Is this a guaranteed way for a wealthy US citizen to pay no State or Federal taxes, and have it be completely legal?
Say that Bob is independently wealthy, no job or business ventures.
Perhaps he is a retired sports star, and has 100 million dollars cash on hand.
Bob decides he doesn't want to pay taxes. Maybe he is a miser or maybe he has political motivations and doesn't like what his tax money is being used for.
Whatever the case is, he wants to avoid paying US taxes while still effectively "living" in the US.
That's where Monaco comes in. Monaco is a very tiny but densely populated independent city state in Europe. It is a notorious tax haven and not difficult for a wealthy person to attain a second citizenship there.
Bob does just that and buys a small flat there, which becomes his permanent legal address.
Bob moves all his money to Monaco, selling his property in the US, paying taxes due to those sales for the very last time.
But Bob only stays in Monaco a few months total time out of the year and "visits" the US for most of the year.
As a US Citizen, he is allowed to be here any time he wants, and he spends extended stays at higher end hotels such as the Ritz Carlton and the Sheraton.
But legally, he lives in Monaco, and all his investment income is in Monaco, which has no taxes.
He has absolutely no taxable income in the US. He supports himself for the 9 months out of the year that hes in the US by flying over from Monaco with a large sum of cash, declared at customs.
Could that work?
Declaring such a large amount of cash at customs shouldn't be suspicious. As a sports star, if any official asks, he could just pull himself up on Wikipedia and show who he is, then they know he's a guy with legit money.
As far as State taxes go he'd still pay sales tax but that's about it.
And when he has that much money, the cost of the hotel stays and property in Monaco should come out less than his capital gains taxes in the US would be within a few years.
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- curtisports2Lv 79 months ago
No. It can only work if he gives up his US citizenship. As a US citizen, you are taxed on worldwide income - no matter where you earn it, you must report it to the IRS.
The reason why many US citizens living in foreign countries pay little to no federal income tax is because they receive a credit for the tax they pay in those foreign countries. This is so there is no double taxation. In a country that has little or no income tax, there will not be that foreign tax credit to offset the US income tax that is owed on worldwide income.
- ibu guruLv 79 months ago
No chance. US taxes all income from all sources worldwide. And foreign banks are required to report holdings by Americans. As a high net-worth individual, he would be on IRS radar.
The largest group of income tax evaders & tax frauds are illegal aliens. The vast majority of illegal aliens commit tax fraud, tax evasion. Very, very few Americans commit tax evasion, tax fraud - a fraction of 1%. They do not mess with the IRS.
- JudyLv 79 months ago
A US citizen pays tax on their worldwide income. Adjustment is made for tax he pays to foreign countries.
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- StephenWeinsteinLv 79 months ago
No. It is a guaranteed way to have to pay at last as much tax, and possibly more. It could not work.
U.S. citizens have to pay tax on all of their income, from anywhere in the world. For investment income, it doesn't even matter whether it is "income in the US" or not, because all income of a U.S. citizen, anywhere in the world, is taxable in the U.S., exactly the same as income in the U.S. (For earned income, there is sometimes an advantage to earning it by working overseas instead of working in the U.S.)
In addition, when -- not if -- the U.S. government noticed that the amount of cash he was spending was more than what he was reporting to the IRS, they could have him arrested and sent to prison for many years for tax fraud.
Also, when the government catches someone traveling with large amounts of cash who can't prove that they got it legally and aren't laundering it, the government can simply seize it, which is essentially a 100% tax. Because it's a civil action, not a criminal charge, the government doesn't have to prove that the person is guilty, they can simply take it and then the person has to prove it's his if he wants to get back some of it.
- babyboomer1001Lv 79 months ago
There is no legal way to do that.
- Pearl LLv 79 months ago
i dont think so
- No BozosLv 79 months ago
First of all, if Bob has no investments or is not earning interest on his money, Bob will not be asked to pay taxes. Taxes, in the U.S. are based on INCOME, not just having money. So, Bob has no need to hide his money in a tax shelter. He also has no need to live anywhere except in the U.S.
Taxes on investments is called Capital Gains taxes and is taxed differently than income taxes. However, most people with Bob's kind of money invest in countries, like Switzerland, is because U.S. banks will not insure large sums of money. The FDIC only allows for deposits of $250,000 to be insured. Deposits in the hundreds of millions can only be insured in places like Monaco.
Also, regardless of whether Bob deposits or invests his money in foreign banks, legally, he is required to report hin gains to the IRS. Whether he lives in the U.S. or not. As long as he is a U.S. citizen, he is required to adhere to the country's tax laws.
- BrianLv 79 months ago
Or, he could just keep it all under his mattress and stay here in the states.
- Aster RhoidsLv 79 months ago
In short, he wants to commit tax fraud.