*** Warning! Warning! Danger Will Robinson! Accounting lingo ahead! ***
I just wanted to clear something up here. No matter what your hunting buddy, golfing friend, mom, dad, second cousin twice-removed, butcher, baker, or candlestick maker may tell you, the simple act of setting up corporation/trust/LLC does not magically transform non-deductible personal expenses into deductible expenses. If someone tells you that it will they either don't know what they're talking about or they're trying to sell you hinky tax planning services. If someone tries to sell you something like this, DON'T BUY IT! Whatever they're selling is very likely to land them in Leavenworth. If you buy it, you risk the possibility of sharing a cell with them.
And another thing, there are no secret provisions of the tax code that say that you only have to pay taxes on foreign income or that only foreigners have to pay income tax or that "gains" are taxable but "earnings" aren't. If anyone tries to tell you otherwise, see above.
Folks, people selling these schemes wind up in prison on a regular basis. The courts have gotten so tired of hearing these idiotic schemes that they generally don't even deign to discuss the issue any more. They generally just say something like, "The taxpayer advanced many tax protestor arguments, all of which are known to be without merit," and move on.
Side note: Yes, you're probably going to see a lot more posts like this as I start winding up for tax season. These posts are a combination of a) utter frustration and b) the desire to keep as many people out of trouble as possible.
Update: I talked to a friend who's a school teacher. She said several teahcers in her district are serving 6 month prison sentences for tax evasion thanks to buying in to some of these "you don't have to pay tax" shysters. Remember: Having to pay taxes is bad, but Leavenworth is worse.