It's tax time, and most Americans are trying to figure how much they owe the IRS.
Still, many corporations and wealthy individuals have already prepared for the big day by assiduously spending money in deliberate ways to minimize their tax liability.
The result is billions in lost revenue for the government every year.
These are just some of the most galling tax deductions that are perfectly legal.
Corporations can avoid paying taxes on U.S. profits with the "Double Irish" arrangement.
Several major U.S. corporations dodge domestic taxes by moving profits internationally to tax havens.
For example, a company can utilize the "double Irish" formula to minimize their U.S. taxes.
If the profits from the sale of a good stayed in the U.S. they would be taxed at the federal 35 percent rate. However, some companies sell the intellectual property rights to an Irish subsidiary in order to minimize tax obligations.
The profits from that U.S. sale are paid overseas to the Irish subsidiary. As long as the Irish subsidiary is controlled by managers elsewhere — for instance, a Caribbean tax haven — the profits can move around the world without a dime of taxation.
At this point, the profits are moved to a nation with no tax, skirting around the U.S. 35 percent rate.
Source: NYT
They can also avoid taxes on international profits by expanding the "Double Irish" to include the "Dutch Sandwich."
This is the "Double" part of the Double Irish, and also entails a trip through the Netherlands.
When the same company's product is sold overseas, that profit is routed to a second Irish subsidiary, Since Ireland has treaties with the Netherlands to make inter-European transfers tax free, the profits are then routed through the Netherlands, and then back to the first Irish subsidiary, and then to the no-tax Caribbean Island.
As a result, the U.S. company never has to repatriate the money and they never has to pay taxes on the products.
Source: NYT
The carried interest loophole allows people who work in investing to skirt federal income tax rates.
Carried interest — profits made by private equity investment managers, hedge funds, venture capitalists and real estate investment trusts — constitutes a major source of income for many financial professionals.
However, carried interest isn't taxed as income. Instead, it's taxed at the capital gains rate, which at 15 percent is considerably less than the top bracket tax rate of 39.6 percent that many of the financial professionals would pay.
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