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October 1, 2005

Section 1031 Exchanges Set the Risk Standard

#Tax Advisor, #2005 Archived

When our Real Estate clients see their real estate values soar in value, a 1031 exchange is an easy recommendation, or is it?

As an experienced tax lawyer, I know that tax planning is rife with potential dangers, including the expensive consequences when clients don't tell the truth to the IRS or to their own advisors.

Clients can easily convince themselves that their transaction is simple and straightforward. Sometimes what seems logical and fair to the client is not always what the tax law says it should be.

The difference between success and failure is how you manage your risks including rapidly changing tax laws, murky facts, unpredictable clients and an uncertain future.

On the flip side, picking the right 1031 Exchange Intermediary, can allow your practice to seize potential opportunities to serve clients with confidence and profitably.

As an experienced 1031 Exchange Intermediary and as an experienced tax lawyer, I can help you and your clients navigate through the minefields, mistakes and malpractice errors. Rely on Strategic Property Exchanges, LLC and our iron-clad tax opinions to protect you and your clients from the IRS.

Frivolous Tax Arguments which will land your client in Hot Water

  • A taxpayer can avoid tax by filing a return that reports zero income and zero tax liability.
  • A taxpayer may avoid income tax by referring to a separate "straw man" entity created by the use of the taxpayer's name in all capital letters in government documents.
  • Wages are not taxable income because taxpayers have basis in their labor equal to the fair market value of the wages they receive; thus, there is no gain to be taxed.
  • The 16th Amendment is invalid because it contradicts the original Constitution, was not properly ratified, and lacks an enabling clause.
  • A taxpayer can make a "claim of right" to exclude the cost of his labor from income.
  • Only income from a foreign source is taxable under Code Sec. 861.
  • The taxpayer claims not to be a "citizen" or a "person" within the meaning of the Internal Revenue Code.
  • Residents of States, such as New York or California, are residents of a foreign country and therefore not subject to U.S. income tax.
  • A taxpayer can escape income tax by putting assets in an offshore bank account.
  • A taxpayer can eliminate tax by establishing a "corporation sole."
  • A taxpayer can place all of his assets in a trust to escape income tax while still retaining control over those assets.
  • A taxpayer can deduct amounts paid to maintain his household by establishing a home business.
  • Nothing in the Internal Revenue Code imposes a requirement to file a return.
  • Filing a tax return is "voluntary."
  • Because taxes are "voluntary," an employer doesn't have to withhold income or employment taxes from employees.
  • A taxpayer can refuse to pay taxes if he disagrees with the government's use of the taxes it collects.
  • A taxpayer can escape income taxes or the tax system by submitting a set of documents in lieu of a tax return.
  • A taxpayer can avoid tax by filing a return with an attachment that disclaims tax liability.
  • A taxpayer can avoid tax by filing a return with an altered penalties of perjury (jurat)statement
  • Certain taxpayers can claim a "reparations tax credit" to right wrongs done in the past.
  • By purchasing equipment and services for an inflated price, a taxpayer can use the Code Sec. 44 disabled access credit to reduce tax or generate a refund.
  • Under Code Sec. 3121 taxpayers can deduct the amount of Social Security taxes paid or get a refund of those taxes.
  • A taxpayer may sell (or purchase) the right to claim a child as a qualifying child for purposes of the EIC.
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