RPF-0041-Tax_Planning_-_Income_Shifting_and_Income_Conversion
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00:00:30.000 | Radical Personal Finance, episode 41.
00:00:33.000 | In today's show, we round out the basic tax planning strategies of income shifting and income conversion.
00:00:57.000 | Welcome to the Radical Personal Finance podcast for today, Wednesday, August 13, 2014.
00:01:02.000 | This is episode 41.
00:01:04.000 | Today we're going to wrap up basic tax planning strategy number two and basic tax planning strategy number three.
00:01:11.000 | Number one was timing, number two is shifting, number three is conversion.
00:01:15.000 | Going to save you some money today.
00:01:18.000 | I hope you're excited about that like I am.
00:01:20.000 | [Music]
00:01:30.000 | If you haven't listened to episodes 15 and 36, I'm going to recommend right here at the beginning that you go back and listen to episode 15 and 36 because these shows are building.
00:01:40.000 | This is basic tax planning but we're not talking about technique yet.
00:01:43.000 | So this is going to be applicable to you no matter where in the world you live.
00:01:47.000 | I'm in the U.S. so I don't know much of the taxing systems of the rest of the world as far as the in-depth technique.
00:01:52.000 | But these tax planning strategies that we're going to cover are going to be useful to you no matter what tax jurisdiction you live in.
00:01:59.000 | So go back.
00:02:01.000 | If you're new to the show, welcome.
00:02:03.000 | Go back and listen to episode 15 which is entitled How to Eliminate Your Taxes, the basic foundation you need to understand to do good tax planning.
00:02:11.000 | That can be found at radicalpersonalfinance.com/15.
00:02:15.000 | And then also listen to episode 36 which is entitled Major Tax Planning Strategy #1, Adjusting the Timing of Income for Maximum Effect.
00:02:24.000 | I'm going to try in today's show not to do a lot of repeat of those past shows.
00:02:29.000 | So I'm just going to point you there right at the beginning and then we're going to move on.
00:02:33.000 | In essence, these are the three basic tax planning strategies that all of the techniques that we'll talk about are going to fit into.
00:02:41.000 | And a lot of times in the personal finance space, you may read of a good technique.
00:02:45.000 | So you may read of something as ubiquitous as a retirement plan, a 401(k) contribution or an IRA contribution.
00:02:52.000 | Or you may read of something – what would be a good sexy tax planning technique?
00:02:57.000 | My mind is blanking.
00:02:59.000 | But you may read of some technique when you say, "Ah, this is amazing. This is beautiful.
00:03:02.000 | This is – look how cool this technique is."
00:03:04.000 | But if we don't have a framework to fit those techniques into, a lot of times we just – it's not very effective.
00:03:10.000 | And so these are the three techniques.
00:03:12.000 | There's a timing technique, which was what 36 was about, Episode 36.
00:03:16.000 | Basically, are we deferring income or are we accelerating income?
00:03:19.000 | Are we deferring deductions or are we accelerating deductions?
00:03:22.000 | And then today we're going to talk about shifting, shifting income from a high-rate taxpayer to a low-rate taxpayer,
00:03:30.000 | and then conversion, converting income from a high-rate activity to a low-rate activity.
00:03:36.000 | And then at the end of the show today I'm going to talk about a couple of IRS tax doctrines that you need to understand,
00:03:42.000 | and then we'll talk briefly just about tax philosophy and strategy, avoidance versus evasion.
00:03:48.000 | That's what we'll end on.
00:03:50.000 | So I hope you enjoy today's show.
00:03:51.000 | So let's jump right into shifting.
00:03:53.000 | Now, we've talked about a timing strategy where basically we're going to adjust the timing of income to try to bring it in in a low-tax rate year if possible.
00:04:04.000 | We can also shift income.
00:04:06.000 | So there's two ways to shift income.
00:04:08.000 | We're going to shift income among taxpayers or we're going to shift income among jurisdictions.
00:04:14.000 | I guess I should say across taxpayers or across jurisdictions because basically we're usually going between two people,
00:04:19.000 | so that would be across rather than among.
00:04:21.000 | Sorry, English nerd in me coming out.
00:04:24.000 | So how do we shift income between taxpayers?
00:04:27.000 | Well, we would try to shift it from a high-rate taxpayer to a low-rate taxpayer,
00:04:33.000 | and there's basically two different ways to do this.
00:04:36.000 | We would do this with related parties, so family members.
00:04:39.000 | So could we shift income from parents to children?
00:04:43.000 | Could we shift income from grandparents to grandchildren?
00:04:46.000 | Or we could shift income between entities, so shifting income from an individual to a business
00:04:52.000 | or from a business to an individual depending on what tax rate we are dealing with.
00:04:57.000 | That's basically the whole point.
00:04:59.000 | And so probably the most common example of this is to try to shift income from high-tax-rate parents to low-tax-rate children.
00:05:07.000 | So let's assume that my wife and I are in a 28% tax bracket,
00:05:12.000 | and let's assume that I have a 20-year-old son who's in a 10% tax rate bracket.
00:05:17.000 | Well, if I could shift any dollar of income from us to my son, then we could save him--we could save 18 cents on the dollar.
00:05:25.000 | And so that's a powerful drag to get off of the income.
00:05:28.000 | If we can get rid of the government out of this--or at least get rid of 18 cents worth of the government out of this transaction,
00:05:34.000 | that's a powerful wealth-building tool.
00:05:37.000 | It's far more powerful than eking out an extra percentage rate or an extra 100 basis points from our investment returns.
00:05:43.000 | So this is why tax planning is so important.
00:05:45.000 | Go from 9% rate of return to 10% rate of return or cut our income tax.
00:05:51.000 | Over time, that's going to be powerful.
00:05:54.000 | I need to correct myself to be technically correct.
00:05:57.000 | They're not directly equivalent simply because the bracket is the income.
00:06:03.000 | I shouldn't have used that as an example.
00:06:04.000 | I'm sorry.
00:06:05.000 | I'm not going to go back and try to record it.
00:06:06.000 | But those aren't technically equivalent.
00:06:08.000 | The additional interest percentage point of investment income is very important,
00:06:14.000 | and then it's just the 18 cents would be pulled off of that investment income if we're talking about investment income being taxed.
00:06:20.000 | Sorry.
00:06:21.000 | I'm not going to be precise.
00:06:22.000 | I do my best when I'm doing these shows to be general so that the concepts can be more easily grasped,
00:06:30.000 | but to be precise and give enough disclaimers, and those two things are not equivalent.
00:06:35.000 | But what I mean is that any time we can--it's easier to do good tax planning a lot of times than to do better investment planning.
00:06:41.000 | Let's leave it at that and go on.
00:06:43.000 | So if we can shift from me to my kids as far as the income, that would be powerful.
00:06:49.000 | Now the question is can we do this legally?
00:06:52.000 | Well, yes and no.
00:06:54.000 | Yes, we can do it, but no, there are limitations.
00:06:57.000 | Now you've got to understand there is--I'm going to throw another tax doctrine at you which you need to understand.
00:07:03.000 | Last time I talked about the doctrine of constructive receipt, when the income is actually received.
00:07:10.000 | So you need to understand that tax doctrine because that one should always be in the back of your head.
00:07:14.000 | When is the income being received?
00:07:16.000 | Well, now we're going to talk about the assignment of income doctrine.
00:07:19.000 | And so under the IRS assignment of income doctrine, income must be taxed to the taxpayer who actually earns it.
00:07:28.000 | So in order to shift income to a taxpayer, the taxpayer has to actually earn the income.
00:07:34.000 | So we can't do it as simply as this.
00:07:36.000 | We can't say that I'm going to go out and I'm going to earn $5,000,
00:07:39.000 | and then instead of putting the paycheck into my checking account,
00:07:42.000 | I'm going to put the paycheck into my son's checking account, and he's going to earn the $5,000.
00:07:46.000 | It doesn't work.
00:07:47.000 | The income must be taxed to the taxpayer who actually earned it.
00:07:52.000 | So if I earned the $5,000, I've got to pay the tax on it.
00:07:56.000 | So it's not as simple as just simply moving the income.
00:07:59.000 | But what I could do is I could hire my son to work in my business,
00:08:04.000 | and I could hire my son to handle my email, and I could pay him $5,000.
00:08:11.000 | So the question is, let's say that I hire my son to answer my email one time per week.
00:08:18.000 | He comes in every Saturday morning and just deals with my inbox.
00:08:20.000 | Can I pay him $5,000?
00:08:22.000 | Well, yes and no.
00:08:25.000 | So this would be what we would call a related party transaction.
00:08:29.000 | So in a related party transaction, which is basically a transaction among family members
00:08:33.000 | or a transaction among businesses and their owners,
00:08:36.000 | then we need to make sure that this is not preferential treatment.
00:08:42.000 | So in a related party transaction, the details of the transaction should be similar
00:08:48.000 | to what we could get in an arm's-length transaction,
00:08:51.000 | where each party that's involved in the transaction is individually negotiating for his or her own benefit.
00:08:58.000 | So if I'm going to go and let's say I'm going to take a job working at a local retail store,
00:09:05.000 | then this employer and I are going to negotiate for the position.
00:09:13.000 | The employer is going to negotiate the wages and the salary,
00:09:17.000 | and I'm going to negotiate whether I'm willing to do it for the wages and the salary.
00:09:20.000 | And it's unlikely that that employer is going to be willing--
00:09:23.000 | let's assume I'm going to go be the person to answer emails--
00:09:27.000 | it's unlikely that that employer is going to be willing to pay me $5,000 a month to answer email every Saturday.
00:09:33.000 | So we've got to make sure that this transaction passes the smell test of an arm's-length transaction.
00:09:40.000 | So I can't necessarily pay my son $5,000 to work in my business one Saturday a month,
00:09:46.000 | but I could if that was what I would pay if I were hiring my son to do work that was equivalent
00:09:55.000 | and the open market would be worth $5,000. I could do that.
00:09:59.000 | So that would be one way that I could shift income from me to my son.
00:10:02.000 | I could shift the income to him at his lower tax rate.
00:10:05.000 | What would be another way? Well, I could also maybe shift investment income.
00:10:09.000 | So let's say that I own a rental property, a piece of real estate.
00:10:15.000 | Could I shift the investment income from me to my son?
00:10:22.000 | Well, the same assignment of income doctrine is going to apply,
00:10:25.000 | and then we're going to use what's called the fruit and the tree analogy.
00:10:30.000 | And this actually comes from a court case back in the 1930s where this doctrine emerged from.
00:10:37.000 | And that court case--where was it? Hang on a second.
00:10:40.000 | Sometimes I can't read my own handwriting of my notes.
00:10:43.000 | That court case was called Lucas v. Earl, and it was in 1930.
00:10:47.000 | And so the doctrine, the corollary of the assignment of income doctrine,
00:10:52.000 | is that for the owner of an investment to avoid being taxed on the fruit from the tree,
00:10:59.000 | which would be the income, the owner must transfer the tree.
00:11:03.000 | So if I were going to shift the investment income from me to my son,
00:11:08.000 | I need to transfer ownership in the underlying asset to my son.
00:11:13.000 | So if I own the piece of real estate, I can't just shift the income.
00:11:18.000 | But if I shift the piece of real estate and now no longer is my name on the title
00:11:23.000 | but now my son's name is on the title,
00:11:27.000 | then now I have done what I needed to do in order to transfer the income.
00:11:32.000 | So any problems here? Maybe yes, maybe no.
00:11:36.000 | So my son is happy, but I might prefer to actually maintain the asset myself.
00:11:41.000 | And so here's where we get this constant friction between tax planning and non-tax planning,
00:11:46.000 | because it may be that this would be superior for the purposes of tax planning,
00:11:50.000 | but for the non-tax planning, the functioning of my family and the functioning of my wealth plan,
00:11:54.000 | I may prefer to retain ownership of this piece of real estate.
00:11:58.000 | So we want to understand that.
00:12:00.000 | We can use this shifting technique from parent to child, but it does have limitations.
00:12:07.000 | So hopefully that makes sense among parents.
00:12:11.000 | There are a lot of little tools and tactics. I'll toss one at you.
00:12:15.000 | If you own a business, I would encourage you very simply to consider hiring your kids.
00:12:20.000 | Now hire your kids at a fair market rate, because let's say that you want to pay for college for your kids,
00:12:25.000 | and you say, "I haven't used any tax-advantaged college planning. I haven't done anything."
00:12:29.000 | Well, would you like to pay for college for your kids with great tax benefits?
00:12:35.000 | If you own a business, hire your kids.
00:12:37.000 | So hire your kids, pay them a wage, a working salary.
00:12:41.000 | Make sure that it's equivalent to what would be an open market salary,
00:12:46.000 | that it's equivalent to what an arm's-length transaction would be.
00:12:49.000 | Then pay your children an income.
00:12:51.000 | Therefore, you have a deductible expense to your business.
00:12:54.000 | It takes income out of your checkbook and puts it to your child,
00:12:57.000 | and then allows your child to pay for their own schooling.
00:13:01.000 | And this schooling would be paid for at a low tax rate,
00:13:04.000 | and you can eliminate the tax burden on that income.
00:13:07.000 | It would probably help them, given that study that I cited last Monday
00:13:10.000 | about children who work and pay for some of their tuition seem to do better in school.
00:13:15.000 | Even though it was only a slight advantage, there was some numerical advantage.
00:13:19.000 | So that would be shifting among family members.
00:13:21.000 | What about businesses?
00:13:23.000 | It's not that we can only limit, we can only shift income inside of our family.
00:13:29.000 | Probably a more common example would be shifting income between a business and a business's owners.
00:13:34.000 | Now, in this situation, we need to distinguish between various types of business entities.
00:13:41.000 | So in the United States, we have various types of entities.
00:13:45.000 | We would have a sole proprietorship, we would have a partnership,
00:13:48.000 | we would have an S corporation, or we would have a C corporation.
00:13:51.000 | And there are some other subsets.
00:13:53.000 | There would be LLCs, LOPs, et cetera.
00:13:56.000 | But let's just stick with the sole proprietorship and a C corporation.
00:14:00.000 | In a sole proprietorship, there is no separate business income.
00:14:04.000 | The business income comes in, and it's taxed to the owner, the sole proprietor of the income.
00:14:11.000 | However, if we were to move over into a C corporation,
00:14:13.000 | the C corporation will file a separate tax return, and it will pay taxes at its own rate.
00:14:18.000 | So here the advantage is sometimes, if we shift income from ourselves to the business,
00:14:24.000 | from the business to ourselves, we can move the income to whichever taxpayer is in a lower bracket.
00:14:30.000 | Sometimes this may be the corporation. Sometimes this may be the individual.
00:14:34.000 | So if we shift income from the corporation to the owner,
00:14:38.000 | then the corporation basically is creating a tax deduction for itself.
00:14:42.000 | So the most common way here is just simply to pay income, compensation, out of the corporation and pay it to the owner.
00:14:48.000 | If we pay it out as a paycheck, as wages, then now we've created a deduction for the corporation,
00:14:53.000 | the compensation to the owner of wages is deductible by the corporation and is taxable to the employee.
00:14:58.000 | We could also do things like have the business owner rent property to the corporation or lend money to the corporation.
00:15:06.000 | So let's say, for example, you own a retail store and you own the real estate.
00:15:11.000 | Well, you may consider owning the real estate as a personal individual
00:15:15.000 | and then renting that piece of real estate at a fair market rent to your corporation.
00:15:20.000 | That way, the income to the corporate, the rental expense to the corporation is deductible to the corporation and its income to you.
00:15:28.000 | So now we've shifted that income from the corporate ledger over onto the individual.
00:15:36.000 | Now, is this advantageous? It may be. And here's where I'm giving you big picture idea.
00:15:41.000 | But the answer is you have to calculate this and look, because there's a dramatic difference,
00:15:45.000 | whether you as an individual are in a 39 percent, 39 and a half percent is the highest bracket now,
00:15:50.000 | 39, 39, basically a 40 percent bracket, or if you're in 10 percent bracket.
00:15:55.000 | It may be if you're in a 40 percent bracket that shifting over to the corporate tax rate,
00:15:59.000 | which is lower than 40 percent, may be advantageous or maybe the other way around.
00:16:03.000 | The corporate tax rate is so much higher and you have to and it's better off to have the income.
00:16:09.000 | Be careful when you're working with a corporation because you want to make sure that any income that's shifted from the corporation to the individual is shifted as compensation and not as dividends.
00:16:22.000 | Because a corporation does not get a deduction when it pays dividends.
00:16:28.000 | So you want to make sure that your corporation is not paying dividends, at least not paying dividends as part of a tax strategy,
00:16:35.000 | because in this situation you incur double taxation.
00:16:38.000 | Any money that's paid from a corporation to an individual as dividends is taxed twice,
00:16:44.000 | first at the corporate level and then at the individual level.
00:16:48.000 | And so this is almost never going to be the best tax planning strategy.
00:16:52.000 | It may be a good non-tax planning strategy, it may be still valid,
00:16:56.000 | but it's probably not going to be a good tax planning strategy if you can figure out another alternative.
00:17:02.000 | So just be careful of that.
00:17:04.000 | That would not apply to something like an S corporation where the income flows through to the individual or sole proprietorship or partnership,
00:17:11.000 | all of which have the income flow through to the individual.
00:17:15.000 | There are other non-tax considerations that you would consider in choosing among these various entities.
00:17:21.000 | So advantages and disadvantages, they vary.
00:17:26.000 | One of the things you would also want to be careful of is that if you're shifting income from the individual over to the corporation,
00:17:33.000 | you can't spend the money.
00:17:35.000 | So this would only work for plans where you're planning to reinvest the income into the business.
00:17:40.000 | So I don't want to go any deeper than that, but there are some good planning opportunities here available for you.
00:17:46.000 | What about other types of income shifting?
00:17:48.000 | Well, we can shift income among taxpayers, and we can also shift income across jurisdictions.
00:17:55.000 | So there are various tax jurisdictions.
00:17:58.000 | So there would be individual states.
00:18:00.000 | If you're in the United States, there would be 50 United States.
00:18:03.000 | There would also be tax we could shift across countries.
00:18:06.000 | So remember the last couple of Monday shows I've done, I've mentioned some articles on corporate inversions.
00:18:12.000 | This is in the news now.
00:18:13.000 | Basically, this is a shifting strategy.
00:18:16.000 | Can we shift our income from one country over to another by doing a corporate inversion, moving our corporation?
00:18:22.000 | And then also with large corporations, generally you'll see that most of the large corporations,
00:18:28.000 | even if they are U.S. headquartered, they will keep a substantial amount of income offshore.
00:18:33.000 | And basically that's because they don't want to shift the income from the offshore tax jurisdiction over into the U.S. jurisdiction.
00:18:40.000 | Otherwise, the income gets taxed twice.
00:18:43.000 | So you can do this as an individual as well.
00:18:46.000 | So if you are operating in multiple jurisdictions,
00:18:48.000 | let's say that you have businesses that have locations in different states,
00:18:52.000 | or if you have businesses that have locations in different countries,
00:18:55.000 | you would want to pay special attention to where you are allocating that income and trying to figure out where is it earned.
00:19:02.000 | Is it earned in the United States or is it earned abroad?
00:19:05.000 | Which state is it earned in?
00:19:07.000 | I don't want to get too technical on examples here, but there would be examples if you have business locations in different states.
00:19:13.000 | Let's say you have a business location in a state that has a state income tax,
00:19:17.000 | and you have a business location in a state that doesn't have an income tax.
00:19:21.000 | You have planning opportunities where you can shift your income between those two states and then also internationally.
00:19:27.000 | There is a lot of scrutiny that happens in this situation.
00:19:30.000 | And so there is a lot of IRS scrutiny, and for that reason I'm not going to go too deep into some of these things on the business side.
00:19:41.000 | But you could, however, use this in a personal side.
00:19:44.000 | So I'll give you an example of how -- just a simple example of how we could combine a timing strategy and a shifting strategy.
00:19:53.000 | And so if you work in a state with relatively high taxes, let's say that you're in California or New York City,
00:19:59.000 | where you have -- New York City would be probably one of the highest where you have federal income taxes,
00:20:04.000 | state income taxes, and then city income taxes.
00:20:08.000 | If you are deferring income into some sort of retirement plan,
00:20:13.000 | then you're avoiding the income tax on the federal tax and the state tax and the city tax.
00:20:19.000 | So then if later you're going to move to another tax jurisdiction -- so let's say you come down to Florida,
00:20:26.000 | you move to another tax jurisdiction -- we don't have state income taxes --
00:20:29.000 | and now you can avoid the state income tax and the city income tax.
00:20:36.000 | So that would be a good example of piling together a shifting strategy and a timing strategy.
00:20:41.000 | So we're pushing forward, we're deferring income to a later year -- that's a timing strategy --
00:20:46.000 | and then we're shifting it from a high-tax jurisdiction to a low-income tax jurisdiction.
00:20:51.000 | That's it for income shifting. Hopefully that makes sense.
00:20:54.000 | Let's move on to conversion. So what about a conversion strategy?
00:20:58.000 | Well, a conversion strategy is basically that there are different tax rates across different activities.
00:21:05.000 | And frankly, this one is incredibly powerful.
00:21:08.000 | This is incredibly powerful for individual taxpayers.
00:21:11.000 | Various types of income would have various tax rates associated with them.
00:21:15.000 | So you would have salary income, interest income, business income --
00:21:21.000 | those would be taxed at relatively high marginal tax brackets versus long-term capital gains income.
00:21:27.000 | And so this is where investment income is taxed at an advantageous rate.
00:21:33.000 | So remember Monday's show this week, which was episode 39, where we talked about what can we learn from the 400 highest income tax returns.
00:21:48.000 | Basically, profits are better than wages.
00:21:50.000 | And of the 400 highest income tax returns, 45.8% of the income that's being reported on those 400 highest tax returns is capital gains income.
00:22:00.000 | That's not a secret. The reason is because it's taxed at an advantageous rate.
00:22:05.000 | The tax code is designed under the current structure to incentivize business investment.
00:22:10.000 | And business investment will likely result in capital gains taxes.
00:22:13.000 | So if you can transfer income that would be received as interest income,
00:22:20.000 | and you can convert it into long-term capital gains income, then this is a conversion strategy.
00:22:27.000 | So one of the things that you would -- so this would lead to various techniques.
00:22:32.000 | I'll give you just a very simple technique.
00:22:34.000 | So a simple technique that any -- you know, financial planning 101 is if you have tax shelters, something like an IRA or a 401(k),
00:22:43.000 | often you want to put your interest-generating investments inside of the IRA or the 401(k),
00:22:49.000 | and you want to keep your capital gains investments outside of the 401(k).
00:22:53.000 | So in general, this would mean if you were going to have a 50/50 portfolio split between stocks and bonds,
00:22:58.000 | you would often keep your stocks outside of the 401(k), and you would usually put your bonds inside of -- excuse me, right, yeah,
00:23:05.000 | put your bonds inside of the 401(k).
00:23:07.000 | Very, very simple, very, very straightforward.
00:23:09.000 | There would be exceptions to that. So there are exceptions.
00:23:12.000 | But this would be a good example of how we're trying to put our income in the right place.
00:23:18.000 | This would be what about income that's tax-exempt?
00:23:23.000 | So maybe you have -- you're going to convert income through an employment contract.
00:23:29.000 | You're going to convert income that would normally be received as taxable wages,
00:23:33.000 | and you're going to convert that into a non-taxable fringe benefit.
00:23:38.000 | So a simple example is you're not currently under U.S. tax law.
00:23:42.000 | You're not generally taxed on the cost of your health insurance premiums.
00:23:46.000 | So if you have to buy health insurance in the open market and you're an individual,
00:23:51.000 | then you would have to pay income taxes and then buy that health insurance policy
00:23:58.000 | and pay the premiums with after-tax income.
00:24:01.000 | But if you can buy that through your employer, then you can purchase that,
00:24:05.000 | and you can avoid the tax on the employer portion of the health insurance premiums.
00:24:11.000 | So you can see how a conversion strategy would work.
00:24:14.000 | Now, probably the most powerful type of conversion strategy for individuals
00:24:19.000 | would be the difference between business expenses and personal expenses.
00:24:24.000 | This is probably the most powerful because if we can take any kind of expense
00:24:31.000 | that would be a personal expense, and if there's a way that we can move a portion of it
00:24:36.000 | or all of it over to a more advantageous type of expense,
00:24:41.000 | either an investment expense or a business expense, then we can save money on the taxes.
00:24:47.000 | So we can deduct on our return the investment costs that are associated with investment profit,
00:24:55.000 | and we can deduct on our return the business expenses that are associated with generating business profit.
00:25:02.000 | So if we can understand the rules and move some amount of our personal expenses
00:25:07.000 | over onto a business return, this is a big benefit to us,
00:25:11.000 | and this would be an income conversion strategy.
00:25:16.000 | So we're transferring our income from the high-rate personal expenses
00:25:20.000 | over onto the business checkbook.
00:25:23.000 | There are a lot of limitations and a lot of rules that you need to follow with all of these,
00:25:29.000 | but especially with business deductions.
00:25:32.000 | Basically, it's got to be an actual business expense,
00:25:37.000 | and there are some IRS doctrines that you need to be aware of to know that, yes, indeed,
00:25:42.000 | this is actually a business expense.
00:25:45.000 | But this is an extremely powerful form of planning.
00:25:52.000 | So in future shows, we're going to go in detail through many of these options
00:26:00.000 | so that you can understand how to integrate these options into your personal planning.
00:26:05.000 | Let's talk about a couple of these doctrines.
00:26:09.000 | For example, I just alluded to the business purpose doctrine.
00:26:13.000 | There are various IRS doctrines that you must understand,
00:26:17.000 | and you must keep in mind any time you're doing this type of tax planning.
00:26:20.000 | So, for example, you have the business purpose doctrine,
00:26:24.000 | and I'm going to write a list of these in the show notes and look them up on Wikipedia.
00:26:29.000 | They're fairly straightforward.
00:26:30.000 | I talked in episode 36 about the constructive receipt doctrine.
00:26:34.000 | Earlier I talked about the assignment of income doctrine,
00:26:36.000 | and then the fruit and the tree, which is a corollary of the assignment of income doctrine.
00:26:40.000 | The business purpose doctrine basically allows the IRS to challenge and disallow any business expenses
00:26:47.000 | for a transaction that doesn't have an underlying business motivation.
00:26:52.000 | So all transactions must have an underlying business motivation
00:26:56.000 | if they're going to be deductible as business expenses.
00:26:59.000 | An example that I would use would be this.
00:27:02.000 | Today is Wednesday, August 13.
00:27:05.000 | Tomorrow morning I am leaving, and I'm driving to Texas for the Podcast Movement Conference.
00:27:13.000 | I will deduct all of the expenses from that trip against this business,
00:27:20.000 | against the radical personal finance business, as a business expense.
00:27:24.000 | I'm not going to Dallas for fun. I'm going for business.
00:27:27.000 | So I'm going specifically for business, so all of the expenses from that trip will be deductible.
00:27:32.000 | I'm planning to drive there, so the mileage will be deductible.
00:27:36.000 | Under the current IRS mileage guidelines, any hotel and accommodation costs that I have will be deductible.
00:27:43.000 | My food will be deductible.
00:27:45.000 | Under certain rules, the cost of the conference ticket, all of that is deductible.
00:27:50.000 | But if I take my wife with me, I can't just deduct all of her expenses
00:27:55.000 | because she is not an employee of this business, so I can't just deduct that.
00:28:01.000 | So for her to go, there has to be a business purpose,
00:28:05.000 | or I need to make sure that I do not deduct any expenses
00:28:09.000 | associated with the additional cost for her going along.
00:28:13.000 | And this is where you get into a lot of very detailed rules
00:28:16.000 | which are important for you to understand and important for you to read.
00:28:19.000 | Now, she can ride along in the car with me, and I can deduct all of the cost for that trip
00:28:24.000 | because I'm going to be going anyway, and there's no additional cost for her to be going along in the car.
00:28:30.000 | But if I purchase a plane ticket for her and for me,
00:28:33.000 | I can only deduct the cost of the plane ticket for me.
00:28:36.000 | I can't deduct the cost of the plane ticket for you.
00:28:39.000 | Bell should be going off in your head as, "Ah, planning opportunity."
00:28:44.000 | That is a legitimate planning opportunity.
00:28:46.000 | That's not why I'm choosing to drive under this scenario, but that is a planning opportunity.
00:28:51.000 | The cost of the car, me getting there, is going to be the same whether it's for me or for her.
00:28:57.000 | But what about if I stop and eat along the way?
00:28:59.000 | Well, if I stop and eat, then the cost of my meal,
00:29:02.000 | if it's associated with my travel expenses, not as personal cost,
00:29:05.000 | that would be a deductible expense, but the cost of her meal would not be.
00:29:09.000 | Or let's say that I take out a hotel room.
00:29:11.000 | If the cost of the hotel room for a single occupant is $100 a night,
00:29:15.000 | but now I need to upgrade the cost of the room to fit the two of us,
00:29:19.000 | that is now $150 a night, well, that additional $50 of cost is no longer a deductible expense.
00:29:26.000 | All of this makes sense under the business purpose doctrine.
00:29:29.000 | So all of the--is that the IRS will not allow me to deduct any business expense
00:29:34.000 | if there's not an underlying business motivation.
00:29:37.000 | Now, what if my wife worked as part of my business?
00:29:40.000 | What if she were an employee of my business and we were working together
00:29:43.000 | and now there's a business purpose for both of us to attend this conference?
00:29:47.000 | Well, under this scenario, then, all of our expenses for both of us,
00:29:50.000 | if there's a business purpose, would be deductible.
00:29:54.000 | So it's important that you understand the business purpose doctrine.
00:29:57.000 | And when we get into specific planning techniques at a later date,
00:30:01.000 | there are many of these things and there are many rules that have been developed
00:30:04.000 | out of various people challenging these doctrines and challenging the tax law,
00:30:09.000 | and there are a lot of specific things where in some of these there are bright--
00:30:13.000 | what are called bright lines where if you meet this bright line test,
00:30:17.000 | then your deductions would be allowed.
00:30:26.000 | The next tax doctrine that you should be aware of is the step transaction doctrine.
00:30:31.000 | And the idea behind the step transaction doctrine is that any--
00:30:38.000 | is that if there are a series of technically, formally separate steps,
00:30:47.000 | those steps can be integrated basically into one event.
00:30:50.000 | So although you may have said, "Well, this happened, this sale happened to this entity,
00:30:55.000 | and then this sale happened to this entity, and then this third thing happened,"
00:30:59.000 | the IRS has a step transaction doctrine which will allow them to collapse
00:31:05.000 | a series of related transactions up into one transaction
00:31:09.000 | to determine the ultimate tax consequences of the transaction.
00:31:13.000 | And there are some various--feel free to read the Wikipedia entry
00:31:17.000 | on the step transaction doctrine. It's fairly straightforward.
00:31:20.000 | There are some other tests that will apply to this one.
00:31:25.000 | So there would be the binding commitment test, the mutual interdependence test,
00:31:29.000 | and then the intent test, the intent of the particular result.
00:31:33.000 | And so this would be one of the doctrines that would be used to push out--
00:31:39.000 | to collapse a series of steps that you may take with your tax planning
00:31:45.000 | that are purely for the purposes of tax planning.
00:31:48.000 | Which leads us to the next one, which would be the substance over form doctrine.
00:31:52.000 | And the substance over form doctrine allows the IRS to consider the substance
00:31:58.000 | of a transaction regardless of its form, and then if appropriate,
00:32:03.000 | to reclassify a transaction according to its actual substance.
00:32:07.000 | So this one comes into play if you have taken a series of steps
00:32:11.000 | and a series of events, and the form is technical.
00:32:15.000 | Look, you have these documents, you have all this proof,
00:32:18.000 | but the reality is the substance of it is purposely designed
00:32:22.000 | to be just a tax planning decision.
00:32:26.000 | Under the substance over form doctrine, the IRS has the foundation
00:32:31.000 | to be able to just focus on what actually happened
00:32:36.000 | as a result of the substance of that transaction.
00:32:40.000 | Which would then lead on to the final one, which would be the economic substance doctrine.
00:32:44.000 | The economic substance doctrine requires any transaction to meet two different criteria
00:32:49.000 | in order to obtain tax benefits.
00:32:51.000 | So the first is a transaction must meaningfully change a taxpayer's economic position
00:32:58.000 | without looking at any federal income tax effects.
00:33:02.000 | And second, the taxpayer must have a substantial purpose
00:33:05.000 | other than tax avoidance for the transaction.
00:33:09.000 | That's the economic substance doctrine.
00:33:11.000 | This has to have some actual reason, some economic reason
00:33:16.000 | that goes beyond just saving on taxes.
00:33:20.000 | Take a look through the Wikipedia articles I've linked to in the show notes
00:33:23.000 | for these tax planning doctrines, and I think it will help you
00:33:27.000 | to kind of understand the rules under which we live.
00:33:34.000 | And I hope that that will help you because when you're looking at things,
00:33:38.000 | this will help you to smell a rat.
00:33:40.000 | If you're hearing some technique that somebody is talking about,
00:33:43.000 | and you say, "Ugh, I'm not so sure,"
00:33:45.000 | these doctrines you need to have in the back of your head.
00:33:47.000 | Now, obviously these doctrines, if you can structure a transaction
00:33:51.000 | in a way that is beneficial from an economic actual substance benefit
00:33:56.000 | and also saves you on taxes, do it. Go for it.
00:34:01.000 | But be aware of some of the more far-out tax planning techniques that you might read.
00:34:08.000 | And remember that if they run in contradiction to these doctrines,
00:34:13.000 | it's likely that you're going to have a challenge.
00:34:16.000 | So that's the overview of the tax doctrines I wanted you to be aware of.
00:34:28.000 | I'm going to wrap up now with two different themes that I want to talk about,
00:34:31.000 | and then we're done for the day.
00:34:32.000 | The first theme is that, as you can see from this overview,
00:34:36.000 | this is an academic construct that I find helpful.
00:34:40.000 | It's basically a mental model in my head.
00:34:43.000 | It's a framework onto which I hang techniques.
00:34:46.000 | I hope this is useful to you.
00:34:48.000 | I'm trying to do something.
00:34:49.000 | I've never seen this done in popular media.
00:34:51.000 | I've never heard this stuff explained this way,
00:34:54.000 | but this is how my brain works.
00:34:56.000 | I like to have things orderly in my head,
00:34:59.000 | and I like to have a framework or an outline onto which I can hang things mentally.
00:35:05.000 | And so for me, this is that framework.
00:35:07.000 | Once I learned this, I said, "Ah, got it.
00:35:09.000 | Now I can tie technique, individual techniques or individual strategies,
00:35:14.000 | to this overview, to this framework."
00:35:17.000 | And I'm under no illusion that this is extremely academic.
00:35:22.000 | Again, it's theoretical.
00:35:24.000 | This is an academic construct.
00:35:26.000 | But it helps me to not be bamboozled by techniques.
00:35:32.000 | Just in my head, "Ah, here's a technique.
00:35:34.000 | Let me take this over.
00:35:35.000 | Timing, shifting, conversion.
00:35:37.000 | Okay, got it.
00:35:38.000 | Hang it.
00:35:39.000 | Done."
00:35:40.000 | Tax planning is, in one way, very simple,
00:35:43.000 | and in another way, incredibly complicated.
00:35:46.000 | That's why once you get beyond technique,
00:35:49.000 | if you're a beginning financial planner
00:35:51.000 | or if you're beginning to look at your own money and understand,
00:35:53.000 | there's kind of an introductory--
00:35:55.000 | there are some good introductory decisions.
00:36:00.000 | So you may learn about the power of an IRA or a Roth IRA.
00:36:04.000 | And what happens a lot of times is there's a growth to this.
00:36:07.000 | As you get turned on about a specific technique,
00:36:10.000 | you say, "Wow, look how effective, amazing Roth IRAs are."
00:36:14.000 | And they're a useful tool.
00:36:16.000 | But if you don't have anything bigger than that,
00:36:19.000 | a lot of times you'll give bad advice.
00:36:21.000 | You'll tell one person to do a Roth IRA,
00:36:23.000 | and you'll tell the next person to do a Roth IRA.
00:36:26.000 | But in their individual situations,
00:36:28.000 | the reality is that one should have done it
00:36:30.000 | and the other shouldn't have done it.
00:36:32.000 | And there are various tax and non-tax factors that apply.
00:36:35.000 | So I see this a lot of times, and I--I--I--I hurt.
00:36:39.000 | Not hurt. I guess that's a little bit strong.
00:36:41.000 | I'm embarrassed of some of the mistakes I made
00:36:43.000 | when I was a younger financial planner
00:36:45.000 | where I just didn't know what I didn't know.
00:36:47.000 | And I'm sure I still make mistakes.
00:36:49.000 | I'm sure I still will make mistakes,
00:36:51.000 | because there's a lot I still don't know.
00:36:53.000 | But I have found it helpful to have these--these overviews
00:36:56.000 | to apply to an individual situation.
00:36:58.000 | And I'm trying to give them to you
00:37:00.000 | so that you can make better decisions
00:37:02.000 | of each individual situation.
00:37:04.000 | Tax planning is--is--is a science and an art,
00:37:08.000 | because it's different.
00:37:09.000 | I can't tell somebody--it's interesting.
00:37:11.000 | Some people say, "Joshua, what are your ideas?"
00:37:13.000 | I don't know. You know, I can't tell somebody
00:37:15.000 | anything that they should do to save on taxes--a client--
00:37:18.000 | unless I know all the details of their situation.
00:37:20.000 | And then even then, chances are it's not a one-time thing.
00:37:23.000 | It's a working thing over--over time,
00:37:25.000 | and you can start to adjust.
00:37:27.000 | You can start to shift some income.
00:37:29.000 | You do a little here.
00:37:30.000 | You start to convert something here.
00:37:32.000 | You adjust the timing of this income over here.
00:37:34.000 | And then--then the other thing is,
00:37:35.000 | what tax systems are we worried about?
00:37:37.000 | Are we worried about employment taxes?
00:37:39.000 | Are we worried about unemployment taxes?
00:37:41.000 | Are we worried about, you know, income taxes?
00:37:43.000 | Are we doing transfer tax planning?
00:37:45.000 | And so I can't--I don't know how to make it simple.
00:37:47.000 | I hope that over time I can learn to make these things
00:37:50.000 | just simpler, more straightforward,
00:37:51.000 | but I don't know how to do it yet.
00:37:53.000 | So bear with me, and I hope you can--
00:37:55.000 | you can benefit from this going forward.
00:37:58.000 | The final thing I wanted to talk about
00:38:01.000 | is just kind of my own perspective on tax planning.
00:38:04.000 | And you always get in tax planning--
00:38:05.000 | you always get into a discussion of tax avoidance
00:38:09.000 | and tax evasion.
00:38:11.000 | And tax avoidance is the commonly practiced,
00:38:15.000 | you know, technique of saying,
00:38:16.000 | "How can I arrange my activities in a way to keep my taxes low?"
00:38:20.000 | And tax evasion is consciously choosing to--
00:38:24.000 | consciously choosing not to pay taxes
00:38:26.000 | and to evade, and this is illegal.
00:38:29.000 | You're going to face legal repercussions
00:38:31.000 | of some kind for this.
00:38:34.000 | I want to read you one of my favorite quotes,
00:38:36.000 | which comes from a court case from 1947,
00:38:39.000 | and the judge in that court case--
00:38:41.000 | the court case was Commissioner--
00:38:43.000 | IRS Commissioner versus Newman--
00:38:45.000 | and the judge--his name was Judge Learned Hand.
00:38:48.000 | He wrote the following statement in his opinion on the case.
00:38:52.000 | It was a dissenting opinion.
00:38:54.000 | "Over and over again, courts have said
00:38:56.000 | "that there is nothing sinister in so arranging one's affairs
00:38:59.000 | "as to keep taxes as low as possible.
00:39:02.000 | "Everybody does so, rich or poor, and all do right,
00:39:06.000 | "for nobody owes any public duty
00:39:08.000 | "to pay more than the law demands.
00:39:10.000 | "Taxes are enforced--exactions, not voluntary contributions.
00:39:15.000 | "To demand more in the name of morals is mere cant."
00:39:20.000 | And that word "cant"--hang on, let me look it up real quick,
00:39:23.000 | the definition.
00:39:24.000 | The word "cant" is a--it's a word we don't use much,
00:39:27.000 | but it--the definition here is,
00:39:29.000 | "It's a hypocritical and sanctimonious talk
00:39:33.000 | "typically of moral, religious, or political nature."
00:39:38.000 | So hypocritical and sanctimonious talk
00:39:41.000 | typically of a moral, religious, or political nature.
00:39:45.000 | And so to me, this is a--it's a good word
00:39:47.000 | that just describes how people talk about this.
00:39:50.000 | And what's frustrating to me is when you get into--
00:39:54.000 | I find it difficult to try to figure out tax planning.
00:39:57.000 | I will try to clearly define when I am--
00:40:01.000 | I'll try to clearly define when I'm talking about
00:40:03.000 | something that is technically legal
00:40:05.000 | and something that is illegal, or lawful and unlawful.
00:40:08.000 | Tax avoidance planning is absolutely lawful,
00:40:10.000 | and I'm going to--I'll try to teach you
00:40:12.000 | very specific techniques, but I also am going to profile
00:40:14.000 | the techniques that I think are good to know about
00:40:17.000 | of the unlawful ones, the evasion techniques.
00:40:21.000 | And we all know this, it's working for cash,
00:40:23.000 | it's the black market, all of these things.
00:40:26.000 | I think it's interesting to know about.
00:40:27.000 | Morally, I'm not going to tell you what to do,
00:40:29.000 | I don't know what you should do.
00:40:30.000 | I do find it frustrating how most of the time
00:40:33.000 | the definition of that word "sanctimonious"
00:40:36.000 | is making a show of being morally superior to other people.
00:40:39.000 | And this is where I find myself constantly
00:40:41.000 | in a personal situation of contradictions,
00:40:45.000 | internal contradictions, when it comes to tax planning.
00:40:48.000 | Is that I love--I choose currently to follow the rules,
00:40:53.000 | but, man, I am so empathetic to other people
00:40:58.000 | who have moral issues with following the rules.
00:41:02.000 | If you remember back to the show that I did
00:41:05.000 | with David Gross, which was episode 17
00:41:08.000 | at RadicalPersonalFinance.com/17,
00:41:11.000 | which was he is a war tax resister,
00:41:13.000 | so he chooses not to pay his taxes
00:41:15.000 | out of protest of what the United States government does.
00:41:18.000 | And I find this to be a constant conflict
00:41:20.000 | that I face personally, is that I do not wish
00:41:23.000 | to support most of the actions of the U.S. government,
00:41:25.000 | and yet I support them with my tax dollars.
00:41:28.000 | And I haven't reached the point where I could
00:41:30.000 | ethically say to myself that, yes,
00:41:32.000 | I am choosing not to pay taxes
00:41:34.000 | because of the moral side of it.
00:41:38.000 | So I pay them somewhat begrudgingly,
00:41:41.000 | but I follow the rules, but, man,
00:41:43.000 | I'm going to do my best to avoid as many of them as possible.
00:41:46.000 | And I hoped--my dream would be to help more people
00:41:49.000 | avoid more and lower the tax revenues.
00:41:51.000 | Now, is this a problem?
00:41:52.000 | It's kind of a contradiction, and I'm very aware of it,
00:41:55.000 | because if you have--if I promote the tax avoidance
00:41:59.000 | and if I promote even tax evasion,
00:42:02.000 | then that means less tax revenue to the U.S. government,
00:42:06.000 | which means that the U.S. government is not about
00:42:08.000 | to lower its spending.
00:42:10.000 | They're not allowed to--they certainly never--
00:42:12.000 | haven't in my entire history, in any history that I can find,
00:42:14.000 | has never decreased spending.
00:42:16.000 | So now all of a sudden the pressure gets turned up
00:42:18.000 | and the taxes go up.
00:42:21.000 | Is that a good thing? Man, I don't know.
00:42:23.000 | You get into the world of ideology,
00:42:25.000 | and as you can--this is obvious from the show,
00:42:28.000 | I have no problem talking about ideology,
00:42:30.000 | but it's something I just constantly struggle with.
00:42:32.000 | I'm rambling a bit here, but it's hard for me
00:42:35.000 | to figure out the answer, 'cause--and so I'm just
00:42:38.000 | going to try to clearly delineate what things are
00:42:41.000 | and then exercise my freedom of speech
00:42:43.000 | to give you the information that you need,
00:42:45.000 | and you decide what your moral position is.
00:42:48.000 | If you are comfortable--if you are comfortable--
00:42:53.000 | if you're comfortable with using the tax avoidance techniques
00:42:56.000 | and that's morally okay for you, great.
00:42:59.000 | If you're comfortable using the evasion techniques
00:43:02.000 | and just choosing not to pay your taxes on some sort of--
00:43:04.000 | some way, and you can justify that, good for you.
00:43:08.000 | I'm sympathetic to it.
00:43:10.000 | I'm not there yet myself, but I'm sympathetic to it.
00:43:12.000 | So I just recognize that this ideology is a little bit confusing,
00:43:15.000 | and frankly I'm still trying to figure it out myself.
00:43:18.000 | I find it a challenging situation.
00:43:20.000 | Probably the thing that annoys me the most
00:43:22.000 | is the sanctimonious nature of a lot of the politicians.
00:43:26.000 | I just say, you know, everyone can voluntarily pay taxes,
00:43:29.000 | so what annoys me is when people say, "Hey, let's raise taxes."
00:43:32.000 | Well, you can choose to pay more.
00:43:34.000 | That's it for today's show.
00:43:35.000 | As we go here, I want to thank you for some of the iTunes reviews
00:43:38.000 | and read a couple of them to you.
00:43:40.000 | Let me look here.
00:43:42.000 | I think the last one I've read on the show was Robbie Kartner,
00:43:45.000 | "Awesome and life-changing information. A five-star review."
00:43:47.000 | Thank you.
00:43:48.000 | We had one here from Cas5NQ,
00:43:51.000 | "Has potential but low information density.
00:43:53.000 | "When I listen to the podcast, I get bored
00:43:55.000 | "because the information density is low.
00:43:57.000 | "Have to skip the first five minutes of every podcast
00:43:59.000 | "because you ramble for too long introducing the topic of the day.
00:44:02.000 | "Give me a 30-second introduction and then jump into the topic.
00:44:04.000 | "If you can't speak more concisely, edit the podcast after recording
00:44:07.000 | "to cut out the rambling."
00:44:08.000 | Thank you for the feedback.
00:44:09.000 | I do my best, but I certainly do ramble.
00:44:11.000 | I'm trying to get better.
00:44:13.000 | Had another review that just came in actually today,
00:44:17.000 | a two-star review also from Wisconsin Camp, a U.S. review,
00:44:20.000 | "Rambling and ideological, but otherwise very enjoyable."
00:44:24.000 | I apologize for the rambling.
00:44:26.000 | It's funny.
00:44:27.000 | It goes back to that speech of, "Give me an hour,
00:44:29.000 | "and I'm ready to talk right now.
00:44:30.000 | "If you need a five-minute talk, though, come back in a month."
00:44:33.000 | I am doing my best.
00:44:35.000 | Frankly, at some point in the future,
00:44:37.000 | if we can figure out a way to do this full-time
00:44:40.000 | and for the podcast to be an income-generating activity for me,
00:44:44.000 | I'll probably be able to devote more time to being prepared
00:44:46.000 | and be able to deliver more concise information
00:44:49.000 | and then have additional resources.
00:44:51.000 | "Fresh take on the saturated personal finance market."
00:44:54.000 | Thank you for the four-star review, Best Buy 82.
00:44:56.000 | "Thought-provoking by MoneyPlan SOS."
00:44:58.000 | That's Steve Stewart on his show, MoneyPlan SOS.
00:45:01.000 | Thank you, Steve, for that.
00:45:02.000 | "Just plain awesome by SunnyFL."
00:45:05.000 | Thank you, he says, five-star review.
00:45:07.000 | "Excellent content in a great format."
00:45:09.000 | This is a Canadian review by Randall Mann.
00:45:12.000 | Thank you so much.
00:45:13.000 | That is awesome.
00:45:14.000 | Very nice comment.
00:45:16.000 | And then we've got, "So informative," five-star review from Jason in India.
00:45:20.000 | And thank you for that.
00:45:22.000 | So I'm thrilled with these international reviews.
00:45:24.000 | It's super exciting.
00:45:26.000 | If you haven't yet left a review, please do so.
00:45:29.000 | I just checked this morning.
00:45:31.000 | Under the rankings in iTunes, we're currently listed as number 19 for the investment section.
00:45:36.000 | So that's super exciting.
00:45:37.000 | Please go to the website, go to iTunes, leave a rating and review.
00:45:40.000 | I would be so thrilled.
00:45:41.000 | Have a great day, everybody.
00:45:43.000 | Remember, come back on Friday.
00:45:44.000 | And I ran out of music.
00:45:45.000 | Come back on Friday.
00:45:47.000 | I'll finish up anyway.
00:45:48.000 | Here goes that rambling that I'm trying to improve.
00:45:51.000 | Bear with me.
00:45:52.000 | So today is Wednesday.
00:45:53.000 | Tomorrow we've got an interview that's coming to you with Dano Songs, who is a full-time musician.
00:46:00.000 | And then Friday, expect the show, "How I Would Become a Millionaire on a Minimum Wage Job at Walmart."
00:46:06.000 | Sorry for the rambling.
00:46:07.000 | I'm done.
00:46:08.000 | I'm out.
00:46:09.000 | Cheers.
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00:46:27.000 | Or check out great fares to Australia and New Zealand with seamless connections via Fiji.
00:46:32.000 | Book now at FijiAirways.com.
00:46:34.000 | From here to happiness, flying direct with Fiji Airways.
00:46:38.000 | [MUSIC PLAYING]