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Posted

I can’t wrap my head around this. 
 

Parent pays adult children as employees, but cpa does w2 with high withholding which once refunded is then compliantly handed to parent to pay in to a quasi life insurance trust for the child. One child has a full time job unrelated to parent and other child is a student  

Issue 1. Is the work legitimate?  Gray area. Paid at higher rate than what work entails. 

Issue 2. Payroll and income taxes are paid so govt gets its share. 

issue 3.  Is it bypassing gift tax if issue 1 is not considered legitimate?  Anything else?

Issue 4. What is blowback on children if irs investigates and issue 3 is confirmed?

Posted

So basically paying the kid to get money out of the business and the kid then buys a life insurance policy with it instead of spending it?

Business deducts the wages.  Business pays employment taxes.

Kid pays income tax and employment tax.

Lots of arbitrage there among tax rates

That seems like very little juice for the squeeze unless we're talking large sums where a few points saved equals big bucks....or if the focus is on the issue #3 and the annual gift exclusion.

The withholding seems dumb.  If you want to pay a kid, the tax is the tax and the withholding/refund part seems irrelevant at first glance....unless that's dad's way of keeping the kid from spending it.....  

Downside risk is that the wage could be treated as a dividend, not reasonable compensation, and that could cause some heartburn.

I guess in thinking through this quickly, that must be the angle - gift over and above the annual gift exclusion and hope the IRS doesn't invalidate the payment as wages and treats them as a dividend.

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Posted

I watched a Grant Cardone youtube video where he discusses paying his 18 year old daughter a multiple 6 figure salary, and then she invests the money back into his real estate deals. He lets her spend a few thousand on fun stuff.

If Grant's doing this, it's gotta be legit. And a reasonable defense when speaking to an IRS agent.

Posted
3 hours ago, Nice Guy Eddie said:

I watched a Grant Cardone youtube video where he discusses paying his 18 year old daughter a multiple 6 figure salary, and then she invests the money back into his real estate deals. He lets her spend a few thousand on fun stuff.

If Grant's doing this, it's gotta be legit. And a reasonable defense when speaking to an IRS agent.

I think he gets around it by including her in videos, promotional items, and bringing her to his high dollar speaking events. He may not be telling the exact truth of how much he pays her but there are probably comps out there to justify it if under an IRS audit. 

Posted
2 hours ago, HRSchenker said:

I think he gets around it by including her in videos, promotional items, and bringing her to his high dollar speaking events. He may not be telling the exact truth of how much he pays her but there are probably comps out there to justify it if under an IRS audit. 

I’m sure Cardone has justification for paying his daughter. Feels like half of his online content is about telling you how to retain millions of your annual income via tax schemes. Advice for the common man. Only $999 for this weekends seminar.

Posted (edited)

Here's a multiple choice.  The difference between tax avoidance and tax evasion is?

A. Whatever the IRS says.

B. A smart lawyer

C. 10 years in prison

D.  All of the above

Edited by Surly Bevo
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Posted
On 9/24/2025 at 3:15 PM, Surly Bevo said:

Here's a multiple choice.  The difference between tax avoidance and tax evasion is?

A. Whatever the IRS says.

B. A smart lawyer

C. 10 years in prison

D.  All of the above

Ah, Gene Hackman.  He did play a good scoundrel. 

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