NEWS & NOTES
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If you were coaching your kid's basketball team, you wouldn't win many games if you told them to aim for the backboard. Your opponents might love you, but there would be at least one dad in the stands screaming at you the entire time. So why have some tax collectors given up aiming for the hoop and settled for rebounds?
At first glance, the tax code looks like 70,000+ pages of incomprehensible gobbledygook. (Sometimes you really can judge a book by its cover.) But scratch the surface hard enough and you'll find a semblance of order. Add up total income from various sources. Subtract adjustments to gross income and standard or itemized deductions. Calculate the tax based on the remaining net income. Finally, subtract any available credits for doing things Washington is willing to subsidize, like having kids, sending them to college, or driving your kids to college in an electric car.
Easy peasy, right? (Yeah, sure.) In practice, of course, it's a lot harder, and leads to complications like "partnership capital account revaluations," "tentative alternative minimum taxable income," and "auditors crawling up your you-know-what for a week and asking for every Staples receipt from the last three years."
The lane to the net can be even twistier on the corporate side. Multinational corporations have crafted strategies like the "double Irish with a Dutch sandwich" (yes, that's really a thing) to shift income from high-tax countries like the U.S. (35%), to low-tax countries like Ireland (12.5%). Clever lawyers save their clients millions of dollars with these sorts of gyrations, which explains why they wear antique Swiss watches and drive pricey German sports cars.
But what if we didn't have to jump through all those hoops? What if we could just bounce the ball off the backboard and call it good? It turns out that some governments are finding ways to do just that.
In London, Treasury chief Phillip Hammond is proposing a "digital services tax" of 2% of gross revenue on U.S. companies like Google, Amazon, and Facebook. The new levy would raise £400 million per year, regardless of where those companies ultimately send their net to be taxed. The European Union and Spain have proposed similar taxes of 3%, and several more countries are eyeing that bandwagon. Those small percentages may not sound like much. But applying them over a broader base can quickly mean enormous revenue for those countries.
Here in the U.S., several states impose revenue-based taxes instead of traditional corporate income taxes. In Texas, businesses pay 1% of gross receipts over $1 million, or 0.575% over $10 million. In California, LLCs pay a fee of up to $11,790 depending on gross revenue. And in Ohio, businesses pay a flat Commercial Activity Tax of 0.26% on Ohio gross receipts over $1 million. Those amounts may look like small potatoes, but they add up fast. Plus, it's easier for businesses to calculate revenue-based taxes and for auditors to verify them.
The good news is that our old-school income tax raised about half of our federal revenue last year. It would take a Herculean effort to change that system, especially when Mitch McConnell and Chuck Schumer can't even agree on naming a post office. And that means all your favorite tax breaks are still safe, at least for now. So call us to make sure you're not missing out on any free throws!
Reality television has introduced us all to the joy of the "big reveal." HGTV specializes in this sort of story. The perky couple, handsome brothers, or plucky first-time homeowners spend most of an episode covered in plaster dust and paint. Then after the final commercial break, they pull back the curtain on the dream interior so viewers can feel inadequate about their own homes. (VH1's Dating Naked did things a little backwards, with the "big reveal" up front, but still managed to wring some drama out of the format.)
In Finland, tucked between the Baltic Sea and the Arctic Circle, they do things a little differently. For starters, they love reindeer sausage! They play host every year to the World Wife-Carrying Championship, where whoever crosses the Finnish line first takes home his wife's weight in beer. But on a more sober note, the Finns have decided to discourage the sort of income inequality that's growing across the world. So, in the interest of transparency, they publish everyone's income tax returns!
The Finnish Tax Administration schedules their big reveal for 8:00 AM on November 1. The New York Times calls it "National Jealousy Day," which seems appropriate, and Finnish newspapers assign up to half of their staff to covering the event. This year, taxpayers reported earning a total of €140 billion and paying €46.8 billion in tax, making Finland one of the highest-taxed countries in the world. But of course the real fun lies in snooping through the individual returns: your bosses, your neighbors, and your friends and family.
Back in 2013, a pair of video game developers named Ilkka Paananen and Miko Kodisoja set the record for the highest capital gains. That's the year they sold 51% of their company Supercell, which makes games for mobile phones. The $62 million they paid on the gains from that sale boosted the entire country's capital gain total by 20%. And they became folk heroes for not taking advantage of any planning strategies to pay less.
Two years later, one reporter discovered that several executives had relocated to Portugal to avoid tax on their pensions. It's hard to blame them for wanting someplace warmer, of course, even if it means leaving the reindeer sausage behind. But the story caused such an uproar that Finland rewrote its tax treaty with Portugal to close that particular loophole.
Last year, Supercell's Paananen and Kodisoja took home the gold and silver at €65.2 million and €57.5 million, respectively. (That sounds even better than winning your wife's weight in beer, right?) Aleksander Hanhikoski, founder of a real-time payments company, picked up the bronze with €24.6 million. Three more Supercell execs helped round out the top ten. There were 12 women among the top 100, with Ulla Riitta Sjöström ringing the bell at number 28 after selling her family's civilian shelter equipment business.
Revealing everyone's income isn't the only way Finns use tax returns. If you get caught speeding, your fine is based on your income. In 2015, the polissi clocked hotelier Reima Kuisla doing 64 in a 50-mph zone. They looked up his income right on the spot, and issued a ticket for roughly $62,000! (Kuisla's car probably has the latest charcoal scrubber system to filter out the smell of poverty, but that $62,000 still had to stink!)
What do you think would happen if our IRS revealed everyone's income? Would you be willing to pay more tax to impress your neighbors? If not, then call us to help you fly under the radar. We bet we'll save you enough for all the reindeer sausage you can eat!
Big-league baseball players like the ones who just wrapped up the World Series enjoy careers that last 5.9 years on average, and with 162 games per year, they enjoy lots of chances to be heroes. But eventually, even the best of them hang up their cleats and join the rest of us in the real world. The lucky ones find high-profile gigs running car dealerships or calling games from the broadcast booth. But every once in a while, a former player manages to makes headlines where you'd least expect them — like working as an accountant!
Ben Hendrickson started out looking like he'd become one of the greats. In 2004, the promising right-hander went 11-3 for the International League Indianapolis Indians and won league MVP honors. Then he got his start in the big leagues. Wearing #40, he pitched 11 games for the Milwaukee Brewers, finishing 1-10 with a 7.41 ERA. (If you're not familiar with baseball stats, those numbers are no bueno.) Milwaukee sent him down to their Nashville farm team and eventually traded him away. But Hendrickson never made it back to "the show," and his bright light faded away.
Fast forward to 2018. Hendrickson is working as an accountant for Floors Northwest in Fridley, Minnesota, just north of Minneapolis. Like all too many Americans, he's working paycheck to paycheck and not getting ahead. How can he throw some heat and escape the grind? Hey, here's an idea! Baseball runners who want to advance to the next base don't have to wait for the batter to hit the ball . . . they can just take off running and steal it! So, if Hendrickson wants more money so badly, why not just steal it from the company?
Last week, Anoka County District Court charged Hendrickson with four counts of "theft by swindle," totaling about $250,000. That's a refreshingly blunt description for the charges against Hendrickson, which can mean trading him away for up to 20 years in a place with no organized baseball whatsoever.
Here's how the Minneapolis Star-Tribune described the criminal mastermind's evil plan:
"While working for Floors Northwest in Fridley, where Hendrickson worked for several years until he left his job last year, he would alter the amount of cash received to make it look like less was collected from sales staff. Hendrickson deposited the lower amount and kept the rest. Nearly $160,000 of the money he stole was taken in the final two years of his employment. He also allegedly shifted $10,000 of the company's money to a personal health care account that paid his medical bills."
Hendrickson admits he stole the money . . . but says he thought he took between $50,000 and $75,000. Which begs the question, just how bad an accountant do you have to be to not count how much you stole? After failing at baseball and bookkeeping, Hendrickson may find that a few years in the metalworking field (specifically, stamping license plates for 11 cents/hour) may be just the vocational training he needs!
We all understand wanting to get ahead. Fortunately, there's an easy way to do it, without risking a trip to the pokey. Call us for a tax plan, and see how many dollars we can advance into your pocket. We think of your average tax rate as your financial "earned run average," and we do everything legal to keep it as low as possible. So call us to take a swing, and watch us bring the heat!
Legend holds that in 1494, an Italian friar named Luca Pacioli was sitting under an apple tree when an apple bounced off his head. In a flash of insight, he invented the "double-entry bookkeeping" system where each entry has a corresponding and opposite entry to a different account. Those entries, called debits and credits, help accountants avoid headaches — if the debits and credits don't balance, there's a mistake somewhere. (Some of you may be thinking that was Sir Isaac Newton with the apple inventing gravity, but this is our story and we're sticking to it.)
Double-entry bookkeeping has ruled accounting for over 500 years. We see it everywhere today, including in our tax code. Revenue flows in, balanced by expenses flowing out. Anything left over eventually winds up in the "taxable income" account.
Sometimes, with taxes, that balance breaks down, and many of those disconnects spell opportunity. Real estate investors, for example, can depreciate the price of their properties over time. (We can help you with "cost segregation" strategies to do it even faster.) In the IRS's ideal world, you'll repay those breaks by "recapturing" them as income when you sell. But with tax-free exchanges, stepped-up basis, and other strategies to avoid that reckoning, most of those depreciation deductions never get recaptured at all.
Now it's Halloween: America's second-favorite, and second-priciest, holiday. The National Retail Federation reports we dropped $9.1 billion on the spooky season last year, including $2.7 billion on candy. (Fun fact: Halloween candy is cheapest exactly four days before the 31st.) How does all that fit into Luca Pacioli's neat little boxes? Well, it gets scary the minute the greedy little trick-or-treater on the other side of your door goes running down your sidewalk with their loot!
Here's the disconnect. The candy company sells sweets to a retailer. That's a taxable transaction. The retailer sells them to you. That's another taxable transaction. But then you just give it to the little goblins, pirates, and princesses on your porch. No deduction for you, no income for them, no 1099s for the IRS. (Ugh. Can you imagine the 1099s?) That removes everything from the IRS's world of debits and credits. Seriously, if the IRS taxed kids on their Halloween candy, they could collect millions of dollars to cover free dental care for everyone.
It's all very ironic because, as any parent knows, Halloween is an exercise in managing the waste of assets. Your kids come home with bulging bags of candy and dreams of sugar highs lasting until Thanksgiving. But pretty soon the good stuff is gone. No more Kit-Kats or Snickers! They're left with a couple of "fun-size" Milky Ways, some of those Jolly Ranchers nobody really likes, and a few stale candy corns. At that point, you "charge off the goodwill" by throwing out the dregs while they're at school and hoping the kids don't even notice.
Today, your average accountant or tax professional focuses their effort on making sure the debits match the credits. But we don't just stop there. We take the time to look for those tax "disconnects" that can rescue thousands in taxes. There's nothing scary about it at all. So call us when you're ready to pay less. You'll think the savings are pretty sweet!
Life is full of ups and downs, and sometimes the downs can be so low that it doesn't feel like there's ever going to be an up again. How many people have dreamed of faking their own death and disappearing under a new identity, never to return to their problems again? It's called "pseudocide," and it's popular enough that novelists have a field day writing thrillers about it. John Grisham pulls some variation of that stunt in half a dozen books, and J.K Rowling, Tom Clancy, and Gillian Flynn (Gone Girl) have all joined him in that theme.
Faking your death doesn't always work. In sixteenth-century Verona, a young nobleman named Romeo tried it with a deathlike potion, and we all know what happened to him. But that doesn't keep the occasional scammer from trying. Most famously, rock-and-roll legend Elvis Presley faked his death, and supported himself by entering Elvis impersonator contests. (He always laughed when he didn't win.) And if you have really valuable information on a really bad guy, the witness protection program will even establish your new identity for you!
There's no law that says you can't fake your death to go ride off into the sunset. But we got to wondering . . . what would our friends at the IRS think about that plan?
Let's start with your life insurance benefits. Code Section 101 says gross income doesn't include amounts your beneficiaries receive "if such amounts are paid by reason of the death of the insured." We're splitting hairs here, but wouldn't they still owe the tax if you aren't really dead? Or would they be safe because the insurance company paid them by reason of your death, even if you're not? (You can be sure that somewhere in America, there's an underemployed lawyer ready to bill by the hour to answer that question!)
Next, let's look at estate tax. Assuming your gross estate is over $11.18 million, and the rest of the world really believes you're dead, at some point your executor will file a return and pay 40% of the taxable amount above that threshold. What's for the IRS to complain about? But come on, folks. While it's true that money can't buy happiness, it can solve a lot of the problems that cause unhappiness. So how many people with $11.18 million are really going to fake their own death in the first place?
(While we're on the topic of estate taxes, it's worth mentioning that the current threshold means that the IRS gets only a couple thousand returns per year now anyway. As recently as 1997, when the threshold was just $600,000, they got 90,000 of them. That's one perk of working in the trusts and estates field: just because the client dies doesn't mean you have to stop billing them.)
Finally, let's talk about anything you make after you pull your David Copperfield act. You'll earn it under a new name and social security number . . . but as long as you've set up your new identity properly, the IRS should be happy getting their usual share. Of course, there's that whole "identity fraud" problem. But hey, nobody said this would be easy!
Look, if life throws you a beanball, we understand the temptation to start fresh. But you will wind up crossing the line into fraud at some point. So if you're having a really bad day, can we suggest an easier (and perfectly legal) alternative? Come to us for a plan to pay less tax, and see if we can give you more reasons to enjoy the life you already have.
Streaming TV services like Netflix have changed how we watch television, dropping an entire season of a series at once for us to binge on. They've even breathed new life into "quality television," a phrase that used to provoke laughs from that insufferably smug type of person who used to brag that they didn't even own what we all used to call the "idiot box."
Netflix has mined TV gold from all sorts of settings. Orange is the New Black explores life inside a women's prison. Stranger Things is a love letter to classic 1980s sci-fi/horror films. And Bojack Horseman takes us inside the world of a half-man, half-horse, has-been TV star who drinks too much. It was only a matter of time before we'd see inside the upside-down world where the IRS unleashes investigators to chase business owners for . . . wait for it . . . paying their taxes.
Ozark introduces us to Marty Byrde, a frugal Chicago-area financial advisor and family man who drives a 10-year-old Honda and resists moving his firm to flashy new downtown offices. (Prudent, right?) One night, he takes an emergency meeting with his partner, where we discover his real business is laundering cash for a Mexican drug cartel. Then Marty learns his associates have stolen millions (spoiler alert: bad move) and watches the boss's sicarios slaughter them and nonchalantly stuff their bodies in barrels.
Marty, played by the always-slightly-oily Jason Bateman, survives by promising to repay what his partners stole and launder another $500 million. He moves his family to Missouri's Lake of the Ozarks, meets a colorful cast of local characters, and searches for businesses he can use to ply his trade. Meanwhile, investigators have found the bodies from the massacre and connected them to the partner who split town. Adventure and hilarity ensue for 20 episodes, and just like that, your entire weekend is gone.
As for the IRS, they don't get all judge-y about how you make your money. They just want their slice of the pie. (Pie is delicious.) But they do get judge-y when you try to pass off cherry pie as apple. That's a real problem for drug cartels. Their business generates cash, and lots of it. They can't just take suitcases full of Benjamins to the bank without raising red flags. They need to turn that dirty cash into legitimate funds they can use to buy things like jet planes, islands, and tigers on a gold leash.
That's where financial alchemists like Marty earn their keep. They find legit businesses (like a struggling restaurant and a skeevy "gentlemen's club") to hide behind. They run the cash through the legit business's books and deposit it in the legit business's bank. They even pay tax on it. Presto, no more narcodollars! It may not be the kind of business they teach in fancy MBA programs. There aren't any glitzy national conferences, or PR-minded professional associations with continuing education and ethics requirements. But hey, it's a living. (Until suddenly one day it's not.)
IRS agents who target Marty and his ilk are experts in following the money. They partner with agencies like the FBI and DEA to stop crooks from hiding their loot, even when "hiding" means paying taxes on it like anyone else.
Sadly, we can't help if you get mixed up with a Mexican cartel. But we can help you stop wasting money on taxes you don't have to pay. So call us when you're ready for a plan, and have fun binging on the savings!
Fall is officially here, and that means whiskey season is back. Most drinkers probably don't think much about taxes when they visit their favorite bar or spirits shop. Liquor levies are generally based on volume, not price, so you pay the same amount of tax on a $4 fifth of Olde Ocelot as the swells pay for their $269 Pappy Van Winkle. But did you know that whiskey played a central role in our country's first tax protest, which took place around this same season 224 years ago?
Turn the dial on the Wayback Machine to 1791. The fledgling U.S. government was struggling to pay off $79 million in Revolutionary War debt. (Today that wouldn't cover a single F-35, let alone win independence from the greatest empire on earth.) Congress had already hiked tariffs as high as Treasury Secretary Alexander Hamilton felt they could go, so they were forced to tax domestic products. Americans loved liquor, in part because alcoholic drinks didn't spread disease (and also because it dulled the pain). So, naturally, Congress slapped a tax on it.
In western Pennsylvania, many farmers distilled their surplus grain into whiskey. Some even used it in lieu of currency. So naturally, none of them exactly raised a toast to the new tax. Out there on the edge of civilization, it sounded a lot like "taxation without representation," and we all know what happened the last time that was a rallying cry. Resistance began immediately, with area gangs tarring and feathering local tax collectors. By 1794, organized militias were battling federal marshals delivering subpoenas and warrants to distillers not paying the tax.
On September 25, 1794, President Washington federalized 12,950 troops (including future explorer Meriwether Lewis) to put down the rebellion. Then he rode out from the capital to lead the troops himself. Apparently his desk job running the country wasn't exciting enough! Fun fact: it was the only time a sitting U.S. president led forces in the field until President Thomas Whitmore (played by Bill Pullman) led a force of plucky jet fighters in a desperate sortie against alien invaders in the 1996 popcorn epic, Independence Day. (Don't bother with the 2016 sequel.)
Washington and his 12,950 troops proved to be maybe 12,900 more than the rebels could handle, and they fled before firing a single shot. Two of their leaders were convicted of treason and sentenced to hang, but Washington pardoned them. (No word on whether they made "dark-money" contributions to the President's PAC.) Opponents kept fighting the tax at the ballot box, helping Thomas Jefferson defeat John Adams in 1800 and repealing the tax. Still, historians agree that Washington's success in quelling the rebellion helped establish the legitimacy of the new federal government.
Today, of course, leading troops is an entirely different matter. If the president wants to target, say, terrorists in Yemen, he gives the word to the Joint Chiefs, who pass word down the ranks to an Air Force officer manning a joystick connected to a drone halfway around the world. The whole thing is about as antiseptic as visiting the dentist, at least on our side of the drone. Can you even imagine Barack Obama or Donald Trump saddling up a mighty steed, raising a sword, and leading a colonnade of troops into battle? We'll wait while you finish laughing. (Now that we mention it, maybe Dubya would have enjoyed that?)
Today, of course, there's an easier way to pay less tax. You don't have to assemble a militia or challenge government forces. You just need a plan. So call us when you're ready to save, and raise a toast to progress!
Some of the world's most popular board games give players the chance to live out professional fantasies. Aspiring property sharks can cheat each other with the classic Monopoly. Would-be Sherlock Holmeses can track down killers with Clue. Armchair generals can settle down to an evening of Risk. But until today there's never been a game to let aspiring tax planners outwit the Internal Revenue Code. Shouldn't that be at least as much fun as figuring out it was Colonel Mustard in the Library with the candlestick?
Well, that all changes in the form of a new board game called "Transfer Pricing: The Game."
Transfer pricing is the process for setting the value of transactions between businesses under common ownership and control. Let's say Amalgamated Widgets owns a subsidiary that makes parts in, say, Macedonia, then puts them together here in the U.S. How much should the parent pay for the parts? That may sound boring and technical (because, yeah, it is). So what difference does it all make? Let's say the corporate tax rate in Macedonia is 10% and the rate here is 21%. Naturally, it makes sense to allocate as much of the profit as possible in Macedonia where the rate is lower.
Of course, tax collectors everywhere are on to the game. So you have to be able to show them you're transferring at an "arm's length" price — the same price a disinterested buyer would pay from a disinterested seller. The Organisation for Economic Cooperation and Development sets out rules for pricing all sorts of transactions, including tangible items, intellectual property, and even loans.
Now you're excited to try it yourself! Too bad you don't own a foreign subsidiary. That's where "Transfer Pricing: The Game" comes in. The publisher describes it as "the card game that decides who has the most substance. Now available, with an arm's length price of only $30." The goal? "You run a subsidiary of Orchid Enterprises and build a substantive value chain, grow income, destroy your corporate rivals, and defend your accomplishments against various Tax Authorities, legal challenges, and business pitfalls. Prove once and for all who is the greatest transfer pricing professional of all time!"
The game is designed for 2-8 players, ages 12 and up. Open the box and you'll find three sets of cards. "Function" cards represent basic business functions like marketing. "Action" cards drive game play. And "defense" cards provide power you need to defend your actions against various challenges from tax authorities. There's no board, so technically it's not a "board game," but if you're not comfortable with technicalities, this really isn't the game for you.
The contest starts when the first player draws an action card and follows the directions (like "audit an opponent"). Once you complete them, you'll draw another function card and trade it for one of your existing function cards or discard it. To finish a turn, draw a defense card and attach it to a function card or hold it for future play. Look, who are we kidding? The whole thing sounds about as much fun as a group project for an MBA class. Maybe that's why it recently ranked just #178,162 in Amazon's "Toys & Games" category.
Here's all you really need to know. Overpaying your tax is no fun, and tax planning isn't a game. So call us when you're ready to play, and get a serious plan to pay less. Then pass GO and find something fun to do with your savings!
Aretha Franklin left this world with a musical legacy for the ages. The Queen of Soul started singing for her father's "gospel carnival tours" at 12, cut her first record at 18, and scored her first hit a year later. She went on to record 112 hit singles, including 20 #1s, and won 18 Grammies. She performed for presidents and even sang for a real queen (of England). When word broke of her death last month, many questioned who on earth could possibly sing at her funeral? (Answer: Stevie Wonder, Jennifer Hudson, and many more.)
Unfortunately, Franklin didn't leave behind a will. This is especially ironic considering how rock steady she was with her money during her life — even downright paranoid! She demanded payment on the spot, in cash, then kept a handbag with stacks of hundred-dollar bills with her security team, or even right on her piano where she could see it. She had seen colleagues like Ray Charles and B.B. King get ripped off, and she was not about to join them!
Franklin died in her longtime hometown of Detroit, and had been divorced since 1984. Michigan law holds that when an unmarried person dies "intestate," or without a will, their assets go equally to their children. Franklin's four sons have stepped forward as "interested parties" in court papers and nominated Franklin's niece as the natural woman to be the estate's personal representative. But that's no guarantee that a chain of fools won't show up with their hands out, especially with an estate valued at $80 million or more. (Not bad for a tenth-grade dropout, right?)
Franklin is hardly the only music icon to spend more time planning their next performance than their financial legacy. When Prince died intestate two years ago, the bitter fighting that erupted among his six heirs set the doves crying. Last year, the estate announced a distribution deal with Universal Music Group valued at $31 million. But five months later, a Minnesota judge let Universal back out after accusing the estate's representatives of fraud. The judge himself described the situation as "personal and corporate mayhem," which is something you never want to hear a judge say about you.
Estate planning may be more important for musicians because so many die young. When Doors frontman Jim Morrison reached the end at 27, he left his estate to his common-law wife, L.A. woman Pamela Courson. She died intestate three years later, so it went to her parents. But Morrison's parents argued his will was invalid because he wasn't competent to write it. (For some reason, they thought he was under the influence of drugs. How could that be?) Oh, and Morrison had married a previous girlfriend in a pagan ritual that included walking on fire and drinking each others' blood. Shouldn't that count for something?
Even proper planning can't guarantee preventing complications down the road. Michael Jackson left a valid will and revocable living trust. But his executors are locked in a Tax Court thriller, battling the IRS over how much to value his name and likeness. The estate pegged them at $2,105, reflecting the damage Jackson had done with his generally weird and scandalous public behavior. The IRS pegs those rights at $161 million because, well, he was the "King of Pop." At least he didn't leave it all to Bubbles the Chimp!
You may not earn your money performing for the Queen. But you probably still work hard for it. So show it some respect, and don't waste anything on taxes you don't have to pay. Call us for a plan to pay less, and we'll give you something to sing about!
This week's story is a briny chowder of petty vandalism, tax avoidance, partisan posturing, and flat-out misinformation. There's probably something in here to offend everyone. So buckle your seat belts and get ready for a ride!
Education Secretary Betsy DeVos has been one of Donald Trump's most controversial cabinet officials since barely surviving Senate confirmation thanks to the Vice-President's tie-breaker. It doesn't help that she's also one of Trump's wealthiest appointees. She and her husband Dick, son of Amway founder Richard DeVos, are worth an estimated $1.3 billion. And the DeVos clan, befitting their place on the Forbes 400 list, enjoy the usual collections of homes, jets, and ten (ten!) yachts that you would expect a family of billionaires to maintain.
Last month, news broke that someone had untied Betsy's 164-foot yacht Seaquest from its dock on Lake Erie. That's maybe newsworthy on its own — the vessel cost $40 million, which means damage could have been significant, and Lake Erie isn't exactly known for random drifting superyachts. But what really drew fire was the news that DeVos, who of course serves a President dedicated to "America First," was flying a Cayman Islands flag on her vessel. The partisan outrage machine instantly kicked into gear, howling that DeVos had avoided over $2 million in tax with the move.
Why would a Michigan billionaire, whose husband actually ran for Governor of that state, register her floating palace on a tiny flyspeck of an island 1,700 miles away? If she registers Seaquest in Michigan, she's potentially subject to the Wolverine State's 6% use tax, or $2.4 million. She's subject to U.S. safety and inspection standards. And her crew is subject to U.S. labor requirements. Registering the yacht in the Caymans lets her meet a considerably less-demanding set of standards. (Think "island time," but apply that concept to maritime rules and regulations.)
So DeVos is a high-class hypocrite, right, exploiting loopholes to save millions and cheat the kids she's sworn to serve? Well, if so, she's hardly alone. Sailing under a "flag of convenience" has a long and sometimes-even-honorable history. Early American merchantmen flew under the British flag to avoid Barbary pirates. And if you've ever taken a cruise, you've done it yourself. Take Royal Caribbean's brand-new $1.4 billion Symphony of the Seas. She's the world's largest cruise ship, with robot bartenders, 22 restaurants, 24 swimming pools. And she sails under a Bahamas flag.
What's more, it turns out the headlines blaming Betsy for registering "a fleet of yachts" outside the country are, to use a loaded term, fake news. For one thing, it turns out Seaquest isn't even Betsy's boat. It's actually owned by a company called R.D.V. International Marine, a subsidiary of the DeVos family office. And the family's other nine yachts — the Blue Sky, Quantum Racing, Delta Victor, Reflection, Attitude, Sterling, Windquest, Zorro, and De Lus — are registered to ports in Michigan, Delaware, and Florida.
What's our bottom line for this week? (Besides "don't believe everything you read"?) The DeVos family may be a little showy with their money. But they didn't get to be billionaires by wasting money on taxes they didn't have to pay. So call us when you're ready to start building your fleet, and see what we can help you buy!
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