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Sohodojo Advisory Board Member
Jim Schneider
The Taxman86 Speaks...
09 May 2000
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New from the Hill; How to pass the wealth; When is a house not a home; What happened to tax legislation?; Where is 1299 Pennsylvania Ave, Washington, D.C., 20004?

1. News from the Hill...

If you did not think the Internet is changing the way we do business, then consider the implications of this article on the issue of "Nexus."

Some Regular and Internet Companies are earning big income, including Service Professionals. If these corporations incorporate in tax favored jurisdictions, such as Delaware or Nevada, and establish a legitimate presence there, such as their Web Sites, then it appears that not only will sales taxes be avoided but state income taxes as well.

Will this really happen, some people think the House Internet Tax Bill, to be voted on tomorrow, will have that effect. Does any House Member, up for reelection want to go on record supporting the taxing of Internet Transactions? We do not think so.

As to ZERO Capital Gains Zones, check out H.R.4358, which will make all of Washington, D.C. an Enterprise Community, raise the Wage Credit to 20% and reduce the ZERO Capital Gains holding period from 5 ot 2 years, retroactive to January 1, 1998. (Visit http://thomas.loc.gov for more.) Wait till the VCs see this one. Michael Jordan picked the right location for his new business enterprise.

2. The best generation is passing the wealth and with it comes the taxman.

Todays San Diego Union Headline on page one of the business section says it all: the best generation is passing trillions in wealth, and the taxman is ready to take his share. ["Age of inheritance | The transfer of wealth from America's WWII generation creates great expectations," by Ann Perry on May 02, 2000]

This issue is one of the most challenging because of the lack of communication in many ways with the generations. Yesterday we talked about a book called Rich Dad Poor Dad by Robert T. Kiyosaki which involves a boardgame to teach children how to handle money. Buy it and have fun. Better yet form a family corporation and spread the wealth.

The family corporation, or partnership, if you will is the hot item these days to pass the wealth, and with a boardgame have some may have fun while doing it.

3. The house is a Big Liability unless it is a home-based business.

If you can not fight them, join them is the motto, and one of the biggest real estate developers in Southern California has got the message. Build work/live lofts above the store and they will come to Sunset and Vine. Urban housing is in for the young professionals. "Loft Sweet Loft at Famed Sunset and Vine," by Brad Berton on May 2, 2000 (You can check the LA Times archive for this article.) But what about those far away places for quiet time to smell the roses? Let the corporation own it and pay for it, under a welfare plan for rest and relaxation.

Better yet build those lofts in downtown Los Angeles, several subway stops from Sunset and Vine, and do it in a tax favored enviroment called the Los Angeles Federal Empowerment Zone. What can you save, you asked? How about $35,000 in additional annual IRC Section 179 deductions for those flat televisons that fit on the wall for $20,000+, the SUV for $50,000, and the new Powerbook and digital cameras for a cool $10,000, all of which are currently deductible in a home-based business in an Empowerment Zone.

4. Tax legislation where art thou?

The President goes with the polls, so does Congress, and what are the polls saying? Do not tax the internet, just yet. The Governors and Mayors, on the other hand want their sales taxes and are raising a stink; our prediction, it will be postponed for another five years and studied more. [See above for our prediction coming true.]

Result, tax free zones will have been in place for several years, and all of the music and film is being sent over the internet; and there goes the sales tax, end of story. The entertainment industry will never be the same, as entertainers, and their production companies move into the tax free zones, and start selling their products to the world over the internet, from those tax free zones. It is the internet generation.

5. Some have heard of 1600 Pennslyvania Ave. but what about 1299?

We saw an interesting Op-Ed piece about taxation without representation in Sunday's Washington Post.

One of the authors is a partner in the law firm of Howrey Simon White and Arnold at 1299 Pennsylvania Ave., Washington D.C., 20004, which is an interesting address to say the least. We checked it out on our Empowerment Zone/Enterprise Community locator and what did we find?

He who lives in glass houses, including the White House, should not throw stones.

Jim Schneider, LL.M.

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