Dawson & Gerbic Conference RoomIncome Tax Planning

Frequent news stories in recent years have exposed tax shelters designed by large international professional firms. These shelters, which were aggressively marketed to numerous taxpayers, usually involved transactions with little or no independent business purpose. Instead, they were designed almost solely to offset tax liabilities arising from prior profitable business or investment activities.

At Dawson & Gerbic, LLP we don't rely on tax shelters to minimize taxes. Instead, we focus on structuring the original transactions to maximize their after-tax returns. Our approach is well-illustrated by the following story adapted from BizMove.com.

A young boy who had lost his left arm in a devastating auto accident phoned a highly-acclaimed judo master, and asked if the master would be willing to train a one-armed novice. The master drew a small, dusty book from a far corner of his library, and after contemplating a series of illustrations in that volume, asked whether the boy would be willing to follow an unorthodox training regime which the master would design for him. Upon the boy's enthusiastic agreement to the customized training, the master took him on.

Over a period of several months, the master taught the boy only one move, but he drilled the boy repeatedly in the minute details of every possible application of that move. And then one day the master took the boy to his first tournament, where he easily defeated all of his stronger and more experienced opponents. Returning home, the boy inquired how he had won using only a single move. "You won for two reasons," the master answered. "You've nearly mastered one of the least known and most difficult throws in all of judo. And the only known defense against that throw requires a grip on your left arm."

We approach tax planning engagements the way the master approached his assignment. We attempt to identify the objectives, relevant facts, and constraints specific to each client's particular situation. Then we apply our technical knowledge and technical resources to identify a workable, tax-efficient way to satisfy the client's requirements.

Finally, like the old master, we attempt to carefully analyze, and reanalyze, potential issues, opportunities and risks in our plan, so that when we conclude the plan is ready, it is. Our tax planning results have often received official scrutiny, but they have seldom been challenged. In those challenges which have occurred thus far, our clients have nearly always prevailed.

Joe Dawson is in charge of our tax planning services. Joe completed both his B.A. in accounting and his J.D. degree in law at the University of Washington with academic honorary memberships. He served as Comments Editor for the Washington Law Review, where he had both a case note and a comment published. When he subsequently completed his LL.M. degree in taxation there, the University of Washington Law School added him to that program's adjunct faculty.

Throughout his career Joe has been drafted for other teaching assignments as well. At various times he taught the tax research class for the Washington Society of CPA's, the Chartered Life Underwriter income tax course for The American College, and the income tax return preparation segment of the Ernst & Ernst national tax training program.

But Joe's career emphasis has not been academic. His focus over the past forty years has been analysis of the tax aspects of a broad range of real-world transactions for diverse business clients. People familiar with Joe's skills have provided him with significant planning challenges, where he has had several notable, innovative successes.

As one example, during the savings and loan crises of the 1980's Joe performed the primary tax analysis and reporting for the first government-imposed involuntary commercial bank takeover of a mutual savings bank. The potential tax benefits totaled tens of millions of dollars, but their preservation and utilization presented several unique and unresolved issues. Joe's analysis and his tax reporting were subsequently reviewed; the former by a U.S. District Court and the latter by the congressional Joint Committee on Taxation, with no changes.

In a subsequent assignment, Joe identified a theory supporting S corporation basis adjustments which entitled an individual client to a windfall net operating loss deduction of nearly ten million dollars. Joe's position prevailed at the Appellate Division of the Internal Revenue Service, and was later fully vindicated in an unrelated U.S. Supreme Court decision.

Our tax planning capabilities extend beyond Joe. Pat Ackerman and Eva Leung have a combined total of over 49 years of successful tax-oriented public accounting experience. Shen Liu and Hang Le both hold Masters of Professional Accounting in Taxation from the University of Washington, and Pat's University of Washington Certificate in Gerontology adds unusual capabilities in generational transfer planning.

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