DSRC has a reputation of providing innovative, creative and responsible tax planning solutions on behalf of our clients. Our goal is to stay at the “cutting edge” of income and estate planning techniques to save our clients taxes.
Out of State Trusts to Save State Income Taxes
The New Jersey Income Tax can represent over a quarter of a taxpayer’s overall tax liability. With a federal capital gains rate of 25% and the maximum New Jersey gross income tax rate of almost 9%, approximately a quarter of the income tax liability will be paid to the New Jersey Division of Taxation. A similar situation applies to qualified dividend income. For those taxpayers who have municipal bonds issued by taxing authorities in other states, there may be no federal income tax, but there remains a New Jersey income tax.
We have represented clients who have sold businesses at significant profits who are looking to minimize their New Jersey income tax liability. We also have represented clients who are seeking to shelter their investment income from New Jersey income tax.
One planning technique is to create a Non-Grantor Domestic Asset Protection Trust in another state such as Delaware, Alaska or Nevada. Although the trust income is subject to federal income tax, it is not be subject to New Jersey income tax. Nor should the distributions from the trust be subject to New Jersey income tax when received by the beneficiaries.
Executive Income Tax Planning
DSRC represents clients in structuring their executive compensation packages. We know how to develop innovative nonqualified deferred compensation plans which comply with Code Section 409A, including Phantom Stock Arrangements, Section 83(b) Compensation and Split-Dollar Insurance plans.
DSRC uses limited liability companies and profit interests to structure deferred income that will be taxable at favorable capital gains rates rather than as compensation taxable as ordinary income which is subject to employment taxes.
DSRC works together with real estate owners to defer the recognition of income on the sale of their real estate. We are expert in structuring like-kind exchanges which defer the recognition of any gain on the sale of real estate.
A taxpayer may qualify for making a deferred like-kind exchange by identifying the new property to be acquired within 45 days after the existing property is sold, and closing on the acquisition with 180 days from the date of the original closing. The proceeds from the original sale must be paid to a third party intermediary rather than to the client or to his attorney’s escrow account.