Montana LLC Re-Visited
Hi guys, I recently spoke to someone who became a full timer and the conversation was interesting. He told me that he sold his home in New York and set up a Montana LLC. He then purchased a new MH...
Forum Discussion
Effy wrote:wnytaxman wrote:
As to any perceived moral issue I don't think there are very many of us that intentionally pay more in taxes than we owe. Your interest on your RV is deductible so do you not take it so that you can pay more in taxes than you owe? I don't think there are too many RV owners who would do this, if there are any!
That's not the point and a bit of apples to oranges. The interest deduction is intended for just that and does not require an LLC. An LLC in a state you do not live in, is not intended to sheler you from taxes on a state you do live in under the guise of a business you don't really operate. It's abused for that. You don't see the IRS sending notices to folks who take an interest deduction on a MH or second home. You do see them questioning opening LLC's for tax shelters. It's a little different.
Effy, with all due respect I think you are missing some of the points of the earlier posts. First off, an LLC is NOT a business. LLC's are used as an asset protection tool and I have seen them used on vehicles, rental properties, and almost anything one can think of to protect the owner from potential lawsuits. That is in the title of Limited Liability Company and the term company only refers to the fact that there may be assets involved.
Second major point is that the individual was no longer a resident of NY, so where should he be paying taxes in general and sales taxes in particular for this situation? Should he be paying them to NY, even though he doesn't live there anymore? Perhaps another state in which he doesn't live? The point here is that as a fulltimer he does not have a resident state with real property that could be called his "home state" so he used the LLC for the vehicle registration.
The use of the Montana LLC becomes illegal, and I would agree immoral, when someone lives in a state and does not comply with their state's laws as to residency and vehicle registration, and uses the LLC strictly for the purpose of avoiding sales tax.
In my case I neither advocate nor condemn those that use Montana LLC's when they are used legally. I'm not fulltiming and don't know if I ever would, but if I did I would explore the possibility of the Montana LLC as long as I felt I could comply with the laws of whatever state I decided to declare residency in.
Tax avoidance is legal while tax evasion is illegal. Avoidance is not paying taxes while being in compliance with the law. Tax evasion is not paying taxes by NOT being in compliance with the law. You avoid taxes by deducting the sales tax on your RV or the interest you pay on your RV. Those are all quite legal and that's why we encourage people to take those deductions when they have paid those taxes or that interest.
