Small tidbits and Sparks of wisdom

Two Ledgers: Life vs. IRS

The Torah obligates every Jew to give tzedakah not from what he reports on paper to the IRS, but from what he truly receives for his own benefit. Just as on Rosh Hashanah there is a Book of Life and a Book of Death, so too there are two ledgers in wealth:

1. The IRS book, kept for governments and tax authorities, designed to minimize tax liability and maximize protection.

2. The Book of Life, recording the real blessings a person enjoys: the bed he sleeps in, the food he eats, the clothes he wears, the cars he drives, the vacations he takes.

Two Ledgers: IRS vs. Heaven

The Torah obligates every Jew to give tzedakah not from what he reports on paper to the IRS, but from what he truly receives for his own benefit. Just as Rosh Hashanah has two “books” — one for life and one for death — so too there are two ledgers in wealth:

1. The official ledger, kept for governments and tax authorities.

2. The true ledger, recording the real benefits a person enjoys: the bed he sleeps in, the food he eats, the clothes he wears, the cars he drives, the vacations he takes.

Clever financial structures may reduce taxes or obscure wealth from the public eye, but they do not reduce the mitzvah of giving. Hashem counts every penny that turns into personal benefit. From that benefit, charity must be given.

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How the Wealthy Manage Their Finances

Wealthy individuals often use sophisticated strategies to protect assets and minimize taxes:

Hiding assets in trusts – separating control from ownership, keeping assets invisible to public records, passing down wealth tax-free, and avoiding lawsuits and probate.

Paying themselves in loans, not salaries – loans aren’t taxed, assets serve as collateral, and there are no payroll deductions.

Using shell companies to own luxury assets – cars, yachts, and jets held by LLCs to remove personal liability, allow expense write-offs, and keep names off public ownership.

Claiming low income but living rich – reporting $50K income while living a $5M lifestyle, with the difference covered through tax-free leverage, company-paid expenses, and homes listed as “offices.”

Structuring assets under holding companies – one holding entity controlling multiple LLCs, streamlining tax planning, isolating risks, and keeping ownership unclear.

Leasing instead of buying – cars, property, and jets leased by businesses so monthly costs are deductible, depreciation tax is avoided, and luxury taxes sidestepped.

Hiring family members – paying children tax-free income, deducting their wages as expenses, funding Roth IRAs for them, and building generational wealth early.

Owning homes through LLCs – the LLC owns the property, while the individual pays “rent” to it, deducting rent from taxable income and turning homes into assets rather than liabilities.

Maxing out loss-carryforward deductions – carrying forward losses to offset future gains, keeping reported income low while boosting long-term net wealth.

These methods may succeed in lowering taxes and protecting assets from the state, but they do not fool Heaven.

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The True Obligation of Tzedakah

The Torah’s demand is not satisfied with clever accounting. Tzedakah is measured from real benefit: the wealth you enjoy, the life you live, the comforts you take.

A man may officially show $2 million in income, but if he enjoys $10 million in perks, assets, and luxuries, his obligation is to give based on the $10 million. If his lifestyle consumes $100 million of travel, parties, and properties while his filings only show $2 million, Heaven still demands charity on the $100 million.

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Practical Applications: The Accountant’s Ledger

This is why the wealthy need accountants not only for taxes but also for mitzvos. Just as a firm keeps books for the IRS, a second ledger should be kept — an “Obligation Ledger” — to calculate the tangible, personal benefits that flow to the individual and his family, no matter how they are routed.

Examples from Rabbi Moshe Hinneman’s Sefer Tzedakah

The Restaurant Meeting
A man attends a large business dinner where the total bill is $5,000. His portion of the meal is valued at $300. If the same type of food prepared at home would have cost $150, then that $150 is considered his personal benefit. For tzedakah purposes, it is as though he took $150 in cash out of the business, and he must give accordingly. The remaining $150 of his portion — along with the balance of the $5,000 spent on colleagues and clients — is a legitimate business expense.

The Luxury Car
If a businessman truly needs a very expensive car (e.g., $200,000) for business purposes — to project an image, impress clients, or gain access in a market where appearances matter — then the entire cost may be a legitimate business expense. But if he does not need such a car for his work (for example, he conducts business online, never meets clients, and simply uses the allowance as an excuse to buy a luxury vehicle for personal driving), then the purchase is entirely personal benefit. In such a case, it is as if he withdrew $200,000 for himself, and he must give tzedakah accordingly. Unlike food, where one can split between business and personal value, with a vehicle it is usually all-or-nothing: either truly for business or fully for personal use. The dividing line is honesty with oneself — because in truth, the individual knows whether he bought it for the company’s needs or for his own pleasures.

The Family Vacation
A businessman books a $50,000 “business retreat” in a resort location. He brings his family along, mixing meetings with relaxation. If he would have taken a vacation anyway with his family at a cost of $20,000, then that $20,000 is considered personal benefit and must be reflected in his obligation ledger. The remaining $30,000 may be treated as legitimate business expense if it is truly necessary for entertaining clients, team building, or closing deals. But if the “business” is only a thin cover for what is in reality a family holiday, then the majority — if not all — of the expense counts as personal benefit.

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Additional Guidance for Accountants

To calculate fairly, an accountant should:

Review LLC Credit Cards – Separate business expenses from personal charges (restaurants, vacations, clothing, luxury purchases). Every personal charge counts toward the obligation ledger.

Track Travel Expenses – Distinguish between business necessity and personal leisure. Flights, hotels, and upgrades enjoyed by the family must be added to personal benefit.

Account for Lifestyle Benefits – Cars, apartments, chefs, staff, and other “business” perks that serve the family’s comfort are part of the true income.

Apply Honest Baselines – Ask: “What would this person have spent for himself at home?” The difference between that baseline and the inflated expense is his personal benefit.

This method creates a clear, fair system that mirrors reality: what Hashem gave and what the individual actually used.

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Conclusion: Two Ledgers, One Obligation

Corporate structures, trusts, shell companies, and deductions may protect wealth and satisfy governments. But the Torah sees through it all. A Jew’s obligation to give tzedakah is measured by what he takes — the food he eats, the clothes he wears, the cars he drives, the vacations he enjoys, the life he lives.

Therefore, the truly responsible wealthy person must maintain not just a tax ledger, but an Obligation Ledger. With it, he can ensure that his giving is faithful to the blessings he enjoys, fair to the community that depends on him, and true to the gifts that Hashem placed in his hands.