Why should you consider transactional planning in San Diego? What is the best way to protect your assets while minimizing tax exposure? Transactional planning is described by our partner, Janathan Allen, as an “integrative plan which organizes an individual’s tangible or intangible assets into a structure which mitigates risk and minimizes tax.”
The first step in deciding as to whether you should consider transactional planning in San Diego is to consider the assets you currently hold, your short and long-term goals and the nature of the income produced by these assets. The next step is to consider how those assets are currently held. Are they creating income? Is the income investment income, passive income or active income and what are the tax ramifications of that income?
There are different IRS rules for how to tax active income versus passive income. In some cases you want to find a way to defer active income. In other cases the objective is to offset passive income through an entity or strategy which generates passive losses. Depending upon the nature of the assets involved and the goals of our clients, we are able to structure an entity or entities which not only provides additional protections for the asset(s) but allows for the creation of offsetting losses to reduce overall tax exposure.
The “when and the ”where” of the transaction or entity also comes into play. If all of our client’s assets are in a single state such as California apply transactional planning in a completely different manner than if they held, for example, multiple pieces of real estate in several different states. The same issues hold true for US taxpayers with foreign assets and investments. Transactional planning may also allow us to create an entity with a different tax year-end which allows us to shift income from one tax year to the next. If the entity has a year-end in March, one may be able to defer a substantial bonus or withdrawal from the end of December to the 2nd of January thereby shifting the realization of that income and ultimately the payment of taxes upon that income to the following tax year.
You should consider transactional planning in San Diego any time you have an asset (even the equity in a single family home) or assets you wish to protect while structuring the way you are organized and conduct your transactions in a way, time and location which reduces your exposure to taxation.
We invite you to listen to our recent podcast on transactional planning and learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.