I could do a whole lot of travel with $189 million

One of the things that I do in my ‘real life’ is help individuals with a charitable purpose minimize their tax burden.

Most folks just make gifts of appreciated stock, which provides the double benefit of a tax deduction for the gift value and avoidance of the ccapital gains tax on the appreciation of the asset.

But there are all sorts of things that people can do, including transferring assets to limited partnerships whose shares have less value than their underlying assets because they carry no voting rights (although after the general partner’s death, presumably those voting rights transfer). This is an interesting way that many folks minimize their estate’s value for taxation purposes.

Similarly, some people gift a percentage interest in their home each year while maintaining the right to live in that home until their passing. They don’t give up control over any asset while they’re alive, but claim a tax deduction each year that they’re living.

Here’s a perfectly legal tax shelter that I wasn’t aware of — the New York Times is reporting on the use of certain kinds of insurance companies, which don’t have to pay tax if they collect premiums of less than $350,000 per year, to hold assets. The investment income earned on those assets aren’t taxed. Billionaire Peter Kellogg apparently avoided $189 million in taxes over five years with this technique.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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