As tax professionals scour for strategies that can save clients money while bolstering their financial positions, among the most innovative options available are alternative investments offering generous deductions. Some even come in at deduction ratios of eight or 10, but watch out for how to dissolve later on to keep the tax benefits. 

For example, one K-1 alternative investment requires a $25,000 investment, producing five times that in deductions ($125,000). Applying the highest personal rate (plus state taxes sometimes) you are looking at $125,000 x.37 as actual dollars saved. That can be more than the original investment netting immediate cash flow. then there are ongoing investment income in some cases

These strategies — ranging from leaseback arrangements to foreign currency investments and structured leveraged ownership plans — are more than just smart tax moves; they’re powerful tools for reshaping financial outcomes. With time running out, these opportunities could be the key to helping clients close the year with a stronger, more optimized tax position.

Leaseback arrangements: Turn assets into tax savings

Leaseback arrangements are like giving an asset a second life. Companies sell an asset — be it real estate, equipment, or intellectual property — and then lease it back from the buyer, freeing up cash while maintaining the asset’s utility. From a tax perspective, these arrangements offer a clever way to convert equity into deductible lease payments.

Tax benefits that count:

• Deductible lease payments: Lease payments become a business expense, directly reducing taxable income.
• Enhanced liquidity: Selling the asset generates immediate cash flow that can be reinvested into the business or used for other strategic purposes.

What to watch out for:

• Fair market value: Pricing must align with market norms to avoid IRS scrutiny.
• Business purpose: The transaction should have a genuine operational reason beyond tax benefits; otherwise, it risks being reclassified.

For clients with underutilized assets, leasebacks can be a win-win strategy: Unlock cash today and save on taxes tomorrow.

Foreign currency investments: Diversify and deduct

Foreign currency investments bring an adventurous twist to tax planning. Whether hedging against domestic currency fluctuations or seeking exposure to international markets, these strategies come with unique tax advantages.

Tax advantages:

• Ordinary income treatment: Gains and losses on most foreign currency transactions are recognized as ordinary income or loss, making them easier to offset against other income.
• Section 988 deductions: Transactions falling under IRC Section 988 provide clear guidelines for deductibility, simplifying compliance.

Smart planning tips:

• Detailed records: Precision matters. Record the exchange rates and transaction details meticulously.
• Strategic hedging: Use hedging strategies to manage risk while preserving potential tax benefits.

For clients already operating internationally or with exposure to multiple currencies, leveraging foreign exchange transactions could be a natural fit for year-end tax optimization.

Structured leveraged entity ownership

Structured leveraged ownership plans turn the power of debt into a tax-savvy advantage. By financing investments through borrowed capital within an entity, clients can amplify returns while benefiting from interest deductibility.

The tax play:

• Interest deduction: Interest payments on the debt used to fund investments can significantly reduce taxable income.
• Entity flexibility: Different ownership structures — such as partnerships or LLCs — can be tailored to maximize deductions while minimizing liabilities.

Stay in compliance:

• Reasonable debt levels: Keep debt-to-equity ratios reasonable to avoid the IRS treating the debt as equity.
• Passive activity rules: Ensure that activities meet IRS guidelines to avoid limitations on loss deductions.

Clients looking to scale their portfolios or businesses can use this strategy to multiply their financial impact while keeping taxes in check.

Seize the moment: Year-end tax planning

With December 31 looming, now is the time to act. To ensure your clients reap the benefits of these alternative investment strategies:

1. Evaluate opportunities: Identify clients with underutilized assets, international exposure, or capacity for leveraged investments.
2. Assess tax scenarios: Pinpoint where these strategies align with your clients’ broader financial goals.
3. Act quickly: Execute transactions before the year closes to lock in deductions for this tax cycle.
4. Partner up: Work closely with legal and financial advisors to navigate the complexities of these strategies while ensuring compliance.

By implementing leaseback arrangements, foreign currency investments, and leveraged entity ownership plans, tax professionals can offer clients not just compliance but meaningful financial transformation. As we head into a new tax year, there’s no better way than by helping clients achieve a stronger, more tax-efficient financial footing.

Approximately eight years ago, I learned about “Exponential Organizations” while attending Abundance 360, an annual conference organized by Peter Diamandis, author of “Abundance,” founder of X-Prize, and co-founder of Singularity University. Dan Sullivan’s Strategic Coach team, with conference experience, helped with the organization. That conference has grown tremendously over the years and provided insights into the convergence of various technologies, especially the future framework for organizations, including CPA firms. I have always looked outside the CPA profession for trends that will improve our profession.

Open ExO is relevant to CPA firms and their best clients. (I will explain in more detail about best clients later.) At Boomer, we have integrated much of the ExO framework into our consulting practice and Boomer Circles over the past eight years. This year, I decided to get serious and became certified as an ExO consultant. These attributes align with Boomer Consulting’s leadership, talent, technology, process and growth pillars. Let me assure you that becoming an ExO requires a unique-ability team. One individual does not have all the skills. That is true at Boomer and at your CPA firm. It is a team sport!

As CPA firms navigate an increasingly complex and competitive landscape, the need for scalable, efficient and innovative approaches to growth has never been clearer. Enter the concept of the “Exponential Organization” — a framework developed to help businesses achieve tenfold growth by leveraging modern technology and strategic principles. For CPA firms, adopting ExO attributes isn’t just a way to boost profits; it’s a pathway to attract top-tier talent and engage clients looking for forward-thinking solutions.

The ExO framework comprises 11 key elements designed to create a sustainable, high-growth environment. While each attribute is unique, they collectively build a powerful, adaptable infrastructure that can position CPA firms and their best clients for long-term success. Over the past eight years, I presented the concept to numerous firms and immediately the resistance came from within firms about how they didn’t want to be “10x” and they could not find the talent. This is part of the firm immune system that resists change.

Change the question and the ExO framework immediately becomes relevant. How do firms add 10x value to their best clients? Many firms focus too little on their top 20% of clients (who produce 80% of their revenue) and spend too much time on the other 80%. Focus on the top 20% and transformation utilizing the ExO framework serves as an inspirational and guiding roadmap. The good news is that most firms only need to focus on three or four of the attributes to transform, while startups need to focus on all the attributes.

Defining the ‘why’

At the heart of any Exponential Organization is its “massive transformative purpose” — a compelling reason for existing that goes beyond profits. For CPA firms, an MTP could be “Designing firms and their clients for success in the 21st century and beyond.”

An MTP serves as a guiding star for the firm, aligning team members, processes and services with a shared vision. This clarity of purpose is a magnetic force for talent, especially for young professionals seeking meaningful work in values-driven environments. When clients see a firm operating with purpose, it builds trust, strengthens relationships, and differentiates the firm in a crowded marketplace. Once you have defined your MTP, the attributes accelerate the execution of your vision.

1. Staff on demand: Flexibility with high-quality freelance talent. Traditional CPA firms often carry fixed overhead in the form of full-time staff. However, by incorporating a “staff on demand” model, firms can leverage a network of skilled freelancers and contractors for specific projects, allowing flexibility and cost efficiency.

Engaging external experts can reduce payroll costs, especially during off-peak seasons, and attract niche talent without the full-time commitment. This also allows firms to expand their services rapidly as they respond to new market demands. Additionally, the firm’s workforce can scale up or down as needed, keeping operational costs lean and profit margins robust.

2. Community and crowd: Harnessing collective knowledge and resources. An ExO thrives on the knowledge, resources and insights of a wider community. By cultivating a network of trusted advisors, clients and partners, CPA firms can build an active community around their services. For example, firms can create virtual communities where clients and advisors engage in real time to share insights, pose questions, and resolve issues. This community-oriented approach strengthens client relationships and provides valuable feedback, driving continuous improvement in service delivery.

Beyond clients, firms can harness the expertise of crowds to improve services and internal processes — processes that allow employees and stakeholders to suggest and vote on innovations, leading to crowdsourced solutions that benefit the entire firm.

3. Algorithms: Driving efficiency and consistency. Incorporating algorithms is a powerful way for CPA firms to automate repetitive tasks, streamline workflows, and reduce human error. For instance, automated data extraction can simplify tax preparation by gathering financial data directly from clients’ systems, reducing the time spent on data entry and review.

Algorithms can also aid in predictive analytics for cash flow management, resource allocation, and client advisory services. By leveraging these technologies, CPA firms not only improve efficiency and accuracy, but can also shift focus to higher-value tasks such as advisory services, thereby increasing client value and profitability.

4. Leveraging assets: Shifting from ownership to access. ExO firms often move away from owning physical assets, instead opting for a shared or leased approach to minimize overhead. For CPA firms, leveraging digital tools and cloud-based platforms provides the same level of functionality without the burden of infrastructure costs.

By utilizing software-as-a-service solutions, CPA firms can avoid the hefty upfront costs of software and hardware, instead paying a manageable subscription fee for flexible access. This keeps operational costs low while ensuring the firm has access to the latest technology, all without the hassle of maintenance and upgrades.

5. Engagement: Cultivating a connected workforce and client base. Employee and client engagement play a central role in the ExO success. Digital platforms like Asana and Microsoft Teams allow for seamless internal communication, fostering collaboration and quick information sharing.

Firms can take engagement a step further by gamifying certain tasks and projects, and rewarding employees for milestones achieved. For clients, engagement can mean creating user-friendly client portals where they can track their progress, upload documents, and receive real-time updates.

Engagement isn’t only about improving experiences; it’s about creating a culture of transparency and trust. When employees and clients feel connected and informed, they are more likely to remain loyal and invested in the firm’s success.

6. Interfaces: Streamlining client and employee interaction. A smooth interface is crucial for managing the complexities of client-firm interactions. Custom portals, for example, can allow clients to access their data, track project statuses, and communicate with advisors in real time.

For CPA firms, the interface attribute focuses on making it easy for clients and employees to navigate systems and processes. A well-designed interface for employees can improve efficiency by making tools and information readily accessible, while clients enjoy a hassle-free experience that adds value to the firm-client relationship.

7. Dashboards: Real-time metrics for data-driven decisions. ExO firms rely on dashboards to monitor their progress toward key performance indicators and goals. Dashboards allow CPA firms to visualize their data in real time, helping partners and managers track client projects, financial metrics, and employee performance.

For example, a dashboard displaying revenue per full-time equivalent provides valuable insights into profitability and efficiency. By monitoring these KPIs, CPA firms can make informed, agile decisions, identifying areas for improvement and optimizing resource allocation.

8. Experimentation: Fostering a culture of innovation. The willingness to experiment is essential for innovation. CPA firms can foster a culture of experimentation by encouraging employees to test new ideas without fear of failure. This could mean piloting a new client service model, testing emerging software, or exploring AI-driven tools for client engagement.

The goal is to embrace agile principles — adapt, test, learn and improve. Small, iterative experiments allow firms to discover what works before investing heavily, reducing risk while positioning the firm as a leader in modern, innovative services.

9. Autonomy: Empowering teams to act. In a traditional CPA firm, hierarchical structures can limit innovation. ExO firms, by contrast, embrace decentralized decision-making, allowing teams to act autonomously in their respective domains. This empowers team members to address client needs proactively, make faster decisions, and deliver services that are both timely and relevant.

Empowered employees are more likely to feel satisfied and engaged, reducing turnover and attracting top talent. Moreover, autonomy helps foster a client-centered approach that enhances service quality and customer satisfaction.

10. Social: Improve teamwork, collaboration and communications. Social technologies in business incorporate the many communication tools that make conversations in the workplace smoother, quicker and way more effective. They encompass communication tools (such as social messaging and discussion forums), collaboration tools (such as cloud-based document management for sharing and real-time editing), and workflow tools (to manage tasks and activity streams.)

Implementing the ExO framework

Transitioning to an ExO model is a journey that often takes 18 to 36 months, depending on the firm’s size, existing infrastructure, and willingness to change. CPA firms can start small, experimenting with one or two attributes before gradually integrating more. Success depends on strong leadership, a shared vision, and an actionable game plan.

The ExO model isn’t just about growth for growth’s sake. It’s about building a firm that can thrive in a rapidly changing environment, delivering exceptional value to clients and creating a work environment where talent can flourish. CPA firms that embrace ExO attributes position themselves as agile, innovative and resilient, equipped to drive profit growth while remaining attractive to both clients and employees.

In conclusion, ExO attributes offer CPA firms a roadmap for transformation.

By adopting an MTP, leveraging assets smartly, embracing staff on demand, and fostering an environment of experimentation and autonomy, CPA firms can enhance profitability, attract top talent, and create enduring client relationships. In a world where change is constant, the ExO model provides a blueprint for sustainable success and a competitive edge in the evolving professional services landscape.