Tax Concepts

Most Family Offices don’t lose wealth by making poor investment decisions—they lose it through inefficiencies. Taxes, fees, and outdated structures quietly erode returns, often without investors realizing it. The most sophisticated Family Offices have figured this out. Instead of focusing solely on higher returns, they prioritize something far more impactful: Structural Alpha. This isn’t about choosing the best hedge fund or private equity deal. Structural Alpha is about optimizing how investments are structured to maximize after-tax returns and eliminate inefficiencies. It’s a way to achieve stronger outcomes not by taking on additional risk but by being more strategic about how capital is deployed. A prime example is Private Placement Life Insurance (PPLI), a tax-efficient structure that allows Family Offices to significantly reduce the tax burden on investments like credit funds. Without it, returns on a credit strategy might shrink from ten percent to seven percent after taxes. With PPLI, those gains can be preserved for a fraction of the cost. Another example is tax-aware investing. Tax-loss harvesting extends far beyond its original application, allowing Family Offices to structure portfolios in a way that minimizes tax liabilities without compromising performance. For Family Offices, this isn’t just an advantage—it’s an essential approach to wealth management. Family Offices exist to preserve and grow generational wealth, yet many still operate within traditional investment frameworks that leave money on the table. By integrating Structural Alpha strategies, they can improve after-tax returns without taking on unnecessary risk, reduce compounding inefficiencies, and ensure long-term capital preservation through smarter structuring. The most forward-thinking Family Offices aren’t just searching for strong investments—they’re refining how they invest. Structural Alpha isn’t a trend; it’s a shift in approach that separates those who quietly optimize their wealth from those who unknowingly give a portion of it away.

Can legislative amendments redefine constitutional concepts like ‘supply’ and ‘service’ under GST, especially when the principle of mutuality? -->In a landmark decision, the Kerala High Court has ruled that certain amendments to the CGST/SGST Acts, which sought to expand the definition of "supply" to include services provided by clubs and associations to their members, are unconstitutional. -->The key issue revolves around whether Parliament and State Legislatures have the authority to redefine the concept of "supply" and "service" in a way that violates the principle of mutuality. Under GST, "supply" and "service" typically require the involvement of at least two separate entities—provider and recipient. However, these amendments would have allowed clubs (acting as self-help groups) to be taxed for providing services to their own members, an action previously exempt under mutuality principles. --> Court’s Ruling: The Kerala High Court ruled that these amendments violated the constitutional understanding of "supply" and "service". The Court emphasized that mutuality, where the club and its members are considered part of a single entity, has been upheld in past rulings like Ranchi Club v. Chief Commissioner and Calcutta Club Ltd.. The Court highlighted that amendments to the definition of supply cannot override judicial interpretations unless the Constitution itself is amended. -->Retrospective Taxation Issue: Additionally, the Court ruled that the retrospective application of these amendments was unconstitutional. The decision to apply the tax retroactively, without adequate opportunity for businesses to adjust or collect the tax from members, goes against the Rule of Law and the principle of fairness. The absence of a reasonable justification for this retroactivity was also flagged by the Court. -->Impact:It reaffirms that legislative bodies cannot arbitrarily alter the meanings of terms like "supply" and "service" in ways that conflict with constitutional principles. The detailed reading of the 51-page order is included in my reading list.   #gst #caselaw #gstwithtarjani #constitutional #law #legal

With the estate tax exemption potentially remaining high - basis planning may become more popular. This could include “upstream” basis planning. The general rule is that if assets are included in a person’s taxable estate at death - those assets receive a step-up in basis. This could potentially incentivize getting appreciated assets into the hands of those family members with the highest mortality chance (not an incredibly palatable thought, I know). It can be done one of two potential ways: 1️⃣Gifting the assets outright to the person with the highest mortality risk; or 2️⃣Granting the person with the higher mortality risk a general power of appointment in a trust This planning isn’t only applicable going “upstream” to parents - it could also be down between spouses in common law marital property states (perhaps where one spouse is much older) It is very important to note that Congress did consider the potential abuse of the step-up rules and put a provision in the IRS code requiring that if a person inherits assets that they previously gifted to a decedent less than a year before - the step-up is not permitted. This is the so-called “boomerang” rule. However, this type of planning is not without risk. In fact, there’s a ton of risk. ⚠️What if the person needs long term care governmental benefits? They have assets in their “possession” that could need to be spent down in order to qualify. ⚠️What if they have creditors? ⚠️What if they get divorced? ⚠️What if they spend it? ⚠️What if the donor ends up predeceasing the donee? No planning strategy is perfect (and some could disregard this one as uncomfortable to employ for many reasons), but always good to know the strategies that are out there! #estateplanning

I’ve tested these 14 tax strategies for over a decade. They are the most reliable for keeping more money in your pocket: For Real Estate Investors: Cost Segregation Studies: These remain valuable for accelerating depreciation on high-value assets, even with declining bonus depreciation rates 1031 Exchanges: Still available for deferring capital gains when selling properties. Real Estate Professional Status (REPS): This status continues to allow investors to deduct rental losses against active income Self-directed IRAs: These remain a viable option for investing in real estate while deferring taxation. For Business Owners: S Corp Tax Election: This strategy for reducing self-employment taxes is still applicable. QBI Deduction: The 20% Qualified Business Income deduction remains available for pass-through entities Home Office Deduction: Still available for those who use part of their home exclusively for business Hiring Family Members: This strategy for income shifting continues to be valid. Retirement Plan Contributions: Maximizing contributions to Solo 401(k)s and SEP IRAs remains an effective tax-reduction strategy For High-Income Earners: Municipal Bonds: These continue to provide tax-free interest income. HSAs & FSAs: These tax-advantaged accounts for medical expenses are still available. Charitable Giving Strategies: Donating appreciated assets remains a tax-efficient giving method. Tax-Loss Harvesting: This strategy for offsetting capital gains is still applicable. Deferred Compensation Plans: These plans continue to be useful for managing tax brackets. Don’t wait until your tax bill arrives—fix it before it’s too late.

You can save thousands in tax... by paying more tax. Sounds backwards, right? But this move saved one of my clients £8,547, without earning a penny more. Here’s what happened: He usually takes £30k a year from his business. But this year, he needed an extra £40k for a house deposit. His plan was to take the full £70k now and get it over with. The problem? That would push him into the higher-rate tax band, triggering a much bigger tax bill. So we took a smarter route: 👉 We split the extra £40k evenly over two tax years — £20k this year, £20k next. That small shift meant: ✅ He stayed in the basic rate tax band ✅ Avoided the higher 40% tax rate ✅ And saved £8,547 in tax overall He technically paid more tax this year, but saved thousands in the long run. That’s the difference between reactive and proactive tax planning. Tax isn’t just about what you pay. It’s about when and how you pay it. If you're thinking about a big withdrawal for a house, car, or anything else, speak to someone first. A bit of planning can save you a lot of money.

Navigating Tax Implications in Real Estate for the Family Office In my experience working with family offices, I’ve seen how taxes can make or break a legacy. When creating a legacy plan for real estate investments, it’s essential to consider the tax implications—this is where the difference between preserving and eroding wealth often lies. A well-thought-out tax strategy is crucial for maximizing the value of your real estate assets. By working closely with tax advisors and estate planning professionals, you can develop strategies that minimize tax liabilities and ensure that the maximum amount of your wealth is passed down to future generations. Whether it’s through setting up trusts, implementing gifting strategies, or exploring other tax-efficient structures, smart planning today leads to lasting benefits tomorrow. It’s about making sure that your wealth isn’t just preserved, but optimized for the future. The key takeaway here is that taxes don’t have to be a burden—they can be managed effectively with the right strategy. P.S. What strategies are you using to manage the tax impact of your real estate investments? Let’s exchange ideas. ♻️ Share this if you believe in the importance of tax planning for legacy building.

You wouldn’t launch a product without a roadmap. So why run your business without a tax strategy? Every founder builds business plans, marketing calendars, and growth forecasts, but when it comes to taxes, most wait until the eleventh hour. That’s like driving with no GPS and hoping you’ll end up in the right place. Tax strategy isn’t just about saving money (though it will). It’s about making smarter decisions, around hiring, compensation, entity structure, and reinvestment, that align with your long-term goals. If you’re scaling and don’t have a clear tax plan in place for this year (and next), it’s time to treat taxes like every other part of your business: proactively. Let’s map it out.

🔎Cairn v India (part I post)- one of the largest investor-state tax related arbitration dispute to date - reveals why: ➲ calling changes in tax law as "clarificatory" by the authors of such changes often create a smoke-screen to the illegal retroactive negative tax consequences (cf. para. 3 of ATAD and the OECD and the EC narratives) -focus of this post; ➲ "aggressive tax planning" is a populistic policy term of no or little legal importance altogether (Cf. para. 80 of the Court of Justice of the European Union judgment in X BV case) - focus of the next post post. The attached print screen comes from my latest lectures at BI Norwegian Business School & Universitetet i Oslo. It illustrates that Cairn Energy UK wanted to enter into Bombay Stock Exchange (now: BSE) through a locally established subsidiary (CIL). To ensure a very high entry value of CIL's shares, assets of 27 subsidiaries operating in oil & gas sector in India were consolidated and eventually transferred to CIL (the Indian subsidiary aiming to on on BSE) in a series of incremental stages (CIHL Acquisition). It resulted from offshore indirect transfers (OITs) of shares. Capital gains stemming from such OITs were clearly outside the Indian jurisdiction to tax at the time of CIHL Acquisition. Supreme Court of India confirmed it in 2012 - Vodafone International Holdings BV v Union of India (2012) 6 SCC 613. The Court stated that section 9(1)(i) of Income Tax Act (ITA) does not impose a charge to tax on the sale of shares in foreign incorporated companies since these shares are not "assets situate in India" even though the assets owned by such companies may be so situated. Side note: Peter Hongler during his presentation for IFA Norway on 16 Oct 2024 called taxation of gains from OITs as an example of taxation beyond jurisdiction to tax, which is compatible with international custom, while the UTPR is not. My take: if not an international investment agreement (IIA), or a DTT as the case may be, custom alone is of no or little legal value to prevent such taxation.  📣India decided to overturn its own highest court's judgment in 2012 by adding to the ITA " Explanation 5", calling it only a "clarificatory" change: "For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India." 💡The Tribunal did not buy the "clarificatory" argument at all. It was clearly a substantive and "grossly unfair" change in ITA (para. 1816). P.s.: ➢ Do you agree with the OECD argument that the PPT only mirrors "a guiding principle", e.g. that addition of the PPT to DTTs is only clarificatory in nature? ➢ Do you know other examples of "clarificatory" tax changes in domestic or international tax law?

New Bill - Eight Estate Planning Ideas - Quick Read On July 3, the House passed signature legislation; below are some ideas for T & E Experts, CPAs and Financial Planners. First, there will be a $15 million estate/gift exemption per person and a $15 million GST exemption per person. The bill does not change the § 1014 basis adjustment. Second, income tax rates will remain the same. Roth conversions will remain white hot. Third, § 199A will remain the same with a 20% deduction. Fourth, there will be a SALT deduction available to both individuals at a $40,000 level with a phaseout when income exceeds $500,000. The problem with this phaseout is from $500,000 and $600,000 of income, the deduction falls from $40,000 back to $10,000. The same SALT deduction will be available for non-grantor trusts. This will impact how trusts are drafted when there are multiple beneficiaries. For example, if you were drafting a trust for four grandchildren, you might be inclined not to draft one trust, but to draft four trusts. By drafting separate trusts you now have $160,000 of SALT deduction and may avoid the phaseout if income otherwise would have been over $500,000. Fifth, additionally §1202 has been liberalized by this bill. This will require a fresh look at the use of qualified small business corporations. This is important because now we can exempt a portion of the gain after three years and four years, not just after five years. The amount of the QSBS gain you can protect is going to increase to $15 million. Sixth, in time virtually every CPA, when posed with the question, “should I be an s-corporation, LLC or C-corporation,” is going to have to incorporate this expanded §1202 language into their analysis. C-corps may be in vogue if the intention is to create and sell a business. Seventh, opportunity zones will return in 2027 and provide a significant tax advantage investment strategy with deferral and tax-free gains. The issue here is that in 2026 opportunity zones will have only marginal utility because the deferral will end December 31, 2026. The interesting issue here is how to bridge gains from 2026 to 2027. The areas being discussed are the use of installment sales, hedging with options until January of 2027, and the use of a charitable remainder trust to bridge income from 2026 into 2027. Eighth, the bill is a watershed moment for estate tax planning that will result in a renaissance of income tax planning with nongrantor trusts. While estate tax planning will be reduced because of a $15,000,000 exemption, there will be a renewed focus on income tax planning and nongrantor trusts will be the cornerstone of that planning.  Bob Keebler July 3, 2025 https://lnkd.in/gBdscHYP

𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐂𝐨𝐦𝐩𝐞𝐧𝐬𝐚𝐭𝐢𝐨𝐧 𝐟𝐫𝐨𝐦 𝐓𝐚𝐱 𝐂𝐨𝐮𝐫𝐭 𝐋𝐚𝐰𝐬𝐮𝐢𝐭 𝐃𝐞𝐜𝐢𝐬𝐢𝐨𝐧𝐬: 𝐆𝐚𝐩𝐬 𝐢𝐧 𝐏𝐫𝐚𝐜𝐭𝐢𝐜𝐞 The enactment of Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP) replaced Article 27A of the General Taxation Provisions and Procedures Law (UU KUP) with Article 27B, introducing new rules for interest compensation. Similar to the previous Article 27A, while Article 27B covers objections, appeals, and judicial reviews, it remains silent on lawsuits, leaving their eligibility for interest compensation unclear. 𝗧𝗮𝘅 𝗖𝗼𝘂𝗿𝘁 𝗗𝗲𝗰𝗶𝘀𝗶𝗼𝗻𝘀 𝗼𝗻 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗖𝗼𝗺𝗽𝗲𝗻𝘀𝗮𝘁𝗶𝗼𝗻 𝗳𝗼𝗿 𝗟𝗮𝘄𝘀𝘂𝗶𝘁𝘀 Lawsuits over rejected interest compensation typically arise from requests to correct, reduce, or cancel tax assessment or Tax Collection Letters. These cases often begin with a taxpayer’s request to cancel or reduce a Tax Collection Letter as mentioned in Article 14 of the UU KUP. If the DGT denies the request, the matter may escalate to the Tax Court through lawsuits. When the Tax Court rules in favor of the taxpayer, resulting in a tax overpayment, taxpayers often seek interest compensation. However, the lack of clear provisions regarding interest compensation in lawsuit decisions frequently leads to DGT rejections, prompting further lawsuits. While there have been Tax Court rulings granting interest compensation in such situations—such as PUT-51032/PP/M.XIA/99/2014 and PUT-011221.99/2023/PP/M.IIIB/2024— the issue remains contentious within the current legal framework. 𝗜𝗻𝘁𝗲𝗿𝗽𝗿𝗲𝘁𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗔𝗿𝘁𝗶𝗰𝗹𝗲 𝟮𝟳𝗕(𝟯) Under Article 27B(3) of the amended UU KUP, taxpayers may receive interest compensation for tax overpayments if their requests for correction or cancellation are granted. However, disputes arise as the DGT often limits compensation to cases initiated by taxpayer requests, excluding ex officio decisions. Referring to previous disputes in the Tax Court that were decided in favor of taxpayers, if such disputes are pursued through lawsuits filed with the Tax Court and subsequently granted, Article 27B(3) should be interpreted to include decisions to reduce or cancel a Tax Collection Letter based on the taxpayer's request. This applies regardless of whether the decision is made directly by the Director General of Taxes or through a new decision issued by the Director General as a follow-up to a Tax Court lawsuit ruling that nullifies the previously disputed decision. As long as the outcome results in a tax overpayment, the taxpayer is entitled to interest compensation under Article 27B(3) of the UU KUP. This interpretation aligns with prior Tax Court rulings favoring taxpayers in similar cases, despite the absence of explicit provisions in both the repealed Article 27A and the current Article 27B. #gnvconsulting #taxcourt #taxdisputes #taxcontroversy