Some of our Clients Use
TAX LOSS METHOD: Let's say a business is told that they need $30,000 more in tax deductions to avoid paying income taxes.
Let's further assume that this business has an incremental cost of 35 percent, meaning that there's a 35c cost for every $1 sale.
Business tells their EOA broker, who lends the business $100,000 trade dollars and has them purchase a piece of property worth $100 thousand cash, for $100,000 trade dollars. The cash repayment cost will only be 35% or $35,000.
If business immediately sales property for $70,000 cash. They will doubled their cash investment while showing a $30,000 loss on their taxes. IRS doesn't care that property was purchased with trade dollars and sold for cash.
Taxable Loss = $30,000
Cash Cost = $35,000
Net Income = $35,000
DONATION METHOD: Let's say say that your company sells hot tubs at a 50% markup. And your CPA tells you that you need $10,000 more in deductions to avoid pay income taxes. You already know that if you donate a $10,000 hot tub to a charity, you can only deduct the costs associated with purchasing and giving the hot tub away, instead of it's market value.
To earn the $10,000 tax deduction you'll need to donate two hot tubs. However your EOA broker has you sell one hot tub for $10,000 trade dollars, which you then donate to the charity.
IF YOU DONATED TWO HOT TUBS:
Tax Savings = $10,000
Cash Cost = $10,000
IF YOU USE EOA:
Tax Savings = $10,000
Cash Cost = $5,000
PREPAID EXPENSES METHOD: Let's say that your CPA tells you that you need $10,000 in deductions to avoid paying income taxes. If EOA lends you $10,000 trade dollars (at a cost to you of $5,000) to prepay advertising and other business expenses this year for next years usage.
Taxable Deduction = $7,000
Cash Repayment Cost = $5,000
Due Income Taxes = $0.00
EOA income is taxable the same as cash income and EOA expenses are tax-deductible the same as cash expenses. This is not tax advice. EOA is not qualified to provide tax advise, and encourages the reader to contact a tax expert (their services are available on trade) before considering using these examples.