CASE STUDY
Tax Mitigation
Strategies
CLIENT OVERVIEW
Annual Net Income:
$4M (2023); $6.25M (2024)
Business Structure:
Multiple LLC's (taxed as S-Corps) and a new C-Corp (planned)
Existing Tax Strategies:
Capitve Insurance, Cash Balance Plans
Primary Goals:
Minimize tax liability, optimize business structure, and enhance asset growth
CHALLENGES
IDENTIFIED
High Tax Burden:
Taxable income increased to $6.25M, significantly raising federal and state tax liabilities.
Limited Tax Mitigation Strategies:
Exisiting strategies (captive insurance, cash balance plans) are insufficient to fully optimize tax efficiency.
Investment Considerations:
New $3M+ investment in a manufacturing project requires an optimized tax strategy.
Asset Growth Focus
Shift from buying tax deductions to investing in income-producing assets.
PROPOSED
SOLUTIONS
01
Tax Optimization via Entity Restructuring
Shift Income to C-Corp: Redirect $2M from S-Corp to C-Corp as a management fee to take advantage of a lower corporate tax rate (21% vs. 37%)
Projected Savings: $360,000 in tax savings from the rate reduction.
02
Exit Retained Capital
Strategy: Retained earnings paid out of C-Corp without double taxation to be used for asset acquisition.
Capital is used to acquired assets such as businesses, real estate, and energy that create additional income tax deductions and tax-efficient passive income.
03
Energy Investments for Tax Deductions
Offers significant, above the line, income tax deduction and passive income.
Projected savings: $159,823 with passive income 15% tax-free.
04
Real Estate Investments for Tax Efficiency
Investment: $500,000 in workforce housing short-term rentals
Projected tax savings: $87,000 through cost segregation and bonus depreciation.
Projected Cash-on-Cash Returns: Mid-20% range.
*If client qualifies for REPS
05
Tax Credits &
Legislative Benefits
Potential R&D Tax Credits: Capitalized and carried over for the next three years.
Leveraging Tax Cuts and Jobs Act, Inflation Reduction Act, and CARES Act for additional benefits.
PROJECTED TAX
SAVINGS SUMMARY
STRATEGY
PROJECTED TAX SAVINGS
Entity Structure Optimization (C-Corp)
$360,000
Exit Retained Capital
$283,000
Energy Investments (Oil & Gas)
$159,823
*Real Estate Investments (Depreciation)
$87,000
Total Projected Savings
$889,823
CONCLUSION
By implementing a comprehensive strategy that combines corporate restructuring, strategic investments, and tax-efficient asset growth, our team is positioning the client to significantly reduce their tax burden while building long-term wealth. With projected tax savings of $889,823, this engagement demonstrates a high-ROI engagement and underscores the power of proactive tax planning.