InKnowVision’s Monthly  HNW Webinar Series               Case Study Webinar    ©2012. InKnowVision LLC. All rights reserve...
FAMILY WEALTH GOAL ACHIEVER™ - INITIAL                                                    PREPARED FOR:                   ...
YOUR GOALS AND OBJECTIVES                                               JOHN THOMASONMaintain my customary lifestyle. This...
FAMILY INFORMATION                                            JOHN THOMASON                                               ...
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - CONSIDERED                                                                 JO...
INTRODUCTION TO THE PLAN STRATEGIES ROADMAP                                                       JOHN THOMASONThe followi...
JOHN THOMASONBUSINESS PLANNING  OPPORTUNITIES                      Page 6
KEY EMPLOYEE                                             JOHN THOMASONOil Trucking has a key employee who is responsible f...
KEY EMPLOYEE                                              JOHN THOMASONGoal: Retain key employee in case of death or disab...
JOHN THOMASON INHERITANCE   PLANNINGOPPORTUNITIES                    Page 9
CREATE AN IRREVOCABLE NON-GRANTOR TRUST                                                         JOHN THOMASON             ...
GIFT TO NON-GRANTOR TRUST                                                          JOHN THOMASONJohn makes a gift of $5,00...
SELL BUSINESS, LLC INTERESTS TO TRUST                                                           JOHN THOMASON           Jo...
LOAN TO TRUST                                                        JOHN THOMASONInvestments, LLC loans $5,000,000 of cas...
DYNASTY TRUST/FAMILY BANK TO HOLD INHERITANCES                                                          JOHN THOMASONThe T...
PURCHASE LIFE INSURANCE IN THE TRUST                                                          JOHN THOMASONTrustees of the...
INSURANCE PREMIUMSWe examined several premium payment options. The term insurance has the lowest cost in terms of net pres...
JOHN THOMASONCHARITABLE PLANNING  OPPORTUNITIES                       Page 17
TESTAM               TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I)                                                  ...
TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II)                                                        JOHN THOMASON ...
JOHN THOMASONADDITIONAL TAX AND BUSINESS PLANNING                       Page 20
CREATE A CAPTIVE INSURANCE COMPANY                                                         JOHN THOMASON                  ...
COMPANY INSURES RISKS                                                       JOHN THOMASON                                 ...
PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED                                                                 J...
JOHN THOMASONLIFETIME SPENDING  AND LIQUIDITY                      Page 24
PERSONAL SPENDING VS. INCOME - PROPOSED PLAN                                                                              ...
TRUST SPENDING VS. INCOME - PROPOSED PLAN                                                                                 ...
YOUR LIQUID ASSETS - PROPOSED PLAN                                                                       JOHN THOMASON    ...
JOHN THOMASONINCOME TAX DEFERRED                       Page 28
COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2011                                                                  JOHN TH...
JOHN THOMASONINCREASE INHERITANCEAND REDUCE ESTATE TAX                        Page 30
COMPARISON OF PLAN RESULTS - PLAN YEAR 2011                                                     JOHN THOMASON             ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2030                                                             JOHN THOMASON     ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2031                                                             JOHN THOMASON     ...
COMPARISON OF PLAN RESULTS - PLAN YEAR 2030                                                            JOHN THOMASON      ...
ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED                                                                      ...
JOHN THOMASON   INCREASE INCHARITABLE GIVING                      Page 36
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2011                                    JOHN THOMASON                           ...
COMPARISON OF CHARITY RESULTS - PLAN YEAR 2030                                    JOHN THOMASON                           ...
DETAILED FINANCIAL ANALYSIS                                         JOHN THOMASON                              INTRODUCTIO...
DETAILED FINANCIAL ANALYSIS                                         JOHN THOMASON                 CURRENT PLAN FINANCIALSI...
CURRENT NET WORTH STATEMENT                                                JOHN THOMASON                                  ...
FINANCIAL ANALYSIS - EXISTING PLAN             ASSET VALUE PROJECTIONS - EXISTING PLANYEAR                                ...
TAXABLE INCOME PROJECTIONS - EXISTING PLANYEAR                                                 Current             2011   ...
INCOME TAX PROJECTIONS - EXISTING PLANYEAR                                  Current       2011        2012        2013    ...
CASH FLOW PROJECTIONS - EXISTING PLAN                                                                       4,600,000     ...
ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR                                Current          2011          2...
SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR                       Current         2011         2012         2013    ...
DETAILED FINANCIAL ANALYSIS                                         JOHN THOMASON                PROPOSED PLAN FINANCIALSI...
NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION                                      JOHN THOMASON                          ...
FINANCIAL ANALYSIS - PROPOSED PLAN                    ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR                         ...
TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR                                   Current       2011      2012      2013   ...
INCOME TAX PROJECTIONS - PROPOSED PLANYEAR                                Current     2011      2012      2013       2017 ...
CASH FLOW PROJECTIONS - PROPOSED PLAN                                                                              -      ...
ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR                                 Current               2011     ...
SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLANYEAR                                 Current           2011         2012     ...
CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLANYEAR                                             Current               20...
CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLAN                                                                         ...
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning
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Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

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The Family Wealth Goal Achiever™ is a plan design book (like a blueprint) that explains in easy to understand text and graphics the planning ideas being recommended by the planning team. It solves for high net worth tax planning, advanced estate planning, business transition planning, asset protection planning.

Learn more at www.inknowvision.com

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Thomason Family Wealth Goal Achiever - InKnowVision Advanced Estate Planning

  1. 1. InKnowVision’s Monthly HNW Webinar Series Case Study Webinar ©2012. InKnowVision LLC. All rights reserved. www.inknowvision.com
  2. 2. FAMILY WEALTH GOAL ACHIEVER™ - INITIAL PREPARED FOR: JOHN THOMASON August 16, 2011 PRESENTED BY Scott Hamilton InKnowVision, LLC 715 Enterprise Dr. Oak Brook, IL 60523 Phone: 630)596-5090Copyright 2011 InKnowVision, LLC
  3. 3. YOUR GOALS AND OBJECTIVES JOHN THOMASONMaintain my customary lifestyle. This should take about $200,000 annually after taxes and gifts.Continue revinvesting profits into Oil Trucking to build business value.Explore incentive options for our key employee that will help to ensure business continuity and growth.Provide an inheritance for my daughters in a manner which will provide them with ample opportunities andencourages them to be productive.Provide for a significant charitable gift.Reduce income taxes if possible.Eliminate or reduce estate taxes. Page 2
  4. 4. FAMILY INFORMATION JOHN THOMASON CLIENT John Thomason Date of Birth June 2, 1963 132 Main St. CHILDREN CHILDS NAME DATE OF BIRTHMelissa Thomason August 11, 1995 Katie Thomason September 26, 1998 Page 3
  5. 5. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - CONSIDERED JOHN THOMASONIn our planning process, we start with the universe of available planning tools. While this universe is constantly changing, the following chartoutlines many of the available tools. We examine each of these strategies and discard those that are not suitable for meeting your goals andobjectives. Charitable Family Limited Grantor Retained Charitable Lead Remainder Uni- 412(e) Private Annuity SCIN Liability Company Annuity Trust Annuity Trust Trust Qualified Personal Sale for Installment Series Limited Trust Owned Life Family LLC TCLAT Flip CRT Residence Trust Note Liability Company Insurance Preferred Limited Long Term Care Maximized Gift to Corporate Premium Finance Business, LLC ILIT partnership Insurance Trust Recapitalization Charitable Life Annuity Walton GRAT Private Foundations Investments, LLC Asset Protection Loan to Trust Estate Withdrawal Revocable Living Principal Protected International Irrevocable Non-SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Dynasty Trust Notes VUL Grantor Trust POAs Supporting Captive Insurance IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Company Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership Trust Page 4
  6. 6. INTRODUCTION TO THE PLAN STRATEGIES ROADMAP JOHN THOMASONThe following section of the plan contains a step by step roadmap for each of the strategies that we are recommending.You will notice that the strategies are often interdependent; that is, in order for one strategy to be successful, you mustcomplete another strategy as well. It is the integration of each of these strategies that allows you to most efficientlyaccomplish your goals.Also keep in mind that there is often more than one way to get from point A to point B. This is true in wealth transferplanning. If a particular strategy or combination of strategies is not acceptable to you, we may be able to reach the desiredresult in a less efficient but perhaps more acceptable way.The following pages are a conceptual road map only. There are numerous details contained in each strategy that are notdetailed in the overall plan that follows. Page 5
  7. 7. JOHN THOMASONBUSINESS PLANNING OPPORTUNITIES Page 6
  8. 8. KEY EMPLOYEE JOHN THOMASONOil Trucking has a key employee who is responsible for many of the supplier relationships.Goal: Protect company from the death, disability or termination of key employee.Ideas1) Diversify supplier relationships to one or more company employees2) Train new employees to do job of key employee3) Train suppliers to accept new employees4) Create incentives for your key employee based on company reaching its goals a. Cash bonus for reaching certain goals b. Continued salary for management of new employees5) Provide security for key employee throughout process a. Pool of cash for retirement, subject to i. Reaching company goals ii. Vesting6) Keep key employee from feeling threatened by the changes a. Constant reassurance b. Written contract7) Keep key employee from leaving and taking relationships elsewhere a. Non-compete b. Non-disclosure c. Tie leaving to financial loss8) Key person insurance on key employee Page 7
  9. 9. KEY EMPLOYEE JOHN THOMASONGoal: Retain key employee in case of death or disability of owner.Ideas1) Deferred bonus based on key employee staying with the company after death or disability of owner2) Employee contract3) Non-compete/non-disclosure4) Key person insurance on Johns life. Could be integrated with insurance purchased for inheritance5) Identify/hire employee capable of taking over Johns role as manager Page 8
  10. 10. JOHN THOMASON INHERITANCE PLANNINGOPPORTUNITIES Page 9
  11. 11. CREATE AN IRREVOCABLE NON-GRANTOR TRUST JOHN THOMASON John creates an irrevocable non-grantor trust. The Trust can be drafted to provide asset protection and long term estate tax savings through the use of dynasty trust provisions. JOHN THOMASON NON-GRANTOR TRUSTNote: Trust should be formed in a jurisdiction thatprovides favorable GST planning and state income taxplanning. HEIRSPotential Jurisdictions: Beneficiaries can include children and future- Alaska generations- South Dakota- Wyoming- Nevada- Delaware Page 10
  12. 12. GIFT TO NON-GRANTOR TRUST JOHN THOMASONJohn makes a gift of $5,000,000 of his non-voting interests in Business, LLC (assumed to be 50%) to the Trust. This gift is designed tomaximize available gifting exemption with an appreciating asset. Gift of non-voting interests in JOHN THOMASON Business, LLC worth NON-GRANTOR TRUST $5,000,000 Owns non-voting interests in Business, LLC worth $5,000,000 HEIRSPlanning Goals Accomplished: - Controls assets so inheritance provides opportunities while minimizing problems for children, grandchildren and future generations. - Reduces estate taxes on appreciating assets - Provides enhanced asset protection - Heirs can have access to income generated from assets in the trust, while not being burdened with asset management decisions Page 11
  13. 13. SELL BUSINESS, LLC INTERESTS TO TRUST JOHN THOMASON John sells remaining non-voting interests in Business, LLC (assumed to be 50%) to the Trust for an installment note. Sell Business, LLC interests JOHN THOMASON worth $5,000,000 NON-GRANTOR TRUST Owns Business, LLC interests worth $5,000,000John owns an installment note after the sale Installment note worth from the sale and interests worth $5,000,000 from $5,000,000 that provides the gift annual payments of $193,000 *Note payments are interest only at 3.9%. HEIRS Receive assets in the future according to terms of the trust Page 12
  14. 14. LOAN TO TRUST JOHN THOMASONInvestments, LLC loans $5,000,000 of cash/securities to the Trust. These loan proceeds will help provide the necessary cash flow tocontinue reinvesting cash back into Oil Trucking. Loans $5,000,000 of INVESTMENTS, LLC cash/securities to the trust NON-GRANTOR TRUST Owns an additional $5,000,000 of Owns a note payable cash/securities Note worth $5,000,000 that makes annual interest payments of $100,000 for 8 years with full repayment in year 9 Page 13
  15. 15. DYNASTY TRUST/FAMILY BANK TO HOLD INHERITANCES JOHN THOMASONThe Trust should be set-up as a Dynasty Trust. This trust would hold the inheritances for children and future generationsin a asset protected and tax advantaged trust, while protecting heirs from having too much too soon.The example on this page assumes annual distributions of 1% of the total Trust principal. This payout could be higher orlower. In addition, payments of principal could be made for health, education, maintenance, support or other items youfeel would be appropriate to allow. DYNASTY TRUST/FAMILY BANK FOR CHILDREN $26,333,336 For example the Trust could distribute annual income to beneficiaries MELISSA KATIE $131,667 $131,667The Trust, acting as a family bank, may lend money to an heir to purchase a home or to start a business but will firstassess the appropriateness of the transaction against a set of guidelines that have been drafted into the formationdocuments. Page 14
  16. 16. PURCHASE LIFE INSURANCE IN THE TRUST JOHN THOMASONTrustees of the Trust purchase 20 year term life insurance with the Trust assets. This assures an inheritance regardless of the shortterm performance of the business. NON-GRANTOR TRUST LIFE INSURANCE Owns 20 Year Term Life Insurance $20,000,000Premium Payment DetailsPremium in the amount of $40,000 is paid with the earnings and capital of the Trust. Thepremium is scheduled to be paid for 20 years when the policy expires.The premium is based on certain assumptions. This is for illustration purposes only. Actual insurance numbers can only be determined byapplying for insurance. Page 15
  17. 17. INSURANCE PREMIUMSWe examined several premium payment options. The term insurance has the lowest cost in terms of net present value. However, insurance is notguaranteed to continue after year 20, as it would with the other policies shown. YEAR PRINCIPAL ** PRUDENTIAL HANCOCK PRINCIPAL METLIFE 2011 40,000 887,840 744,760 1,176,460 161,100 2012 40,000 - - - 161,100 2013 40,000 - - - 161,100 2014 40,000 - - - 161,100 2015 40,000 - - - 161,100 2016 40,000 - - - 161,100 2017 40,000 - - - 161,100 2018 40,000 - - - 161,100 2019 40,000 - - - 161,100 2020 40,000 - - - 161,100 2021 40,000 202,100 256,760 - 161,100 2022 40,000 202,100 256,760 - 161,100 2023 40,000 202,100 256,760 - 161,100 2024 40,000 202,100 256,760 - 161,100 2025 40,000 202,100 256,760 - 161,100 2026 40,000 202,100 256,760 - 161,100 2027 40,000 202,100 256,760 - 161,100 2028 40,000 202,100 256,760 - 161,100 2029 40,000 202,100 256,760 - 161,100 2030 40,000 202,100 256,760 - 161,100NPV of Premiums 498,488 2,331,812 2,597,517 1,120,438 2,007,662Reflects the present value of premiums paid over 20 years with a discount rate of 5%All policies would lapse in year 21 without additional premiums paid.** Principal 20 year term insurance Page 16
  18. 18. JOHN THOMASONCHARITABLE PLANNING OPPORTUNITIES Page 17
  19. 19. TESTAM TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part I) JOHN THOMASON Include language in your trust or will that creates a testamentary charitable lead trust (TCLAT) at your death. JOHN THOMASON TCLAT At death $15,746,548 of the assets taxable TCLAT owns assets with a value of in your estate will pass to the TCLAT. This $15,746,548 after your death should bring your estate tax to $0 THOMASON FAMILY CHARITY TCLAT Assumptions The charity will receive payments of $844,912Asset growth rate 5.00% each year for a period of 25 years totalingTCLAT payout rate 5.37% $21,122,811Present value discount rate 5.00%Assumed date of death 2011 Page 18
  20. 20. TESTAMENTARY CHARITABLE LEAD ANNUITY TRUST (Part II) JOHN THOMASON At the end of the TCLAT term, your heirs will receive all of the remaining trust assets. TCLAT HEIRS Based on the plan assumptions, your heirs could expect to inherit $8,710,301 from theAt the end of the 25 year term, the TCLAT TCLAT. The amount passing to heirs is a assets will be distributed to your heirs present value number using a discount rate of 5%Note: The amount passing to beneficiaries is entirely dependent on the rate of return of the assets in the trust. Ahigher rate of return means more passing to heirs and a lower rate of return could mean that nothing passes toheirs. Page 19
  21. 21. JOHN THOMASONADDITIONAL TAX AND BUSINESS PLANNING Page 20
  22. 22. CREATE A CAPTIVE INSURANCE COMPANY JOHN THOMASON You, or a trust, create and own a captive insurance company. The captive is formed to insure currently insured and uninsured risks of Business, LLC - Oil Trucking. BUSINESS, LLC - OIL TRUCKING Premium CAPTIVE INSURANCE COMPANY Risk CoverageIn the plan we have assumed that the Captive is owned by a trust.This provides inheritance and estate tax benefits as well as income taxbenefits.Planning Goals Accomplished: - Asset protection - Effective tool for passing a tax advantaged inheritance - Creates income tax deferral for the company and increases current investment capital Page 21
  23. 23. COMPANY INSURES RISKS JOHN THOMASON The Captive Insurance Company insures various risks of loss. Pay annual premiums of $1,000,000 to cover risk of loss. Premiums for insurance are deductible if theyre ordinary BUSINESS, LLC - OIL TRUCKING CAPTIVE INSURANCE COMPANY and necessary business expenses Risk CoveragePremium is paid from the cash flow of Oil Trucking, which includestax savings and loan proceeds as detailed later in the plan. UNDERWRITING PROFITSNet premium of up to $1.2M is excludable from captive companyincome if proper tax election is made. Underwriting profits of the captive will ultimately be distributed out to the owner of the captive Page 22
  24. 24. PERIODIC TABLE OF ESTATE PLANNING ELEMENTS - RECOMMENDED JOHN THOMASONThe highlighted tools are those we have determined are most suited to achieving your goals and objectives. Charitable Family Limited Grantor Retained Charitable Lead Remainder Uni- 412(e) Private Annuity SCIN Liability Company Annuity Trust Annuity Trust Trust Qualified Personal Sale for Installment Series Limited Trust Owned Life Family LLC TCLAT Flip CRT Residence Trust Note Liability Company Insurance Preferred Limited Long Term Care Maximized Gift to Corporate Premium Finance Business, LLC ILIT partnership Insurance Trust Recapitalization Charitable Life Annuity Walton GRAT Private Foundations Investments, LLC Asset Protection Loan to Trust Estate Withdrawal Revocable Living Principal Protected International Irrevocable Non-SPIA/Life in a CLAT Trusts, DPAs and Crummey Powers Dynasty Trust Notes VUL Grantor Trust POAs Supporting Captive Insurance IRA to Charity Gift Annuity Remainder Sales Life Estates LLC/CRTs Organizations Company Charitable Succession Defined Benefit Qualified Plan Bargain Sales Risk Management Remainder Annuity ESOP Planning Planning Plans Limited Partnership TrustGreen equals a new Blue equals a social Yellow equals an planning tool for capital or existing planning family charitable tool tool Page 23
  25. 25. JOHN THOMASONLIFETIME SPENDING AND LIQUIDITY Page 24
  26. 26. PERSONAL SPENDING VS. INCOME - PROPOSED PLAN JOHN THOMASON $900,000 $800,000 $700,000 $600,000 - Retirement - No salary from Oil $500,000 Trucking $400,000 Reduction in salary lowers income tax liability $300,000 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Annual Cash Flow Income Total Living ExpensesThis chart compares your personal cash flow income to cash flow expense under the proposed plan year by year for 20 years. Page 25
  27. 27. TRUST SPENDING VS. INCOME - PROPOSED PLAN JOHN THOMASON $22,000,000 $20,000,000 $18,000,000 Sale of Oil Trucking $16,000,000 $14,000,000 $12,000,000 Includes Loan - $10,000,000 proceeds from Investments, LLC Loan repayment $8,000,000 from Trust $6,000,000 $4,000,000 $2,000,000 $- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Annual Cash Flow Income - Trust Total Expenses - TrustThis chart compares cash flow income to cash flow expense inside of the Trust under the proposed plan year by year for 20 years. In years 2011 - 2017,expenses include annual cash reinvestments into Oil Trucking. Page 26
  28. 28. YOUR LIQUID ASSETS - PROPOSED PLAN JOHN THOMASON $35,000,000 $30,000,000 $25,000,000 - $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Liquid Assets - Proposed PlanThis illustrates your readily available liquid assets over the next 20 years. Promissory notes are not considered liquid assets until repaid. We are showingassets as liquid during the first 8 years of the plan, although some of these assets may currently be pledged as collateral. Page 27
  29. 29. JOHN THOMASONINCOME TAX DEFERRED Page 28
  30. 30. COMPARISON OF INCOME TAX RESULTS - PLAN YEAR 2011 JOHN THOMASON Existing Plan Proposed Plan Captive Taxes Deferred State Tax Saved 2011 Estimated Income Tax $ 839,000 $ 457,000 $ 350,000 $ 107,000 2012 Estimated Income Tax $ 925,000 $ 528,000 $ 350,000 $ 178,000 2013 Estimated Income Tax $ 1,215,000 $ 675,000 $ 350,000 $ 325,000 2014 Estimated Income Tax $ 1,339,000 $ 770,000 $ 350,000 $ 420,000 2015 Estimated Income Tax $ 1,477,000 $ 876,000 $ 350,000 $ 526,0005 Year Estimated Tax Deferred $ 1,750,000 $ 1,556,000Proposed plan income taxes include those of the Trust. Tax amounts are approximations. Page 29
  31. 31. JOHN THOMASONINCREASE INHERITANCEAND REDUCE ESTATE TAX Page 30
  32. 32. COMPARISON OF PLAN RESULTS - PLAN YEAR 2011 JOHN THOMASON Existing Plan Proposed Plan Advantage Estate Value $ 22,577,993 $ 16,529,324 Heirs Receive Immediately $ 16,262,688 $ 26,333,336 $ 10,070,648 Heirs Receive from Deferred Inheritance $ - $ 3,982,824 $ 3,982,824 Total Benefits to Family $ 16,262,688 $ 30,316,160 $ 14,053,471 Family Charity $ - $ 16,339,031 $ 16,339,031 Estate and Income Tax $ 6,064,525 $ - $ 6,064,525This chart assumes that you die this year and compares the results of the current plan with the proposed plan.Deferred Inheritance is a general approximation based on the long term performance of the TCLAT. Page 31
  33. 33. COMPARISON OF PLAN RESULTS - PLAN YEAR 2030 JOHN THOMASON Existing Plan Proposed Plan Advantage Estate Value $ 71,874,283 $ 36,119,098 Heirs Receive Immediately $ 32,354,543 $ 64,034,698 $ 31,680,155 Heirs Receive from Deferred Inheritance $ - $ 8,710,301 $ 8,710,301 Total Benefits to Family $ 32,354,543 $ 72,744,998 $ 40,390,455 Family Charity $ - $ 35,732,907 $ 35,732,907 Estate and Income Tax $ 38,775,997 $ - $ 38,775,997 Present Value of total to Heirs $12,803,791 $28,787,666 Discount rate for PV calculation 5.00%This chart assumes that you die in 2030 and compares the results of the current plan with the proposed plan.Deferred Inheritance is a general approximation based on the long term performance of the TCLAT. Page 32
  34. 34. COMPARISON OF PLAN RESULTS - PLAN YEAR 2031 JOHN THOMASON Existing Plan Proposed Plan Advantage Estate Value $ 76,015,872 $ 37,875,234 Heirs Receive Immediately $ 34,199,621 $ 47,109,406 $ 12,909,785 Heirs Receive from Deferred Inheritance $ - $ 9,134,098 $ 9,134,098 Total Benefits to Family $ 34,199,621 $ 56,243,504 $ 22,043,883 Family Charity $ - $ 37,471,481 $ 37,471,481 Estate and Income Tax $ 41,031,092 $ - $ 41,031,092 Present Value of total to Heirs $13,533,951 $22,257,464 Discount rate for PV calculation 5.00%This chart assumes that you die in 2031 and compares the results of the current plan with the proposed plan.Deferred Inheritance is a general approximation based on the long term performance of the TCLAT. Page 33
  35. 35. COMPARISON OF PLAN RESULTS - PLAN YEAR 2030 JOHN THOMASON Proposed Plan - Captive Proposed Plan - No Captive Captive Advantage Estate Value $ 36,119,098 $ 36,119,098 Heirs Receive Immediately $ 64,034,698 $ 58,308,614 $ 5,726,084Heirs Receive from Deferred Inheritance $ 8,710,301 $ 8,710,301 $ - Total Benefits to Family $ 72,744,998 $ 67,018,914 $ 5,726,084 Family Charity $ 35,732,907 $ 35,732,907 $ - Estate and Income Tax $ - $ - $ - Present Value of total to Heirs $28,787,666 $26,521,660 Discount rate for PV calculation 5.00%This chart assumes death in 2030, and compares the results of the current plan with the proposed plan without a Captive InsuranceCompany.Deferred Inheritance is a general approximation based on the long term performance of the TCLAT. Page 34
  36. 36. ASSETS PASSING TO YOUR FAMILY - CURRENT VS. PROPOSED JOHN THOMASON $80,000,000 $70,000,000 $60,000,000 $50,000,000 - $40,000,000 $30,000,000 $20,000,000 $10,000,000 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Current Plan Proposed Plan Proposed Plan - No Life InsThis chart compares the amount of your assets that will pass to heirs after estate taxes and costs of implementation in the current plan as against theproposed plan. Page 35
  37. 37. JOHN THOMASON INCREASE INCHARITABLE GIVING Page 36
  38. 38. COMPARISON OF CHARITY RESULTS - PLAN YEAR 2011 JOHN THOMASON Existing Plan Proposed Plan Increase in CharityCharity Receives from TCLAT $ - $ 16,300,000 $ 16,300,000 Family Charity $ - $ 16,300,000 $ 16,300,000 Page 37
  39. 39. COMPARISON OF CHARITY RESULTS - PLAN YEAR 2030 JOHN THOMASON Existing Plan Proposed Plan Increase in CharityCharity Receives from TCLAT $ - $ 35,700,000 $ 35,700,000 Family Charity $ - $ 35,700,000 $ 35,700,000 Page 38
  40. 40. DETAILED FINANCIAL ANALYSIS JOHN THOMASON INTRODUCTIONThe following section of the plan contains all of the financial analysis used to show you where youstand with your current plan and what is possible with the proposed plan.All of the numbers are based on information provided by you or gleaned from statements and taxreturns. If numbers do not look correct, please let us know so that we can make the appropriatechanges.Assumed growth and yield numbers are all listed on the Net Worth contained in these sections. Page 39
  41. 41. DETAILED FINANCIAL ANALYSIS JOHN THOMASON CURRENT PLAN FINANCIALSIn the Current Plan Section you will find a current balance sheet and detailed cash flow and assetprojection analysis. Page 40
  42. 42. CURRENT NET WORTH STATEMENT JOHN THOMASON JOHN YIELD GROWTHMARKETABLE SECURITIES Investments, LLC (100%) 10,130,856 2.0% 5.0% Total of Marketable Securities 10,130,856 2.0% 5.0%OTHER INVESTMENTS Business, LLC (100%) 10,000,000 20.0% 0.0% Hobby, LLC (100%) 1 0.0% 5.0% Total of Other Investments 10,000,001 20.0% 0.0%RESIDENTIAL REAL ESTATE 132 Main St. 800,000 0.0% 3.0% Total of Personal Residences 800,000 0.0% 3.0%TOTAL ASSETS 20,930,857TOTAL LIABILITIES -NET WORTH 20,930,857 Page 41
  43. 43. FINANCIAL ANALYSIS - EXISTING PLAN ASSET VALUE PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Asset ValuesMarketable securities 10,130,856 10,669,067 11,572,136 12,351,693 15,958,652 17,120,217 18,239,024 26,685,665 36,672,892Other investments ** 10,000,001 11,100,001 12,321,001 13,676,311 20,761,603 18,811,602 19,752,182 26,469,814 33,782,935Personal residences 800,000 808,925 833,193 858,189 965,899 994,876 1,024,722 1,223,572 1,418,455Total assets in estate 20,930,857 22,577,993 24,726,330 26,886,192 37,686,153 36,926,695 39,015,929 54,379,050 71,874,283 Net worth 20,930,857 22,577,993 24,726,330 26,886,192 37,686,153 36,926,695 39,015,929 54,379,050 71,874,283** Includes Business, LLC. After the sale of Oil Trucking, we assume a growth rate of 5% for the assets inside of Business, LLC.In the event that there is a cash flow surplus, the surplus is added to the marketable securities row by default.If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in marketable securities. Page 42
  44. 44. TAXABLE INCOME PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Sources of taxable incomeMarketable securities 202,617 213,381 231,443 299,546 319,173 342,404 500,873 688,244Other investments ** 2,000,000 2,220,000 2,464,200 3,740,829 - 376,232 504,187 643,484Cap Gains from Sale of Oil Trucking - - - - 6,500,001 - - -Client earned income 287,808 287,808 287,808 287,808 287,808 - - - -Gross income 2,490,425 2,721,189 2,983,451 4,328,183 6,819,174 718,636 1,005,060 1,331,729** Income from Business, LLC. After the sale of Oil Trucking, we assume a yield of 2% on the assets inside of Business, LLC. Page 43
  45. 45. INCOME TAX PROJECTIONS - EXISTING PLANYEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Income tax EstimationAdjusted gross income:Dividend income (marketable sec.) 202,617 213,381 231,443 299,546 319,173 342,404 500,873 688,244Capital Gains Income - - - - 6,500,001 - - -Earned and other income 2,287,808 2,507,808 2,752,008 4,028,637 - 376,232 504,187 643,484 Adjusted gross income 2,490,425 2,721,189 2,983,451 4,328,183 6,819,174 718,636 1,005,060 1,331,729DeductionsReal estate tax 12,495 12,495 12,870 13,256 14,920 15,367 15,828 18,900 21,910State income taxes 136,973 149,665 164,090 238,050 375,055 39,525 55,278 73,245Interest 35,423 35,423 36,486 37,580 42,297 43,566 44,873 53,580 62,114Charitable gifts 117,859 117,859 121,395 125,037 140,730 144,952 149,300 178,272 206,666Charitable Deduction available 117,859 121,395 125,037 140,730 144,952 149,300 178,272 206,666Charitable Deduction allowed 117,859 121,395 125,037 140,730 144,952 149,300 178,272 206,666Total deductions 302,750 320,416 339,963 435,996 578,939 249,526 306,031 363,936Reductions - - (84,500) (124,841) (199,571) (16,555) (25,148) (34,948)Deductions allowed 302,750 320,416 255,463 311,155 379,368 232,971 280,883 328,988Taxable income 2,187,675 2,400,774 2,727,988 4,017,028 6,439,806 485,665 724,176 1,002,741Federal and State income tax 839,450 924,574 1,215,010 1,799,431 1,659,566 202,486 312,690 440,968 Page 44
  46. 46. CASH FLOW PROJECTIONS - EXISTING PLAN 4,600,000 5,821,000 7,176,310 14,261,601 55%YEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Sources of income for LifestyleReturn of Basis in Oil Trucking - - - - 14,261,601 - - -Consumable income (taxable) 2,490,425 2,721,189 2,983,451 4,328,183 6,819,174 718,636 1,005,060 1,331,729Total income available for lifestyle 2,490,425 2,721,189 2,983,451 4,328,183 21,080,776 718,636 1,005,060 1,331,729Uses of CashLiving expenses 200,000 206,000 212,180 238,810 245,975 253,354 302,518 350,701Income tax 839,450 924,574 1,215,010 1,799,431 1,659,566 202,486 312,690 440,968Reinvestment into Business, LLC 1 1,100,000 1,221,000 1,355,310 2,057,456 18,811,602 - - -Total uses of cash 2,139,450 2,351,574 2,782,500 4,095,697 20,717,143 455,840 615,208 791,669Surplus 350,975 369,615 200,950 232,486 363,633 262,796 389,852 540,0601 Assumes 55% of profits from Business, LLC are reinvested back into the business.In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier.If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction inmarketable securities row on the "Asset Value Projections" 3 pages earlier. Page 45
  47. 47. ESTATE TAX ESTIMATION AND DISTRIBUTION - EXISTING PLANYEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Tax Calculation on Johns deathJohns assets 20,930,857 22,577,993 24,726,330 26,886,192 37,686,153 36,926,695 39,015,929 54,379,050 71,874,283Johns estimated estate 20,930,857 22,577,993 24,726,330 26,886,192 37,686,153 36,926,695 39,015,929 54,379,050 71,874,283Settlement expenses (234,309) (250,780) (272,263) (293,862) (401,862) (394,267) (415,159) (568,791) (743,743)Johns taxable estate 20,696,548 22,327,213 24,454,066 26,592,330 37,284,292 36,532,428 38,600,770 53,810,260 71,130,540Tax base 20,696,548 22,327,213 24,454,066 26,592,330 37,284,292 36,532,428 38,600,770 53,810,260 71,130,540Federal Estate Tax 5,493,792 6,064,525 6,808,923 14,279,982 20,160,561 19,747,036 20,884,623 29,249,843 38,775,997Total Estate Tax Due 5,493,792 6,064,525 6,808,923 14,279,982 20,160,561 19,747,036 20,884,623 29,249,843 38,775,997Distribution of Johns estateSettlement expenses 234,309 250,780 272,263 293,862 401,862 394,267 415,159 568,791 743,743Taxes 5,493,792 6,064,525 6,808,923 14,279,982 20,160,561 19,747,036 20,884,623 29,249,843 38,775,997Residual estate to heirs 15,202,756 16,262,688 17,645,143 12,312,349 17,123,731 16,785,393 17,716,146 24,560,417 32,354,543Total 20,930,857 22,577,993 24,726,330 26,886,192 37,686,153 36,926,695 39,015,929 54,379,050 71,874,283 Page 46
  48. 48. SUMMARY OF BENEFITS TO FAMILY - EXISTING PLANYEAR Current 2011 2012 2013 2017 2018 2019 2025 2030Benefits to FamilyResidual estate 15,202,756 16,262,688 17,645,143 12,312,349 17,123,731 16,785,393 17,716,146 24,560,417 32,354,543Total assets to heirs 15,202,756 16,262,688 17,645,143 12,312,349 17,123,731 16,785,393 17,716,146 24,560,417 32,354,543 Page 47
  49. 49. DETAILED FINANCIAL ANALYSIS JOHN THOMASON PROPOSED PLAN FINANCIALSIn the Proposed Plan Section you will find a balance sheet which reflects the repositioning of assetsas set out in the step by step roadmap in the proceeding section. You will also find detailed cashflow and asset projection information on each of the proposed planning strategies. Page 48
  50. 50. NET WORTH STATEMENT AFTER PLAN IMPLEMENTATION JOHN THOMASON JOHN YIELD GROWTHMARKETABLE SECURITIES Investments, LLC (100%) 10,130,856 2.0% 5.0% Total of Marketable Securities 10,130,856 2.0% 5.0%OTHER INVESTMENTS Hobby, LLC (100%) 1 0.0% 5.0% Total of Other Investments 1 0.0% 5.0%RESIDENTIAL REAL ESTATE 132 Main St. 800,000 0.0% 3.0% Total of Personal Residences 800,000 0.0% 3.0%OTHER STRATEGY ASSETS GDOT Note 5,000,000 3.9% Total of Other Strategy Assets 5,000,000 3.9%TOTAL ASSETS 15,930,857TOTAL LIABILITIES -NET WORTH 15,930,857 Page 49
  51. 51. FINANCIAL ANALYSIS - PROPOSED PLAN ASSET VALUE PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Asset ValuesMarketable securities - Equities 10,130,856 5,720,398 6,332,638 6,933,479 9,680,812 10,298,841 15,949,936 16,885,988 29,700,643Other investments 1 1 1 1 1 - - - -Loan to Trust - 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 - - -Personal residences 800,000 808,925 833,193 858,189 965,899 994,876 1,024,722 1,055,464 1,418,455Note from childrens GDOT 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000Total assets in estate 15,930,857 16,529,324 17,165,832 17,791,669 20,646,712 21,293,717 21,974,658 22,941,452 36,119,098Net worth 15,930,857 16,529,324 17,165,832 17,791,669 20,646,712 21,293,717 21,974,658 22,941,452 36,119,098In the event that there is a cash flow surplus, the surplus is added to the marketable securities row by default.If there is a cash flow shortage (because of spending or gifting capital) then the shortage is treated as a reduction in marketable securities. Page 50
  52. 52. TAXABLE INCOME PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Marketable securities - Equities 202,617 114,408 126,653 178,769 193,616 205,977 318,999 561,584Interest Payment from Trust Note 193,000 193,000 193,000 193,000 193,000 193,000 193,000 193,000Interest Payments from Loan to Trust 100,000 100,000 100,000 100,000 100,000 100,000 - -Client earned income 287,808 287,808 287,808 287,808 287,808 - - - -Gross income 783,425 695,216 707,461 759,577 486,616 498,977 511,999 754,584 Page 51
  53. 53. INCOME TAX PROJECTIONS - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Income Tax EstimationAdjusted gross income:Dividend income (Marketable Sec.) 202,617 114,408 126,653 178,769 193,616 205,977 318,999 561,584Earned and other income 580,808 580,808 580,808 580,808 293,000 293,000 193,000 193,000Adjusted gross income 783,425 695,216 707,461 759,577 486,616 498,977 511,999 754,584DeductionsReal Estate Tax 12,495 12,870 13,256 14,920 15,367 15,828 16,303 21,910State income taxes 43,088 38,237 38,910 41,777 26,764 27,444 28,160 41,502Interest 35,423 36,486 37,580 42,297 43,566 44,873 46,219 62,114Cash charitable gifts 117,859 121,395 125,037 140,730 144,952 149,300 153,779 206,666Deduction available 117,859 121,395 125,037 140,730 144,952 149,300 153,779 206,666Deduction allowed 117,859 121,395 125,037 140,730 144,952 149,300 153,779 206,666Total deductions 208,865 208,987 214,783 239,723 230,649 237,445 244,461 332,193Reductions - - (16,220) (17,783) (9,594) (9,965) (10,356) (17,634)Deductions allowed 208,865 208,987 198,563 221,940 221,054 227,480 234,105 314,560Taxable income 574,560 486,229 508,897 537,637 265,562 271,497 277,893 440,024Federal and State income tax 181,119 162,996 211,071 225,319 106,653 109,470 112,489 186,389 Page 52
  54. 54. CASH FLOW PROJECTIONS - PROPOSED PLAN - - - - 3,500,000 3,500,000 3,500,000 3,500,000 55%YEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Sources of Income for LifestyleConsumable income (taxable) 783,425 695,216 707,461 759,577 486,616 498,977 511,999 754,584Repayment of Loan to Trust - - - - - 5,000,000 - -Distribution from Marketable Securities 4,597,694 - - - - - - -Total income available for lifestyle 5,381,119 695,216 707,461 759,577 486,616 5,498,977 511,999 754,584Uses of CashLiving expenses 200,000 206,000 212,180 238,810 245,975 253,354 260,955 350,701Income tax 181,119 162,996 211,071 225,319 106,653 109,470 112,489 186,389Loan to Trust 5,000,000 - - - - - - -Total uses of cash 5,381,119 368,996 423,251 464,129 352,628 362,824 373,443 537,091Surplus - 326,220 284,209 295,448 133,988 5,136,153 138,556 217,493In the event that there is a cash flow surplus, the surplus is added to the marketable securities row on the "Asset Value Projections" 3 pages earlier.If there is a cash flow shortage (spending or gifting capital) then the shortage is treated as a reduction inmarketable securities row on the "Asset Value Projections" 3 pages earlier. Page 53
  55. 55. ESTATE TAX ESTIMATION AND DISTRIBUTION - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Tax Calculation on Johns deathJohns assets 15,930,857 16,529,324 17,165,832 17,791,669 20,646,712 21,293,717 21,974,658 22,941,452 36,119,097.7Johns estimated estate 15,930,857 16,529,324 17,165,832 17,791,669 20,646,712 21,293,717 21,974,658 22,941,452 36,119,098Settlement expenses (184,309) (190,293) (196,658) (202,917) (231,467) (237,937) (244,747) (254,415) (386,191)Charitable deduction from TCLAT (15,746,548) (16,339,031) (16,969,173) (17,588,752) (20,415,245) (21,055,780) (21,729,912) (22,687,038) (35,732,907)Taxable estate 0 0 0 0 0 0 0 0 0Plus Johns lifetime taxable gifts 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Tax base 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Federal Estate Tax - - - - - - - - -Distribution of EstateSettlement expenses 184,309 190,293 196,658 202,917 231,467 237,937 244,747 254,415 386,191Taxes - - - - - - - - -Contribution to TCLAT 15,746,548 16,339,031 16,969,173 17,588,752 20,415,245 21,055,780 21,729,912 22,687,038 35,732,907Total 15,930,857 16,529,324 17,165,832 17,791,669 20,646,712 21,293,717 21,974,658 22,941,452 36,119,098 Page 54
  56. 56. SUMMARY OF BENEFITS TO FAMILY - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Benefits to FamilyValue of Trust 5,000,000 5,140,836 5,945,408 6,866,311 13,573,775 12,165,209 13,297,203 14,285,512 28,329,542Life insurance proceeds GDOT 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000Captive Insurance Accumulation 250,000 1,192,500 2,205,975 3,290,393 6,517,081 6,973,277 7,461,406 7,983,705 15,705,156NPV of TCLAT benefits to children 3,838,400 3,982,824 4,136,428 4,287,458 4,976,447 5,132,585 5,296,912 5,530,222 8,710,301Total assets to heirs 29,088,400 30,316,160 32,287,811 34,444,161 45,067,303 44,271,071 46,055,521 47,799,439 72,744,998 Page 55
  57. 57. CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLANYEAR Current 2011 2012 2013 2017 2018 2019 2020 2030Balance SheetAssetsInitial Capitalization (non-deductible) 250,000 267,500 286,225 306,261 401,445 429,547 459,615 491,788 967,421Captive Insurance Company - 925,000 1,919,750 2,984,133 6,115,636 6,543,730 7,001,792 7,491,917 14,737,735 Total (Marketable Securities )* 250,000 1,192,500 2,205,975 3,290,393 6,517,081 6,973,277 7,461,406 7,983,705 15,705,156These are gross numbers subject to potential claims against the captive insurance company.* Assumes 7.0% annual growth on profits and reserves.Assets in Captive $ 250,000 $ 1,192,500 $ 2,205,975 $ 3,290,393 $ 6,517,081 $ 6,973,277 $ 7,461,406 $ 7,983,705 $ 15,705,156 Page 56
  58. 58. CAPTIVE INSURANCE COMPANY DETAILS - PROPOSED PLAN (Continued)CIC Cash Flow Current 2011 2012 2013 2017 2018 2019 2020 2030 Income Misc - - - - - - - - Premium Income 1,000,000 1,000,000 1,000,000 - - - - - Total Income 1,000,000 1,000,000 1,000,000 - - - - - Initial Captive Capitalization 250,000 - - - - - - - Expenses Captive Management Fees - (70,000) (70,000) - - - - - First Year Feasibility and Set Up (75,000) - - - - - - - Net Income (Cash Flow) 925,000 930,000 930,000 - - - - -Taxable Income Current 2011 2012 2013 2017 2018 2019 2020 2030 Dividend income (Marketable Sec.) - - - - - - - - Initial Captive Set up Fee (Amortized deduction) (15,000) (15,000) (15,000) - - - - - 831(b) Premium Exclusion (1,000,000) (1,000,000) (1,000,000) - - - - - Misc - - - - - - - - Taxable Income (1,015,000) (1,015,000) (1,015,000) - - - - - Page 57

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