How a $1M Physician Transformed Tax Liability into Investment Capital
Prepared by Sigma Capital
Sigma 3's Precision Wealth Stack™ for High-Income Medical Professionals
Client Profile: High-Income Medical Professional
Profession: Medical Doctor (W-2 income, $1,000,000 annually)
Assets: $500,000 in brokerage and savings
Primary Goals:
Reduce crushing tax burden
Evaluate real estate investment opportunities
Protect wealth and future-proof legacy
Establish smart business structure for investment management
The Challenge: Maximum Income, Minimum Deductions
Doctors face some of the highest tax rates and lowest deduction flexibility among high earners. This client was experiencing:
Overpaying taxes due to limited W-2 write-offs
Missing deductions on investment-related expenses
Personal liability exposure from future assets
Zero participation in real estate's powerful tax benefits
No scalable structure for wealth and retirement planning
Sigma 3's Precision Wealth Stack™
A multi-LLC structure built under a holding company enables maximum flexibility, protection, and tax efficiency.
Organizational Structure:
Component Breakdown
Trading LLC – "Market Alpha Strategies"
Purpose: Active portfolio management with business-level tax treatment
Investment Focus:
S&P 500 ETFs for broad market exposure
Options strategies for enhanced yield
Structured yield strategies
Treated as business using "hedge fund strategies" model
Key Benefits:
Home office deductions for research and trading space
Unlimited trading loss deductions (no $3,000 limit)
Wash sale rule exemption for advanced strategies
Solo 401(k) eligibility when profitable
Research tool deductions (Bloomberg, data subscriptions)
Real Estate LLC – "Growth Vault Properties" (Optional Path)
Flexibility for Future Growth: Provides structure for real estate investments when ready
Short-Term Rental Tax Strategy (STR): Powerful depreciation strategy that turns paper losses into immediate tax deductions
Requirements:
100+ hours per year of personal involvement
Client (or spouse) must work more hours than any property manager
Tax Benefits (if criteria met):
STR depreciation offsets W-2 income directly
Bonus depreciation from cost segregation ($75K–$100K+)
No passive activity limits apply
⚠️ Warning: If not materially participating, losses may be suspended until gains or sale
Investment Advisory LLC – "Sigma Family Office Lite"
Strategic Management Hub:
Manages internal financial strategy across entities
Charges deductible management fees to other LLCs
Enables Solo 401(k) or Defined Benefit Plan contributions
Advanced Capabilities:
Private investment coordination
Family trust integration planning
Future pension-style benefit structures
Investment Strategy: Designed for Medical Professionals
| Asset Class | Target Allocation | Strategic Rationale |
|---|---|---|
|
SPY ETF (S&P 500)
|
33%
|
Broad market exposure, liquidity
|
|
Bonds
|
33%
|
Stability, consistent income
|
|
Options Strategy
|
33%
|
High beta, tax-efficient premium income
|
Year-One Tax Optimization Analysis
| Category | Without Planning | With Sigma 3 Structure |
|---|---|---|
|
Deductible Investment Expenses
|
$0
|
$40,000+
|
|
STR Bonus Depreciation (Optional)
|
$0
|
$75,000+
|
|
Solo 401(k) Contributions
|
$0
|
$66,000+
|
|
Capital Loss Deductions
|
$3,000 max
|
Unlimited
|
|
Wash Sale Exposure
|
Yes
|
No
|
|
Total Tax Savings
|
~$3,000
|
$150K–$200K+
|
10-Year Wealth Compounding Projection
| Scenario | Value in 10 Years |
|---|---|
|
$150K One-Time Tax Savings
|
$389,000
|
|
$150K + $30K Annual Savings
|
$862,000
|
Projected ROI: Tax Savings Compounded Over Time
Assuming Sigma's strategy results in $102,608 in year-one tax savings, and you reinvest those savings annually in a portfolio tracking the S&P 500 (estimated 8% annual return), the compounding effect significantly enhances the long-term benefit of implementing this structure.
10-Year Wealth Compounding Projection
| Year | Annual Tax Savings Invested | Portfolio Value (8% Growth) |
|---|---|---|
|
1
|
$102,608
|
$102,608
|
|
2
|
$102,608
|
$213,237
|
|
3
|
$102,608
|
$335,344
|
|
4
|
$102,608
|
$470,172
|
|
5
|
$102,608
|
$618,969
|
|
6
|
$102,608
|
$783,151
|
|
7
|
$102,608
|
$964,331
|
|
8
|
$102,608
|
$1,164,355
|
|
9
|
$102,608
|
$1,385,301
|
|
10
|
$102,608
|
$1,629,481
|
Implementation Timeline
Phase 1: Foundation
Entity Setup: Form Holdings + Subsidiary LLCs, obtain EINs, make elections
Tax Planning: Coordinate with CPA for optimal structure and elections
Phase 2: Infrastructure
Brokerage Setup: Open trading accounts, establish logs, implement QuickBooks
STR Research: (Optional) Begin STR analysis with Sigma RE partners
Phase 3: Optimization
Retirement Contributions: Deploy Solo 401(k) or Cash Balance Plan
Strategy Execution: Implement trading and investment protocols
Why This Matters for Doctors
Medical professionals face unique financial challenges:
High-income earners with severely limited deductions
Audit-exposed by nature of their profession
Often behind on real estate investing and wealth transfer strategies
This structure transforms your tax bill into investment capital and enables you to start building a family office framework without waiting until retirement.
Your Next Step: Complete Wealth Architecture
Sigma 3 Capital offers turnkey implementation of this advanced strategy:
✅ Entity formation and legal structure
✅ Tax filing and ongoing compliance
✅ Investment management and portfolio optimization
✅ Real estate support and STR analysis
We architect the entire system.
You focus on your practice and life.
Ready to Transform Your Tax Strategy?
Let's schedule your entity setup consultation and design your custom wealth architecture.
Contact Sigma 3 Capital:
Phone: (408) 832-1148
Email: Longnguyen@sigma3capital.com
Disclosure: Advisory services are offered through Sigma3Capital LLC, an Investment Advisor in the State of CA. All content is for informational purposes only and is not intended to provide tax or legal advice. Investing involves risk, including possible loss of capital. Past performance is not indicative of future results.
