King: Yes, these things must definately be considered.

Xenia: Where can I find information on such aspects of Warbucks/Red Inc, without coughing up a few thousand up front?

King: Everything you need to know to "understand" the Warbucks/Red Inc. Strategy may be found in Laughlin's Corpoation Manual. In my opinion, the definitive literary work on the subject. The Manual is $99 and can be bought from Laughlin Associates (800) 648-0966. Putting the strategy into play is another matter. You can: 1.) Invest in Laughlin's Nevada Headquarters Package (NHP) which will give you a Nevada Resident Agent + an office in CaRson City. The cost is $250 a month. or 2.) You can engage the services of a friend who will act as your resident agent + give your new Nevada corp an address in Nevada. Your friend might do it for free.

Xenia: I thought that owning the two entities was sufficient to be recharacterized, making the arms-length test unnecessary.

King: In my royal opinion, "arms length" is the single biggest rule that must be followed if the strategy is to hold water.

Xenia: An entity you control receiving a note servicing contract from another entity you control has not created a profit, since self-dealing is by definition not profit.

King: You are correct. Self-Dealing is NOT profit, but if you are charging a loan servicing fee and getting it, it IS [profit.] It is not profit twice, but it is profit once...and that is good enough for this King.

As far as "income shifting" goes, let's face it, that is one of the main reasons for implementing Warbucks/Red Inc...to shift income from your high-tax state, (The Peoples Republic of California,) to tax-free (ahhhhhh) Nevada, n'est-ce pas?

The King