined in the following table:

Includes ... Does not include ...
earnings and profits from
property.
wages, salaries, etc.
interest and
dividend income.
commissions.
pension or annuity
income.
self-employment income.
deferred compensation.
alimony and separate maintenance.
income from certain
partnerships.
military differential pay.
any amounts you exclude
from income.
nontaxable combat pay.

You stated that your income is from an "investment." If so, then that income is not compensation, and cannot be contributed to an IRA or 401(k).

Purchasing tax-free munis also may reduce future taxable income, but it will not reduce your current income from the investment that you are receiving.

What you may want to consider is that at the moment, the federal capital gains tax and ordinary income tax is set to rise to ordinary income tax rates on Jan 1, 2011. Absent Congressional action, if you can receive your investment prior to year end, then you will almost certainly save at least 5% in taxes, because the current Democratic plan is to limit the capital gains rate to 20%. And, if the battle between Democrats and Republicans continues after the election tomorrow, then that 5% is probably the best that you can hope for. Therefore, receiving the income this year is probably the single most optimal action you could take.

The second most optimal action is to relocate your permanent residence immediately to a U.S. state jurisdiction which has no personal income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.). You only have to permanently reside in one of these jurisdictions during the tax year in which you receive your income. This could additionally reduce your overall tax liability considerably.

In my view, the most optimal tax arrangement is to live in Washington State, but on the Oregon border, because Washington has no state personal income tax, and Oregon has no state sales tax. Therefore, if you receive income in WA and shop in OR, then you will have a zero state tax liability.

Hope this helps.
Ask Your Own Tax Question
Customer reply replied 7 years ago
Ok, last question. I purchased this investment through my LLC, which is based in Nevada. If I use the LLC purchase and return the dividend to the LLC, does that make it exempt?
This issue is extremely complicated.

In general, however, your personal liability for LLC receipts is based upon (1) your right to receive income from the LLC, not whether or not you take actual receipt of that income, and (2) the right to the accruing while you are resident in a particular statet jurisdiction. When both elements are satisfied, you are subject to tax under the laws of your state of residence.

socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,354
Experience: Retired (mostly)
Verified
socrateaser and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask socrateaser Your Own Question
socrateaser
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,354
39,354 Satisfied Customers
Experience: Retired (mostly)

socrateaser is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
What are the taxes rates 2016 for term gains in irrevocable
what are the taxes rates 2016 for long term gains in irrevocable trusts … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
In the new GOP tax plan, Alimony payment will no longer be a
In the new GOP tax plan, Alimony payment will no longer be a tax deduction for the paying spouse. Does the receiving spouse still need to pay tax on it? If that is the case, it would be double taxatio… read more
abci168
abci168
Principal
27 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Under current law a 100,000 taxable income pays $10,365 plus
Under current law a 100,000 taxable income pays $10,365 plus 25% of the amount exceeding $79,400 i.e. about $16,000. Under tax reform will the tax be $25,000? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Is the sale of customer list a capital gain or ordinary income?
Is the sale of self-created intangibles, such customer lists, digital files, web sites, etc subject to capital gain or ordinary income treatment?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have an LLP (limited liability partnership) with an
I have an LLP (limited liability partnership) with an operating agreement that indicates it's organized as a general partnership. I am the designated 'tax matters partner'. The *other* partner is resp… read more
abci168
abci168
Principal
27 satisfied customers
I have a question regarding the ordinary income tax. If the
Hello, I have a question regarding the ordinary income tax. If the ordinary income tax due is negative does that apply anywhere? This pertains to the sale of an S corp .business. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
We have $400,000 in capital gains for the sale of our
We have $400,000 in capital gains for the sale of our California home of … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Sell of property tax liability. Ca. Bought home 25 yrs ago
bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
What would the federal and state tax rate percentages be for
What would the federal and state tax rate percentages be for a $7700 IRA early withdrawal in Ohio?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,466 satisfied customers
When does the Florida sales tax liability due to the DOR'
When does the Florida sales tax liability due to the DOR' invoice & delivery or title registration with the county tag office? … read more
abci168
abci168
Principal
27 satisfied customers
What is the income tax rate if it is not withdrawn from the
Hi! What is the income tax rate if it is not withdrawn from the LLC? The owner has not withdrawn any balance from the business all the amount reinvested into the business. Thank you!… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,466 satisfied customers
If a person hasn't contributed Roth IRA (or any other plan)
If a person hasn't contributed Roth IRA (or any other plan) in the past few years, although he had employment income, could he still be able to use these accumulated room to contribute? If so, would t… read more
abci168
abci168
Principal
27 satisfied customers
Second opinion] Has the tax rate in Peru on capital gains
Second opinion] Has the tax rate in Peru on capital gains for non residents recently been changed? I heard it is now 5% and no longer 30%.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What is capital gains tax rate for sale of home: My mom is
What is capital gains tax rate for sale of home: My mom is selling her home and has zero income. She is on social security. … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x