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Is defined as:
- Tax shelter as defined under Internal Revenue Code (IRC) Section 6662(d)(2)(C),
- Reportable transaction as defined under IRC Section 6707A(c)(1) that is not adequately disclosed in accordance with IRC Section 6664(d)(2)(A),
- Listed transaction as defined under IRC Section 6707A(c)(2),
- Gross misstatement within the meaning of IRC Section 6404(g)(2)(D), or
- Transaction to which the noneconomic substance transaction (NEST) penalty applies under Revenue and Taxation Code (RTC) section 19774.
- Browse Related Terms: Abusive tax avoidance transaction (ATAT), Material Advisor, Organizer, Potentially abusive tax shelter, promoter, Red Cross Scheme, Seller, transaction
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Transactions promoted for the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. These transactions typically have no economic purpose other than reducing taxes, or may involve the use of multiple layers of domestic and foreign pass-through entities including: partnerships, S corporations, limited liability companies, and trusts.
- Browse Related Terms: Abusive tax schemes, Large entity, Listed transaction, Noneconomic substance transaction, Offshore financial arrangement (OFA), Reportable transaction, Tax Benefit, Tax Haven, Tax Shelter
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Many offshore financial secrecy jurisdictions permit the issuance of bearer shares by corporations chartered in their jurisdiction. The bearer (the holder, or the one with possession of) the share certificate(s) is the owner of the share(s). Only the bearer knows that he/she owns stock in the offshore corporation. Therefore, the ownership of this offshore corporation (IBC) remains private. Bearer shares may be bought, sold, or exchanged in complete privacy.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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This term refers to the true owner of an entity, asset, or transaction as opposed to any stated ownership provided in documents or oral representations. The beneficial owner is the one that receives or has the right to receive proceeds or other advantages as a result of the ownership. It is common practice in offshore financial secrecy jurisdictions to interpose entities, individuals, or both as stated owners. The beneficial or true owner is contractually acknowledged in side agreements, statements or by other devises.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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This is a service whereby a person or entity agrees to hold and manage assets on behalf of another person or entity.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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It is common practice in the offshore industry to issue false invoices as a means to transfer money to an offshore jurisdiction, while at the same time achieving a tax deduction for the paying entity. Commonly an entity associated with an offshore promoter will issue the invoice.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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This term refers to the confidentiality afforded to financial transactions either by enactment of law or by other means. There are many forms of financial secrecy. Financial secrecy can be a part of an agreement between the institution and the client. Law can impose it with either criminal or civil sanctions. Financial secrecy can be operationally given by the financial institution whereby the institutional practices call for only top management to know who owns the account or no bank official knows who owns the account, such as a numbered account. It can also be obtained by the imposition of an attorney, nominee, or entity between the bank and its client.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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Any individual whose net worth is greater than $2 million immediately before the transaction.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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The term international business corporation or IBC refers to a corporation formed in an offshore financial secrecy jurisdiction which is afforded certain tax advantages and protection as to the disclosure of its beneficial owner. Depending on the offshore financial secrecy jurisdiction, shareholders of the IBC may remain confidential through the use of bearer shares.Just as with U.S. corporations, the same person may act as a shareholder, director, president, agent, or as any other officer within the company. Generally, however, the beneficial owner(s) will appoint resident officers and directors for the IBC. Typically an IBC is authorized to do business anywhere in the world except in its home country where it was incorporated (i.e. an IBC formed in The Bahamas may do business anywhere in the world except The Bahamas). The IBC may purchase real estate, cars, businesses, etc. The beneficial owner may act as an agent of the IBC to purchase assets on its behalf. By this means, assets are held under a corporate name, thereby helping to protect the beneficial owner's privacy. It has been reported that there are over one million IBCs formed in offshore jurisdictions worldwide.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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Any entity with gross receipts greater than $10 million during the year the reportable transaction occurs or in the preceding taxable year.
- Browse Related Terms: Abusive tax schemes, Large entity, Listed transaction, Noneconomic substance transaction, Offshore financial arrangement (OFA), Reportable transaction, Tax Benefit, Tax Haven, Tax Shelter
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A letter of wishes is a document that purportedly has no legal status. In fact the document is used to transmit the wishes of the creator or the alleged owner of the trust to the trustee. A letter of wishes is a separate document and not a part of the trust instrument. Letters of wishes are generally used by the beneficial owner of the trust assets to retain some control over the trust assets. Trustees normally welcome this tool. It enables them to exercise their discretion having in mind the wishes of the grantor. The trustee may consider the letter but is not bound or otherwise accountable by its terms. In reality the letter of wishes will be honored as if it were a binding legal document. Although a letter of wishes is frequently associated with abusive trusts, both domestic and offshore, it is also used as a part of normal estate planning and in other contexts for legitimate purposes.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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A reportable transaction that is the same as, or substantially similar to, a transaction specifically identified by the IRS or FTB as a tax avoidance transaction.
- Browse Related Terms: Abusive tax schemes, Large entity, Listed transaction, Noneconomic substance transaction, Offshore financial arrangement (OFA), Reportable transaction, Tax Benefit, Tax Haven, Tax Shelter
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Any person who:
- Provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and
- Directly or indirectly derives gross income in excess of the threshold amount for such aid, assistance, or advice.
The threshold amount is $50,000 if an individual derives substantially all of the tax benefits. For all other cases, the threshold amount is $250,000.
- Browse Related Terms: Abusive tax avoidance transaction (ATAT), Material Advisor, Organizer, Potentially abusive tax shelter, promoter, Red Cross Scheme, Seller, transaction
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A nominee is an individual or entity, which acts on behalf of a beneficial owner. Most often the nominee pretends to be the owner of an entity, asset, or transaction to provide a veil of secrecy as to the beneficial owner's involvement. Many offshore entities provide nominee services whereby they will provide a nominee to act as owner of your arrangement but generally will not act unless instructed to by the beneficial owner.
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Every IBC must have a Board of Directors. The Board may consist of one person or many people. For instance, the beneficial owner of the IBC may appoint himself/herself as the director and sole officer of the corporation. However, most IBCs are formed with a nominee director. The nominee may be, but does not have to be, an individual who works and/or resides in the country where the IBC was formed. The nominee may be used to sign (contracts, loans, etc.) for the IBC should the beneficial owner not want his/her signature to be connected with the corporation. Typically, the nominee director will have no knowledge of the IBC's affairs or accounts, cannot control or influence the IBC, and will not act unless instructed to by the beneficial owner.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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Means the disallowance of any loss, deduction or credit, or addition to income attributable to a determination that the transaction or arrangement lacks economic substance. A transaction lacks economic substance if the taxpayer cannot demonstrate a valid California business purpose other than tax savings.
Beginning March 24, 2011, the definition of noneconomic substance transaction includes any disallowance of claimed tax benefits by reason of a transaction lacking economic substance under federal law.
- Browse Related Terms: Abusive tax schemes, Large entity, Listed transaction, Noneconomic substance transaction, Offshore financial arrangement (OFA), Reportable transaction, Tax Benefit, Tax Haven, Tax Shelter
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This term, when used in this context, and when referring to a country, means a jurisdiction that offers financial secrecy laws in an effort to attract investment from outside its borders. When referring to a financial institution, "offshore" refers to a financial institution that primarily offers its services to persons domiciled outside the jurisdiction of the country in which the financial institution is organized.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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Any transaction designed to avoid or evade California income or franchise tax through the use of: (a) offshore payment cards, including credit, debit, or charge cards issued by banks in foreign jurisdictions, or (b) foreign banks, financial institutions, corporations, partnerships, trusts, or other entities.
- Browse Related Terms: Abusive tax schemes, Large entity, Listed transaction, Noneconomic substance transaction, Offshore financial arrangement (OFA), Reportable transaction, Tax Benefit, Tax Haven, Tax Shelter
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Often an IBC's offshore address is nothing more than a mail drop (P.O. Box) assigned to the IBC. Bank and brokerage statements and any other type of company mail may be sent to this address. The mail will typically be picked up twice monthly by the offshore facilitator. The IBC's mail will be put into a plain, brown envelope and mailed to the address of the beneficial owner's choice. Only the domestic return address and the recipient's address appear on the envelope. Thus, the discrete envelope arrives with the offshore IBC's mail inside. Using offshore mail forwarding insures that the wrong eyes will never view sensitive offshore mail.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking
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An offshore promoter is a person or entity who markets offshore arrangements to the public. The promoter can be a financial institution, lawyer, accountant, broker, financial planner, or other individual.
- Browse Related Terms: Bearer Shares, Beneficial Ownership, Custodian Services, Fictitious Invoices, Financial Secrecy, High net worth individual, International Business Corporation (IBC), Letter of Wishes, Nominee, Nominee Director, Offshore, Offshore Mail Forwarding Address, Offshore Promoter, Offshore Trustee, Personal Investment Corporation (PIC), Private Banking