TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, May 5, 2012

How to Pay No Taxes: 10 Strategies Used by the Rich

Bloomberg: How to Pay No Taxes: 10 Strategies Used by the Rich, by Jesse Drucker:

For those who can afford a shrewd accountant or attorney, our era is rife with opportunities to avoid—or at least defer—tax bills, according to tax specialists and public records. It’s limited only by the boundaries of taste, creativity, and the ability to understand some very complex shelters. Here’s a look at some of them:

  1. The ‘No Sale’ Sale:  Cashing in on stocks without triggering capital-gains taxes
  2. The Skyscraper Shuffle:  Partnerships that let property owners liquidate without liability
  3. The Estate Tax Eliminator:  How to leave future stock earnings to the kids and escape the estate tax
  4. The Trust Freeze:  “Freezing” the value of an estate, so taxes don’t eat up its future appreciation
  5. The Option Option:  Stock options allow executives to calibrate the taxes on their compensation in a big way
  6. The Bountiful Loss:  Using, but not unloading, underwater stock shares to adjust your tax bill
  7. The Friendly Partner:  With this deal, an investor can sell property without actually selling—or incurring taxes
  8. The Big Payback:  So-called permanent life insurance policies are loaded with tax-avoiding benefits
  9. IRA Monte Carlo:  Tax advisers recommend converting traditional IRAs to Roth IRAs—soon
  10. The Venti:  Putting a chunk of pay in a deferred-compensation plan can mean decades of tax-free growth

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Amazing. Congress outlawed the "friendly partner" tax strategy in 1984. Or at least Congress thought it had. Unfortunately Treasury wrote regulations in 1992 that preserve the loophole.

Posted by: Jake | May 5, 2012 5:25:01 PM