The Poison Pill of Honest Taxes

I suddenly felt an overwhelming urge to pay ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠taxes like a madman. June 13, ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠1979, at Debenzer The Manor. The moment the meeting ended, Henry practically threw himself into the master suite office. As he scribbled future action plans into the notebook he always carried, his eyes flicked toward the status window floating in the corner of his vision.

'Please let my hypothesis be right.'

Every item discussed in the meeting had been critical. From establishing the family office to expanding the liquor business, these were matters that would shape the clan's future. But for Henry personally, nothing mattered more than figuring out exactly how to acquire Points.

Even while getting side-eyed by Gilberto for being insane, he'd insisted on claiming a hundred-thousand-dollar dividend with the ridiculous excuse, "New York City's struggling right now. I should at least chip in a little!" That shameless stubbornness was the final piece needed to test the hypothesis he'd been obsessing over since the beginning of his possession: 'Points are proportional to actual taxes paid.'

'Those initial 125 Points. Where the hell did that weird number even come from?'

While getting to know the family, Henry had combed through old ledgers like a man possessed. What he'd discovered was the inheritance tax on the trust assets from his maternal side. The total value of the Debenzer-Selzberg Trust, as ruthlessly assessed by IRS auditors at the time, came to $5,116,400. Applying the brutal progressive tax rates of 1979 produced a staggering inheritance tax bill of $2.5 million that made his vision go ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠dark.

The problem was liquidity. The maternal trust only held $1.25 million in cash, and Henry's personal cash reserves were practically nonexistent. Without intervention, he'd have to request a deferral on the inheritance tax or take out a bank loan using the trust assets as collateral, playing the part of a debtor while getting squeezed by interest payments.

But the family's experts had solved it another way. On the surface it looked like a loan, but in reality it was asset absorption. The contract was structured so that if the maternal trust failed to repay the loan, ownership of the shares would immediately transfer to the family trust.

In the end, Henry borrowed from the Debenzer family trust to pay his personal taxes in full, avoided gift taxes, and in the process the shares of The New York Times naturally moved from his left hand to his right—straight into the family trust's pocket.

'That mess of inheritance taxes I handled in a frenzy right after possessing this body... this was the result.'

Henry wrote the numbers down in his notebook.

The key was right there. The money the family lent him was essentially a debt, but the $1.25 million in cash the maternal trust originally held was the real tax Henry had paid entirely under his own name.

'If the cash I had on hand converted at one Point per ten thousand dollars, then the $1.25 million paid in inheritance tax equals exactly 125 Points. The numbers line up perfectly.'

That was why Henry had stubbornly pushed for the dividend despite the disapproving stares from the family elders.

'Ah, let's just pay some taxes first! This is the most important thing for me right now!'

A hundred-thousand-dollar dividend. The core of this gamble was confirming whether the amount taken as tax from it would convert into Points.

'If the real way to earn Points is by paying taxes under my personal name, this is going to be a massive headache...'

In truth, growing wealth through trusts in America was practically a sacred domain. Trusts had no disclosure requirements. If you wove countless sub-trusts and offshore entities beneath one massive family trust like a spiderweb, outsiders had no way to grasp its true form. No trust published its assets or accounting books like a publicly listed company, so external scrutiny was impossible. If you stayed out of direct management and only made equity investments, anonymity was nearly perfect.

Debenzer A Trust, B Trust. By giving each one completely unrelated names and routing investments through countless numbered sub-trusts, no one outside the actual operators could possibly figure it all out at once.

And the tax benefits trusts enjoyed with this method were overwhelming. By splitting income across dozens of trusts to keep it locked in low-tax brackets, then passing assets down through generations to slip through the inheritance tax net with ease—that was the formula by which conglomerates preserved their wealth.

One final decisive blow remained. In 1986, Delaware was scheduled to abolish the Rule Against Perpetuities, which had limited the duration of trusts.

The Rule Against Perpetuities. Simply put, it was the legal time limit that said "you can't tie up money in a trust forever." Under American common law, a trust had to be dissolved twenty-one years after the death of the last living beneficiary. At that point assets flooded the market and enormous taxes were triggered. Countless prestigious families went bankrupt because they couldn't withstand it. That was how so many old money clans disappeared and were forgotten.

It was a shackle the state had placed to prevent "eternal monopolies of wealth." No matter how massive a family was, after about a century they would face the judgment of taxes.

But offshore trust hubs like the Bahamas began allowing perpetual trusts first, sucking up the capital of the world's rich like black holes. When even mainland American capital started flowing out like an ebbing tide, a panicked Delaware hastily cut the outdated shackles and jumped into the "perpetual trust" competition.

From then on, everything changed. Trusts were no longer hundred-year contracts. They became truly immortal vaults that could grow for as long as America itself existed!

The empire Henry was building would remain an invincible monster that multiplied forever under the single name Debenzer, never split or torn apart no matter how many generations passed.

Henry, who knew this from his previous life's knowledge, and who had the possibility of achieving immortality through clones, saw inheritance-tax-free assets as nothing short of an ultimate weapon.

'That was also why no inheritance tax appeared when I inherited the paternal trust. Once the law changes, I can simply move all my assets into a perpetual trust under the family name and never pay a single cent in inheritance tax again. Of course, I'll still need to make some strategic charitable donations to keep up appearances.'

Henry had already mapped out the legal technique known as decanting—pouring assets from existing trusts into new ones with more favorable or modern conditions.

'As long as I don't mess up the Generation-Skipping Trust setup like on my mother's side or carelessly mix personal assets with trust assets, I won't get hit with any tax bombs. If you design it properly from the start, legally denying ownership is child's play.'

The decisive reason these trusts were exempt from inheritance tax was that legal ownership of the assets belonged to the trust itself, not to Henry. He received dividends as beneficiary and controlled the assets as chairman of the investment committee and protector, but legally he was not the owner. The logic was that only management and control rights had passed down to him, not the property itself.

'I didn't inherit any property. The title of manager simply transferred, that's all.'

It sounded like wordplay, but this was the magic spell that let America's conglomerate families nullify inheritance taxes.

Perpetual trusts took it one step further. Beyond the Generation-Skipping Trust that essentially said, "We'll give this to the grandson we believe will be born in the future, so the son can just be the manager. We're skipping this guy," it justified the claim, "This is simply family property. My descendants are only managing it." And because of that, there was no inheritance tax.

It was nothing short of a dynastic trust.

Knowing all this, Henry's existing goal had been crystal clear. Use the massive family trust as a shield to expose only a fraction of his true assets. On the surface, the head of a historic conglomerate family. Behind the scenes, the shadowy puppet master controlling the American economy.

But if the only way to earn Points was by paying taxes under his personal name, then this entire design would fall apart before it even began. No, he'd have to completely revise every plan he'd painstakingly built so far.

'It's not like I can just dump extra cash into taxes like it's a donation. All my assets are tied up in trusts. Paying taxes under my personal name would be absolute insanity.'

America was a country where even ordinary people considered tax avoidance a virtue. For the rich, tax minimization was practically a passive skill on the level of breathing. Anyone who couldn't do it was usually treated like an illiterate idiot.

If Henry suddenly announced he wanted to pay more taxes, the IRS would throw a party, but high society would be buzzing with gossip like, "It seems the young head of the Debenzer family has lost his mind." And before that, the family office and think-tank elites would foam at the mouth in opposition.

'In the end, if I want to naturally pay taxes under my personal name without raising suspicion, there are only two options.'

The first was to grow assets inside the trust, receive dividends, gradually build personal wealth, and pay taxes that way. The second was to manage personal assets directly from the beginning and get hit with taxes honestly(?).

If Points didn't come from taxes, Henry would have obviously chosen the first option. He'd set personal dividends at the bare minimum needed for maintaining dignity (meals, living expenses, etc.) and bury everything else in the darkness of the trust.

Americans loved to point fingers at the extravagance of self-made businessmen who built the American Dream—at least for now. In the future they'd applaud it. But they viewed the extravagance of hereditary rich kids born with silver spoons with particularly cold, colored glasses.

It wasn't for nothing that legendary families like Rockefeller, Carnegie, and Morgan hid behind trusts and foundations. Public jealousy easily turned into politicians' votes, which then became the IRS's microscope and the guillotine of regulation.

'But if I have to keep taking dividends because of Points? Then hiding in the shadows loses all meaning.'

If his personal assets kept growing every year through steady dividend income, there would be no way to avoid public scrutiny. It would be the perfect target for arrows of public opinion like, "Just how much have they stacked in that trust to be throwing around dividends like that?" or "If someone's living like a global rich list member on dividends alone, we need to investigate them immediately!"

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In the end, the only remaining option was the hellish condition of using his pitiful(?) personal assets—consisting of nothing but One Times Square and ten thousand dollars in cash—purely as a "tax payment machine" to accumulate Points.

Henry was torn exactly fifty-fifty between hoping Points came from taxes and desperately hoping they didn't.

'If the system would just recognize taxes paid under the trust name too, I'd pay them with a smile...'

His head was spinning. If his hypothesis was correct, he'd have to set up a separate investment company under his personal name starting with the investment team. Funding would also be a problem. Pulling money from the trust as a loan would get his head chopped off by the IRS for self-dealing violations, and even creating a fund wouldn't easily avoid that trap.

'If the family office run with trust money gives even the slightest help to a company I personally own, that'll trigger massive fines too. This is seriously giving me a headache.'

While pondering various roundabout solutions just in case and occasionally glancing at the status window, Henry's eyes suddenly flew wide open. The Points number had finally begun to move.

"It's changing! Wait, hold on... no way!?"

Henry snatched up the phone receiver like he was intercepting a pass.

"Gilberto! Get me Gilberto right now!"

A moment later, a bewildered Gilberto's voice came through the line, clearly confused about what was happening at this hour.

"Boss, what is it? Is something urgent?"

Henry asked in a trembling voice, "That hundred-thousand-dollar dividend I mentioned earlier. Did you execute it?"

"Ah, yes. I just finished paying this quarter's estimated taxes and completed your entire tax filing."

Henry swallowed dryly and got to the main point. "The tax... exactly how much tax came out from that dividend?"

"Since we followed your instructions and didn't apply any separate tax-saving structures, it was taxed at the highest rate. Combined federal and state taxes came to exactly $51,000. The remaining balance in your Chase Bank account after that..."

"Ah, that's fine. I understand. I have some things to think about so I'll hang up now. Good work."

Henry cut Gilberto off and set the receiver down. Then, with trembling eyes, he stared at the status window floating in the air.

The family trust had to pay a staggering $3.8 million in taxes this quarter. But the status window didn't bat an eye at that enormous sum. Only the '$51,000' that had left Henry's personal account had been converted into a number.

'...It really was true. One Point per ten thousand dollars. The system just coolly rounds down decimals.'

Henry let out a hollow laugh. He'd become the head of a conglomerate family that controlled the family's enormous wealth, yet to earn system Points he had to let cold hard cash get ripped out of his own pocket as taxes. The irony was killing him.

'The family trust pays millions and I get zero Points, but when fifty thousand comes out of my allowance I only get five Points? Isn't this a complete poison pill clause?'

A massive crack had formed in his plan to hide behind the invincible shield of the trust and grow his wealth. To earn Points, raise his stats, and create clones, he ironically had to become the most "honest taxpayer" in the world and grow his personal assets.