How the Review Runs Alongside Your CPA and Attorney

A physician does not begin with a prescription. He begins with an examination, arrives at a diagnosis, and only then writes something down. If the condition is serious, he expects the patient to seek a second opinion and he is not offended by it.

That sequence is not a courtesy. It is how you avoid treating the wrong thing.

Our method follows the same order and it has four steps.

One. Discover

Establish the facts. What is being sold, what it cost, what depreciation has been claimed, how it is held, what debt sits against it, what other income the year will produce, which state has a claim, and what the client actually wants to accomplish afterward.

Most of this comes out of documents the client already has. Where a figure is unavailable, we say so and mark it as an assumption rather than guessing quietly.

The output of this step is the conventional outcome. What the transaction produces with no proactive planning at all, federal and state, with the depreciation component separated from the balance of the gain.

That number is the baseline for everything after it. Until it exists, there is nothing to compare against and no decision to make.

Two. Plan

Identify which approaches the client's facts actually support, and model each one against the baseline in the same format.

Same assumptions. Same columns. Cost of implementation included. Timing of when funds are actually available shown alongside the tax result, because those two things are not the same and clients care about both.

This step frequently ends in a disqualification, and I want to state that plainly rather than bury it. The transaction is too small to justify the structure. The timing has passed. Conventional treatment already produces a reasonable answer. When that is the case we say so in writing and the engagement ends there.

Turnaround on the analysis is typically three business days.

Three. Verify

Before implementing anything, the client verifies the authenticity of the solution in law through his own CPA, his own attorney, or other independent experts of his choosing.

I put this step into my written description of the method years ago, and of the four it is the one I would defend most vigorously.

Here is why.

A strategy that cannot survive review by the client's own advisors will not survive review by anyone else. If his CPA raises an objection we cannot answer, that objection was going to surface eventually, and I would rather it surfaced in a conference room than in an examination.

I have had recommendations come back with problems attached. It is not comfortable and it is the system working correctly.

There is also a harder point underneath this one. Section 7701(o) removed the reasonable cause defense for transactions lacking economic substance. A taxpayer who relied in good faith on a professional opinion is not protected by that reliance. Which means independent review is not a way of transferring risk. It is a way of finding problems while they can still be fixed.

Four. Implement

TaxWealth does not execute. We never have.

Implementation is handled by the specialist firm appropriate to the strategy, under its own engagement, with its own documentation. The client's CPA receives the filing package. The client's attorney reviews the instruments. We coordinate and we stay available, but the execution belongs to the people qualified to perform it.

Who is in the room, and in what order

The client decides. Nobody else does, and no one should present it otherwise.

His CPA and attorney hold authority over their domains and their objections stop the process.

The specialist firm executes.

We produce the analysis and coordinate the whole of it.

If your advisor is not in that room, something has gone wrong. When an Alliance Partner brings us a client, that partner stays in every meeting and reads the analysis before the client does. We are not there to occupy his seat.

What to ask of anyone doing this work

Whether or not you ever speak to us, these are the questions worth asking of any firm proposing a tax strategy to you.

• Show me the conventional outcome first. What happens if I do nothing?
• What are the assumptions, and which figures are estimates?
• What does implementation cost, and is that cost in the comparison?
• When are the funds actually available to me?
• Will you put this in writing for my CPA and my attorney to review before I sign anything?
• What would disqualify me?

A firm that answers all six without discomfort is worth continuing with. A firm that resists the last two has told you what you needed to know.

This information is general and is not tax, legal, or investment advice. Every situation is different. Work with your own CPA and attorney before acting on any strategy.