Great decision, Sean! This thread has been incredibly educational for everyone involved. As someone who works in financial compliance, I see these types of schemes regularly, and they always follow the same pattern - complex structures that exist primarily for tax avoidance rather than legitimate business purposes. What's particularly valuable about this discussion is how it demonstrates the importance of community knowledge sharing. The collective experiences shared here - from those who nearly fell for similar schemes to those who got audited - create a comprehensive picture that's much more powerful than any single professional opinion. For future reference, the IRS publishes an annual "Dirty Dozen" list of tax scams that often includes these types of abusive tax shelters. They also maintain a list of "reportable transactions" that must be disclosed on tax returns, and many of these software license/LLC arrangements fall into that category. The fact that you trusted your instincts and sought out community input before making a decision shows exactly the kind of due diligence that protects people from financial harm. Your experience will undoubtedly help others who find this thread after being approached by similar companies. Thanks for sharing your story and for the follow-up on your decision. It's a perfect example of how asking the right questions and getting multiple perspectives can save you from very expensive mistakes.

As a tax professional who's been dealing with these schemes for over a decade, I want to applaud everyone who shared their experiences here - this is exactly the kind of community knowledge sharing that protects people from financial predators. Sean, your decision to walk away was absolutely the right call. What strikes me about the My Health CCM pitch is how it hits every single checkbox on the IRS's list of abusive tax shelter characteristics: artificial complexity, disproportionate tax benefits, entity creation solely for tax purposes, and most tellingly, the insistence on using their "approved" professionals. I've represented clients in audits involving virtually identical structures, and the outcomes are consistently bad. The IRS has specific teams dedicated to unwinding these arrangements, and they're very good at it. They'll typically challenge both the inflated valuation of the software licenses AND the business purpose of the entire structure. For anyone else reading this who might be considering similar arrangements, here's my professional advice: if a tax strategy requires you to create new entities, involves transactions primarily with the company selling you the strategy, or promises tax benefits that seem disproportionate to your economic risk, get multiple independent opinions from tax professionals who have ZERO financial relationship with the promoter. The legitimate tax planning world has plenty of genuine opportunities that don't require elaborate schemes or artificial time pressure. Trust your instincts, do your due diligence, and remember that the best tax strategy is one that makes business sense first and tax sense second. Thanks again to everyone who contributed to this invaluable discussion!

22 One thing nobody's mentioned is using a dedicated credit card for your cash withdrawals. I have a business credit card that I ONLY use for ATM withdrawals for inventory purchases. Then in my records, I note which items were purchased with which withdrawal. Creates a clear paper trail from credit card statement → cash withdrawal → inventory purchase → sale. My accountant loves this system!

As someone who's dealt with similar documentation challenges, I'd strongly recommend also keeping a mileage log specifically for your business trips. The IRS allows you to deduct business mileage at the standard rate, and those pickup trips to Facebook Marketplace sellers definitely qualify. I use a simple app that tracks my location and lets me categorize trips as business or personal. For each pickup, I log the starting point, destination, and business purpose ("Inventory purchase - iPhone 12"). This adds up to significant deductions over time and creates another layer of legitimate business expense documentation. Also consider photographing the items with a timestamp when you first acquire them, then again when you list them for sale. This visual documentation helps establish the business nature of your purchases and can be valuable supporting evidence if questioned.

Important point that hasn't been mentioned yet - the timing of UBIT tax payments. If your expected UBIT tax will exceed $500 for the year, your IRA must make quarterly estimated tax payments using Form 990-W. Missing these payments can result in penalties, and many self-directed IRA investors don't realize this until it's too late. I learned this the hard way last year and got hit with penalties.

One thing I wish I had known before investing my IRA in a real estate syndication - make sure to get clarity on exactly how the sponsor will handle K-1 distribution timing. My syndication was supposed to issue K-1s by March 15th, but they were delayed until mid-April, which made it impossible to file my IRA's Form 990-T by the deadline. This created a cascade of problems because my custodian charges a $150 late filing fee, plus I had to file for an extension and pay penalties to the IRS. The delay also meant I couldn't accurately project my UBIT liability for the following year's estimated payments. Another consideration - some syndications have "side letters" or management agreements that could potentially create prohibited transaction issues if there are any relationships between the sponsor and other service providers. I learned to specifically ask sponsors about any affiliated entities providing services to the LLC, as this could complicate the prohibited transaction analysis for IRA investors. The due diligence process for IRA investments in syndications is much more complex than regular investing, but the returns can justify the extra effort if you do your homework properly.

I've been audited before (not fun) and the IRS specifically questioned my "office supplies" category which included snacks and drinks. The auditor told me personal consumption items aren't deductible even if they help you work. BUT they did allow the coffee service I had for client meetings as a 50% business meal expense. Keep good records of who visited and when if you're claiming those contractor coffee expenses!

This is such a common question for home-based business owners! I went through the same confusion when I started my consulting business. The key thing I learned is that the IRS looks at whether an expense is "ordinary and necessary" for your business AND whether it's primarily for business vs. personal use. For your daily coffee and energy drinks that you consume while working, these are generally considered personal expenses because you'd likely drink coffee/beverages regardless of whether you were working or not. The IRS views this as personal consumption that happens to occur during work hours. However, you're absolutely right about the contractor situation! When you provide refreshments to contractors, clients, or other business visitors in your home office, those costs are typically deductible as business entertainment expenses (usually at 50% of the cost). Just make sure to keep detailed records - date, who visited, business purpose, and receipts. One strategy some business owners use is setting up a dedicated "client refreshment" area with separate supplies specifically for business visitors. This makes it easier to track and justify those deductions while keeping your personal consumption separate. The bottom line is: be conservative with personal consumption items, but don't miss out on legitimate deductions for business hospitality!

Is your wife considered of counsel or an employee of a firm? That can change how this is reported. My wife is of counsel and her firm takes 40% of any referral fee (their policy), so she only gets 60% of it, but it's still reported on a 1099-NEC to her, not a W-2.

One more thing to consider - since this is a substantial one-time payment ($48,000), you might want to look into whether you can make a SEP-IRA contribution to reduce the tax burden. If your wife treats this as self-employment income on Schedule C, she may be able to contribute up to 25% of her net self-employment earnings to a SEP-IRA (after deducting half of the self-employment tax). This could potentially allow her to shelter several thousand dollars from current taxation while building retirement savings. The contribution deadline would be the tax filing deadline (including extensions), so you'd have some time to set it up if you decide to go this route. Also, don't forget to factor in state taxes if you're in a state that has income tax - this referral fee will likely be subject to state income tax as well as federal.