Benefit Pension Plan Becomes a Boon

Recently, we met with a new client. who had been working for many years and was able to:

  1. Accumulate a large amount of “extra” ordinary income from a business
  2. Have the flexibility to legally choose what tax year that income would be reported

Based on the above criteria, we developed a tax plan to completely avoid paying any tax on the large amount of “extra” income.  We first designed a special defined benefit pension plan which created a gigantic tax deduction over the next few years.  Then we simply reported the “extra” ordinary income, and took this extra income to pay for the annual pension contribution (timing is everything).  This resulted in no taxable income because the pension deduction completely offset the extra income.  Also, there were no employees so 100% of the income, which was paid into the corporate pension plan, ended up in the client’s pension account – all tax free today and tax deferred in the future. 

When we first met with the client, the tax on this extra income would have cost over $200,000.  After the implementation of our tax plan, we were able to eliminate over $200,000 of income taxes and at the same time contribute over $500,000 into our client’s pension plan (which will hopefully grow to over $1 million in the future).

This situation reminds me of a famous quote: “It’s not how much you make, but how much you keep.” 

Our goal is to be creative in our tax planning approach and proactive to our clients’ needs.  Our motto is, "We do more so you have more."  Therefore, we are extremely motivated toward helping you realize exceptional business and personal success. 

Thanks to all of your referrals (which include the success story above), we’re proud and privileged to have the opportunity to help a great group of clients. 

Doug Forbes