Hard-to-Spot Differences in Tax Loopholes vs. Tax Scams
by Peter Katt
July 28 was like any other mid-summer Sunday that found me checking E-mails around the middle of the day. But it was unusual for so many E-mails to be flowing into my inbox from clients and tax attorneys—all about a New York Times front-page article appearing that morning with the headline IRS Loophole Allows Wealthy to Avoid Taxes.
It was no surprise to me that the loophole claimed in the article had life insurance as its cornerstone. As I have written about many times in the past, permanent life insurance is often associated with various promised tax loopholes because it is very complicated and the commissions earned from its sale are hidden and grossly high.
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Although it may never be possible to know precisely the planning blueprint hinted at in the article (due to confidentiality agreements signed by those who participated), it is an open question as to whether it is a loophole, as the headline screamed, or only a catch-us-if-you-can scheme.
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