20 OFFSHORE FINANCIAL AND INVESTMENT STRATEGIES OFFSHORE MANAGED COMMODITY ACCOUNT

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This is another way to invest in a diversified portfolio of commodities

not available in the United States. Through your offshore corporation

or trust, which can provide additional asset protection, you can establish

an offshore managed commodities account and be making excellent

returns in precious metals, foreign currencies, financial futures,

and commodities markets worldwide, including the United States.

These can be investment pools offered by offshore specialists who

have developed such programs. In the current economic climate,

commodities are worth investigating. You will want to carefully review

any investment proposals and their tax implications. For a personal introduction

to an excellent offshore brokerage firm, e-mail me your

contact particulars, and I will place you in touch immediately and

free of charge.

OFFSHORE INVESTMENT FUNDS

There are thousands of investment funds worldwide, many of which

exclude U.S. citizens and residents for a couple of reasons. The funds

do not want to spend time and money complying with U.S. securities

laws to gain the additional business, and even if they did so, their operations

would become subject to the all-imposing U.S. government

and its myriad laws. They would also be exposed to the predatory

whims of the U.S. litigation industry, which constitutes 94 percent of

all lawsuits filed worldwide, thanks partly to mentality and partly to

the ease of suing on a contingency basis in the United States.

Even if these funds avoid doing business in the United States, the

long arm of the Internal Revenue Service still has a far-f lung reach

into its own taxpayers’ affairs including whoever they might be doing

business with. Having U.S. customers can be plain troublesome.

On the f lip side of this sad tale, the U.S. government has created

investment protectionism through laws and policies designed to discourage

average investors from venturing abroad with their money.

These policies are designed to keep the money on Wall Street, and in

American banks.

As a result, investment choices are limited for Americans, but the

news is not all bad. Many top-performing offshore funds exist, all producing

greater returns than their domestic counterparts. Although it

is illegal for Americans to purchase them directly, you can still get

into these productive investments indirectly and gain all the benefits.

By using the offshore strategies illustrated here, you can invest for

better returns worldwide, and legally, just as the rich and powerful always

have. While gaining valuable investment diversification, American

investors also can achieve asset protection and engage some real

tax reduction strategies.

Investing in international funds, like the mutual fund, is an easy

way to participate without buying into foreign companies directly.

But, that would be too simple, and the IRS has other ideas about what

they want to do, which is to subject you to the unfavorable Passive Foreign

Investment Corporation (PFIC) rules. These regulations constitute

a penalty and a means to curtail investing overseas. In this way

over time, the IRS can hit you with a punitive interest charge that can

ultimately wipe out all your gains, and in some cases, even your principal.

You want to avoid this at all costs.

Instead, you can invest in funds that are not corporations, but taxneutral

limited partnerships or limited liability companies, thereby allowing

you to pay your taxes on your prorated portion of the income

or profit, and not break the law.

Other options are presented in this book, such as investing

through a tax-protected offshore retirement plan, variable annuity, or

portfolio bond. Other offshore vehicles could be structured for the

same purpose, allowing you to legally invest in the offshore investment

funds of your choosing.

International fund sources such as Standard & Poor’s and Fund-

Insite are listed in Part Four on page 268, “Financial Information and

Business Opportunities,” along with competent financial advisors lobarb_

cated in the Appendix who can give you straight-up advice on proceeding

legally and avoiding the pitfalls. Take a close look at some of

the offshore funds and compare them with your experience and

knowledge of investing domestically.

Another option for investing in international funds, and for that

matter, back into U.S. markets, is through your offshore or Swiss

bank. But, a word of caution here: So convinced is the IRS that every

taxpayer with a foreign bank account is trying to cheat on taxes, they

have implemented the qualified intermediary (QI) regulation, under

the Administrative Procedures Act, in hopes of capturing more tax

dollars. In an effort to stop Americans from investing back into the

states anonymously from offshore, they have imposed far-reaching requirements

on foreign institutions, expecting them to disclose the

identity of any U.S. account holders.

The idea is to prevent “U.S. persons,” as the IRS defines them,

from investing back into the U.S. markets through an intermediary

such as a foreign bank or financial institution without disclosing their

identity to the IRS. The penalty for not complying is a 30 percent

withholding tax on foreign-source earned income, including the entire

investment and its cash flow. And, how is the IRS going to enforce

these actions and collect this money? Sadly, this would only work

through the “qualified intermediaries,” who will receive compensation

to act as auditors and agents on behalf of the U.S. government.

Fortunately, not all banks are going to jump on this bandwagon to

play pseudo tax cop and risk their image and reputation.

You can get around this problem, but get solid professional advice

before starting, so that legally you are completely in the clear.

Offshore investments funds are an easy way to diversify your investments,

and invest in equities overseas, typically with a nominal initial

investment. Minimum requirements to open an account can be as

low as $5,000.

PRECIOUS METAL CERTIFICATES

An excellent program for acquiring and safely storing precious metals

is known as the Perth Mint Certificate Program (PMCP).

The PMCP is a Western Australia (S&P AAA investment rated)

government-guaranteed program where you can invest in gold, silver,

or platinum, in either coin or bullion, with your holdings represented

by ownership certificates. The certificates are easy to both purchase

84 BUILDING A SOLID OFFSHORE FINANCIAL FORTRESS

and liquidate. The precious metals in question are safely stored in the

Perth Mint, and have been since 1899, located in politically and economically

stable Western Australia, and are fully insured by Lloyds of

London at the expense of the mint. The certificates may be in increments

of as little as $50 each and can even be held by an Individual

Retirement Account (IRA), a foreign trust, or an offshore corporation.

The ownership relationship of the precious metals is with a government

vault, not a foreign bank. The certificates are issued in the

name of the purchaser and each certificate has a number. They are

nonnegotiable and transferable. The certificate fee is low. The mint

uses a system of code numbers to ensure client confidentiality and security.

The Perth Mint is accredited by the London Bullion Market Association,

the New York Commodities Exchange, and the Tokyo

Commodities Exchange. As an additional benefit to U.S. and Canadian

taxpayers, the mint does not maintain any corporate presence in

either the United States or Canada. Minimum investment of U.S.

$10,000 required.

For complete information, refer to Asset Strategies International,

Inc. in part Four, “Financial and Investment Services.”

GOLD-BACKED ELECTRONIC CURRENCY

There is an alternative payment system to the federal banking system

that deserves discussion and lends itself nicely to asset diversification,

providing asset protection and consideration of the geopolitical aspects

with regard to your banking and investments.

Banking provides a wide variety of services; one that we all use

daily without thinking twice is the ability to make and receive payments.

Banks are also where we store our money for short and long

periods, believing it is safe. Unfortunately, security is as much perception

as reality.

With the advent of high technology and computers, a new era has

emerged. The digital age has posed new opportunities and also new

threats to previous ideas and methods. The government and the banking

system are working hard to rid us of cash, a commodity that empowers us

as individuals by allowing us anonymity and sovereignty, and replace it

with a digital system that can record all financial transactions. Right

now, “they” are even considering eliminating the U.S. $50 and $100 bills.

Gold-backed electronic currencies are an interesting alternative

to traditional banking. They allow the customer to make and receive

payments online. And the funds on account are backed 100 percent by

gold or other precious metals of the customer’s choice. In the United

States, we were taken off the gold standard by the U.S. government in

1971, so that our U.S. dollars are backed by nothing more than the

“good faith and credit of the United States government.” Basically,

this promise is a big IOU, and only as strong as the issuer. Money

printed today under this system is essentially fiat money that has no

value backing it. In countries where fiat currencies have been issued,

there have been tremendous cases of runaway inflation. And, to compound

the matter, the promisor in this instance, the U.S. government,

is trillions of dollars in debt already.

The gold-backed electronic currency provides the user with a

cash-payment system backed up by gold, silver, and other precious

metals, at the choosing of the customer. The value of the account f luctuates

with the value of the precious metals being held. In today’s economic

climate, it is a favorable environment to be holding gold and

other precious metals. They are the best hedges against what we have

today, a declining U.S. dollar, inflation that promises to rise dramatically

in the near future, a shaky national real estate market, rising interest

rates, the depletion of worldwide oil reserves, rising gas prices,

war with no end in sight, terrorism, and huge private and public national

debt. Independently of each other, these influences put positive

upward pressure on precious metals. Combined, they have sent

gold and other commodities soaring in the recent past, and it could

just be the beginning. And, even if precious metals were to drop, the

truth is, you still have a real asset with real value, whereas the person

holding printed currency has something of no hard value but really

just a promise.

This new payment system works internationally, 24/7, and protects

you from your cash being stolen. It allows you to move money

across borders instantly without red tape and eliminates the usual collection

problems and costs associated with other forms of payment

like checks, cashier’s checks, drafts, credit card processing, and so

on. Plus, it circumvents fraud.

The initial step to establishing an account can be completed online

within minutes, and an account number will be assigned and

ready for use. Many conveniences, cost savings, and security measures

are built into this system. It is also one of the simplest and fastest

means to buy and hold gold and other precious metals. Now you can

join the many individuals and businesses worldwide that are benefiting

from a secure payment system and alternative to the traditional

banking system and the weakening U.S. dollar.

For additional information on the gold-backed electronic

currency and how to sign up free within minutes, visit www.

barberf inancialadvisors.com.

EURODOLLAR BONDS

Eurodollar bonds are a secure means to invest offshore. Eurodollars

are simply U.S. dollars on deposit by American banks with a foreign

counterpart or one of their foreign branches in Europe. As these deposited

U.S. dollars are held overseas, they are not regulated by the

Federal Reserve Board or the Securities and Exchange Commission

(SEC), and thus they are a popular investment. Eurodollars are issued

in the Netherlands and Delaware by international finance subsidiaries

of giant transnational corporations. Both the principal and

interest are fully and unconditionally guaranteed by the issuer and

are not subject to U.S. withholding taxes. Often, they can be exchanged

for common stock in the parent company, and the stock can

be sold tax-free. Similarly, U.S. dollars that are held by foreign banks

in Asia are known as Asiadollars.

For more information on Eurodollar bonds, contact Mr. Thomas

P. Azzara in Nassau, Bahamas (see Part Four: “Financial and Investment

Service Contacts”).

OFFSHORE PHYSICAL STORAGE;

OFFSHORE SAFE DEPOSIT BOX

The best place to store physical items of value is outside your own

country, such as the United States. It is a bit inconvenient, but it is also

a great deal safer. It would be challenging, depending on the country

and the bank or vault where the valuables are stored, to get a court

order forcing the bank or other vault to open up.

A safe-deposit box is not reportable, as would be a safekeeping

or custodial account with a bank, which will hold assets in their care

per your instructions, including in sealed packages. These accounts

are only reportable if their value, like a foreign bank account, exbarbceeds an aggregate value of $10,000 in a year. But, by using a safedeposit

box for this purpose, you would avoid the necessity of filing

Treasury Form TD F 90-22.1 and acknowledging it on Schedule B of

your U.S. tax return no matter how high the value of the contents.

Smaller items like stock certificates, bonds, any negotiable instruments,

bearer bonds, bearer share certificates, jewelry, precious metals,

cash, important documents, collector items, hard-to-replace items,

copies of trust papers, wills, and evidence of asset holdings (e.g., gold

certificates) are best placed in an offshore safe-deposit box of a reputable

bank. Banks in Switzerland, Liechtenstein, and Austria are

ideal. But, as a first step, or for items not so sensitive, or on a temporary

basis, an American may want to hold some items in a safe-deposit

box in Canada for convenience.

Although the degree of security and privacy is not the same, say, as

in Switzerland, it would still be outside the United States and better

than your local bank. If travel is a problem, you could give an entrusted

family member, friend, or associate a limited power of attorney authorizing

their access to the box for the purpose of putting things in it and

removing them per your instructions. Naturally, trust is the key factor

here, and it raises the risk level.

This is also important in the event of your death, as the bank

would be required by law to seal the box, and it would become part of

your estate. Your beneficiaries may not be allowed to access the box in

such event, until the Internal Revenue Service gets a chance to look

inside. They might try to seize anything that appears not to have been

reported as required by law, including going after the contents of any

hidden accounts, anywhere. Keeping the safe-deposit box outside the

United States keeps its contents out of their reach. At least easy reach.

This move could also allow rightful beneficiaries the time to gain

legal access to the box through the foreign jurisdiction rather than

under the authority of U.S. laws.

This also applies to offshore physical storage facilities, often as secure

as a bank’s vault, which could be used for similar items or maybe

more voluminous records and possessions (see Via Mat Management

AG, in Kloten, Switzerland, and Safes Fidelity, S.A. in Geneva, Switzerland,

in Part Four: “Financial and Investment Service Contacts”).

A better way to allow beneficiaries access to a safe-deposit box or

other secure facility on your death, would be to have the box rented

by your offshore corporation. Since the corporation is usually for perpetuity,

and regardless of a shareholder’s death, it will continue, and

the status of the safe-deposit box will remain the same. Access to it

could be secured by a director or officer, or the major shareholders.

So, a beneficiary could already be in such a position, or a director or

officer could authorize a beneficiary to have the right to access the

box. A corporate resolution could be furnished to the bank, and it

would be required to comply. Of course, this authorization could be

withdrawn or changed at any time. The corporate approach also removes

it a step from creditor claims. This can be done in the United

States as well, but it wouldn’t be as airtight.

FOREIGN REAL ESTATE

There are some excellent real estate investment opportunities in foreign

countries, including tax havens and other locales that would

make attractive retirement havens. Property could be purchased in

advance of wanting to move, and can provide rental income in the

meantime. Part Four provides detailed information on two countries

offering Economic Citizenship Programs and over 30 other countries

for possible residency and citizenship. Most of these countries permit

foreigners to purchase real estate. Tremendous real estate opportunities

exist worldwide, and real estate prices are often lower, even much

lower, compared with U.S. prices. Many of these countries are experiencing

good appreciation in the area of real estate. You could easily

establish a comfortable lifestyle while lowering or totally avoiding

personal income tax by exercising the $80,000 annual loophole discussed

earlier. Review the real estate related contacts listed in Part

Four and you can be on the road to discovering your own quaint hideaway.

There are no U.S. reporting requirements in the case of foreign

real estate ownership; keep in mind, however, that foreign public ownership

records are likely. Often, a piece of real estate, like a private island,

will be owned by a local or offshore corporation, and ownership

can be changed simply by transferring the stock. With this structuring,

the stockholder would not be a part of the property records.

I suggest a visit to www.InternationalLiving.com for foreign real

estate opportunities and information of interest to prospective expatriates.

Their contact information can be found later in this section

under “Real Estate.”