Mastering Legal Wealth Laundering

Get Your Personal Financial Budget Statement Here:

https://s3.us-central-1.wasabisys.com/40webinars/personal-financial-statement.xlsx

BriarCliff Crest is an exclusive, invite-only opportunity for select traders looking to elevate their strategies. The only way to secure a chance for an invitation is to email the contact info provided on this podcast.

Show NotesIncome as Slavery

• Antonio's point:
• Income is a form of slavery because it is attached to responsibility.
• You will never receive income in capitalism that comes without responsibility.
• Example:
• If someone offers you $83,000 annually, it won’t come without obligations.
• Companies give income in small increments (e.g., bi-weekly) to ensure you stay in debt and dependent on the system.
• Trickle-down effect: You receive just enough to return to work and maintain debt, which keeps you from saving enough to buy assets outright.

Money Laundering Steps (Legal Context Applied to Stock Market)

• Step One (Placement):
• Cashing out a stock is the equivalent of placing money into the system.
• This is the most risky step because it's when income taxes and tracking start.
• The moment you cash out, all responsibility for the money is on you, making it fully traceable.
• Step Two (Layering):
• After cashing out, move the money into an income-producing asset.
• Example: Reinvest the money into another stock, real estate, or any asset that generates cash flow.
• The goal is to disguise the origin of the funds so it is no longer taxed as income.
• The money is no longer personal income but business income tied to an entity.
• Step Three (Integration):
• Integration is when the funds have been cleaned or legitimized through continuous investments and cash flows.
• By the time it cycles back to you, the funds are now legal, legitimate, and taxed differently (lower taxes or exempt).

Control vs. Ownership

• Ownership leads to taxation:
• If you own something (stocks, property, etc.), you are responsible for the taxes.
• Strategy: Control assets without owning them directly.
• Antonio's Strategy:
• Instead of owning stocks, control them.
• Example: Move funds from stock to another asset immediately to avoid responsibility for tax liabilities.

Using Companies to Reduce Tax Responsibility

• Why use companies?:
• Companies allow you to control income without personally owning it.
• Income-producing assets like real estate or stocks can be placed under a business entity, which then reduces personal tax liability.
• Practical Example:
• Cashing out stocks into a personal bank account attaches the money to your Social Security number, subjecting it to income tax.
• To avoid this, reinvest it immediately in other assets or use a company EIN (Employer Identification Number) instead of your Social Security number.

Legal Terminology

• Step 1 (Placement):
• Placing money in a way that it can be tracked and taxed (e.g., cashing out a stock).
• Step 2 (Layering):
• Moving money into assets or reinvesting it in a way that disguises the original source of income.
• Example: Reinvesting the money in a dividend-paying stock.
• Step 3 (Integration):
• Legitimizing the money so it becomes legally clean and can no longer be taxed as income.
• Example: The money is now business income from assets like real estate or long-term investments.

Using Dividends to Disguise Income

• Dividends:
• Dividends are a form of income but taxed differently as investment income.
• Reinvesting dividends allows you to continuously grow wealth without being heavily taxed.
• Otis’ Strategy:
• Reinvest in dividend-paying stocks to generate a steady stream of income that doesn’t carry the same tax burden as salary or wage income.

Achieving Financial Independence

• Goal:
• The objective is to shift income from your Social Security number to a business EIN.
• Income from stocks should not be stored in personal accounts but reinvested or moved to income-producing vehicles (real estate, other stocks).
• Next Step:
• Once the investment firm is established with the $30,000 minimum, you can move stock earnings directly into this entity, avoiding the personal tax responsibility.

Key Takeaways

• Income tax is attached to personal income (e.g., wages, salary).
• To avoid high tax liabilities, cash out stocks and immediately reinvest in another asset or stock.
• The objective is to shift personal income into business income by using companies and income-producing assets.
• Topic: Breaking down money laundering in relation to investments, stock markets, and income.
• Key focus: Income as a form of slavery and using money laundering techniques legally through investments.

Income as Slavery

• Income as responsibility:
• Income is tied to responsibility, meaning it can never be 100% free.
• In capitalism, income is always attached to obligations, like taxes or work requirements.
• Amortized salary:
• Salaries (e.g., $83,000/year) are given in installments (bi-weekly/monthly) to keep employees in debt.
• If companies gave salaries as lump sums, individuals would manage their money better, reducing their dependence on banks.

Money Laundering Applied to Stocks

• Money laundering framework:
• Antonio introduces money laundering steps and explains how they apply to stocks and income.
• Step 1: Placement
• Placement refers to introducing the money into a system.
• In the context of stocks, this step is the moment you cash out, making you responsible for taxes and tracking.
• Example: Cashing out a stock puts the responsibility on you to handle tax liabilities.
• Step 2: Layering
• Layering means disguising the origin of the money.
• After cashing out, the goal is to quickly move the money into an income-producing asset or another stock.
• The money is no longer income but has been transformed into cash flow or business revenue.
• Example: Reinvesting stock profits into another stock immediately.
• Step 3: Integration
• Integration occurs when the funds become legitimized through continuous reinvestment.
• By reinvesting in assets, the money is legally clean and taxed differently, often at lower rates (e.g., dividends).
• Example: Moving money into real estate or a business entity, where it can be taxed as business income rather than personal income.

Dividends and Tax Strategy

• Dividends are taxed differently:
• Dividend income is taxed at a lower rate than regular income (e.g., 13-15% for dividends vs. 20-30% for income).
• This is why wealthy individuals like Warren Buffett pay lower tax rates than their secretaries, as dividends are not considered regular income.
• Example:
• Athletes with $30 million contracts only take home around $14 million due to taxes, agent fees, and state taxes (higher in places like New York and California).

Reinvestment and Scaling Up

• Understanding the reinvestment cycle:
• Reinvest your stock earnings into another stock or asset until it reaches a sufficient amount, like $60,000 or more.
• You should continue this reinvestment to avoid triggering tax liabilities too early.
• Income-producing assets:
• The aim is to eventually move money into income-producing assets like real estate, stocks, or a business.
• Real estate is a great long-term asset, but even smaller amounts can be reinvested into other stocks.

Avoiding Taxes and Optimizing Investments

• Avoid taxes by not owning:
• Taxes are paid by those who own income. If you control income through assets or a business, your tax liabilities are lower.
• Example: Control income by reinvesting stock profits through a company, reducing your tax exposure.
• From Social Security to EIN:
• The strategy is to shift personal income (tied to your Social Security number) to business income (tied to an EIN).
• Once this transition is made, tax liabilities are significantly reduced.

Practical Implementation

• Where to put money after cashing out:
• Move funds into an investment firm or business entity where they generate cash flow and are taxed at a lower rate.
• Example: Antonio suggests continually reinvesting profits until the money can be moved into a larger vehicle, like an investment firm.
• Layering explained:
• Layering involves removing responsibility by moving money to a business or asset, so it’s no longer personal income but business revenue.

Key Points on Financial Management

• Dividends as income:
• Dividends are taxed differently, making them an effective way to generate wealth without high tax exposure.
• Otis’ approach: Reinvest dividend-paying stocks to create steady cash flow while deferring taxes.
• Business structure:
• Eventually, use a business structure (e.g., an investment firm) to handle larger sums of money, keeping it away from personal accounts.
• Final takeaway:
• The goal is to understand how to launder your money legally by moving it through assets and investments to reduce tax liabilities and generate wealth over time.
• Scenario: You are in a foreign country like China, starting from the lowest level in a job (e.g., janitor) to rise to the top, utilizing your skills and knowledge without being noticed initially.
• Analogy: This is similar to how money laundering works — starting at a small level and transforming it step by step into a legitimized, higher value form.

The Steps of Money Laundering in InvestmentsStep 1: Placement

• Action:
• Place the money somewhere, just like how you "place" yourself at the bottom of an organization.
• In financial terms, placement is the process of acquiring funds and introducing them into an ecosystem.
• Stock Example:
• When you invest in stocks (e.g., Apple), initially, there are no taxes.
• The moment you cash out of that stock, taxes are applied, as now the money is fully placed in your possession.

Step 2: Layering

• Action:
• Layering means removing the responsibility of the taxes from yourself.
• It involves disguising the origin of the money so it doesn’t appear as taxable income.
• Professional Terms:
• The objective of layering is to take off the responsibility of the taxes from your money and disguise its origin.
• Stock Example:
• After cashing out of Apple stock, you quickly reinvest it into another stock (e.g., Netflix, McDonald’s), keeping the money in circulation without letting it be taxed.
• This process removes the tax burden as long as the money is continually invested.

Step 3: Integration

• Action:
• Integration is when the money has been successfully laundered and becomes legitimate income, usually in the form of cash flow or other unearned income.
• It refers to creating a steady flow of income that is taxed differently from earned income.
• Stock Example:
• Once you reach a desired sum (e.g., $60,000 from multiple reinvestments), you now move it into an income-producing asset, such as real estate.
• This integrates the money into cash flow, which is taxed at lower rates than ordinary income.

Important Concepts and ClarificationsReinvesting Dividends (Layering)

• Dividends:
• Dividends are a form of income from stocks, but they are taxed differently.
• Warren Buffett, for example, pays less tax on dividends than his secretary does on her earned income.
• Dividend Reinvestment:
• Reinvesting dividends (buying more stocks) removes the tax burden because the money stays within an investment vehicle.
• By continually reinvesting, you are layering the money and disguising its origin, preventing it from being taxed as regular income.

Income vs. Cash Flow

• Income (Step 1):
• When you cash out stocks, it becomes taxable income.
• Taxes are applied based on the type of income and the amount.
• Cash Flow (Step 3):
• The final goal is to convert income into cash flow (unearned income) through investments like real estate.
• Cash flow is taxed at a lower rate compared to earned income, making it more advantageous for wealth building.

Key Examples in Real LifeTax Liability and Investment Strategy

• Warren Buffett's Tax Strategy:
• Dividend income from stocks is taxed at around 13-15%, which is lower than regular earned income taxes.
• Secretaries and employees earning a salary can be taxed up to 30% or more, especially with additional state and local taxes.
• Example with Athletes:
• Athletes with high-income contracts (e.g., $30 million) often take home only about $14 million after taxes, agent fees, and other deductions.
• By using investment vehicles and cash flow strategies, wealthy individuals reduce their tax liabilities.

Money Flow Process

1. Placement:

• Invest in Apple stock (no taxes initially).

1. Layering:

• Cash out the stock (taxes applied), but quickly reinvest into another stock like Netflix to avoid paying immediate taxes.

1. Integration:

• Once you reach your desired amount (e.g., $60,000), you invest in real estate or other cash-flow-generating assets, integrating the money into a system where it is taxed less heavily.

Key Takeaways

• Tax Efficiency:
• Understand that earned income (from salaries) is taxed heavily. The key is to transition money into cash flow (unearned income) through layering and integration steps.
• Legal Money Laundering:
• The process of moving your money through investments and reinvesting dividends is essentially a form of legal money laundering to avoid high tax liabilities.
• Reinvestment Strategy:
• Keep reinvesting stocks or income-producing assets to avoid immediate taxation until you're ready to generate cash flow at a more favorable tax rate.