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Washington Post Speaks to Beth Shapiro Kaufman on the Wealthy Delaying Tax Payments

June 1, 2017, The Washington Post

Wealthy Americans and business owners are putting off paying taxes in the hopes that Republicans will deliver big cuts, leaving the government increasingly short on cash and accelerating its crash into the debt ceiling.

“Investors are hopeful that tax rates will go down next year, and that the net investment income tax will go away,” said Beth Shapiro Kaufman, who is the president of Caplin & Drysdale, a Washington law firm.

For investors aiming to delay taxes, the simplest approach is to put off selling investments that have appreciated in value. Alternatively, investors can sell securities that have declined in value ahead of schedule to subtract those losses from their income subject to tax in the current year.

Many investors, however, do not want to change how they are timing the market, and they are using a range of different legal options to delay their taxes anyway, advisers said.

One of Kaufman's clients is the owner of a closely held business who is retiring and selling his stake in the firm. To put himself in position to take advantage of a tax cut in the future, the company will pay him out in installments over the next several years, rather than in a lump sum. If Republicans bring down rates, that client will be able to pay less in taxes when those installments come due.

Another strategy Kaufman's clients have deployed involves a special legal entity known as a charitable remainder trust. Wealthy taxpayers can shelter their assets in these trusts, which can sell securities at a profit without incurring a tax bill. The investor remains in control of the assets and can take a regular payment out of the trust as long as a certain minimum remainder — about 10 percent of the total assets — is donated to charity.

For the full article, please visit The Washington Post’s website.

Excerpt taken from the article “Americans are Taking Their Sweet Time Paying Taxes, and the Government Is Running Out of Cash” by Max Ehrenfreund and Damlan Paletta for The Washington Post.


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