Crack and pack

I wanted to call your attention to this article (subscription required) in the WSJ dated 4/3/18 on the topic of "crack and pack."

In a nutshell, the article profiles a few pass-through entities and their mastering of recent changes in the tax code. "Interesting reading."

Where to go with next steps?

This is a workaround.

If your entity has been exempted from the 20% across-the-board pass-through tax deduction for business owners, have your accountant or CPA model a "before and after" cash flow analysis and determine the merits of splitting the business in two; one business that handles the blocking and tackling and the other to do the admin and back-office support. 

Naturally, this step will most certainly result in a change in legal status and re-classification of some employees.

In closing:

"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes." 

  • Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).