Tax Secrets of the Rich

The rich utilized a number of different tax strategies and secrets to maximize their wealth. This includes stock options, golden parachutes, capital gains, and equity swaps. Consider using some of these for your own personal gains.

The rich seem to be getting richer and the rest of the world just isn’t catching up, so just what are the tax secrets to their multiplying wealth and success? Hi, my name is Allan Madan, your trusted accountant, and I will tell you about the tax secrets of the rich.

Secret Number One – Stock Options:

The rich are purchasing and exercising stock options at an increasing rate. An option is a contract that allows you to buy a specified number of shares at a predetermined price sometime in the future. Assume that in 2009 you entered into an options agreement to purchase Apple shares within five years for only $10 a share. With Apple shares hovering close to $1,000 a share, you would make a whopping $9,990 per share.

Secret Number Two – Golden Parachutes:

Besides receiving a hefty paycheque, being a key executive has other privileges. The golden parachute exists to provide these key executives with security in the event of termination or a merger. These include extravagant benefits such as stock options, severance pay, and a big cash bonus. BlackBerry CEO, Hines, recently received a golden parachute for his termination, making him a lightning rod for controversy.

Secret Number Three – Capital Gains:

Most wealthy CEOs, unlike us, don’t receive a consistent paycheque or a salary. Instead, the source of their wealth is through company shares they own, providing them with a very low tax rate of 23 percent. If they were being taxed on regular salary then their tax rate would almost be double. Business tycoon and financial guru, Warren Buffet, was known to be paying less tax than his secretary with this secret tax loophole for the rich.

Secret Number Four – Equity Swaps:

An equity swap is an official contract that allows two wealthy parties to exchange losses and gains on a set of assets without transferring ownership. This allows them to avoid transaction costs in local taxes where their assets are located.

Thank you for reading. I hope you find this article about tax secrets of the rich useful. Please comment as it helps me produce better articles for you. Also, get access to a free report, ’20 Tax Secrets on How to Beat the Tax Man’, by visiting my blog.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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