We have been retained by a new client who works for one of the large pharmaceutical companies in a top management position. He believed that the amount of taxes his household paid was exorbitant. We have recommended the tax planning, an engagement that addresses ways a taxpayer can reduce overall tax burden without running afoul of the law. The client gladly agreed and we got to work. After an extensive interview with the client, we learned that client’s spouse is a homemaker and has plenty of time on her hands. We made a recommendation that the spouse take up a business activity that would legitimately generate a loss, at least for the first three years. One of the options was a real estate rental business. After explaining all nuances of starting and running such a business and complying with relevant IRS requirements, we calculated the impact on client’s taxes.
The effect was tremendous – with other recommendations yielding even more tax savings, we saved the client about $14,000 in federal and state taxes in the first year alone. Over the next three years, the savings exceeded $50,000.
The client thanked us for essentially increasing their family disposable income.