Cutting Edge

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  1. Cutting Edge

Fixed mindset vs. Growth mindset.

Not Stale & Boring

We are heads & shoulders ahead of our competitors. We’ll cut your tax to the legal minimum & we’ll protect your wealth, your companies & your vital business assets from every conceivable threat (bulletproof).  


People who create or control a situation by causing something to happen rather than responding to it after it has happened are proactive. If you wait until something happens and try to figure out a solution, you’re reactive.

Proactive is being in control of your life.


Reactive is letting other people control your life, berate you & push you around as you respond to challenges or events. Reactive is reacting to whomever or whatever is in control of your life. But it’s not you.  

Proactive vs. Reactive

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Two Kinds of People

A proactive approach focuses on eliminating problems before they have a chance to appear and a reactive approach is based on responding to events after they have happened. Businesses that emphasize proactive strategy are better at fending off challenges.

People who create or control a situation by causing something to happen rather than responding to it after it has happened are proactive. Reactive If you wait until something happens and try to figure out a solution, you’re reactive.

Proactive is taking control of your life. Reactive is letting other people push you around and responding.


Exponential Talent

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Exponential Capabilities

Powerful Intellect • Mensan • Genius IQ • Polymath • Creative • Innovative • Thought leader • Exponential experience • I have tens of thousands of hours of learning, reading & experience stored in my brain.

EXPONENTIAL EXPERIENCE – After graduating from college with highest grades, I joined the biggest & best CPA firm in the world where I audited, advised & prepared tax returns for the largest companies in the world. After that, I joined the Fortune 500 where I held C Suite positions w/ 2 Fortune 500’s & led the team that introduced mag stripe cards to the marketplace, initiating the digital economy & revolutionizing the way the world does business, attempted LBO, ran for Congress, founded the first cloud based CPA firm in the country & built it to 7 figures.

Starting a Business?

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We’re in the business of helping you start your business

Before you start a business, grr in touch with us.

All the tips & tricks an old hand knows about starting a business with a leg up on the competition.

What is your competitive advantage?

Battle for the Tax Code

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Battle for the Soul of America.

Appeals Court Judge Learned Hand vs President Roosevelt

Anyone may arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” Judge Learned Hand.

The history of the tax code boils down into a massive fight for the soul of America between two men, President Franklin Roosevelt and Billings Learned Hand, an American judge and judicial philosopher. who was an avid supporter of free speech and noted for applying economic reason to American tort law. Their battle ground was the tax code. Roosevelt fought for an autocratic approach to tax, and Judge Learned Hand fought for a democratic approach to the code more in line with the 16th amendment itself. 

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

But in addition to the wording of the 16th amendment, above, there was another consideration which Roosevelt did not like.  After Congress released the wording to be voted on by the nation, Congress became aware that the amendment would not pass. So they took out ads in newspapers all over the country saying,

“We will only tax profits.”

That did the trick; the 16th amendment passed; and the ad became part of the legislative intent requiring the courts consider that important limitation in any litigation.

Most of Learned Hand’s career he spent as a judge on the United States of Appeals for the Second Circuit. He was never nominated for the Supreme Court, despite being one of the most respected and accomplished jurists in American history, because Roosevelt hated him. 

This fight between these two men is responsible for the evolution of tax law into the backbone of America’a tax philosophy. Without the liberal tax code created in 1913 when the 16th amendment passed, America would not be the same. The battle was fought over the meaning of the 16th Amendment. The stance each man took was completely opposite the other man’s  Roosevelt favored ditching the democratic approach to taxation & the 16th amendment after 16th amendment was passed in 1913.  Over the entire battle, Roosevelt made the IRS became extremely, inducing Congress to create powerful judicial safeguards against the government. Hand was responsible for much of those protections.

Neither man realized it at the time, nut this was a battle for the soul of America. Had Roosevelt won, the nation would surely have followed the tax code into a a police state with an autocratic soul.  Only Judge Learned Hand & his fervent belief in free speech & everything that goes with it, saved our democracy. But it makes it quite clear will have their own battle to preserve the Republic.

Roosevelt was born in 1883 and died in 1946. Learned Hand was born in 1872 and died in 1961. Their careers and their influence overlapped each other. Although Learned Hand won the argument, the eventual result wasn’t obvious for years. Their result of their long battle was decisive in determining the extent of Presidential and government power.  Hand was one of the most influential jurists in American history, but he spent the entire apex of his career on the Court of Appeals. He was never nominated to the Supreme Court because Roosevelt hated him. Their battle was a fight to the death.

The Issues

Roosevelt’s position on income tax was he could do what he wanted with it. His administration was very aggressive on income tax. For his entire presidency, the top tax rate was between 80% and 90%. From 1934 to 1937, during a time when the top tax rate was 90%, Roosevelt carried out a tax trial charging Andrew Mellon with tax fraud, The prosecutor didn’t think the evidence supported Roosevelt’s position, but he prosecuted the case for four years and won the case. Mellon had to pay $600,000 is back taxes. You can read about it here.

Roosevelt was also generally opposed to tax deductions, including business tax deductions. He & Learned Hand fought over taxes and other issues until Roosevelt died. The battle ended with his death in 1945, and the results came in, in 1954 with the Supreme Court Case now referred to as Glenshaw Glass. That case provided the basic framework of the American tax system when it made the case that tax deductions had to be ordinary, necessary in pursuit of profits by a legitimate business.  Over time it evolved to …

“Tax deductions must be ordinary, necessary & reasonable in pursuit of profits by a legitimate business, and they must meet the additional tests of valid business purpose & economic substance”

Also in 1954, the issue was also dealt with by Congress in Section 162, Trade or Business Deductions, in much the same way the Supreme Court dealt with it.

Learned Hand is a legitimate American Hero. He saved the Republic. If the government could tax at high rates and no deductions, we would have a much different country today. Roosevelt’s tax policies were driving companies out of the U.S. for greener pastures overseas. But Learned Hand ended that. The same thing happened in the Obama administration, but tax reform is bringing U.S. dollars back from overseas.

Learned Hand is noted for applying economic reason to American tort law. Among his quotes are the following.

Top quotations about U.S. taxation. 

First. A given result at the end of a straight path is not made a different result because reached by following a devious path.  Minnesota Tea Co. v. Helvering, 302 U.S. 609 (1938).

Second. A transaction is to be given its tax effect in accord with what actually occurred and not in accord with what might have occurred. While a taxpayer is free to organize his affairs as he chooses, nevertheless, once having done so, he must accept the tax consequences of his choice, whether contemplated or not.  Commissioner v. National Alfalfa Dehydrating, 417 U. S. 134 (1974).

Third. Whether and to what extent deductions shall be allowed depends upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934)

Fourth. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes. Judge Learned Hand.

Fifth. Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

My favorite. “Anyone may arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” This is the essence of tax planning. Judge Learned Hand.

Regression to the Mean

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Regression to the mean or regression to mediocrity is the phenomena of a group’s performance trending closer & closer to the mean over time. This results in small elite groups out performing large elite groups. For instance a small elite group of accountants will often out-perform a Big firm.  

This is the reason, small groups often out-perform large groups. At Ellis, we perform better than our larger competitors because  we take advantage of Regression to the mean by limiting staff size to 14 or fewer.   Actually we notice a fall of in performance over 12. We are certainly one of the best performing firms in the . world, and this is a reason why.



Apple’s Tax Strategy

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Apple’s Tax Strategy


Steve Jobs Carves Apple’s Mark on the universe with Tax Strategy.

“Apple’s Steve Jobs was singular in his ability to take a company “on a path to die” and turn it into the world’s most valuable — in part by “casting spells,” billionaire Bill Gates said. Gates spoke of Jobs, the Apple Inc. co-founder and chief executive officer who died of pancreatic cancer in 2011, in a segment on leadership to be broadcast Sunday on CNN’s Fareed Zakaria GPS.

I was like a minor wizard because he would be casting spells, and I would see people mesmerized, but because I’m a minor wizard, the spells don’t work on me, I have yet to meet any person whom could rival Jobs “in terms of picking talent, hyper-motivating that talent, and having a sense of design of, “Oh, this is good. This is not good,”  Gates added of his sometime collaborator and competitor. ”Even when he failed, he succeeded. NeXT, the computer that completely failed, it was such nonsense, and yet he mesmerized those people.” NeXT ceased making hardware five years later, and in 1996 it was bought by Apple.”

Steve was obviously a genius. But one part of his genius has been very little reported on – His leadership genius.

Tax Strategy

Before Apple began their meteoric growth, they addressed the tax problem with the Double Irish & a Dutch sandwich tax strategy. That & Jobs’ innovations propelled them to the most valuable company in the world. But it wouldn’t have happened without the tax savings. Every dollar of tax saved drops straight to the bottom line as another dollar of cash, working capital, profits & competitive advantage created out of thin air.

Without first solving the tax problem, Apple would have always been watching from the sidelines as other companies beat them to the prize.

The Apple miracle

In a scant 14 short years, Steve Jobs single-handedly pulled Apple from the brink of bankruptcy and propelled the company he founded into the most valuable company in the world.

Following a long struggle with Apple CEO John Scully for control of Apple, jobs was demoted and resigned in 1985. After a hiatus of twelve years, during which he founded Pixar & Next, two similarly valuable companies, Jobs returned to Apple in 1997. He died in 2011 with Apple on the brink of becoming the most valuable company in the world.

Steve talked a lot about his goal to carve his mark on the universe. The study of Jobs provides a number of lessons about growing companies for every CEO, if they can follow them. 

Addressed the tax problem

Before Apple began its phenomenal growth, they first addressed the tax problem with The “Double Irish & a Dutch sandwich” tax strategy. That & Jobs’ product innovations propelled them to most valuable company in the world. Without first solving the the tax problem, they would have always been an also ran, despite the phenomenal products.

Billions of Dollars

Over the next two decades, Apple harvested billions of dollars in tax savings which quickly added massive amounts of cash to their balance and profits to their income statement, and advantage over competitors. Apple’s stock value grew steadily along with Apple’s profits, cash balance & competitive advantage. Every dollar a company drops straight to the bottom line as another dollar of cash, working capital, profits & competitive advantage created out of thin air. Apple’s billions in cash, harvested from their tax strategies, steadily built Apple’s Balance Sheet and pushed their value higher & higher.

Innovation leads to competitive advantage

Jobs’ innovation wasn’t limited to Apple products. He was genuinely & completely innovative. He was always looking for a better way to do it. Whatever “it” was.  Without those tax savings, it’s unlikely Apple would have achieved the competitive advantage necessary to thrive. .

So, are you having trouble carving your mark on the universe? Give us a call to get started on the right foot.

The U.S. Tax System

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The U.S. Tax System

The U.S. tax system consists of the tax code (77,000 pages), 50 state tax codes, litigated results, Revenue Procedures, Revenue Rulings & various other components (another 77,000 pages?). That’s at least 150,000 pages of pertinent, relevant information. It is impossible to master it all. That is a good reason not to pay much attention to a tax advisor who constantly mentions individual tax code numbers. Code 454 means something to him or her but absolutely nothing to you, and that’s why they do it … to intimidate you.

Here’s a better way to approach the tax dilemma.

Little Know Fact

The 16th amendment to the constitution created two tax systems, one for individuals and and one for businesses. And there’s a world of difference between them.

After proposing the new amendment, Congress began to worry that the amendment wouldn’t be ratified by the states. The issue was the way it was worded.

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.”

The specific language causing the concern was, “collect taxes on incomes from whatever source derived.” The concern was, the way it was written included money borrowed & the proceeds when selling at at loss in income subject to taxation.  Obviously, Congress had a good reason to be worried. So at the last moment, Congress took out ads in newspapers all over the country promising to ‘tax only profits’.

That relieved an uneasy electorate and the amendment passed unanimously among all the states that voted. Voters weren’t opposed to income tax, they were opposed to an unreasonable tax.

The 16th amendment was subsequently ratified by the Supreme Court in ‘Glenshaw Glass’ and added to the tax code in section 162 of the 1954 tax code. In their deliberations, both the Supreme Court & Congress considered those ads as ‘legislative intent’. Courts have subsequently looked back at those ads to determine Congress’ intent. Intent is crucial to determining how the law will be interpreted and enforced.

In the final analysis, this created to tax systems, which I will explain in my next post.


The upshot is this. Wage earners with no business income have a only handful of tax deductions allowed by Congress; mortgage interest, contributions, etc. Every one of them is a gift from Congress and can be revoked at any time.

On the other hand, businesses can deduct anything & everything.  There are no limitations on what a business can deduct. Over the decades since 1913 when the 19th amendment was passed, the requirements for a business deductions into these five requirements.

  1. Ordinary
  2. Necessary
  3. Reasonable
  4. Economic substance
  5. Valid business purpose.

Plus, the IRS does not make those decisions, the business or its owner makes them. If the IRS disagrees, it has to prove the deduction doesn’t meet these requirements.

Since 1913, 90% of tax law, in one way or another, has been written in an attempt to get around the 16th amendment.


According to the constitution & the Supreme Court, before the 16th amendment was added to the Constitution in 1913, it was illegal for Congress to levy tax directly. Congress’ taxing authority was limited to taxing the states, who could raise the money anyway they wished. Never-the-less, Congress actively taxed people off and on until 1895, when the Supreme Court finally took the matter up & decided a direct income tax was un constitutional.

The U.S. Tax System is Brilliant by Mistake.

In the right hands, the tax code is a powerful force for good. It’s size, duration, & complexity create an environment where a good tax professional can mine the complexities, anomalies, differences and conflicts for tax savings.

I am a big fan of the U.S. tax code and the entirety of U.S. tax law. I think it’s a veritable playground of tax saving opportunities that most tax professionals never discover. Throw in 50 states and it gets better. Throw in 171 countries and tax law becomes the perfect playground for tax cutting strategies. Apple built itself in this playground.

The tax code may be an integral part of America’s economic prowess. I believe it is. It opened the door for innovative companies to use unique tax approaches to save taxes. That’s what we do. Every dollar saved drops straight to the bottom line as another dollar of cash, working capital, profits & competitive advantage.

Nowhere in tax are you standing on solid ground.

The tax code is always moving under your feet. There are 54 different individual codes in the United States Code. The Internal Revenue Code is the 26th of 54 titles in the . Other codes include Armed Forces, Bankruptcy & Banking. The 53 other codes are relatively stable & unchanging.

Tax Law is a constantly evolving matrix composed of the code itself, IRS Regulations, litigation results, Revenue Proclamations, private letter rulings, interpretations, etc. Each of these define the way the law is interpreted or enforced. And each of them change regularly as developments occur, especially when the law is new. And none of those are reflected in the original statute or the code itself. So just looking up the tax code is not enough. My research is not complete until I read articles about that specific tax law.

The Tax Code

Prior to 1874, U.S. statutes were not codified. That is, the acts of Congress were not separately organized and published in separate volumes based on the subject matter (such as taxation, bankruptcy, etc.). The first attempt to codify the Tax Code was in the Revenue Act of 1861. Codifications of statutes, including tax statutes, undertaken in 1873 resulted in the Revised Statutes of the United States, approved June 22, 1874, effective for the laws in force as of December 1, 1873. Title 35 of the Revised Statutes was the Internal revenue title. Another codification was undertaken in 1878.


    1. Revenue Act of 1861
    2. 1873 tax code
    3. 1878 tax code
    4. 1939 tax code
    5. 1954 tax code
    6. 1986 tax code
    7. 2017 tax code

In 1954 all the various tax laws that had ever been passed were codified into the 54 tax code, even preceding the 16th amendment, which became law in 1913. This code was referred to as the 54 code. This basic structure of the tax code has been identical ever since. Tax laws, which are passed every year, are simply hung like Christmas Tree ornaments on the 54 code. Few tax laws are ever repealed. Instead they are superseded. But, if they are never superseded they last forever. In 1986, during the Reagan administration, a big batch of new bills were passed as a reform package. This included ‘at risk’ provisions and ‘passive activities’ to kill a burgeoning tax shelter industry. ‘Economic Substance’ and ‘Valid Business Purpose’ arose separately as tax doctrines with the force of law. They were used to attack tax frauds such as ‘Boss’ & ‘Son Of Boss’. People began calling it the 86 code, but the basic 54 Code structure is still the basic structure of the code and remains unchanged. Many unsupervised tax laws remain fully functional although little used. 2017 tax reform will undoubtedly come be called the 2018 tax code.

So, for the entire time since 1863, Congress has been adding to to tax law, known since 1883 as the U.S. tax code. It started at 400 pages in 1913, the size of a decent book. In 26 years it grew only to 504 pages. Today it’s more than 77,000 pages long. (An entire library of 400 page books.)

This creates a bizarre matrix of anomalies, inconsistencies, differences, conflicting individual laws, that are tied together by invisible threads. This is today’s tax code.

The Tax Code Was Brilliant By Design …

… but the brilliant result was unforeseen. As I’ve already said, the 16th amendment created two separate tax systems. One for business & one for wage earners. That’s because wages are considered profits, which excludes wage earners from deducting ordinary, necessary & reasonable expenses. Businesses & their owners have the full benefit of the 16th amendment.

The Way It Works Is Brilliant By Mistake.

Overwhelming Size & Complexity. The tax code is reportedly 77,000 pages long. Add in Regs, Rev Procs and litigated results, and you’re up to 240,000 pages. Add in 50 states and 172 countries and you are dealing with 25 million to 53 million pages.

Somewhere in that conglomeration, the average tax preparer is completely left behind. Our genius intellect, 4+ decades experience and deep domain expertise sets us apart from the average tax preparers who were left behind after a few thousand pages.

Inevitably in anything as complex and enormous as the tax codes, there are hundreds of thousands of unintended discrepancies, differences, anomalies, inconsistencies, etc. that are breeding grounds for legal tax savings. In addition, in some instances, such as international taxation, when you’re determining which countries to run revenues through, your data base includes the 25 to 53 million pages. There are discrepancies, differences, anomalies, inconsistencies between countries as well as within individual tax codes that can play off each other to save tax legally. This is breeding ground for tax strategy.

Facts & Circumstances

Here is the pecking order of the entire body of tax law. From most important to least important. The bottom of the list reflects the language passed into law. Emphasis moves up the list as government decides how to administer and enforce it legislation & litigated results.

    1. Facts & Circumstances. (Most important.)
    2. Litigation
    3. Revenue Procedures
    4. IRS Regulations
    5. Everything else like private letter rulings.
    6. Tax code.
    7. Individual tax acts like the Tax Cut & Jobs Act. (Least important.)
    8. Private Letter Rulings

The tax code is unique in all the world. As soon as it hits the internet, the law begins morphing as the IRS, the courts & taxpayers begin attacking it determining how the act will be administered & enforced. Unique among the worlds’ tax codes, U.S. tax law, not the code, is a living law, constantly growing & changing. No other law in the world is anything like it.

We are unique, and this ubiquity, and all the other iniquities about the U.S., add to to the powerful uniqueness of our country? Especially our economies muscle.

No other country in the world holds a candle to us.

Tax law is available to everyone in the country. It’s identical for everyone. Taxpayers with identical earnings should get identical results. Bit they don’t because Facts & Circumstances change, & also because of widespread incompetence throughout the professions. When facts & circumstances are introduced into that particular mix, the door opens to niche opportunities to save tax legally based on facts & circumstances. That is the brilliance of the U.S. tax system.

That’s why we have a tax industry in the U.S. The distinguishing factor between companies that are successful long term in blending talent with tax law. Most of the Global 500 have people who can blend them together well. See here for a discussion of tax talent. Private companies generally don’t.

The difference in talent is severe. That’s why the GAO reported large companies pay less tax at lower rates than privately owned companies. Both have access to the same tax code, but vastly different talent. Top notch talent is simply not widely available to private companies. Most tax professionals avoid the talent issue altogether by filing tax on the SALY (same as last year) method.

Key Tax Doctrines

The entire tax code rests on two doctrines which, technically, are not in the tax code per se, but which for all intents and purposes provide the foundation the entire tax code was based on – Economic substance & valid business purpose. Every time I think about this I am reminded of the parable about building your house on solid rock instead of shifting sand. The entire tax code was built on shifting sand. It took a Supreme Court decision, Glenshaw Glass, to place the cornerstone. We introduced them above, but these two precepts lurk in the background of every tax controversy. So you need to be aware of them.

Economic Substance.

Economic substance is a doctrine in the tax law of the which a transaction must have both a substantial purpose aside from reduction of tax liability and an economic effect aside from the tax effect in order to be considered valid. It isn’t valid to pursue a course of action if saving taxes is the only reason you do it. Every transaction must have an economic substance aside from avoiding taxes in order to be valid. Just satisfying the technical requirements of the code, isn’t enough. You also have to pass the test of economic substance. If it doesn’t, it’s considered abusive. Economic substance made its way into the tax code for the first and only time in in 2010 in ACA.

Valid Business Purpose.

Valid business purpose raises the issue of motive on federal income tax liability. Tax avoidance “by means which the law permits” traditionally has been viewed as a legal right. Justice Learned Hand of the New York Court of Appeals, made the famous statement, “It is perfectly legal to so arrange your affairs to pay the least income tax.” However, for forty-five years, the Commissioner of Internal Revenue (Commissioner) has been probing taxpayers’ business motives, generally with the blessing of courts. This has led to the development of the business purpose doctrine, which permits the Commissioner to reverse tax benefits for certain transactions motivated by tax avoidance or non-business purposes. Although the doctrine arose in the context of reorganizations, it was extended rapidly to other areas.- Recently, it has been discussed as a “pervasive judicial doctrine” in tax law. When and how the doctrine should be applied, however, is still the subject of controversy … because it has never been codified by adding it to the tax code.

These concepts developed organically in the courts because they were necessary to hold the tax code together. As people with uncommon abilities began working in the tax code on behalf of their clients to avoid income tax, some very bright people discovered ways to work in the seams of the tax code to follow the letter of the law but cut taxes to nothing. (This is what we do at Ellis.) That’s still possible. But today you have to be aware of these two foundational precepts. People have overlooked them & gone to prison for their oversight.

In today’s world, there are three kind of tax professionals. Education based, preparation based & strategy based. The education based suffered severe devaluation when Google put everything on your phone. Today, I personally do a large part of my research on Google.

Preparation based prepare returns by plunking your numbers on tax forms. This is by far the vast majority of American tax professionals.

Tax strategists make the world go around by devising means to save tax that you would otherwise pay.


In its ultimate simplicity, if you’re doing everything else right, there are only three ways to save tax; move income to lower tax jurisdictions, convert personal, non-deductible expenditures into legitimate tax deductions, or convert taxable income into nontaxable income. The hated fourth way that targets you specifically or as part of a protected group from the maximum tax rates. For instance, Carried Interest that allows specific individuals to pay capital gains rates on ordinary income.

The fifth way which is generally considered folk lore, tax strategy. Tax strategy can’t be learned in college. You can’t learn it from a book or osmosis. Not everyone has a strategic viewpoint. And not everyone is creative. There is only one way to learn tax strategy … by actually doing it over a long period of time. A few years won’t do it. A couple decades may not be enough. Today, I’m now more than four decades into tax strategy. Do the math. As far as I know, I’m the only tax strategist working with private businesses.

Here’s how we do it.

First we listen & learn. Then we mix & match. Tax law with circumstances. The result is tax strategy custom designed specifically for you. Which is exactly what Apple’s tax strategist did for them, and we’ve had similar success. In the last decade, we’ve saved millions of dollars for hundreds of businesses using this process. We are successful 99% of the time. Because these savings repeat themselves year after, it’s nearly impossible to estimate the total tax we saved.

There 28 million privately owned business & their owners, but there’s only one of us. You need us worse than we need you. We’re the prize.

If your tax preparers aren’t saving you tax, what good are they?

Quote from a frustrated physician … “Despite hiring a local CPA, I was paying excessive amounts of taxes. Even worse, every time I suggested a way to reduce my tax burden it was rejected off hand. Taxes were easily my biggest expense and I had a sinking feeling that I was overpaying. When I discussed the topic with my colleagues, they were in the same boat.” Read this to understand why.

The Definitive Study of Human Performance

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The Definitive Study of Human Performance

According to Google, there are 654,375 CPA’s, 29,000 attorneys, 210,190 CPA’s, 213 enrolled actuaries, 57,805 enrolled agents, 642 enrolled retirement plan agents and 60,463 people with other qualifications. Total tax preparers – For a  grand total of 952,303 credentialed preparers.

155.8 million tax returns filed. 164 tax returns per preparer.

Big 4
312,000 people work at Deloitte
219,281 people work at KPMG
270,000 people work at EY
276,000 people work at PWC.
1,077,281 Total

Fortune 500
The population of Fortune 500 companies is too diverse to come up with even a reasonable estimated average. Small Fortune 500’s have at least 500 accountants working for them. Larger Fortune 500’s have at least 10.000 accountants. For the entire Fortune 500 that average’s 5000 each.

The study presented here charts performance. The theory of performance says every activity, trade or profession charts the same. See below.  

The purpose of this study was to determine the performance of each professional in the entire population of tax & accounting professionals. This explains why small privately owned businesses pay more tax at higher rates than the global 500. They don’t have access to top notch tax professionals.

The results of the definitive study on expertise will startle you. It is so dramatic it’s hard to believe.  

The Results Are In ...

We discovered the best professionals in any trade or business perform 100 to 1000 times better then average professional. A few outliers outperform the entire population by startlingly tremendous amounts. There is so much difference, top performers and average performers can’t even understand each other. 

This is a Pareto distribution. Definition: Pareto distribution is a skewed, heavy-tailed distribution that is sometimes used to model that distribution of incomes. The basis of the distribution is that a high proportion of a population has low income while only a few people have very high incomes.Jul 18, 2011. In our case, the distribution is based on measurable human performance. The following Pareto chart was pulled from Wikipedia. 

Generalized Pareto distribution - WikipediaProvided by Wikipedia.

The Chart

The following chart is a Pareto chart of 707,000 actual live tax & accounting professionals. 654,000 CPA’s & 53,000 IRS Enrolled Agents. Every chart of human performance will look identical to, or very close to, this chart, which we commissioned.

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Performance Chart

It’s basically an L. The Pareto Curve has the largest numbers on the far right. The far right would extend off the page and into the next block if we charted it accurately.

The left axis represents expertise. It runs from 100% at the top (most expertise) to zero % at the bottom (least expertise). The bottom axis runs from 0 population on the left to 707,000 population on the right.

Specifically Applied to the Tax Profession

    • 707,000 total tax practitioners
    • 636,300 perform worse than 10%.
    • 70,700 rank perform better than 10%.
    • 7,070 rank above 10%
    • 707 rank above 1%

According to Rutger Hoekstra, there are 100,000 multinational corporations, all of them hungry for elite tax talent. But, out of a total of 707,000 tax practitioners, only 78,700 perform better than 50% competence, and the numbers continue declining as performance rank improves. That means some multinationals have no tax practitioners that rank above 50% performance. There is a severe shortage of tax talent, which means Global companies are competing of the same tax talent that staff local practices. There simply isn’t even enough proficient tax preparers for each multinational to have one. So you can bet they are fighting over every mediocre tax talent out there.

What do you think your chances of finding a decent tax do your taxers?

This is a problem Ellis can solve.

I’m a right brained, intuitive, mensan, genius with a distinguished career at the highest levels. I graduated with the highest grades and was recruited to the biggest & best accounting firm in the world. They hired me during my junior year in college. I spent the first half of my career with them & in C suite positions at 2 Fortune 500’s. After attempting to LBO my employer & running for Congress, I founded this private practice as the first cloud based CPA firm.

The Ellis Solution

In two tests of accounting & tax mastery, I ranked in the top percentile.  Our entire staff of 10 to 12 is elite. By keeping our firm at that size, we are able to avoid regression to the mean and attract & retain elite level talent.. We are the only alternative you have.

Intellect Chart

Brilliant intellect is absolutely necessary for superior professional performance. Robert Ellis a right brained genius, mensan.

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Experience Chart

The value of experience in a pertinent field improves performance dramatically The value of experience doubles every ten years. It grows geometrically. This plays a very large role in professional performance. Here’s our founder’s chart. 

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What this means

You don’t have access to a top performing tax professional because they are all employed by the Global 5000. 


Our founder ranks in the top percentile of intellect, intuition, experience. At Ellis we provide the best professional performance available to privately owned businesses. 

Our Discovery

Several years ago, I ran across an  article in Business Insider that completely captivated me. Here is what caught my eye. “A new study provides evidence that individual performance doesn’t fit on a bell curve (with its stable average and limited variance), but follows a distribution in which the average is unstable, the variance is infinite and the prevalence of outliers is much higher … There was consistently a sizable number of outliers, ‘elite performers” in each profession that accounted for the lion’s share of output while a majority of workers performed below the mathematical average.” (Business Insider)

That hit like a bolt of lightening.  It summarizes the concept perfectly.

Over time, I found other references to this phenomenon.

Steve Jobs

Also years ago, I was attracted to a quote by Steve Jobs about software developers. It stuck in my mind, so after the Business  insider article, I searched it out and researched the circumstances. I soon found a bevy of similar quotes. Jobs was obviously an extremely bright guy, so I’m not surprised he figured it out through observation. But I am surprised no one took him seriously.

    1. “An outstanding programmer is 25 times better than an average programmer.” (Steve Jobs).
    2. “Now, in software, and it used to be the case in hardware, the difference between the average software developer and the best is 50:1; Maybe even 100:1. (Steve Jobs from the lost interview.)
    3. “The difference between’ a superb programmer and an average programmer is 25:1.” (Steve Jobs)
    4. “I found that there were these incredibly great people at doing certain things, and that you couldn’t replace one of these people with fifty average people.” – (Think Like Steve Jobs, p91)
    5. “I was convinced the best people can achieve exponentially more than the merely competent or capable.” – (Think Like Steve Jobs, p92

Nassim Nicholas Taleb

You can find a decent discussion of this phenomena in Taleb’s book, Black Swan. At location 5280 in Black Swan, Nassim Taleb briefly discusses extreme outliers in a Pareto Chart.

Derek Thompson

Derek Thompson’s book, Hit Makers. “One fifth of the movies took four fifths of the box office. In book publishing, 90 percent of revenues come from about 10 percent of books. In digital markets, it’s even more extreme: 60 percent of all app store revenue comes from just 0.005 percent of companies. For hit makers, the vast majority of bets are failures. The difference between a great year and a terrible year in publishing might come down to a tiny minority of deals.”

Vilfredo Federico Damaso Pareto

Vilfredo Federico Damaso Pareto was an Italian engineer, sociologist, economist, political scientist, and philosopher. He made several important contributions to economics, particularly in the study of income distribution and in the analysis of individuals’ choices. But he missed the big picture.

Perry Marshall

“Top performers are not twice as good as average performers. It’s more like 100 times better. Everything that matters in business isn’t linear, it’s exponential. 80/20 is about Power Laws –powers of 10. You should always think in multiples of 10.” (Perry Marshall, 80:20 Sales & Marketing.)

Peter Thiel

Also, take a look at the Pareto curves on pages 85 & 89 of Peter Thiel’s ‘Zero To One.’ Substitute ‘performance’ on the X axis (or left margin) & ‘total population’ on the Y axis across the bottom. “This Pareto principle has been extended to mean that 80 percent of sales often comes from 20 percent of products.”

After running tests on professions with derailed performance re odds available, professional sports, I turned my attention to the tax profession  here is what I found

    1. Average tax talent performs at 5% of the best talent.
    2. Top tax talent outperforms the average tax practitioner by 20 to 500 times.
    3. The unavoidable conclusion is, there aren’t enough elite tax professional to supply the Global 2000
    4. Less than 0.001% rank in the top percentile on performance.
    5. Only 0.28% of the population rank above 50% on performance.
    6. Less than 7% of the population rank above 10% on performance.

Some people knew a Long time ago

“Four-fifths of everybody’s work must be bad. But the remnant is worth the trouble.”–Rudyard Kipling

“Using the standard that 90% of science fiction is crap, then 90% of film, literature, consumer goods, etc. is crap.” –Theodore Sturgeon

Expertise / Outliers

In every profession or trade, there are very few experts who perform vastly better than the average. The best performers are 100 to 1000 times better than average performers. Pareto charts reveal this previously masked truth. A few outliers, a few experts, outperform the population by crazy, unimaginable degrees.
• Less than 0.001% rank in the top percentile on performance.
• Only 0.28% of the population rank above 50% on performance.
• Less than 7% of the population rank above 10% on performance.

In the tax industry …

• 367,000 population
• Only 367 out of 367,000 perform in the top 1%.
• Only 10,276 out of 367,000 perform better than 50% on performance.
• Only 25,690 our of 367,000 perform better than 10% on performance.

Since the Big 5 and Global 5000 have a bigger appetite for top talent that 25,690, you will have a hard time trying to find someone in the top 90% to be your tax adviser. Basically all the talent performing above 10% (35,709) are employed by Big 5 accounting firms and the Global 5000. The remainder (332,000) fall into the small to medium sized local & regional tax & accounting firms. These are the people available to advise you on tax.

The Ellis Solution

Ellis CPA is a top performing firm with a national reputation and various areas of expertise. Tax strategist • though leader • leading the tax industry into the 21st century • • •

Our founder & CEO ranks in the top percentile on this chart. But more important, or systems make it possible for everyone on our staff to perform at the highest levels. Our CEO also scored at the top of the scale on exponential experience and intellect. He’s a genius level Mensan. That combination of intellect, aptitude & expertise are the primary determinants in proficiency, competence & performance. Our principal was trained in the Big 5 and in Fortune 500 C suites. He has genuine expertise in tax.


Noticeably intelligent people have observed over the years that extreme performance exists in the long tail on the left margin of Pareto charts of every profession and every measurable phenomena on earth, such as best sellers and hit records. The 80/20 rule, which scratches the surface of this phenomenon, says, “80% of the land in Italy is owned by 20% of the people.” In the course of my reading, I discovered Pareto Charts were showing some startling things about outliers. Outliers represent a tiny portion of the population but they occupy the the top half of the performance scale. In fact, a mere handful occupy the top 80% of the performance scale. They outperform the rest of the population by unimaginable degrees, from 100 to 1000 times.


• There are 1.4 million accountants employed in the United States.
• 735,399 PTINs have been issued to tax practitioners by the IRS.
• 620,000 CPA’s & EA’s. actively prepare tax returns.
• 239 million tax returns are filed every year.
• 30 million business tax returns filed every year.
• We assumed 367,699 (half the PTIN’s) actively prepare tax returns.

This is how tax professionals rank on performance.

• Less than 0.5% (1,835) rank above 50% performance.
• Less than 0.5% (1,835) rank above midway on performance.
• More than 99.5% (365,165) rank below <50% performance.
• More than 99.5% (365,165) rank below midway on performance.
• 95% of the population rank below 5% on performance.
• 5% of the population rank above 5% on performance
• 0.21% rank in the top 1% on performance.
• 76 rank in the top 1% on performance.
• There are 30 million businesses in the USA.
• 45,508 companies are listed on stock exchanges around the world.
• Less than 0.5% (1,835) rank above 50% performance.
• There are not enough top notch tax professionals to go around the Global 2000.
• There are 1.4 million accountants employed in the United States.
• 735,399 PTINs have been issued to tax practitioners by the IRS.
• 620,000 CPA’s & EA’s. actively prepare tax returns.
• 239 million tax returns are filed every year.
• 30 million business tax returns filed every year.
• Attorneys. 29,688.
• Enrolled Retirement Plan Agents‎: ‎738‎
• Enrolled Actuaries‎: ‎357‎
• Enrolled Agents‎: ‎53,077‎
• Actual number of returns filed – 1,152,000
• 60% get professional help – 691,000
• Number of returns prepared by average successful preparer – 100
• Number of Individuals with Current Preparer Tax Identification Numbers (PTINs) 710,553.
• Number of active preparers: 691,000/100=6,912
• Of 6,912 preparers … only 30 rank above 50% performance (top dot)
• Of 6,912 preparers … only 744 rank above 10.8% performance (bottom left dot)
• Of 6,912 preparers … 3,456, 50%, half, rank below 1% performance (bottom right dot)

More About Ellis
• Genius intellect
• 4+ decades high level experience
• Big 5 auditor
• Fortune 500 C suite
• Attempted LBO
• Power politics – ran for Congress
• Private practice, clients in 46 states
• Deep domain expertise tax strategy
• Top percentile tax aptitude
• Graduated #1 every time

I love this quote: “I think the finance (tax?) field is being overrun with dull and repetitive business people, who are doing the minimum possible to get by, with apathy, and complacence, and generally achieving mediocrity.” Oren Klaff

Expert  Expertise  

Expert: a person who has a comprehensive and authoritative knowledge of or skill in a particular area. I.e., “a financial expert” The four components of expertise are: Intellect + intuition + experience + performance. I personally rank in the top 1% in all four areas. My staff bright as well.


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Ellis Advisory is an innovative international management consulting company providing premium professional services that includes every traditional accounting & accounting service.

Most CPA’s & just do tax returns, auditing & bookkeeping which are reactive, & most attorneys aren’t licensed to work in multiple states.

Ellis has been on the cutting edge of technology for the firm’s entire existence. We became the first cloud based virtual firm, although its not widely recognized. Clients in 46 states & 5 countries. Ellis’ headquarters office is located on the banks of the Colorado River in Grand Junction, Colorado.

In the circles we work with, we are considered the premier tax & consulting firm in the world.

POWERFUL INTELLECT – Mensan • Genius IQ • Polymath • Creative • Innovative • Thought leader • Exponential experience.

I have tens of thousands of hours of learning, reading & experience stored in my brain.

EXPERIENCE BACKGROUND – After graduating from college with highest grades, I joined the biggest & best CPA firm in the world where I audited, advised & prepared tax returns for the largest companies in the world. After that, I held C Suite positions w/ 2 Fortune 500’s where I led the team that introduced mag stripe cards to the marketplace, initiating the digital economy & revolutionizing the way the world does business, attempted LBO, ran for Congress, founded the first cloud based, digital & virtual accounting firm in the world & built it to 7 figures. Clients in 46 states & 5 countries.


Here’s my experience graph.

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Cognitive Capital in the Knowledge Economy

QUOTE – “True genius resides in the capacity for evaluation of uncertain, hazardous, and conflicting information.” –Churchill”.


Here’s my intellect graph.

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The Definitive Study of Human Performance

For the full story click on the link above. For our purposes here is just to say, our principal rank in the top per cent of CPA & tax performance. 

The best tax professionals perform 100 to 1000 times better then average. A few outliers outperform the entire population by tremendous amounts. There is so much difference, top performers and average performers can’t even understand each other. 

The Chart

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It’s basically an L. It’s i