Originally Posted by The_Jazz

I think you're confusing personal taxes and corporate taxes, at least if you're talking about the US tax code. They're very different animals. For instance, your friend buying the new Mercedes is almost certainly not doing so with his personal funds; he controls a business that purchases it for him. It is a deduction for the business but not for him personally.

I do in fact know the difference between corporate and personal taxes, and my point was that the closely held corporation is going to do as much as possible to balance expenses to income including salaries, compensations, and perks so as to have as low a tax profile as is possible.

I'm also willing to bet that you've never been a small business owner - I could be wrong, but it seems like a safe bet - so I don't know if you understand the ramifications of a small business bumping compensation and perks for the owners. That's going to create some significant tax liabilities for them personally, most specifically with compensation. For instance, a salary going from $75k to $100k is going to result in a change in tax brackets and an increase in personal income tax by roughly $10k. But maybe you're talking about something completely different.

I've actually had several, from a bird food manufacturing and packaging operation with about 15 to 20 employees, a bindery business for the print industry with 145 employees, and a high end stereo home theater business to name the bigger entities. Where the real experience and exposure to corporate logistics came in was doing turnaround consulting with failing and struggling businesses. I also dated Senator Petris's aide and the California Senate Oversight Chairperson who had personal control of somewhere around 300 to 500 million a week in override appropriations. I have an insider's perspective on how businesses as well as the government are run. It would be relatively easy to initiate oversight programs that would save staggering amounts of money if there weren't such a ridiculous degree of opposition by the GOP to monitor how money is spent and what we get for it.

If you have $50k in tax personal liabilities for last year - 2010 - you need to get a new investment advisor. You're making over $400k, so you can afford it. There are many ways - municipal bonds for instance - that allow you to grow money with little or no penalty.

My wife inherited some money last year and the way her dad had investment accounts set up it made the cash assets directly payable to my wife as taxable income. Fortunately the rest is in probate from the sale of a paid for house and commercial property in Los Angeles.

Now, your current advisor's recommendation is fraudulent. I can easily check with a tax attorney if you'd like (I'm related to more than one), but I'm certain that there's no provision that allows an individual to purchase a corporation's losses to claim as their own. Perhaps you haven't described the theory well enough, but as it stands, what you've described is blatantly - and obviously to me - illegal.

You may be correct about the tax shelter my accountant is recommending being gray area fraudulent, but he showed us the statute that defines how it is to be done and it is there in black and white. The tax code on obscure and senseless exemptions and credits needs to be cleaned up and brought back to a basics state. As I had stated we are not interested in paying someone $25k to save $50k, it smells of subversion even if it is legal. Unfortunately wealthier people that actively manage investments are generally prone to taking advantage of every little obscure loophole they can bend to fit their circumstances. Investments are made so as to profile and shelter money by those who have enough extra money to change their profile. Meanwhile those just moderately getting by are stuck paying more taxes than those who are making more.

If we're talking about the US, I think you're getting some pretty bad information from someone.