Anderson Business Advisors Podcast: Recent Episodes
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Real Estate Investors, Stock Traders, and Business Owners guide to preserve their wealth, protect their assets, and prosper in the future.
In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., answer listener questions on tax planning, entity structuring, and asset protection for real estate investors. They discuss the best tax strategies for investors who own multiple rental properties as sole proprietors and examine whether converting an S Corporation that owns rental property into an LLC could trigger property tax reassessments or other tax consequences. Amanda and Eliot also explain the rules surrounding home office deductions, including using a detached ADU as a dedicated workspace and claiming deductions for business storage in a garage. They cover the differences between operating as an S Corporation with an accountable plan versus filing on Schedule C, addressing common concerns about IRS scrutiny. Finally, they explore the complexities of structuring a 1031 exchange alongside a self-directed Solo 401(k), highlighting prohibited transaction rules, financing considerations, and strategies for staying compliant while maximizing tax benefits. Tune in for practical guidance on protecting your investments and making informed tax decisions.
Submit your tax question to taxtuesday@andersonadvisors.com
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Highlights/Topics:
0:00 Intro
9:29 I work in a family-owned company and have the opportunity at the end of this year to obtain equity/ownership. Would you recommend accepting that ownership under a specific tax strategy or corporate setup, or just accepting the ownership under my name and Social Security number?
18:26 Is it a good idea to pull money from a traditional IRA early and then invest in oil funds to get IDC deductions to help offset the taxes I will incur by withdrawing from the IRA?
23:25 Can tax documents be reviewed for previous years and if my previous preparer didn’t use all the available strategies; can those strategies be applied for those years?
27:32 I will be relocating to South Africa which has a tax treaty with the United States Government. I am a retiree who receives a monthly annuity. Will I be double taxed? I will be paying both federal and state taxes in the USA.
34:36 What is the best tax strategy for sole proprietor ownership of 12 rentals?
40:50 I have a 22-unit condo project that we converted into rentals in 1992. It was a C Corp. Now it is an S corp. One adviser suggested converting to an LLC. Would this trigger a taxable event for property tax assessments?
47:23 I have a detached ADU in my backyard. I want to use it as a home office. Can I do that and if so, how is the deduction calculated? Also, can I get a deduction if I use part of my garage for the business for storage?
53:59 Does a Sub-S election with an accountable plan attract more attention than a Schedule C filer?
57:07 We are completing a 1031 exchange and would like guidance on the best way to structure the purchase of our replacement property. Our objective is to use all available 1031 exchange proceeds while funding the remaining balance with assets from a self-directed Solo 401(k), if permissible, and avoid obtaining a conventional mortgage. Are there any IRS rules, prohibited transaction concerns, or tax implications we should be aware of before proceeding?
Want to build a million-dollar retirement without guessing on stocks? In this video, Toby Mathis, Esq. is joined by Eliot Thomas, Esq. of Anderson Business Advisors to break down how the type of account you use—like a taxable brokerage account versus an IRA or 401(k)—can make a massive difference in how fast your money grows.
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You’ll learn how taxes impact your investments, and why strategies like tax deferral and Roth accounts can help you keep more of what you earn.
They also cover how certain plans let you contribute far more than most people realize, sometimes even hundreds of thousands per year.
If you’re serious about growing your wealth and understanding how retirement accounts actually work, this is a must-watch.
Show Notes:
00:00 Introduction
1:18 Why Most People Never Reach $1 Million for Retirement
3:42 The Truth About Retirement Millionaires
6:15 The Power of Consistent Investing
9:30 Common Mistakes That Destroy Wealth
13:05 Tax Strategies That Accelerate Growth
17:20 Building Multiple Income Streams
21:10 Creating a Long-Term Retirement Plan
24:05 Final Takeaways
In this Tax Tuesday episode, Anderson Advisors' Barley Bowler, CPA, and Eliot Thomas, Esq., answer listener questions covering entity structuring, real estate tax planning, investing, and charitable giving strategies. They explain when it makes sense to form an LLC or S Corporation for a real estate flipping business and whether new investors should wait until after closing their first deal. They also discuss how profits earned inside an LLC trading stocks and stock options are taxed, and whether leaving funds in a brokerage account changes the tax treatment.
Barley and Eliot break down whether a cost segregation study makes sense for a long-held commercial property undergoing significant capital improvements, and how that decision compares to selling the property, completing a 1031 exchange, and performing a cost segregation study on replacement assets. They also explore tax-efficient charitable giving strategies, including ways to contribute appreciated assets or funds designated for charity while minimizing capital gains taxes. Tune in for practical guidance on these tax-saving strategies and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Resources
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TAX TUESDAY LIVE Toby Mathis, Esq. and his guest will answer ALL your tax questions LIVE on Tax Tuesdays every other Tuesday entirely FREE. 👉 https://aba.link/5a5z
Register for our Free Tax & Asset Protection Workshop 👉https://aba.link/t5n1
Chapters:
0:00 Intro
9:32 Please speak about vacation rentals that are considered primary residences. We will rent our new property out in the summer months while we are at our secondary residence and stay there in the winter months (so we can’t take advantage of the STR loophole). What tax strategies are available to us in the above case?
17:03 We are selling our company at the end of July 2026. Usually this would be treated as long-term capital gain (taxed at 23.8%) but because I haven't been with the company for 12 months, I believe I would be taxed as ordinary income. Could I invest those funds in a Qualified Opportunity Zone to avoid paying ordinary taxes? Are there new rules with OBBBA that will take effect January 1, 2027?
27:03 I have a C Corporation that earns income from management fees normally paid annually from the LLCs the C Corp manages. During the last C Corp fiscal year, no management fees were paid due to the LLC not having income. Does the C Corp still need to file a tax return if it has no income, and does this mean the C Corp cannot pay any reimbursements for this tax year?
31:45 Please explain the details of when you sell a stock at a loss and repurchase the same stock within 30 days. (Wash Sale Rules)
35:57 At what point do I need to form an LLC or S-Corp for my real estate flipping business? I am just starting in the market and was told not to worry about it until I made my first deal. Is that true?
39:45 I have an LLC for trading stock options and stocks. If I make $1,000,000 profit and do not transfer it out of my brokerage account to me personally, is this money taxed, or is it taxed when I do pull it out of the account?
45:15 I am the managing partner of a general partnership that owns a strip center for many years with little depreciation left. We are spending about $500,000 on a new roof and paving to put a big-box tenant in a long-standing vacancy. Would a cost segregation study benefit here? Should we sell (at a massive profit) and 1031 into new assets and then do the CSS?
51:09 Is there a way to put funds into an account for charity and it not be taxed on gains?
57:23 Can you please explain the non-AFS 417(c) method? Can it be used for an LLC partnership? And can it be used to create a loss, or does the loss carry over to the following tax year?
Interested in learning how to hide your real estate with a land trust? Schedule a free consultation here: https://aba.link/rcvw
In this podcast, Toby Mathis sits down with attorney and asset protection expert Amanda Wynalda to explain why keeping your real estate ownership public can put your finances, privacy, and future at risk.
You’ll learn how lawsuits really happen, why newer investors are often the most vulnerable, and how a single bad tenant situation can spiral into hundreds of thousands of dollars in legal costs.
Toby and Amanda break down how to use land trusts, LLCs, insurance, and privacy strategies work together to help protect real estate investors from unnecessary exposure.
They also explain who actually needs these strategies, common mistakes investors make, and how to create multiple layers of protection around your assets before problems happen.
FREE TAX & ASSET PROTECTION WORKSHOP Register for an upcoming workshop today if you want to protect your business and personal assets from snoopy lawyers and creditors. Save Your Seat: https://aba.link/jyn9
Highlights/Topics:0:00 Intro
1:51 Who Actually Needs Real Estate Privacy?
3:14 The “Invisible Wall” Asset Protection Strategy
6:13 Real Case Study: Anonymous Investor vs Public Owner
9:12 How Anonymous Ownership Changes Settlements
12:29 Land Trusts vs LLCs Explained
13:00 What Is a Land Trust?
15:24 Attorney Trustees vs LLC Trustees
17:52 Why Land Trusts Need LLCs for Protection
19:59 Biggest Mistakes Investors Make With Land Trusts
22:48 Are Land Trusts Enough By Themselves?
24:45 Can You Use This Strategy In Every State?
26:19 Common Asset Protection Mistakes To Avoid
34:35 How To Get Property Out of Your Personal Name
37:00 Outro
Would you like to learn more about protecting your assets and minimizing taxes? Schedule a free consultation here: https://aba.link/964265
Today, we're discussing a significant tax credit, the Eligible Automatic Contribution Arrangement (EACA), which means actual dollars in your pocket, not just a tax deduction.
Savannah Wallace, one of our expert attorneys, joins to explain how this finance strategy can help you save money on taxes. This is crucial personal finance information for anyone looking to optimize their tax planning.
Don’t miss this opportunity to reduce your tax bill and build wealth smarter.
Sign up for a Free Tax & Asset Protection Workshop here: https://aba.link/lx3q
Join Eliot Thomas, Esq. and Amanda Wynalda, Esq. for this Tax Tuesday replay as they discuss whether you can use a 1031 exchange to buy land for a subdivision, key IRS rules to know, and common mistakes investors should avoid.
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Show Notes:
0:00 Intro
8:57 If I sell a rental property, how can I do so, without having to pay capital gains and recapture all the depreciation, or at least minimize the effect of that cash impact? After those tax expenses we will not have much cash left from the sale, if any. Since we only have 1 rental there isn't anything to roll the money into or offset the gains.
18:59 Can I use money from a 1031 exchange to buy land from a lot from another property I subdivide?
21:22 Should I report my capital gains under my name or set up an LLC?
26:10 We are considering purchasing an Airbnb and/or a college rental. We just established an LLC and Trust with Anderson. What are the tax considerations/implications for this?
34:17 When is real estate professional status not beneficial?
40:42 I have an S corporation and am trying to determine what a reasonable wage for myself would be. How do I determine a reasonable wage?
48:11 What is the best tax strategy for your S corporation business renting from yourself? Is it better to lower the rent to yourself and have less rent deduction from 1120S? Are there tax deductions other than property tax and maintenance? Should I form an LLC as a landlord to my business? Or will it make more work filing?
56:24 Are there any ways to shelter interest earned from hard-money lending if the money was lent from personal savings, not under any business entity?
59:15 What can I file to maximize my tax benefits as a 1099 independent contractor?
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Enjoy this full replay of Tax Tuesday.
Show Notes:
0:00 Intro
10:13 What is the difference between a Public Charity and a Private Foundation?
21:47 I have a single-family residence that I have owned and rented out for 10 years. I want to somehow use it for my public charity. Should I sell it and donate the proceeds or donate the house directly to the nonprofit?
29:37 I have a US-based Public Charity. Can I use it to make donations overseas?
34:01 Can I run an Airbnb out of my Public Charity?
37:49 Am I able to use Artificial Intelligence to fill out IRS Form 1023 to request Federal tax-exempt status?
43:19 I have a rental property in an Opportunity Zone – how can I avoid capital gains tax? That same property has furniture – how do I deduct that?
53:12 I purchased a triplex in December 2025 and self-manage it. I am actively involved in real estate investing and qualify for Real Estate Professional status. What are my options as far as cost segregation strategy vs traditional depreciation?
1:03:10 I currently have a rental property which has been depreciated since purchase. I would like to know if it is possible to establish it as my primary residence and the tax impact. Will I have to repay all the depreciation allowances?
1:07:47 Regarding a guaranteed partner payment to a C Corp management entity from the trading LLC. What is a guideline for the maximum % allowed where the C corporation owns 20% of the LLC?
1:13:06 I make targeted investments in private companies and venture funds via this entity. What is the role of an 83B designation? What are the rules and timeframe?
In this episode, Anderson Advisors' Barley Bowler, CPA, and Eliot Thomas, Esq., tackle listener tax questions spanning real estate, trading, and business structures. They explain how California's clawback rules and residency tests apply to precious metals gains when relocating to Tennessee, and outline how a trade structure with a corporate partner can shift trading income while avoiding personal holding company tax. Barley and Eliot also cover entity options for leasing a personal vehicle to a business, the filing requirements for out-of-state rental income, and how a property management S-Corp can be used to offset W-2 income through short-term rental material participation. Other topics include strategies for minimizing capital gains on a long-term rental sale — including 1031 exchanges and cost segregation studies — offsetting capital gains from a personal residence sale with business losses, and how non-dividend distributions are taxed as a return of capital. Tune in for expert advice on these and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:00:00 Intro to Tax Tuesday with Eliot and Barley
08:06 — "I've lived in California for decades but am now moving to Tennessee. Once in Tennessee, I will sell some of my precious metals to go toward buying a personal residence. Will California try to claw back taxes on the precious metal gain since I purchased it while living in California? How long do I have to be a resident of Tennessee before I am under Tennessee taxation rules for selling precious metals?" — Clawbacks don't apply; timing and residency ties to California matter most.
18:24 — "As an equity options trader (not eligible for TTS status), what is a good entity structure for tax advantages when my partner has an SMLLC for business?" — A trade structure with a C-Corp partner shifts and protects gains.
26:05 — "I have a trading structure. Please explain the tax treatment guidelines when investments in securities are sold, when a K-1 is triggered, etc." — Gains split by ownership percentage; K-1s issue once the 1065 is filed.
36:05 — "I'm wondering if I can purchase a vehicle and lease it to my business year by year — is that a possible tax advantage for a private investigation business?" — Possible, but reimbursing mileage through an S-Corp is simpler and safer.
44:20 — "I live in Washington State. If I buy a rental in Oregon, do I have to file Oregon tax and pay Oregon tax on the property located there?" — Yes — the source state taxes rental income regardless of residency.
47:02 — "I run three Airbnb properties and have an LLC taxed as an S-Corp that I use as a management company, where all revenue and expenses flow into it. It does not take depreciation since the LLC doesn't own the property — we have the deeds in our personal name. How can I take advantage of the loss and depreciation to offset our W-2 in this case?" — Short-term rentals need material participation, not REP status, to offset W-2.
1:04:27 — "How can I avoid or minimize capital gain taxes if I sell a rental property I've had for seven years?" — Use passive losses, a cost-seg study, 1031 exchange, or capital loss harvesting.
1:10:32 — "Can a long-term capital loss (from the sale of a business) be used to offset a long-term capital gain from the sale of a personal residence?" — Yes, after applying Section 121's home-sale exclusion and depreciation recapture rules.
1:15:24 — "Are non-dividend distributions considered a return of capital and therefore not taxed?" — Only partly — earnings, then basis return, then capital gain, in order.
Resources:Tax and Asset Protection Events
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Toby Mathis YouTube
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In this episode, Anderson Business Advisors' Toby Mathis, Esq., and business advisor Eric Winkler break down three catastrophic mistakes people make when entering partnerships. They explore why failing to separate personal and business liability can expose partners to financial ruin, sharing real-life stories including three brothers who lost everything when a partner's personal debts wiped out their shared bank account. Toby and Eric discuss the critical importance of proper operating agreements, individual protection structures, and choosing the right business entity and jurisdiction from day one. They also walk through three steps to protect any partnership, including why Wyoming LLCs offer powerful charging order protection. Whether you're partnering with friends, family, or strangers, this episode delivers essential guidance on structuring your business to survive the unexpected.
Highlights/Topics: * 00:00 Intro * 00:58 What Is a Partnership? * 02:29 The Hidden Liability Risk in Partnerships * 03:43 When Partners Disappear With the Money * 05:00 The Three Brothers Real Estate Disaster * 07:40 How Creditors Seized the Partnership's Bank Account * 08:22 Why You Must Structure Partnerships Correctly From Day One * 09:07 Mistake #1: No Liability Protection * 10:35 Mistake #2: Personal Liability Bleeding Into the Business * 11:49 Why Every Partnership Needs an Operating Agreement * 13:34 How Business Disputes Turn Ugly Fast * 16:41 Mistake #3: Using the Wrong Business Structure * 20:47 Why "Just Set Up an LLC" Is Bad Advice * 22:08 3 Steps to Protect Any Partnership * 24:34 How Individual Protection Structures Work * 28:03 Why Wyoming LLCs Offer Better Protection * 29:41 How Charging Order Protection Works * 32:01 How Proper Structuring Changes Your Risk Profile * 35:20 Final Advice * Share this with business owners you know
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In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle eight listener questions on a wide range of tax topics. They open with a deep dive into the tax advantages of purchasing property in an Opportunity Zone, covering both the original program and the newly reinvigorated Opportunity Zone 2.0 launching January 1, 2027, including deferral periods, stepped-up basis benefits, and rural vs. urban pathways. They also explain required minimum distributions and the five-year Roth seasoning rules, the nuances of married filing separately in community property states, and strategies for reducing passive capital gains tax after a multifamily syndication sale.
Amanda and Eliot break down Qualified Small Business Stock under Section 1202, including new tiered exclusion rates and documentation requirements, walk through K-1 preparation and 1065 filing for limited and general partnership structures, and cover the Accumulated Earnings Tax for C corporations. The episode wraps with guidance on claiming education expenses for new businesses, amending prior-year returns, and using C corporations as the right vehicle for startup cost deductions. Tune in for expert advice on these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: * [00:00] — Intro and questions * [10:04] "If I'm still working for the company that sponsors my 401k when I turn 73, even if it's part time, do I need to take RMDs or required minimum distributions from that account? And once my Roth 401k is quote unquote seasoned for 5 years, if I roll it over to another Roth IRA account I have already had for 5 years, am I still able to take out the profits tax free?" - Still employed means no RMD required unless you own over 5% of the business. * [13:42] "I am looking at a couple different commercial rental properties. One of them is in an opportunity zone in Florida. What are the benefits slash tax advantages of purchasing a property in an opportunity zone? Are there any downsides?" –Opportunity Zones defer capital gains tax with stepped-up basis and potential ten-year appreciation exclusion. * [22:08] "My husband and I file separately. I itemize and my accountant said because I itemize, my husband must also itemize, which is worse for him as he loses out on the standard deduction. Is there any way around this? In addition, the IRS wants to know my salary on his return, which then leads to him owing tons of additional taxes. How can this be? Why would he be taxed on my income? I'm already being taxed on my income. So this year he left my salary blank on his tax return. Will this come back to bite him and incur fees? We file separately for many reasons, including me having rentals and he has child support and other things affecting his return." - Community property states require spouses to split income; no double taxation occurs. * [30:32] "I was a passive investor in a multifamily unit deal. The property was sold and my CPA informed me that I have capital gains tax of 55,000 for 2025. Anything I can do to reduce this tax? If not, what could I have done differently?" - Cost segregation on existing property can create passive losses to offset the gain. * [36:57] "I'm investing 250k in a software startup pre Series A. The founders say it qualifies under section 1202 as a qualified small business stock or QSBS. Let's say the stock grows 10x over the next 10 years, so my stock becomes worth 2.5 million. Ten years from now, how do I prove to the IRS that the profit should be tax free under section 1202? Do I just document it now and hope they agree when I file an 8949 when I sell? It seems like there are no assurances they'll agree and the profits, though not subject to income tax, still become part of my estate, potentially subject to estate tax. Is it just easier investing using my Roth to ensure that all future gains will be income tax free?" – Thorough documentation of C corp status and assets under $75 million proves 1202 eligibility. * [48:20] "Anderson created my limited partnership and general partnership structure. My questions are which entity has to create or issue a K1 and who prepares it for me? And when preparing the 1065 tax return, who do I list as the limited partner, me or the entity?" - The limited partnership files the 1065 and issues K-1s; list yourself as the limited partner. * [50:16] "I invested in education for several businesses last year. None have come to fruition yet. Is the education able to be claimed on 2025 taxes? Also I filed without any of the education being claimed. So I was wondering if I could amend my taxes at some point this year." - Amend within three years; a C corp can claim education costs as deductible startup expenses.
Resources:Tax and Asset Protection Events
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Toby Mathis YouTube
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Clint Coons YouTube
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In this episode of Tax Tuesday, Anderson Advisors' Barley Bowler, CPA, and Eliot Thomas, Esq., answer listener questions covering a broad range of real estate, retirement, and investment tax topics. They break down cost segregation studies and depreciation recapture, explaining how bonus depreciation accelerates deductions and how 1031 exchanges and stepped-up basis can help investors defer or eliminate gain entirely. They address whether vacated rental rooms can qualify as deductible office space, and walk through how multi-state 1099 income is taxed when a worker performs services in Kansas for California patients through a Utah company.
Barley and Eliot also clarify how MAGI determines the taxable portion of Social Security benefits in retirement, and confirm that qualified retirement plan distributions are protected from California taxation once a taxpayer has established residency in Nevada. Additional topics include 529 college savings plans for children attending accredited foreign universities, combining Roth IRAs with a payroll strategy for minor children, when Schedule E versus Schedule C applies to short-term rental income, and the significant hurdles of qualifying for Trader Tax Status — along with an alternative C-corporation trading structure that may offer far greater and more reliable tax advantages. Tune in for expert advice on these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:[00:00] Intro to Tax Tuesday with Eliot and Barley
[7:10] "I would like to know more about cost segregation and depreciation recapture on property sales." Cost segregation accelerates deductions upfront. Recapture taxes those gains at ordinary rates upon sale.
[18:00] "At the beginning of this year, I moved into a new home. At my previous residence, I had been renting two rooms, and I am currently working to sublet them. I am still on the lease and committed to covering the cost of those two rooms until I find replacements. My question is: since I am continuing to pay for these rooms, would it be possible to classify them as office space and potentially use them as a tax deduction?" Have your business assume the lease directly. That creates a clean, legitimate deduction.
[22:53] "My wife is doing remote 1099 work, and I had a question on where state taxes are due. We live in Kansas and she performs the work from a home office or rented office space in Kansas. She is performing this work through a contracting/locums company based out of Utah, but the current work she is providing is for patients in California. Do we pay KS or CA state income tax for this 1099 work?" Both Kansas and California claim the income. Kansas credits taxes already paid to California.
[29:35] "Taxes in retirement: we know you can be taxed on Social Security. We don't know the details. How much can you make to avoid being taxed? Does the IRS include all incomes, passive and active? We just don't have details." Between 50–85% of benefits may be taxable. MAGI includes all income, even tax-exempt interest.
[36:54] "I have been a Nevada resident for 2 years. I started my retirement from a California corporation this year. Can California tax my retirement benefits now that I am a NV resident?" No. Federal law fully protects qualified retirement benefits paid to Nevada residents.
[40:55] "I am a business owner in Texas. My twin kids are growing up in a foreign country with their cousins. They may want to pursue higher education there. I haven't started a 529 college savings plan yet. If they decide not to go to college at an American university, what would be the best type of tax-sheltered account to invest in, for the kids?" 529 plans cover accredited foreign universities. Combine with a Roth IRA for maximum impact.
[48:17] "Is it okay to use Schedule E to report short-term rental income?" Yes, if you provide only minimal services. Substantial services push income to Schedule C.
[53:55] "For 2025 tax year, I made more than 800 trades - frequently - 3 days/week throughout the year. I made profits both from long-term investing and short-term trades. Am I eligible for Trader Tax Status and able to deduct my expenses in 2025 filing (I applied for extension)." Trader Tax Status is highly subjective and audit-prone. A C-corp trading structure is safer.
Resources:
🔗 Tax and Asset Protection Events
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
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Clint Coons YouTube
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In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle a wide range of listener questions on tax strategy for real estate investors, business owners, and stock market traders. They dig into whether Section 187 depreciation on heavy equipment can offset capital gains from a property sale, and why material participation is critical for bonus depreciation to work. They clarify that real estate professional status is an individual designation — not an entity filing status — and explain how it can convert passive rental losses into active deductions.
Amanda and Eliot also address how stock market gains can be offset through actively managed farms and rentals, the benefits of a C-Corp property manager in Washington state despite the Business & Occupation tax, and why you cannot deduct life insurance policy loan interest under Section 264. They cover the tax impact of converting a rental property to a primary residence, how the Section 121 exclusion applies proportionally to a mixed-use apartment building, the mechanics and timing rules of a 1031 exchange, and why transferring a fully depreciated property into a land trust generally has no income tax impact. Tune in for expert advice on these and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: 00:00 — Intro and questions * 09:50 — "I'm starting a Heavy Equipment Rental Business, which will be active income. Can I use the Section 187 Depreciation expense on Heavy Equipment to offset the Capital Gains tax that I will incur on an investment property that I am selling in 2026?" Section 187 is obsolete (was for mining safety); bonus depreciation requires active material participation. * 18:50 — "I am a homebuilder with an LLC structured as a C-Corp. I self-manage/own a new 36-unit rental property in a passthrough LLC. I have my real estate license (inactive). Should I change my filing status to real estate professional from a C-corp?" Real estate professional is an individual status, not an entity's filing designation. * 25:02 — "I am consistently making profits in the stock market. I have a farm and some rental properties owned as pass through LLC's. Can I invest in my business and the rentals to reduce tax consequences from stock market gains?" Active material participation in farm and rentals can offset stock gains. * 33:44 — "We set up a C-corp property manager to manage a rental portfolio via rental LLCs. Unfortunately, in WA state prop. mgrs. are required to pay a 1.5% Business & Occupation tax, while rental owner LLCs are not. High-level question: is it still worth using a C-corp property manager?" Yes — the management fee income stays below the $100K B&O exemption threshold. * 38:45 — "How can I borrow money from a life insurance policy, use it to invest in lending like private lending or a mortgage note, and be able to write off the policy loan interest as expenses to lower overall tax liabilities from interest earned from lending activities?" Tax code Section 264 prohibits deducting life insurance policy loan interest. * 41:42 — "What are the tax implications if I purchase a property in an LLC for rental purposes, renovate it, and take all applicable write-offs, but then change my mind and decide to live in it and transfer it into a living trust?" Depreciation deductions lower your basis, reducing your Section 121 exclusion later. * 46:04 — "I live in Arizona and owner-occupy (live-in) in 6% (1 unit) of a 17-unit apartment building square footage (9,645ft²). Would the $250,000 capital gains tax exclusion rule apply to the sale of the building?" Only the 6% owner-occupied portion qualifies for the capital gains exclusion. * 49:49 — "Please review the benefits of 1031 exchanges." A 1031 exchange defers all capital gains tax by rolling into replacement property. * 55:10 — "What is the tax impact of placing my fully depreciated property in a land trust?" Transferring to a land trust typically creates no income tax event whatsoever.*
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-turn-stock-market-gains-into-tax-smart-investments-in-your-business%20&utm_medium=podcast
Schedule Your FREE Consultation
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Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
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In this episode, host Toby Mathis sits down with 529 plan expert Chris Stack to explore the surprisingly versatile — and widely misunderstood — ways these accounts can be used far beyond traditional college savings. Chris explains how 529 plans primarily benefit account owners, not just future students, offering tax-free compounding growth, powerful estate planning advantages, and remarkable flexibility in how and for whom funds are used. They discuss how married couples can superfund a single account with up to $190,000 in one contribution, how beneficiaries can be changed to any family member without tax consequences, and how accounts can be structured to grow entirely outside your taxable estate.
Chris also covers the strategy of directing non-educational distributions to lower tax-bracket recipients to minimize taxes, rolling leftover 529 funds into a Roth IRA, bankruptcy creditor protection, and the wide range of qualifying expenses from K–12 through graduate school, trade schools, apprenticeship programs, and nearly 500 international institutions. Tune in to discover how 529 plans can be a powerful, flexible tool for wealth building, legacy planning, and tax strategy at every stage of life.
Highlights/Topics:* 00:00 529 expert Chris Stack - most surprising ways people use 529s * 02:10 How 529 plans work and their history * 06:41 Gifting strategies and estate planning benefits * 17:42 Taking money out for non-education expenses * 23:05 Investment options costs and choosing a plan * 29:46 Eligible expenses and qualifying institutions worldwide * 31:41 Three groups who benefit most from 529s * 40:43 Overcoming misconceptions and getting started * Share this with business owners you know
ResourcesChris Stack – Saving for College: savingforcollege.com
Chris Stack Email: cstack@savingforcollege.com
IRS Form 709 – Gift Tax Return: irs.gov/forms-pubs/about-form-709
U.S. Department of Education – Eligible International Institutions: studentaid.gov/understand-aid/eligibility/requirements/international-schools
Would you like to learn more about protecting your assets and minimizing taxes? Schedule a free consultation here:https://aba.link/3c7g
Register for a Free upcoming workshop today if you want to protect your business and personal assets from snoopy lawyers and creditors. Save Your Seat:https://aba.link/14g1
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
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In this episode, host Toby Mathis, Esq., welcomes returning guest Chris Streit to break down the truth about cost segregation studies — when they work, when they don't, and who should consider one. Chris explains how cost seg studies accelerate depreciation by separating a property's components into shorter-lived assets, enabling large year-one deductions under bonus depreciation rules. They walk through a real-world example of a $500,000 duplex to illustrate potential tax savings, and discuss who qualifies to use those losses — including real estate professionals versus passive investors.
The conversation also covers the best and worst property types for cost seg, how to use studies to offset rental income across a portfolio, and whether you can apply a study retroactively after a tax year has ended. Chris shares critical red flags to watch for when hiring a cost seg firm, including improper land valuation, lack of site visits, and insufficient substantiation — all of which can expose investors to serious IRS risk. Tune in for expert, no-nonsense guidance on one of real estate's most powerful — and misunderstood — tax strategies.
Highlights/Topics:* 00:00 Intro - Bonus depreciation and year one write-offs * 04:01 Who should consider a cost seg study * 06:06 Example 500K duplex breakdown * 10:00 Real estate professional versus passive investors * 14:19 Best versus worst property types for cost seg * 18:25 Red flags and bad cost seg providers * 22:08 Importance of site visits and proper substantiation * 25:20 The biggest mistake real estate investors make * 27:32 How to get started with a cost seg study * Share this with business owners you know
Resources:CSA Partners (Chris Streit's company — cost segregation specialists): https://csap.com/
Request a FREE Cost Segregation Benefit Analysis: https://aba.link/594e87
Anderson Advisors Free Workshop (asset protection & business structure): https://aba.link/7gdd
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode of Tax Tuesday, Anderson advisors Eliot Thomas, Esq., and Barley Bowler, CPA, tackle a packed lineup of listener questions covering construction business accounting, rental property depreciation, and family tax planning. They explain the pros and cons of switching from accrual to cash accounting, and when a SEP or Solo 401(k) can help reduce a tax bill before an extension deadline. They walk through how to claim a college student as a dependent even if the student earns grant income, and how hiring your kids through a C corporation can shift income and fund a Roth IRA.
Eliot and Barley detail how the Ladybird enhanced life estate deed works in the five states that allow it, and how stepped-up basis applies at inheritance. They cover when a management corporation makes sense for short-term rental owners with W2 jobs, the real risk of children's working hours undermining a spouse's material participation, and how the aggregation election simplifies real estate professional status across multiple properties. Other topics include how to catch up missed depreciation using Form 3115, how to properly report an owner-financed note, and whether repairs and maintenance on a non-income-producing rental are deductible. Tune in for expert guidance on these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:00:00 Intro to Tax Tuesday with Eliot and Barley
7:09 We file accrual; however, if I switch to cash, the tax bill will be lower. Is this a good idea? Is there anything I can do to lower 2025 taxes before my extension is due in September, like a SEP or retirement plan? - Cash basis is simpler; a SEP or Solo 401(k) can still be established.
16:16 My son gets some grant money from the University for his peer mentor role and research he does. He is a Junior and is 20 years old. Can I still list him as before as a dependent on my tax return? - Yes, if you provide more than half of his total annual support.
21:28 What are the tax ramifications of my brother and I inheriting my mom's home via a Ladybird (enhanced life estate) deed? - You receive stepped-up basis; rental or personal use rules then apply.
27:17 My husband and I both have W2 jobs. We have both long-term and short-term rentals. I manage the STRs. Does it make sense that I open an S Corporation as a management company? Is there an additional advantage to employing my teenage kids to help manage properties? - A C corporation management company maximizes tax-free reimbursement benefits for families.
39:00 We have a home management company (partnership). My spouse qualifies for REP status with no other job. Could he have both? Can you also elaborate on this: "Under §469, each rental property is treated as a separate activity. You must participate in each property. Not just your portfolio as a whole." - An aggregation election bundles all rentals to simplify material participation requirements significantly.
49:05 I have a single-family home rental. Depreciation was not taken on previous tax returns. How do I go back and calculate depreciation? -File Form 3115 to catch up all missed depreciation in one year.
53:50 How do I report the mortgage payment paid to me from my owner finance note? - Report interest received on Form 1098 and installment gain on Form 6252.
57:38 Can you write off expenses and maintenance costs for rentals that are not producing any income due to disrepair? - Yes, if the property remains available for rent or is temporarily out of service.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-claim-missed-depreciation-on-a-rental-property%20&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-claim-missed-depreciation-on-a-rental-property%20&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode of Tax Tuesday, Anderson attorneys Eliot Thomas, Esq., and Amanda Wynalda, Esq., tackle ten listener questions covering a range of real estate and tax topics. They explain when short-term rentals belong on Schedule E versus Schedule C, and how material participation and substantial services factor into that decision. They explore strategies for mitigating capital gains on rental properties, including 1031 exchanges, Delaware Statutory Trusts, and UPREITs, and clarify why house flippers cannot use a 1031 exchange since flipped properties are treated as inventory. Eliot and Amanda also cover write-off strategies for fix-and-flip investors using a C corporation, grouping rental activity with an operating business to offset income, and deducting stock trading education expenses through startup costs. Additional topics include accountable plans for home office and mileage reimbursements, the difference between contributing funds to a for-profit business versus donating to a nonprofit, reporting the sale of foreign property on a U.S. tax return, and whether a prior-year cost segregation study can still be applied in 2026. Tune in for expert, practical guidance on all of these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* [06:08] "Can I file a Schedule E if I'm doing short term rentals?" Avoid substantial services and keep average guest stays over seven days. * [15:49] "How can I mitigate capital gains taxes for rental property if I do not want to hands on operate rentals anymore?" Consider a 1031 exchange into a Delaware Statutory Trust or UPREIT. * [22:38] "How can I get tax write offs on fix and flips?" Use a C corp for deductions through accountable plans and reimbursements. * [26:24] "If I'm in the business of flipping houses, could I use a 1031 exchange to defer my taxes?" No — flipped properties are inventory and not eligible for 1031s. * 30:29] "How does grouping work in order to claim losses in a self rental situation?" Group your rental property with your business to offset income with depreciation. * [35:41] "I already purchased stock trading education programs before having any entity set up. How can I deduct those education expenses?" Set up your C corp now; deduct education courses as startup costs. * [39:33] "How can I get reimbursed for a home office, business mileage and other expenses?" Use an accountable plan through your S corp or C corp. * [44:15] "Can you write off or deduct a financial contribution made from your personal account to your for profit business account in the same way you can make a contribution or donation to your nonprofit?" No deduction; contributions adjust your basis and reduce future taxable distributions. * [49:58] "If I sell property abroad, how do I handle the taxes on my US Tax return?" Report on Form 8949, Schedule D; claim a foreign tax credit. * [53:15] "If I had a cost segregation study conducted in a previous year but did not use it, can I still use it in 2026?" Update calculations with your original cost seg firm before filing your return.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-use-a-1031-exchange-when-flipping-houses&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-use-a-1031-exchange-when-flipping-houses&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq. sits down with insurance expert Caleb Guilliams to break down the truth behind infinite banking and permanent life insurance — and why so much of what circulates online is misleading. They examine how life insurance is routinely oversold as an investment, using Kyle Busch's widely publicized $8 million loss as a cautionary tale about what happens when policies are structured for agent commissions rather than client performance. Caleb explains the three distinct types of life insurance strategies — term, estate planning, and high cash value — and why the vast majority of people should start with term coverage before considering permanent products. Toby and Caleb also walk through how policy loans actually work, including interest rates, repayment flexibility, and the buy-borrow-die strategy as it applies to real estate investors. Additional topics include internal rate of return after all costs, the asset protection advantages of cash value, chronic and critical illness riders as an alternative to traditional long-term care policies, and the red flags that signal a policy has been designed to benefit the agent far more than the client. Tune in for expert insight on how to evaluate, structure, and integrate life insurance as part of a broader financial strategy!
Highlights/Topics:* 00:00 Don't believe everything you see online * 01:22 Insurance being sold as an investment * 02:55 What infinite banking actually is * 09:00 Where policies go wrong * 13:20 Commissions and hidden costs * 18:30 How policy loans really work * 23:00 The 3 types of life insurance strategies * 31:00 Why most people need term first * 38:00 Who life insurance is really for * 41:00 Biggest red flags to watch for * 45:30 Final thoughts * Share this with business owners you know
Resources:Guest – Caleb Guilliams / BetterWealth
Have a policy you want reviewed? →https://go.betterwealth.com/tm-review
Want to see if life insurance can better your financial situation? →http://betterwealth.com/tm-call
The AND Asset: The Secret Way to Save And Use Your Money at The Same Time: https://www.amazon.com/Asset-Secret-Save-Your-Money/dp/1732724903
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=the-truth-about-infinite-banking-and-permanent-life-insurance&utm_medium=podcast
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Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson attorney Eliot Thomas, Esq., and CPA Barley Bowler tackle a wide-ranging set of listener questions on retirement accounts, real estate strategy, and business tax planning. They explain the key differences between non-recourse and DSCR loans inside a Solo 401(k), and why maintaining non-recourse status is critical to avoiding a devastating unrelated debt financing income hit. They walk through how to properly establish state residency when relocating and cashing out a 401(k), and clarify why donating fully depreciated work trucks to charity won't produce a charitable deduction or avoid recapture. Eliot and Barley also lay out a detailed framework for strategically unwinding a rental portfolio — factoring in passive losses, real estate professional status, and sale timing. They break down the reverse mortgage interest deduction rules for a mixed-use property, explain how insurance proceeds and roof capitalization work after hail damage, and make a strong case for why real estate should always be transferred — never sold — into a disregarded LLC. The episode closes with a warning about Universal Business Organization Trusts, a rarely used entity type that typically surfaces in fraudulent tax schemes and won't generate the refundable NOL investors hope for. Tune in for expert guidance on these and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:
0:00 — Intro
8:37 — "I want to change from a Solo 401(k) non-recourse SFR loan to a Debt Service Coverage Ratio (DSCR) loan. Any tax implications or penalties to be aware of, particularly considering I'm 67 years old?" - No tax implications exist as long as both loans remain non-recourse.
14:35 — "I lived in Colorado January through March of 2025 and moved to Arizona in April. I had a small 401(k) that I cashed out in October 2025. Taxes were withheld. I understand I will be required to file two state returns. How will I reconcile the 401(k) for both states?" - Establish Arizona residency first; the 401(k) cash-out is taxed only there.
20:25 — "I have a fleet of work trucks that needs to be replaced. Can I donate the trucks to charity to avoid depreciation recapture? Can the charity then sell the trucks tax-free to fund their operations?" - Fully depreciated trucks yield no charitable deduction and no recapture to avoid.
25:08 — "From a tax perspective, what is the most strategic approach to unwind residential rental property?" - Track passive losses per property and time sales to offset income strategically.
32:33 — "I have a reverse mortgage on a 2-unit property where I rent one of the units. Will I be able to deduct the interest when I sell the property? What are the rules regarding reverse mortgages? Anything I should know after 10 years pass?" - Interest deductibility depends entirely on how the reverse mortgage proceeds were spent.
40:05 — "My rental property sustained hail damage that totaled the roof. I replaced it. Insurance paid for most of the work, but did not cover deductibles or roof depreciation. Can I recover those expenses using Federal and State tax codes? I live in California." - Out-of-pocket roof costs are capitalized and depreciated over 27.5 years.
43:58 — "When setting up a corporate structure to hold real estate assets, is it more tax efficient to sell the property to the corporation or just transfer ownership and declare it as startup capital?" - Transfer as a capital contribution; never sell to your own entity.
50:25 — "Can I sell my failing business/LLC to a Universal Business Organization Trust at 'cost basis'? Since the trust has no 'money/income' yet, I believe it will create a refundable NOL. Is that correct?" - No — the LLC's losses already flow through to your personal return.
Resources:
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=the-tax-smart-way-to-move-real-estate-into-a-corporation&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=the-tax-smart-way-to-move-real-estate-into-a-corporation&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., answer listener questions on a wide range of real estate and tax topics. They cover tax benefits available for raw land purchases, including property tax deductions under SALT and investment interest expense on Schedule A. They explain the IRS tax code reference for short-term rentals — IRC Section 469 and Treasury Regulation 1.469-1T — and address special considerations for Airbnb-type rentals in foreign countries, including the mandatory alternative depreciation system (MADS) and foreign tax credits. Amanda and Eliot discuss minimum purchase prices for cost segregation studies and highlight property types like RV parks, car washes, and convenience stores that offer strong bonus depreciation benefits. They tackle the vacation home standard deduction question, clarifying how Schedule E rental properties interact with itemized deductions. The episode dives deep into multiple 1031 exchange questions, including timelines for entering a second 1031, California's clawback provisions on out-of-state replacement properties, and the drop-and-swap strategy for LLC partnerships. They also explain how to navigate delayed IRS refunds using the Taxpayer Advocate Service, and break down the time limits and rules for changing LLC tax status, including Form 8832 and the five-year rule. Tune in for expert advice on these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* 00:00 — Intro * 07:06 — "We recently made a large land purchase. Are there any tax benefits we can claim against our income?" — Deduct property taxes under SALT and investment interest expense on Schedule A. * 14:27 — "Is there an IRS tax code reference I can look at for short-term rentals?" — Yes: IRC Section 469 and Treasury Regulation 1.469-1T define short-term rental rules. * 18:20 — "Any special considerations for short-term Airbnb-type rentals in foreign countries?" — Use mandatory ADS depreciation; claim foreign tax credits to avoid double taxation. * 22:55 — "Is there a minimum purchase price you recommend for STRs? Also, what type of property is ideal?" — A building value of $150,000–$300,000 is an ideal cost segregation starting point. * 28:21 — "With today's Individual Standard Income Tax Deduction now so high, how can a Schedule E Vacation Home still be a tax advantage when write-offs no longer exceed the Standard Deduction?" — Schedule E rental deductions are entirely separate from your standard deduction benefit. * 35:46 — "I sold one investment property and bought two under a §1031 exchange. When can I sell the two §1031 exchange replacement properties and enter a new §1031 exchange without a tax penalty?" — Hold replacement properties at least two years and thoroughly document your rental intent. * 41:15 — "If a property is sold in California in a §1031 exchange and the replacement property in Tennessee is later sold through a second §1031, does California have capital gains taxes that need to be paid?" — Yes; California tracks deferred gains annually on Form 3840 until the tax is due. * 44:34 — "If you have an LLC partnership with 3 members that recognized a sale, can each member make their own election with respect to a 1031 exchange? Or must the entire entity participate in the replacement property?" — Use the drop-and-swap strategy carefully; the IRS watches closely for step transactions. * 49:15 — "In June of last year, the IRS asked me to submit my previous taxes before receiving my current tax refund. I did so. When I check the IRS website periodically, it says my refund is delayed. I have attempted to call, but no answer from the IRS. How do I expedite receiving my tax refund? Thank you in advance." — Contact the Taxpayer Advocate Service and review your IRS tax transcripts online. * 53:18 — "What's the time limit on changing LLC tax status?" — File Form 8832 with an election date up to 75 days back or 12 months forward.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-sell-1031-replacement-properties-without-tax-penalties&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-sell-1031-replacement-properties-without-tax-penalties&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, real estate data expert and multifamily investor Neal Bawa returns for the annual 2026 housing market forecast. Neal breaks down the performance of single-family and multifamily asset classes over the past several years, explaining why rents were essentially flat in 2025 and how the ICE workforce crackdown pushed a wave of unfinished inventory into 2026. He outlines why multifamily prices have hit a bottom — down 20–30% from their 2022 peak — and why that represents a buying opportunity, while single-family prices have remained surprisingly resilient due to the mortgage lock-in effect.
Neal also shares his prediction of a rental supply shortage in 2027–2028 that should drive rent growth and occupancy higher, offers frank advice to syndication investors on holding through the downturn, and explains why small interest rate cuts can have an outsized impact on equity. He also introduces AI as a major wildcard that could reshape housing demand beyond 2030. Tune in for data-driven insights and practical takeaways for investors at every level.
Highlights/Topics: * 0:00 Intro + welcome Neal Bawa (2026 real estate predictions) * 0:34 Single-family vs multifamily explained (Class A/B/C framework) * 1:32 Real-world rent drop example: Fresno & Madera inventory surge * 2:30 2025 rent growth recap: flat year, concessions, inflation effect * 4:36 2026 forecast: supply rolling over, Q1 weak then accelerating rent growth * 6:26 Investor question: should you buy now or sit on the sidelines? * 7:11 Multifamily vs single-family since 2022: prices, resilience, lock-in effect * 10:11 Why single-family cash flow is hardest right now (rates, taxes, insurance) * 11:08 Why multifamily is near the bottom + “great time to buy” thesis * 13:39 2027–2028 outlook: coming rental supply shortage + rent/occupancy boost * 19:50 The AI wildcard: demand, jobs, and what changes after 2030 * 22:00 Advice for syndication investors: hold, cash calls, protect equity * 24:16 Interest rates + equity math: why small rate cuts matter a lot * 27:24 The “emotion” factor: sentiment shift and opportunity in 2026 * 32:00 Wrap-up + Neal’s free webinars at multifamilyu.com/club * Share this with real estate investors you know
Resources:Multifamily University Investor Club — Free webinars (8/year), no upsell, no subscriptionhttps://multifamilyu.com/lp/multifamily-university-investor-club-lp/
Grocapitus — Neal Bawa's investment companyhttps://www.grocapitus.com
Location Magic eBook — Neal Bawa's data-driven market selection resourcehttps://multifamilyu.com/lp/location-magic-ebook/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson's Barley Bowler, CPA, and Eliot Thomas, Esq., address listener questions on a wide range of tax strategies for real estate investors, business owners, and healthcare professionals. They explain how seller financing affects the ability to use cost segregation and bonus depreciation under IRC Section 465's at-risk rules, and how a single-member LLC can recoup startup education costs through a C Corporation structure with shareholder loans. Barley and Eliot walk through the powerful tax advantages of setting up a management C Corporation over a Wyoming holding company — including medical reimbursements, accountable plan deductions, and W-2 solo 401(k) options. They cover what Medicare premiums and COBRA costs are reimbursable through a C Corp's medical reimbursement plan, how the Section 121 exclusion works for primary residence sales, and what options exist for mitigating a seven-figure business sale gain. Other topics include write-offs for uncollected insurance balances in healthcare practices, avoiding required minimum distributions by rolling into an employer plan, and electing pass-through entity tax in New York for investment partnerships. Tune in for expert guidance on these strategies and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: 7:18 — "How does the use of seller financing impact the ability to use strategies such as cost segregation and bonus depreciation?" Under IRC Section 465, your deductible losses are limited to the amount you have personally at risk. First phrase: "This is a great question. This covers a lot of different angles."
15:27 — "The business failed to make any profit in year 1. How are those initial costs recouped, and how much can be carried forward to future years?" A C Corp election allows full education deductions; fund via shareholder loan for tax-free recoupment. First phrase: "A single member LLC spent $9,500 on training and other related startup costs."
21:06 — "If I operate one LLC per real estate project, does it make sense to have a separate management entity to deduct shared expenses like an assistant, office costs, business meals, travel, and pre-development work? What's the correct tax structure?" A management C Corporation reduces rental income and allows tax-free reimbursements to the owner. First phrase: "If I operate one LLC per real estate project, does it make sense to have a separate management entity..."
27:45 — "What components of Medicare premiums are reimbursable by my property management C corporation?" Out-of-pocket Medicare and COBRA premiums qualify; general wellness supplements typically do not. First phrase: "What components of Medicare premiums are reimbursable by my property management C Corporation..."
38:10 — "If I sell my house, how long do I have to buy something else before I owe capital gains tax? Do I need to purchase the next home for more than the sale of the house or is there a percentage of that value?" Section 121 excludes up to $250K single or $500K married with no replacement property required. First phrase: "If I sell my house, how long do I have to buy something else before I owe capital gains tax?"
44:45 — "For my healthcare practice, where can I write off balances that insurance refuses to pay, and promotions/certain population deals where I give service discounts or free visits/supplement packages for charity events?" Cash-basis taxpayers cannot deduct uncollected income, and donated services are not tax-deductible. First phrase: "For healthcare practice, where can I write up balances? Insurance refuses to pay."
50:02 — "Can I avoid taking Required Minimum Distributions at age 73, if I roll over my retirement contributions from a previous employer's plan to my current employer's plan?" Rolling into a current employer plan may defer RMDs if you are not a greater-than-5% owner. First phrase: "Can I avoid taking required minimum distributions at age 73?"
53:12 — "Can an investment partnership elect the Pass Through Entity Tax in New York? What are the issues creating/dissolving investment partnerships?" New York allows any partnership to elect PTET, generating a valuable federal-level tax deduction. First phrase: "Can an investment partnership elect the pass through entity tax in New York?"
59:38 — "I sold my company, and I am coming into a 7-figure settlement soon. What can I do with that money to decrease my taxes?" Explore charitable remainder trusts, qualified opportunity zones, and capital loss harvesting strategies. First phrase: "I sold my company and I'm going to come into a seven figure settlement soon."
Resources:Tax and Asset Protection Events — Live workshop in Las Vegas, March 19–21
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-structure-a-tax-efficient-management-entity&utm_medium=podcast
Schedule Your FREE Consultation — Scan the QR code or visit the link to book your strategy session
https://andersonadvisors.com/strategy-session/?utm_source=how-to-structure-a-tax-efficient-management-entity&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, host Toby Mathis, Esq., speaks with returning guest Chris Streit, a cost segregation expert from CSA Partners, about two frequently overlooked tax strategies that can save real estate investors thousands of dollars: Partial Asset Dispositions (PAD) and Qualified Improvement Property (QIP). They discuss how PAD allows investors to immediately expense the remaining value of replaced building components like roofs, rather than continuing to depreciate both the old and new assets simultaneously. Chris explains how QIP enables investors to leverage 100% bonus depreciation on commercial property improvements made after January 19, 2025, including improvements to short-term rentals.
The conversation covers the critical timing of converting long-term rentals to short-term rentals before making improvements, the necessity of cost segregation studies for substantiating these deductions, and real-world applications for various commercial properties including hotels, restaurants, and retail spaces. Toby and Chris also address common concerns about IRS audits and emphasize the importance of working with specialized professionals to maximize these often-missed deductions.
Highlights/Topics:* (00:00) Understanding partial asset dispositions and roof replacements * (07:11) Qualified improvement property explained for commercial assets * (11:18) Converting long-term rentals to short-term * (18:31) Bonus depreciation timeline and audit concerns * Share this with business owners you know
Resources:📊 Cost Segregation Resources: Request a FREE Cost Segregation Benefit Analysis: https://aba.link/83c5ab Learn more about CSA Partners: https://csap.com/
🎥 Related Videos With Chris Streit:
5 Cost Segregation Mistakes That Trigger IRS Audits: https://youtu.be/1urK1954GS8
Stop Overpaying Depreciation Recapture: The §1245 Move They Skip: https://youtu.be/DBbT2jVG3Js
📚 Download Your Free Resources: Download Your Digital Copy Of Infinity Investing: How The Rich Get Richer And How You Can Do The Same: https://inf.link/efz
Register for an upcoming workshop today to protect your assets from creditors.
Save Your Seat: https://aba.link/6ea4bf
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle listener questions on tax strategies for real estate investors and traders. They explain the tax implications of house flipping, including when to report income and how installment sales affect taxation. Amanda and Eliot discuss transitioning from a disregarded LLC to an S Corporation for managing rentals and flipping properties, emphasizing the importance of avoiding dealer status. They dive deep into 1031 exchange requirements, including timing constraints, qualified intermediaries, and the rules for converting investment property to a primary residence. Other topics include home office deductions versus reimbursements, deducting mileage for consultants with administrative offices, optimal business structures for active stock trading, differences between S and C Corporations, and the tax consequences of using corporate equipment for personal use. Tune in for expert guidance on maximizing tax savings while maintaining compliance!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* [00:00] Intro * [06:26] I purchased a home for $12,000 in 2025 for flipping. Do I show it on my taxes at all or only after I flip? How do I calculate the taxes from flipping? If I want to sell a flip on installments – how does that change the tax? Report only after sale; calculate as ordinary income plus self-employment tax. * [10:02[ What do you recommend to transition from a disregarded LLC to S Corp for managing rentals and doing house flipping as well? Use separate S or C Corporation to avoid dealer status. * [14:10] I'd like to do a 1031 Exchange and eventually move into the property as my primary residence. How quickly can I do that? Wait 24 months with proper rental use before converting to residence. * [19:03] What are some of the pitfalls of a 1031 exchange to focus on? Timing deadlines, qualified intermediary requirement, and boot recognition are critical pitfalls. * [29:28] Can my S Corporation pay rent to me for my home office? And if so, is this considered personal income? Use accountable plan reimbursements instead to avoid taxable rental income. * [33:32] If I am a consultant and take a gig at a company 35 miles from my S-Corporation's administrative office, can I write off the costs to get to the facility on the days I work there? Yes, with administrative office, mileage becomes deductible business travel expense. * [36:41] What's the best business structure setup for active stock trading? Limited partnership with C Corporation general partner provides optimal tax benefits. * [42:19] What are the differences between an S Corporation and a C Corporation for an LLC? S Corporation flows through; C Corporation pays flat 21 percent rate. * [47:25] If I move equipment into my C corporation, can I still use it for personal use? Personal use over 50 percent creates taxable fringe benefit complications.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=1031-exchange-pitfalls-real-estate-investors-must-know&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=1031-exchange-pitfalls-real-estate-investors-must-know&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson attorney Clint Coons, Esq., sits down with real estate investor Gabriel Hamel to explore creative financing strategies for building wealth without traditional bank loans. Gabriel shares his inspiring journey from working minimum wage after military service to acquiring nearly 400 properties using seller financing and no-money-down techniques. They discuss how to structure creative deals, overcome the misconceptions about creative financing, the importance of cash flow over appreciation, and strategies for analyzing deals that work in any market. Gabriel also explains the power of building relationships, finding motivated sellers, and creating win-win scenarios that benefit both buyers and sellers. Clint and Gabriel emphasize the importance of taking action, getting involved in investment communities, and pursuing time freedom through real estate investing. Tune in to learn how you can start building your real estate portfolio even if you have little to no cash!
Gabriel Hamel joined the military at 17 and deployed to Iraq in 2003-2004. After returning home, he found himself working 30 hours a week at minimum wage with dreams of financial freedom. When the 2008 financial crisis eliminated traditional lending options, Gabriel discovered creative financing and seller financing strategies. Starting in 2009 with his first no-money-down deal, he systematically replaced his minimum-wage income and eventually built a $60M portfolio of nearly 400 properties. Today, Gabriel co-hosts the Zero to 100 Real Estate Podcast, helping investors build wealth designed around freedom, family, and choice.
Highlights/Topics: * (00:00) - Introduction to Creative Financing with Gabriel Hamel * (02:08) - First Properties and the 2005-2007 House Hacking Strategy * (06:08) - The 2008 Financial Crisis: When Banks Said No * (07:38) - Debunking Creative Financing Myths and Misconceptions * (10:08) - Finding Motivated Sellers and Structuring Win-Win Deals * (20:15) - Cash Flow vs. Appreciation: Building Sustainable Wealth * (30:45) - Analyzing Deals and Making Offers That Work * (42:49) - The Zero to 100 Tribe: Community and Time Freedom * (45:46) - Taking Action: Final Advice for Aspiring Investors
Resources:Connect with Gabriel 👇
http://www.zeroto100tribe.com/
https://www.instagram.com/the_real_gabriel_hamel
https://podcasts.apple.com/us/podcast/the-zero-to-100-real-estate-podcast/id1745322778
Schedule Your FREE Consultation
https://aba.link/0qx
Tax and Asset Protection Events
https://aba.link/2f2856
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Anderson Advisors Tax Planning Appointment
https://andersonadvisors.com/ss/
In this episode, Toby Mathis, Esq., sits down with 3,700+ unit operator Aaron Adams to discuss the six hottest real estate markets for 2026 and six markets to avoid. They cover the economic factors driving real estate growth, including GDP expansion, potential interest rate decreases, and tax bill impacts. Aaron shares his top picks: Kansas City (benefiting from Oracle's massive $28 billion Cerner acquisition), Idaho Falls (emerging nuclear technology hub), Charlotte (continued banking sector growth), the Winston-Salem triad area (affordability with five universities), and Indianapolis (steady lockstep growth in rents, wages, and prices).
On the flip side, they discuss why to avoid Chicago (high property taxes, population decline), San Francisco (rent controls, tenant protections), Detroit (60% population loss, aging infrastructure), New York City (landlord-unfriendly policies), Los Angeles (high acquisition costs, poor cash flow), and Austin (overbuilt multifamily, high insurance and taxes). They also cover the strategy of investing in smaller cities within 30-40 miles of hot metros to capitalize on growth while maintaining affordability. Tune in for expert insights on where to invest for cash flow in 2026!
Highlights/Topics: * 00:00 - Introduction: 2026 Real Estate Market Outlook * 01:42 - Economic Convergence: GDP, Interest Rates & Tax Impacts * 12:30 - Hot Market #1: Kansas City (Oracle's $28B Acquisition) * 17:02 - Hot Market #2: Idaho Falls & Markets to Avoid: San Francisco * 23:08 - The 30-Mile Strategy: St. Joseph, MO Example * 28:16 - Hot Markets #3-5: Charlotte, Winston-Salem & Indianapolis * 35:31 - Asset Allocation Strategy: The 30-30-30-10 Model * 40:39 - Markets to Avoid: LA, Austin, Chicago & Detroit * Share this with business owners you know
Resources:📚 Download Your Free Resources:
Download Your Digital Copy Of Infinity Investing: How The Rich Get Richer And How You Can Do The Same
https://inf.link/efz
Register for an upcoming workshop today to protect your assets from creditors. Save Your Seat:
https://aba.link/6ea4bf
🏘️ Connect With Aaron Adams:
REI Kickstart Summit Event
https://course.infinityinvesting.com/infinity-summit-interest-update
Alpine Capital Solutions
https://alpinecapitalsolutions.com/
Contact Aaron Adams
https://alpinecapitalsolutions.com/contact/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Eliot Thomas, Esq., and CPA Barley Bowler address listener questions on diverse tax topics including property management S corporations and QBI deductions. They explain how to structure management companies for rental properties, the relationship between W-2 wages and K-1 distributions, and the power of the 199A qualified business income deduction. Eliot and Barley dive deep into 100% bonus depreciation, cost segregation studies, and depreciation recapture rules—clarifying when to use Section 179 expensing versus bonus depreciation. They also cover maximizing education expense deductions through C corporations, leveraging oil and gas working interest investments for immediate ordinary deductions of 60-85%, structuring private operating foundations with proper payroll procedures, and optimal tax strategies for business sales including the powerful Section 1202 exclusion. Tune in for expert guidance on these advanced tax planning strategies!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: * 00:00 - Intro * 05:34 - "I have a property management S corporation for my rental properties. All rents and expenses are paid to/from the S-corporation. I take a W2 from the corporation. At the end of the year I receive a K1 for the net rental income. Can I take a QBI deduction for this K1?" - The K-1 reflects only the management fee, not rental income. QBI applies to that fee. * 14:07 - "I am curious how I can get the maximum benefit from a tax perspective for education class fees paid." - C corporations can deduct new business education via loans from shareholders arrangement. * 19:04 - "Please explain 100% Bonus Depreciation recapture and eligible assets with a less than 20 year life being fully depreciated in Year 1." - Cost segregation identifies 5, 7, 15-year assets eligible for immediate bonus depreciation. * 24:08 - "What happens if you sell a rental property with depreciation recapture after a cost segregation with bonus depreciation?" - Five-year and fifteen-year property recaptures at ordinary rates; building capped at 25%. * 29:46 - "Please explain Section 179 expensing." - Section 179 allows immediate equipment expensing but cannot create a loss situation. * 36:20 - "Is oil and gas a good tax deduction?" - Working interest investments provide immediate 60-85% ordinary deductions through intangible drilling costs. * 40:36 - "My family has a private operating foundation. One family member works full-time for the foundation and we agreed to pay a wage to that individual. Would that family member have a w-2? Or does the owner withdraw? Also payroll?" - Pay reasonable W-2 wages through payroll; no owner withdrawals in nonprofit foundations. * 44:40 - "What is the best tax strategy for selling a business?" - Stock sales create capital gains; consider Section 1202 for qualified small businesses.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=100-bonus-depreciation-recapture-explained&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=100-bonus-depreciation-recapture-explained&utm_medium=podcast%C2%A0
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq., interviews Chris Streit from CSA Partners about the five critical elements that cause cost segregation studies to fail under IRS audit. Chris, whose firm has completed tens of thousands of cost seg reports, reveals that 80% of studies contain fatal flaws that will not survive scrutiny. The conversation covers the importance of establishing proper real estate professional status or short-term rental qualification before taking accelerated depreciation.
Chris explains why land value allocation is the first thing the IRS examines and how it must use county valuation at time of purchase—not rule-of-thumb percentages. They discuss the non-negotiable requirement for physical site visits with video documentation, the necessity of using current RSMeans software with local jurisdiction pricing (not outdated books or averages), and why having accessible audit support is crucial when the IRS comes calling. Chris emphasizes that the burden of proof is on the taxpayer, making professional documentation and expert backup essential. Tune in to learn how to protect your cost segregation deductions and avoid costly audit failures!
Highlights/Topics: * (00:00) - Introduction: Why Your Cost Seg Will Fail * (00:54) - Element #1: Real Estate Professional Status * (02:46) - Element #2: Land Value Allocation * (09:06) - Element #3: Engineered Study & Site Visits * (12:38) - Element #4: RSMeans Cost Data Requirements * (15:39) - Element #5: Audit Support & Accessibility * Share this with business owners you know
Resources:Request a FREE Cost Segregation Benefit Analysis
https://aba.link/vsh
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=your-cost-segregation-will-fail-audit-if-you-miss-these-5-elements&utm_medium=podcast
Learn more about CSA Partners:https://csap.com/
https://csap.com/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle listener questions on reducing capital gains taxes and advanced tax strategies for real estate investors and business owners. They explore the intricacies of cost segregation studies and bonus depreciation versus Section 179, including timing issues for renovations. Amanda and Eliot discuss strategies for minimizing capital gains after decades of depreciation, converting ordinary income to capital gains in development deals, and the tax implications of oil and gas working interest investments. The duo also covers deductible expenses for corporate retreats, entity structuring for piano tuning and bookkeeping businesses, and sophisticated trading partnerships using C corporations. Finally, they take a deep dive into Solo 401(k) contribution limits, explaining the differences between employee contributions, employer matches, and the mega backdoor Roth strategy for maximizing retirement savings. Tune in for expert advice on these and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I purchased a rental and did a cost seg in 2024. I renovated it in 2025. Can I use a cost segregation and/or Section 179 to depreciate the new renovation assets in 2025?" Answer: Yes, bonus depreciation works; 179 has limitations. * [21:16] “How can I reduce capital gains on the sale of a rental property after nearly 27 and a half years? The accelerated depreciation reduced the basis to zero." Answer: 1031 exchange, installment sale, or opportunity zones. * "How can I get capital gains on my K-1 instead of ordinary income on my investment into a real estate developer corporation?" Answer: Development corporations typically generate ordinary income, not capital. * "What expenses for an off-site retreat for an LLC member and officers meeting are deductible? For example, travel, lodging, meals, activities." Answer: Travel, lodging, 50% meals if genuinely business-related. * "If I invest in an oil and gas working interest and I have a first year larger intangible drilling cost loss than is needed for a given tax year based on adjusted gross income, can the excess be carried forward to a future tax year as a net operating loss? Would the NOL have alternative minimum tax implications as well?" Answer: Yes, NOL carries forward; minimal AMT concerns today. * "How do I set up a holding company in California? I want the holding company to own my two companies. One's a piano tuning business and then a bookkeeping business. I have an average income of $125,000 per year combined: $45K for piano, $80K for bookkeeping." Answer: Wyoming LLC holding company owns two California entities. * "I want more information on how I can structure my LLC more efficiently for day trading. What can I do to minimize my taxes for the new year? How can I lower my capital gains tax from day trading?" Answer: Trading partnership with C corporation for deductions. * "Please take a deep dive into Solo 401(k) contributions. What are the individual contribution limits, employer match limits, and especially the voluntary after tax contribution limits. Which components need to be earned income and how does this change if contributing to a Roth 401(k)?" Answer: $72K total; $24.5K employee; mega backdoor uses after-tax.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-reduce-capital-gains-taxes-when-selling-a-rental-property&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-reduce-capital-gains-taxes-when-selling-a-rental-property&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson Business Advisors host Clint Coons, Esq., sits down with Brian Hanson, co-founder of Real Advisors and AI for Business, to explore how artificial intelligence is revolutionizing real estate investing. Brian, who has been teaching business owners and investors about AI and marketing for several years, shares how investors can use AI to crunch massive amounts of data in seconds to identify the most predictable houses likely to sell — something that used to cost $20,000+ from data scientists. They discuss using humanized chatbots and voice bots that can have thousands of personalized conversations simultaneously without sounding robotic, automating follow-up sequences that never miss opportunities, and building custom apps in under five minutes without any coding knowledge. Brian reveals specific tools like Rest Bag for analyzing repair costs at 10 cents per photo, Yellow Pages Scraper for building 20,000-person cash buyer lists for just $80, and browser-use.com for creating custom APIs by simply showing the system what you do manually. As Brian explains, "I just don't think that most people really realize what's possible out there." The conversation covers everything from data mining and lead generation to creating high-converting marketing campaigns using competitive intelligence, virtual staging, and automation tools like Lovable, Google's AI Studio, Air DNA, House Canary, and Semrush. Tune in to discover how AI is the ultimate force multiplier for real estate investors looking to scale their businesses efficiently!
Brian Hanson is the co-founder of Real Advisors and AI for Business. He got his start in real estate in his early 20s working with renowned real estate educator Ron LeGrand, where he developed a passion for marketing. Over the years, Brian has become obsessed with finding smarter, faster ways to grow businesses, and when AI emerged, he immediately recognized its transformative potential. Brian now teaches business owners and investors how to leverage AI to dramatically scale their operations, reduce costs, and increase output. He hosts the AI for Business podcast and regularly conducts three-day intensive training events where he shares cutting-edge AI strategies and tools. Brian's approach focuses on practical implementation—helping entrepreneurs automate processes, eliminate roadblocks, and achieve results they never thought possible.
Highlights/Topics: * (00:00) - Brian Hanson and the AI Opportunity * (05:23) - Finding Off-Market Deals: Data Crunching and Lead Generation * (11:35) - Automating Follow-Up and Conversations with AI * (17:24) - Property Analysis, Contracts, and What AI Can't Replace * (25:19) - Building Custom Apps in Minutes Without Coding * (30:13) - AI-Powered Marketing and Competitive Intelligence * (33:17) - Where to Learn More and Final Thoughts
Resources:https://podcasts.apple.com/ke/podcast/ai-for-business-podcast/id1821570230
https://www.linkedin.com/in/brian-hanson-1548797
https://www.facebook.com/brian.hanson1?mibextid=LQQJ4d
https://events.aiforbusiness.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=ai-for-real-estate-investing&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=ai-for-real-estate-investing&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Anderson Advisors Tax Planning Appointment
https://andersonadvisors.com/ss/
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, interviews Ryan and Tait, hosts of the Passive Income Pilots Podcast and seasoned real estate investors. Ryan has built a $750 million self-storage portfolio while Tait continues flying for a major commercial airline. They share how pilots can build tax-free income while traveling the world through strategic real estate investing, syndications, and debt funds. The conversation covers the biggest mistakes new pilots make with retirement accounts, powerful Roth conversion strategies during probationary years, and how to leverage real estate professional status to offset W-2 income. Tyler and Tait explain how they legally pay almost no federal income tax on nearly $1 million in combined annual income using accelerated depreciation, cost segregation, and oil and gas investments. You'll also hear about whole life insurance strategies, airplane leasebacks for depreciation benefits, and why pilots' largest expense is actually taxes—not housing. Tune in for expert insights on building multiple income streams and achieving financial freedom!
Ryan Gibson is the President, Chief Investment Officer, and Co-Founder of SIG. He has organized over $450M of private equity for Spartan’s projects. Ryan has experience managing the development of SIGs projects in challenging markets. For SIG, Ryan is responsible for investor relations and capital raises for projects. Ryan is also a highly experienced commercial airline pilot. Ryan graduated from Mercyhurst University with a bachelor’s degree in Business, with concentrations in Marketing, Management, and Advertising.
Tait Duryea is the Founder and Chief Executive Officer of Turbine Capital. As an experienced airline captain and third-generation aviator, Tait combines deep industry knowledge with more than a decade of real estate investing experience across single-family, multifamily, self-storage, industrial, mobile home parks, and short-term rentals.
Highlights/Topics: * Best pilot-friendly passive income models: syndications, debt funds, and strategic real estate investing * Biggest mistakes new pilots make: rolling old 401(k)s too quickly and missing Roth conversion opportunities during probationary year * Tax-advantaged real estate: using accelerated depreciation and cost segregation to offset high W-2 income * Real estate professional status: How Tait and his wife legally pay almost no federal income tax on nearly $1 million annual income * Stacking strategies: combining low-income year Roth conversions with discounted LP valuations for maximum tax savings * How one Southwest pilot saved $100,000 in taxes by following podcast education and implementing strategies * Lifestyle creep: Converting purchases into time to make smarter financial decisions and avoid overspending * What separates financially free pilots from those who aren't: continuous education, networking, and disciplined saving * Share this with business owners you know
Resources:Listen To The Passive Income Pilots Podcast
https://passiveincomepilots.com/
Learn more about Ryan Gibson and Spartan-Investors
https://spartan-investors.com/
Learn more about Tait Duryea and Turbine Capital
https://www.turbinecap.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-pilots-build-tax-free-income-while-traveling-the-world&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson Advisors’ Barley Bowler, CPA, and Eliot Thomas, Esq., tackle a wide range of listener questions covering everything from business structures to retirement planning. They discuss the pitfalls of investing in movie production under Section 1801, explain why commuting expenses aren't tax-deductible even for long-distance work arrangements, and clarify the new 1099-NEC reporting thresholds and the upcoming 1099-DA requirements for digital assets. Barley and Eliot break down Section 179 vehicle deductions and the advantages of heavy SUVs over luxury vehicles, explain the reasonable wage requirements and distribution strategies for S corporations, and provide guidance on structuring spec house construction businesses to minimize employment taxes. They also cover mark-to-market elections for traders, the tax consequences of below-market rent to friends or family, and the complications of placing a personal residence in an LLC. Tune in for expert advice on these topics and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: * "Any thoughts about investing in movie production for high-income earners?" - Section 1801 expires 2025, creates passive losses, not recommended for most. * "I work for a local government agency in Cochise County, Arizona and live in Maricopa County, Arizona, approximately 215 miles apart. I commute in on Monday, stay in a hotel and leave on Thursday. I've been doing this every week since December of 2024. Is there a tax break deduction for this?" - No deduction available; this is considered commuting, not business travel. * "Is the new 1099-NEC now starting after $2,500?" - Still $600 for 2025; increases to $2,000 in 2026 only. * "Who needs to file this new 1099-DA digital asset form?" - Brokers must send to clients by February 15, 2026. * "I'm a sole proprietor and would like to buy a BMW X7 to save the tax based on section 179. Is it covered?" - Yes, if over 6,000 pounds; 100% write-off available first year. * "I'd like to know the proper ratio of distribution payments to salary within an S corporation." - One-third to 60% of net income is typical rule of thumb. * "Can I pay myself quarterly out of my S corporation LLC?" - Yes, quarterly W-2 payments are acceptable and help avoid penalties. * "What's the best way to structure a business to minimize taxes when building spec houses? I do the majority of the work on the houses, so it looks like a lot of profit on my labor, which is not good. I'm currently structured as a pass through LLC and purchase the house lots in a different LLC from my construction LLC." - Use S corporation for labor; sell land separately at capital gains rate. * "Is it too late for a mark to market election for 2026?" - No, must file on 2025 return by April 15, 2026. * "Is mark to market a good tax deduction?" - Only if trader status qualifies; creates ordinary losses on unrealized gains. * "I'm renting to a friend for $300 a month. Fair market rent would be over $1,500. Any tax consequences?" - Deductions limited to income received; cannot create rental loss at all. * "How can I have an LLC for my personal residence if the house is the residence of both my son and I as joint tenants?" - Possible but risks losing section 121 exclusion and homestead exemption.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-structure-multiple-llcs-for-spec-home-building-and-lower-taxes&utm_medium=podcast
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In this episode, Toby Mathis, Esq., interviews Chris Streit, a tax incentive and cost segregation expert, about four major changes for real estate investors under Trump's One Big Beautiful Bill. Chris explains how energy tax credits like 45L (residential) and 179D (commercial) are sunsetting on June 30, 2026, offering up to $5,000 per door for qualifying new construction. They discuss the brand new Qualified Production Property (QPP) provision that allows manufacturers to expense up to 70% of facility costs with zero recapture if held for 10 years—a game-changing opportunity for production facilities. The conversation covers the return of 100% bonus depreciation for properties acquired and placed into service after January 19, 2025, and how this creates immediate tax benefits for residential and commercial real estate investors. Chris and Toby also explore how investors who purchased properties before January 19th can still benefit from 100% bonus on improvements made after that date. Tune in for expert insights on maximizing these tax strategies before key provisions expire!
Chris Streit is the Chief Executive Officer of CSA Partners, a firm specializing in tax services like cost segregation, known for leading with operational excellence, customer-centricity, and driving significant growth in areas like tax incentives for real estate. He's a seasoned executive with decades of experience in finance, investment, and leadership, having previously worked at major firms like Merrill Lynch and Bridgewater Associates.
Highlights/Topics:* Energy tax credits 45L and 179D are sunsetting June 30, 2026—builders can still get up to $5,000 per door for new construction meeting Energy Star requirements * 179D commercial energy deduction offers $5.80 per square foot for properties with construction starting before January 2023, exempt from prevailing wage requirements * Qualified Production Property (QPP) allows manufacturers to expense up to 70% of facility costs with zero recapture if held 10 years—a permanent tax reduction * 100% bonus depreciation is back for properties acquired and placed into service after January 19, 2025, creating immediate first-year tax benefits * Properties purchased before January 19th still eligible for 100% bonus on improvements made after that date, though original purchase uses old rates * One client discovered $30 million in overlooked 179D benefits on a 5.1 million square foot property that started in 2021 * QPP creates new manufacturing incentives by expensing facility costs without recapture, making production facilities extremely attractive for investors * Cost segregation studies paired with bonus depreciation can generate immediate tax savings worth 7-10x the cost of the study * Share this with business owners you know
Resources:Request a FREE Cost Segregation Benefit Analysis https://aba.link/ka3
Learn more about CSA Partnershttps://csap.com/
Stop Overpaying Depreciation Recapture: The §1245 Move They Skip
https://youtu.be/DBbT2jVG3Js
Real Estate’s Biggest Tax Loophole: Cost Seg + 1245 Exchange Explained
https://youtu.be/JYKo34_n8yU
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In this episode, Anderson CPA Barley Bowler and attorney Eliot Thomas, Esq., tackle year-end tax planning strategies and answer listener questions on a variety of critical topics. They explain the new rules for research and development cost deductions following recent legislation, including the choice between immediate 100% deduction or five-year amortization for domestic R&D. Barley and Eliot cover the 72T procedure for penalty-free early IRA withdrawals, the strategic benefits of qualified opportunity zone investments for deferring capital gains, and how to use IRA funds without penalty for first-time home purchases. They discuss the complex rules for deducting expenses on mixed-use vacation homes, calculating tax-free administrative office reimbursements, and essential year-end action items including payroll, bonus depreciation, solo 401K contributions, and charitable giving strategies. Tune in for expert advice on maximizing deductions before December 31st!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "What are research and development costs? How are they deducted?" - Domestic R&D costs can now be 100% deducted immediately. * "What expenses that I incur on behalf of my employer can I deduct on my personal 1040 tax return?" - Very limited options exist; reimbursement from employer is best approach. * "Can you please explain what a 72T procedure is?" - Take equal IRA distributions before 59.5 without 10% penalty. * "I am considering investing in an opportunity zone fund to defer capital gains. What are some top items I should be thinking about?" - Consider fund structure, compliance requirements, and ten-year holding period benefits. * [33:35] Title Question "How can I be exempt from paying the IRS the penalty of using my retirement money to buy a condo?" - First-time homebuyers can withdraw $10,000 from IRA penalty-free. * "Are expenses such as real estate property taxes and home improvements deductible on vacation homes that are used both for personal and rental purposes?" - Personal use over 14 days limits deductions to rental income. * "I'm attempting to calculate the reimbursements for our administrative office. How do I calculate, how much can I reimburse myself for tax-free every year?" - Calculate square footage percentage times home expenses for reimbursement amount.
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In this episode, Anderson Advisors Barley Bowler, CPA, and Eliot Thomas, Esq., tackle listener questions on critical tax strategies. They cover the differences between Section 179 expense deductions and bonus depreciation, including how to combine them effectively and avoid creating excessive losses. Barley and Eliot discuss the timing of equipment purchases for tax planning purposes and explain the complexities of equipment leasing investments, emphasizing the importance of material participation tests. They address the mark-to-market election for active traders and explain why Anderson doesn't recommend this strategy due to audit risks. The attorneys clarify that qualified charitable distributions can only be made from IRAs, not Solo 401(k)s, and explore strategies for using IRA withdrawals to purchase rental properties while offsetting taxes through cost segregation studies. They also explain excess business loss limitations, the interaction between cost segregation studies and qualified opportunity zone funds, and why 1031 exchanges cannot be used to avoid capital gains tax deferrals ending in December 2026. Tune in for expert guidance on these advanced tax topics!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "How can I take advantage of tax code 179, Section 179?" - Section 179 allows immediate deduction of qualifying business equipment expenses. * "If I have more business items to buy like a desk, should I buy them before the end of the year? Or maybe I wait to the new year? When do I buy these things?" - Purchase timing depends on which year needs the deduction more. * "If one invest in an equipment leasing investment in 2025, and it's active, and writes off 100% of the equipment cost in 2025, but then in 2026 no longer active, does the income revert to passive income or is it still active for 2026?" - Active losses remain locked in; only future income becomes passive. * "Can I still take the IRS mark-to-market election for the tax year starting January 1st 2026?" - Election must be made on 2025 return by April 15th. * "I have a Solo 401(k). First of all, how does this work? And can I make qualified charitable distributions from my Solo 401(k)? Plus do these tax-free distributions go on my 1040 as a deduction?" -QCDs only work from IRAs, not Solo 401(k) retirement plans. * "Is there a cap on how much money I can withdraw per year from my traditional IRA to purchase an income-producing rental property? What are the things I need to consider before making this decision? I'm 55 years old and I am aware of the 10% penalty." - No cap exists; expect regular income tax plus 10% penalty. * "Is there an annual cap on bonus depreciation? Is there a limit on how much bonus depreciation we can take?" - Excess business loss limitation caps deductions at $313,000 single, $626,000 married. * (44:44) Title question "Can I do a cost segregation study on a property that's in a qualified opportunity zone fund? How does this impact the capital gains tax deferral that ends in December of 2026?" - Yes; cost seg helps operations but doesn't offset deferred gains. * "Can I do a 1031 exchange and avoid the tax due when the deferred tax comes due in 2026?" - No; cannot use 1031 to avoid QOZ deferred capital gains.
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Toby Mathis TikTok
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Clint Coons YouTube
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In this Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle listener questions on choosing the right business structure and maximizing tax savings. They explore when to switch from sole proprietor to S-corporation status, explaining the sweet spot for making the transition and the significant tax benefits available through S-corps versus Schedule C filing. Amanda and Eliot dive deep into house flipping strategies using C-corporations to avoid dealer status and self-employment tax while maximizing deductions through accountable plans and bonus depreciation. They clarify the complexities of 1031 exchanges, especially when properties are held in partnerships, and introduce the "lazy 1031" strategy for offsetting capital gains using passive activity losses. The duo also addresses managing multiple LLCs without creating excessive tax filing burdens, deductions available for nonprofit volunteer work, and creative ways to fund retirement accounts through trading partnerships. Whether you're a truck driver looking to reduce your tax burden or an investor navigating 1031 exchange rules, this episode delivers expert guidance on structuring your business for maximum tax efficiency!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I have a trading partnership with 40% C-corporation and 60% myself for ownership. The partnership makes around $20,000 in ordinary staking income." We're going to be talking about Bitcoin. "Can the C-corp use its $8000 in income to fund a 401(k) owned by the corporation since this is ordinary income?" - Yes, use solo 401(k) or tax-free reimbursement strategies instead. * "What kind of deductions can I use as a C-corporation to offset capital gains from a house flipping?" - House flipping creates ordinary income, not capital gains, offset accordingly. * "If I have multiple LLCs, do I have to file multiple tax returns?" - It depends on entity type and how they're connected. * "I am a sole proprietor, independent truck driver, and I feel I'm paying very high taxes. What can I do?" - Consider switching to S-corp for self-employment tax savings at scale. * "My tax preparer says, don't switch to an S-corp. Make an S-election until your revenue hits a hundred thousand dollars. Why is that? And how will an S-corp help me?" - S-corps save self-employment tax but add compliance costs and complexity. * "If a property purchased via 1031 exchange is held in an LLC partnership, can it be converted to personal use like a personal residence after two years? If so, what are the tax implications?" - Extremely complicated; partnership ownership creates significant tax issues and barriers. * "How may I pay no capital gain without a 1031 exchange?" - Use the lazy 1031 strategy releasing suspended passive losses. * "If I volunteer my work or my time at a nonprofit agency, are there any tax deductions that I can take?" - Personal time isn't deductible, but mileage and expenses are.
Resources:Schedule Your Free Consultation
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Toby Mathis YouTube
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Toby Mathis TikTok
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Clint Coons YouTube
In this special episode, tax attorney Toby Mathis, Esq., shifts focus from financial health to physical health by welcoming William Donovan from the Pritikin Longevity Center to discuss America's number one killer: cardiovascular disease. William shares his personal story of reversing heart disease and eliminating the need for bypass surgery through lifestyle changes at Pritikin, explaining how their medically supervised program has helped thousands achieve remarkable health transformations. The conversation covers the alarming statistics showing that 50% of heart attack victims had normal cholesterol levels, the critical role of endothelial function and arterial plaque, and why traditional risk factors don't tell the whole story. William explains the Pritikin Program's three-pillar approach, combining a whole-food, plant-based diet low in calorie density, daily exercise routines including resistance training, and comprehensive lifestyle education. They discuss how participants typically see dramatic improvements in just two weeks - lowering cholesterol by 23%, reducing blood pressure, eliminating medications, and reversing diabetes. With insights on inflammation, the dangers of processed foods and added oils, and the importance of getting professional medical guidance, this episode provides actionable strategies for anyone concerned about heart health, especially business owners and investors who need to protect their most valuable asset: their health.
Highlights/Topics:* 0:00 Heart Disease Statistics and Personal Story * 3:40 What Pritikin Does and Nathan Pritikin's Story * 12:45 Opening the Center and 60 Minutes Validation * 19:40 What Happens in One to Two Weeks at Pritikin * 30:20 The Challenge of Getting Healthy in Modern Society * 36:45 Inspiring Success Stories * 39:20 GLP-1s vs Lifestyle Change * 42:50 Three Big Myths About Heart Disease * Share this with business owners you know
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Clint Coons YouTube
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In this episode of Tax Tuesday, Anderson advisors Barley Bowler, CPA, and Eliot Thomas, Esq., address listener questions on tax topics ranging from basic bookkeeping to advanced ESOP strategies. They cover essential bookkeeping practices for first-time rental property owners and the tax implications of transferring a fully depreciated truck from an S corporation to personal use. Barley and Eliot explain how to catch up on missed depreciation from prior years, the tax benefits of inheriting property versus receiving it as a gift, and how independent contractors should handle federal income and employment taxes. Other topics include choosing the best filing structure for single-member LLCs, tax reduction strategies for Schedule C solopreneurs earning over $100K, deferring traditional IRA distributions using Qualified Longevity Annuity Contracts (QLACs), and the little-known 1042 fund strategy for deferring taxes on ESOP distributions. Tune in for practical tax advice and strategies to keep more of what you earn!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "What's the most efficient way to get my books ready for filing taxes? I'm filing taxes for my first time rental business. I just acquired them this year. I'm a first time landlord without bookkeeping experience." A: Use bookkeeping software and categorize expenses properly throughout the year. * "My S corporation owns a fully depreciated truck. Can I transfer the truck to my personal name and start taking mileage reimbursement instead? What are the tax implications?" A: Yes, but you'll recognize income equal to fair market value. * "For the eight years now, my prior taxpayer never took depreciation for any of my rental properties or my property assets for the building, along with the components like the water heater. What do I do now?" A: File Form 3115 for a change in accounting method. * "I'm considering moving into my parents' home while they're still living there. I'm curious about the best way to either transfer the house into my name or should I stay there and wait until they pass because they intend to leave the house to me anyway." A: Wait for inheritance to receive stepped-up basis and avoid gift taxes. * "How do I pay federal income and employment taxes working as an independent contractor receiving a 1099?" A: Pay quarterly estimated taxes using Form 1040-ES throughout the year. * "What tax filing structure do you recommend for a single-owner LLC wanting to not be a disregarded entity? Why? Pros and cons of the options." A: Consider S corporation for self-employment tax savings if income supports it. * "I'm a Schedule C solopreneur looking for ways to avoid being overtaxed. I made over $100K this year and I'm the only breadwinner in my family of four with two kids under 18. We're in Florida. What do you recommend for ways to lower my taxable income?" A: Establish S corp, maximize retirement contributions, and utilize business deductions. * "Is there any way to defer for tax reporting a distribution from my traditional IRA? I recently heard someone talking about this and was not sure if they were referring to a Qualified Longevity Annuity Contract (QLAC)." A: Yes, QLACs allow deferring up to $200K until age 85. * "How does a 1042 fund work? I've never heard of that." A: It defers ESOP distribution taxes by reinvesting in qualified replacement stock.
Resources:Live Event in Dallas Dec 4-6 2025
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In this episode, tax attorney Toby Mathis, Esq., welcomes Tom Chittum, former ATF Deputy Director and firearms law expert, to discuss the critical intersection of firearms ownership and estate planning. They explore what families need to know when inheriting firearms, from identifying contraband weapons to navigating complex federal regulations. Tom explains the biggest mistakes executors make, including informal transfers and failing to determine whether firearms, such as machine guns, are properly registered under the National Firearms Act of 1934. The conversation covers the distinction between regular firearms and NFA weapons (machine guns, silencers, short-barreled shotguns), the severe criminal penalties for unlawful possession, and the importance of working with federal firearms licensees for transfers. Tom provides practical guidance on securing firearms, maintaining proper inventories, using gun trusts to simplify inheritance, and understanding both actual and constructive possession. With insights from decades of ATF experience, Tom offers actionable steps gun owners can take today to protect their families from legal headaches and ensure valuable firearms or family heirlooms don't become government-destroyed contraband due to simple mistakes.
Highlights/Topics:* 0:00 Why Listen to Tom Chittum * 2:58 Biggest Mistakes with Firearm Inheritance * 6:20 History of Federal Gun Laws * 8:36 Legal Possession and Registration Requirements * 11:30 Prohibited Persons and Transfer Restrictions * 12:59 How to Transfer Firearms to Heirs * 15:30 NFA Firearms and Special Requirements * 18:35 Gun Trusts and Estate Planning * 22:29 Executor Rights and Possession * 24:31 Securing Firearms in Estates * 25:51 Handling Contraband Firearms * 28:50 Weekend Action Steps for Gun Owners * 31:00 Outro * Share this with business owners you know
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Clint Coons YouTube
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In this episode, tax attorney Toby Mathis sits down with Chris Streit, CEO of CSA Partners, to dive deep into cost segregation studies and how they can dramatically improve cash flow for real estate investors. They explore the biggest mistakes investors make with depreciation, explaining how the IRS treats properties as single assets when they're actually composed of multiple components that depreciate at different rates. Chris breaks down the mechanics of cost segregation studies, revealing how even a $200,000 rental property can generate $40,000 in year-one deductions instead of just $5,000-$6,000 annually. The conversation covers the impact of the One Big Beautiful Bill's reinstatement of 100% bonus depreciation, the differences between engineered studies versus software-generated reports, and strategies for minimizing depreciation recapture through 1245 exchanges. With over 20,000 studies completed and minimal audit issues, Chris provides expert guidance on audit-proofing returns, maximizing tax savings throughout the property lifecycle from acquisition to sale, and debunks common myths about depreciation timing and syndication eligibility.
Highlights/Topics:* 0:00 Biggest Mistake Real Estate Investors Make * 5:15 Why Regular Investors Should Care About Cost Segregation * 8:45 What is a Cost Segregation Study * 12:20 Real Life Cash Flow Examples * 15:30 Engineering Studies vs Software Studies * 20:45 Audit Concerns and IRS Statistics * 25:10 One Big Beautiful Bill and Bonus Depreciation * 30:15 Depreciation Recapture and 1245 Exchanges * 35:40 Cost Segregation and 1031 Exchanges * 38:20 Advice for Investors * 40:50 Cost Segregation on Syndications * 42:30 Biggest Myths About Depreciation * 44:15 Closing Thoughts * Share this with business owners you know
Resources:Learn more about Ryan Gibson and Spartan-Investors https://spartan-investors.com/
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In this episode of Tax Tuesday, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle a diverse range of tax questions from listeners. They discuss oil and gas investments used to offset Roth conversion income and explain excess business loss limitations. Amanda and Eliot clarify filing requirements for C-corporations with losses, emphasizing that corporations must file regardless of activity. The team explores multiple scenarios involving converting short-term rentals to primary residences or vacation properties, covering Section 121 exclusions, depreciation recapture, and the strategic use of S-corporations to step up basis. They present creative alternatives to 529 plans, including paying children through family businesses to fund education tax-free. Eliot and Amanda also review key provisions of the One Big Beautiful Bill Act affecting small business owners, including permanent QBID, enhanced bonus depreciation, and the SALT workaround. Finally, they demystify passive loss limitations, explaining the hurdles of basis, at-risk rules, and passive activity loss restrictions that syndication investors commonly face.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I've made a Roth conversion earlier this year and am currently in the process of doing another conversion. We have invested in oil and gas to help offset taxes due. Is there a concern that we've invested too much?" - Excess business loss limits apply but unused losses carry forward. * "I have not had any activity in my C-corporation and it had $26,000 of loss, and had some expenses. Do I still need to file an 1120 corporate return?" - Yes, corporations must file tax returns regardless of activity level. * "We're thinking of taking our short-term rental out of service and moving into it as our primary residence. What are the tax implications if we sell our existing primary residence?" - Section 121 excludes up to $500,000 gain on primary residence sale. * "Same scenario with short-term rental and primary residence, but we're turning our existing primary into a short-term rental instead of selling it. What are the implications?" - Basis transfers to rental, depreciate building over 27.5 years going forward. * "Same scenario with short-term rental and primary residence, but we're converting one property into a vacation home with no rental activity. What happens?" - Personal vacation homes lose business deductions, only Schedule A applies. * "We do not have any education savings set up for our son who is now a junior in high school. Is there any other option to pay for college pre-tax? Most of our income is from rentals." - Pay child W-2 wages through rental LLC under standard deduction amount. * "Would you please go over some of the benefits of the Big Beautiful Bill for small business owners?" - Permanent QBID, 100% bonus depreciation, SALT workaround, enhanced Section 179 available. * "A lot of time you talk about taking passive losses from syndications to offset passive income. However, I've encountered passive loss limitations where about two-thirds of losses have been disallowed due to basis, at-risk limitations, or excess business loss. Would you please explain how and why losses are being limited?" - Three hurdles exist: basis, at-risk, and passive activity loss rules. * "What expenses are incurred for rental properties that are tax deductible and what is the best way to stay organized when keeping records?" - Reference IRS Schedule E page one for complete deduction list. * "How do we properly track and maximize deductions across multiple rental properties while maintaining compliance?" - Maintain separate books per property, use accounting software regularly.RetryClaude can make mistakes. Please double-check responses.
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Clint Coons YouTube
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In this episode of Tax Tuesday, Anderson advisors Barley Bowler, CPA, and Eliot Thomas, Esq., tackle listener questions covering essential tax strategies for real estate investors and business owners. They explain how LLCs holding investments should be taxed, breaking down the differences between disregarded entities, partnerships, and corporations. They walk through complex scenarios including calculating capital gains on homes with mixed personal and rental use, including non-conforming use periods and depreciation recapture. Barley and Eliot discuss strategic tax planning for cryptocurrency gains, maintaining disability benefits while generating passive income, and the mechanics of cost segregation studies for accelerating depreciation deductions. They also cover creative strategies like the daughter's stock trading scenario using the 0% capital gains bracket, finding passive income to offset accumulated passive losses, and using nonprofits for tax savings. Throughout the episode, they emphasize the importance of proper structure and timing to maximize deductions while staying compliant.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: * "Should my LLC holding investments file as a C or an S corporation or with my individual 1040?" - Disregarded LLC on personal return; corporations for active business only. * "We are selling our personal home with acreage for considerable gain. How do I figure out which percentage of capital gains we will owe? Zero 15. 20. And how can we decrease the amount of capital gains we will owe?" - 0%, 15%, or 20% based on taxable income brackets after exclusions. * "My daughter trades stocks and has low earned income. If she closes positions at a profit that were held over a year, the capital gains remain untaxed provided her net taxable income is below the threshold. Can she close in a profit and reopen the same position year after year? Can that be ongoing to avoid any tax?" - Yes, if total taxable income stays below threshold annually. * "What is the best asset protection entity structure to be in that will save on taxes with gains in cryptocurrencies?" - Trading partnership with 90/10 split and C corporation for efficiency. * "I'm a disabled nurse collecting social security disability. I'm considering an LLC as an asset holding company. How can I make it so the distribution and salary are passive so that I don't lose my benefits?" - Use disregarded LLC; dividends and capital gains typically don't affect disability. * "Can you please explain a cost segregation study?" - Accelerates depreciation by reclassifying building components into shorter-life assets for upfront deductions. * "I have a house I lived in for three years, rented for five years, moved back in two years ago. How does the rental depreciation and recapture gain work on my tax return if I sell it?" - Apply Section 121 exclusion; 50% non-conforming use affects gain calculations. * "What types of passive income could I invest in to offset my accumulating passive losses?" - Limited partnership interests in businesses generating profits, not portfolio income like stocks.
"Would you please explain how nonprofits are used to save on taxes?" - Itemized charitable donations create deductions; funds must serve nonprofit purposes only.
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ode of Tax Tuesday, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle a diverse range of tax questions from viewers. They explore the differences between PadSplit/co-living models and short-term rentals, explaining why PadSplit typically doesn't qualify for the same tax advantages as short-term rental activities. The duo covers entity formation costs and how they're treated for disregarded LLCs, the importance of proper documentation for independent contractor payments including W-9 forms and 1099 requirements, and cryptocurrency taxation for long-term holders. They also discuss offsetting bond interest with stock losses, wash sale rules for options trading, 1031 exchange strategies including improvement exchanges to minimize boot taxation, and comprehensive guidance on real estate professional status requirements. The episode concludes with settling a marital dispute about whether primary residence maintenance counts toward real estate professional status hours.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "Are the fees for disregarded LLCs taxable on the business return or the personal return?" - Fees follow the entity's disregarded destination and activity type. * "Will the PadSplit/co-living model give you the same tax advantage as a short-term rental?" - No, PadSplit typically doesn't qualify for short-term rental benefits. * "Last year I purchased a three-level eight-bedroom house with one kitchen and one bathroom on each floor. I rent the floors as separate apartments except for one level where I have two rooms rented separately. I put the house in service on January 25. I listed it as my primary residence. I never actually lived there. Can I perform a cost segregation, take advantage of bonus depreciation, et cetera?" - Yes for cost seg, but homestead fraud concerns exist. * "I paid freelancers to put up a fence last year. I didn't get a receipt. Can I write off any of the costs of this fence? I used my company credit card or bank checks to conduct business with vendors and stores. I am bad at keeping receipts. But I print my bank statements. Can I use my statements as proof of purchase for tax purposes?" - Bank statements help but proper W-9s and 1099s are required. * "I will be receiving profits from the sale of cryptocurrency investments that I've had for five years. I'm retired and receive social security as my only income. How will this crypto be gained from an IRS perspective?" - Taxed as capital gains, likely at fifteen percent rate. * "Can interest gained on a US savings bond be offset with the loss on a stock sale for tax purposes?" - Yes, up to three thousand annually against ordinary income. * "If I sell a stock at a loss and purchase calls instead, do I lose my loss benefit as if I had repurchased more stock within the 30 day period? Or in simpler terms, are calls treated the same as stock?" - Yes, calls typically trigger wash sale rule provisions. * "We did a 1031 exchange with the building we own, but the place that we bought the replacement property was 250,000 cheaper. How do we minimize our capital gains on the leftover money? I know we can use capital improvements that we've made, but what are the rules and how must we document the improvements? Likewise, can we use depreciation schedules from the prior returns for the new tax returns?" - improvement exchanges must occur during exchange. * "I wanna know more about the tests for real estate professional status as a way to deduct expenses from other passive income. I understand that I need 750 hours, but this is very loose and I'm not sure how it is audited exactly." - 750 hours plus fifty percent test, requires detailed documentation. * "Please settle this one thing that my husband and I disagree on, I say that maintenance on our primary residence cannot be used towards rep status. He says certain things you could count towards reps would be pool maintenance, HVAC service, et cetera. I say no because it's a primary residence and reps is strictly for time you spend on rentals only. I'd like him to not have to sleep on the couch any longer." - No, personal residence maintenance doesn't count toward business hours.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson Advisors’ Barley Bowler, CPA, and Eliot Thomas, Esq., tackle ten listener questions covering essential tax strategies for business owners and real estate investors. They break down the enhanced contribution limits for solo 401(k)s, including the new employer Roth contributions and age-based catch-up provisions. The attorneys explain proper loan structures between shareholders and corporations, emphasizing documentation requirements and interest rate compliance. They cover installment payment reporting for private money loans, clarify the Augusta Rule (280A) for tax-free rental income from home meetings, and distinguish between deductible business expenses versus personal costs. Investment structuring strategies for AI and energy stocks are explored, along with C-corporation real estate ownership considerations. The episode concludes with discussions on the expanded SALT deduction limits, pass-through entity tax workarounds for high-tax states, and the new research and development tax benefits under recent legislation.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "What is the maximum that can be contributed to a solo 401k Roth as the employee and employer of my own business, what do I need to do to handle payroll for myself?" - Employee limits: $23,500 (under 50), $31,000 (50-59), $34,750 (60-63). Employer: 25% of compensation. Use professional payroll services. * "I want to loan cash for my business to myself, since my spouse and I have regular W2 jobs that push our incomes into high, the highest tax brackets. Other than loaning money to myself to pay for rental property. Are there any other uses for those loan funds? What are the issues on the backend for repayment rights?" - Must have written documentation, regular payments, and applicable federal rate interest (4.22% for 2025). * "I'm receiving installment payments on a private money loan from my borrower. Are these payments listed as income, even though the entire principal balance and interest haven't been paid yet? How do you show this on a tax return?" - Interest portion is taxable income as received. Principal repayment is not taxable. Report on Schedule B. * "I have a C Corp and two LLCs. Can you clarify the tax allowance on Augusta meetings, please? Also known as 280A. I believe I was informed that I can deduct up to $1000 per month on these monthly meetings when held, is this still the case for 2024 and 2025?" - Fourteen days maximum per year regardless of entity count. Get three local quotes for reasonable rates. * "Are the paid fees for business essentials and the Living Trust deductible as startup costs or operating costs?" - Business essentials are deductible (startup vs operating depends on timing). Living trust is personal expense, not deductible. * “What strategies should I set to invest in AI or energy stocks?" - Wyoming LLC for passive investing. Trading partnership with C-corp for active trading and tax benefits. * "A C corporation owns a disregarded LLC, which in turn owns real estate. The real estate is sold for capital gains that is incurred by the C Corp. Is this the best way to be structured?" - Never put appreciable real estate in C-corp unless flipping. For buy-and-hold, use Wyoming holding company structure. * "Does the SALT (state and local tax) deduction of $40,000 apply to a joint tax return?" - Yes, $40,000 limit applies to joint returns. Phases out at $500,000 AGI but maintains $10,000 floor. * "How does the new PTET (pass through entity tax) SALT (state and local tax) deduction work around policy work for high tax states like California? Are certain entities included like SSTBs (specialized service trader businesses)?" - Pass-through entities can pay state tax for federal deduction. Complex structures and publicly traded partnerships excluded. * "How might the research and development (R&D) tax credit that's been affected by the big beautiful bill help me as a small business owner?" - Domestic R&D expenses can be deducted immediately (100%) or over five years. Foreign expenses still 15 years.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/?utm_source=5-reasons-restructure-sole-proprietorships&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson tax attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle a diverse range of tax questions covering rental property strategies, depreciation rules, and business structure optimization. They explain the tax implications of renting property to family members below market rates, including income reporting requirements and limited deduction capabilities. The attorneys discuss gifting rental properties to children and the associated gift tax filing requirements, while exploring sophisticated property management company structures for generating earned income and maximizing retirement contributions. They provide detailed guidance on utilizing IRS sections 168 and 179 for depreciation and bonus depreciation, clarifying the current 100% bonus depreciation rules and debunking outdated 80% figures. Other topics include S-corp benefits for 1099 contractors, holistic health business taxation, accountable plan cell phone deductions backed by IRS Notice 2011-72, vehicle deduction methods and limitations, and even professional gambling expense deductions for Vegas visitors. Throughout the episode, they emphasize proper entity structuring, asset protection, and tax planning strategies.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I have a question about tax implications of renting my property to my parents. If I rent it to them for less than fair market value, are there any tax incentives or exemptions in this situation? I'm trying to understand whether I would still need to report the income and if I would lose the ability to deduct expenses associated with the property." - Must report income; IRS treats below-market family rentals as not-for-profit activities. * "In 2024, I deeded some rental properties to my children about $250,000 each. Is there a way to write this off?" - No deduction available; must file Form 709 for gift tax reporting. * "I have four rental properties. I personally manage them through an LLC. Can I use my company as a management company and charge a 20% fee for managing it to be able to show I have earned income and then contribute to an IRA? Also, would I be able to establish a Roth IRA?" - Yes, with reasonable fees and proper structure; enables IRA contributions. * "How do I utilize IRS code section 168 and 179 for depreciation and bonus depreciation? How do I buy cars and furniture right off up to 80% of the value of the property every time I buy a house rental or asset? Can I utilize AI or any AI software with these to automate and hands off anything?" - Use 179 first, then 168 bonus depreciation; now 100% not 80%. * "I'm a 1099 independent contractor. I own two pieces of property, one is my primary residence, the other has a home and a small apartment on it that I rent out long term under the table. My thoughts are that I need to create an LLC for my business, possibly an S corp. As I understand the tax laws, there will be no way to use any of the rental properties to reduce the tax burden of my 1099 income. Am I on the right track here?" - Report all income; S-corp saves self-employment tax; passive losses don't offset. * "I'm going to start a consulting business that focuses on holistic health. What should I be looking for in the next six months or so when I launch? Is taxation different from real estate and in what way?" - Consider S-corp for self-employment tax savings; business expenses differ significantly. * "With an accountable plan, can I deduct a hundred percent of a cell phone? Is there some documentation that backs this up? Prove it." - Yes, 100% deductible with S/C-corp; IRS Notice 2011-72 provides documentation. * "I have a question about vehicle deductions. There are two methods available, the standard mileage deduction and the actual expense method. Can I use the actual method to claim all the depreciation in one year, then switch to the standard mileage deduction in subsequent years. If this is possible, how does it work? Assume the vehicle is used a hundred percent for business purposes." - Three methods exist; business-owned vehicles allow 100% bonus depreciation benefits. * "Since you're in Vegas, you might know the answer to this one. My friend won a reportable jackpot, mid five figures, and he was wondering if he could deduct the travel lodging expenses just as he might do if he made this money as a business deal or future excursions to Sin City to try and extend his winnings." - Only if professional gambler with business intent and meticulous records.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/?utm_source=5-reasons-restructure-sole-proprietorships&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today on Tax Tuesday, Anderson Advisors Barley Bowler, CPA, and Eliot Thomas, Esq., focus on capital gains, cryptocurrency, stock trading structures, and real estate strategies. They explain how capital losses are deducted and the $3,000 annual limit that hasn't been adjusted for inflation since the 1950s. You’ll hear about Bitcoin's tax treatment as a personal asset with favorable capital gains rates but note the lack of wash sale rule protections. They demonstrate how a trading partnership with a C corporation can provide significant tax advantages through accountable plan reimbursements. The episode extensively covers real estate topics including the distinction between repairs and capital improvements, the inability to deduct lost rent from deadbeat tenants, and home office deductions for primary residences. They explain 1031 exchanges in detail and explore strategies for managing large capital gains from personal residence sales, including converting to rental properties and the Section 121 exclusion benefits.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I have a large capital loss. How are capital losses deducted? When should I consider taking a tax write off by closing the position, unrealized versus realized gains?" - Capital losses offset gains first, then $3,000 annually against ordinary income. * "My wife and I are considering investing in Bitcoin. What are the tax advantages or disadvantages of doing so investing crypto for crypto for that type of investment?" - Bitcoin treated as capital asset with favorable rates, no wash sale rules. * "I do a lot of stock buying and selling. Is it tax efficient to set up a business entity?" - Trading partnerships with C corporations provide excellent accountable plan reimbursement opportunities. * "Can you explain what differentiates whether a real estate rental deduction would be categorized as a maintenance repair deduction versus a capital expense deduction? And provide examples. Please explain how these are treated differently from a tax perspective as well." - Repairs maintain property condition; capital improvements add value, extend life, or change use. * "Can I deduct lost rent from a deadbeat tenant?" - No deduction available; you simply don't report income you never received. * "I've heard you talk about renovations major to rental property and tax advantages, but what about for my primary residence? I need to finish the basement. Upgrade the house. This is also the address of my C corp business is registered to, and I operate a home office out of it. When I complete taxes next year, is there anything specific that I can take advantage of due to this large expense?" - Primary residence improvements add to basis; home office allows business-related deductions. * "Can I do a 1031 exchange on real property?" - Yes, but not on primary residences or inventory properties like flips. * "I bought a rental property in California in 2019 for 700,000 as replacement property from a 1031 exchange. 400,000 was from the sale of rental property in Seattle, Washington. 300,000 from my savings. I took a loan, also a 600,000 for expansion, uh, in repairs in January of 25. How much of the money I invested from my personal savings, the 300,000, can I get back without having to pay tax? I listed my rental property for 935,000." - Any cash taken from 1031 exchange creates taxable boot; consider real estate professional strategies. * "I'm selling my personal residence next year. We currently have an anticipated capital gain of a million. I'll be paying taxes on 500,000 of the capital gain above the capital gain exclusion for married filing joint. What tax strategy would you suggest that I may plan to use in order to mitigate paying federal taxes against the 500K capital gains? Could I do a 1031 exchange or of a personal residence? Can we convert the personal residence to a rental and then sell it in one to two years?" - Use Section 121 exclusion first, consider converting to rental within five-year window for 1031.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session
Tax and Asset Protection Events
https://andersonadvisors.com/ss/?utm_source=5-reasons-restructure-sole-proprietorships&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this special Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., break down the major provisions of the "One Big Beautiful Bill" - nearly 1,000 pages of new tax legislation. They cover significant changes to child tax credits (increased to $2,200), expanded 529 plan qualifications now covering trade schools and licensing exams, and modifications to personal casualty loss deductions. The attorneys explain the updated salt (state and local tax) limitations increasing from $10,000 to $40,000, new charitable deduction rules for both itemizers and non-itemizers, and the elimination of clean energy tax credits after 2025. They also discuss the extension of lifetime estate and gift tax exemptions to $15 million, the return of 100% bonus depreciation for real estate investors, revamped opportunity zone investments starting in 2027, and enhanced qualified small business stock (1202) exclusions with reduced holding periods and increased limits. Tune in for expert analysis on these game-changing tax strategies!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* Child Tax Credit Changes - Increased to $2,200 with $1,700 refundable portion for qualifying children. * 529 Plan Expansion - Now covers trade schools, licensing exams, and K-12 up to $20,000. * SALT Deduction Limits - Increased from $10,000 to $40,000 for state and local taxes. * Charitable Deduction Rules - Non-itemizers get $1,000 single/$2,000 married; itemizers face 0.5% floor starting 2026. * Clean Energy Tax Credits - Electric vehicle and solar credits eliminated after September 30, 2025. * 100% Bonus Depreciation - Applies to property with 20-year or less lifespan; requires cost segregation study. * Opportunity Zone Investments - 10% stepped-up basis after 5 years; tax-free appreciation after 10 years. * 1202 Stock Exclusions - Reduced holding periods: 50% at 3 years, 75% at 4 years, 100% at 5 years.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, sits down with Ryan Gibson from Spartan Investment Group to discuss the current housing market and the unique opportunities in self-storage investing. They explore how the housing market has changed with low transaction volumes due to homeowners holding onto low-interest-rate mortgages, creating opportunities in alternative real estate sectors.
Ryan explains how self-storage offers advantages over traditional rental properties, including no evictions, automated operations, and steady cash flow. The discussion covers Spartan's approach to acquiring mom-and-pop storage facilities and professionalizing their operations, the different investment strategies in self-storage, and how millennials have become the largest demographic using storage facilities. With over 800 million dollars in assets under management and a track record of 16 successful exits, Ryan shares insights on market consolidation, value-add opportunities, and why self-storage has been the best-performing commercial real estate asset class.
Highlights/Topics:* (00:00) Intro * (00:58) Current Housing Market Update * (05:20) Self Storage Investing Benefits * (08:33) How to Consider Investing in Self-Storage * (12:39) Different Types of Strategies * (15:40) Big Opportunities * (19:23) Millennials are Using Self-Storage the Most * (21:33) Self Storage is a Great Asset * (22:44) Outro * Share this with business owners you know
Resources:Learn more about Ryan Gibson and Spartan-Investors https://spartan-investors.com/
https://spartan-investors.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=this-boring-real-estate-asset-is-crushing-it-in-2025&utm_medium=podcast
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=this-boring-real-estate-asset-is-crushing-it-in-2025&utm_medium=podcast
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Barley Bowler, CPA, and Eliot Thomas, Esq., tackle a diverse range of tax questions covering business structures, real estate investments, and tax optimization strategies. They demonstrate significant tax savings by comparing Schedule C sole proprietorship versus S Corporation structures, showing how proper business formation can save approximately $6,000 annually on just $50,000 of income. The hosts address healthcare deductions for S Corporation owners, explain the complexities of the self-employed limited partner exception, and dive deep into capital gains calculations and 1031 exchanges. They also cover tax lien investments, charitable boat donations, and probate avoidance strategies. With practical examples and real calculations, this episode provides actionable advice for entrepreneurs and real estate investors looking to minimize their tax burden while staying compliant with IRS regulations.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "What is the best way to reduce my income and my self-employment taxes? I'm single, a handyman/contractor with no dependents. I work solo, no employees." - Form S Corporation, pay reasonable wage, save on employment taxes. * "I have an S-Corp LLC for my property management and business consulting activities. I'd like to provide my me and my spouse's healthcare through the LLC. What's the best way to go about this?" - S Corporation pays premiums, adds to W2, deducts on Schedule 1. * "Self-employed limited partner exception. Please talk about this topic." - Very risky strategy; IRS cracking down; use S-Corporation instead. * "How can one start a business, LLC or C-corp, and an ideal state of incorporation and hold those shares in a Roth IRA?" - Cannot own an operating business in Roth IRA; consider ROBS instead. * "What types of taxes and tax reporting will be involved if I begin investing in tax liens?" - Interest income or property ownership; depending on the redemption outcome. * "What are the rules for capital gains taxes on the sale of a house when the profits are used to pay cash on the next property?" - Sales price minus adjusted basis equals gain; cash use is irrelevant. * "I am taking my primary home and turning it into a rental for one to two years. How do taxes work if you wanted to 1031 a portion of the gains?" - Take Section 121 exclusion first, then 1031 the remaining gain. * "Under a 1031, taxpayers must select three possible real estate properties within 45 days. Can these selected properties be changed before the 180-day deadline?" - No changes allowed after 45 days; very strict timeline rules. * "I have a boat to donate to charity. Is it true that I can make a $5,000 donation without having a certified appraiser?" - Yes, under $5,000 needs written acknowledgment, not certified appraisal. * "What are the ways we can avoid probate?" - Living trust, joint ownership, beneficiary designations, lifetime gifting strategies
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=capital-gains-rules-when-you-sell-a-home-and-buy-another&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=capital-gains-rules-when-you-sell-a-home-and-buy-another&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Anderson Business Advisors host Clint Coons, Esq., sits down with long-time client and real estate investor Tarl Yarber to discuss whether now is the right time to invest in real estate. Tarl, a "recovering house flipper" who has completed over 650 flips, shares his journey from wholesaling in 2005 to becoming a full-time investor focused on the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat). They explore the current market disruption, why people should be buying when others are running away, the importance of understanding construction and value-add opportunities, and how to properly evaluate cap rates beyond surface numbers. As Tarl explains, "Will my future self thank me on this deal or not?" - a question every investor should ask themselves. Tarl also explains the power of 1031 exchanges for building wealth, including a detailed breakdown of reverse 1031 exchanges. The conversation covers market fundamentals, the benefits of forcing appreciation through construction, and why investing is about mitigating risk first, profit second. Tune in for expert insights on navigating today's real estate market with confidence!
Tarl Yarber is a "Recovering House Flipper" with over 650+ single-family residential properties purchased, rehabbed, and resold over the last 13 years. Tarl is considered an expert in the single-family residential investment industry and specializes in scalable, duplicable systems for real estate investing. In the last few years, Tarl has been fighting his addiction of Fix and Flip, and focusing on a new passion, BRRRR investing. As a recovering house flipper, Tarl has taken his years of experience in rehabbing houses and applied that experience in mastering the buy, rehab, rent, refinance, repeat investment model. In addition to his real estate success, Tarl has teamed up with Ken McElroy to create The Limitless Financial Freedom Expo, where they focus on real no BS education, as well as bringing some of the world's top financial minds to one event.
Highlights/Topics:* (00:00) - Intro * (01:35) - Tarl Yarber Introduction * (05:45) - Lesson Learned from Flipping * (07:09) - Limitless Expo * (17:32) - Is Now a Good Time to Buy Rentals? * (19:51) - Why People Should Buy Real Estate Now * (28:24) - Evaluate Cap Rates * (37:27) - Reverse 1031 Exchange Explained * (42:38) - Summary, closing comments, final words of advice
Resources:Instagram: @tarlyarber
Limitless Expo (July 31- Aug 2 in Dallas) Site:go.LimitlessExpo.com (discount code Tarl10)
http://go.limitlessexpo.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=is-now-a-good-time-to-buy-rental-property&utm_medium=podcast
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Anderson Advisors Podcast
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Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Anderson Advisors Tax Planning Appointment
https://andersonadvisors.com/ss/
In this comprehensive Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle complex tax strategies focusing heavily on 1031 exchanges and business deductions. They explain why fix-and-flip properties cannot use 1031 exchanges since they're considered inventory rather than investments, and suggest using C-corps or S-corps for tax savings instead. The attorneys dive deep into 1031 exchange mechanics, covering depreciation carryover basis, cost segregation complications, and state clawback rules in California, Oregon, Montana, and Massachusetts. In other topics, they discuss the heavy SUV deduction for vehicles over 6,000 pounds, explaining how to maximize depreciation through Section 179, bonus depreciation, and MACRS while requiring material participation. Other tips include strategic use of management C-corps for rental property mileage deductions through accountable plans, qualifying for 0% capital gains rates, handling Ponzi scheme losses through IRS safe harbor provisions, tax implications of timeshare deed-in-lieu transactions, and expatriation exit taxes for high-net-worth individuals renouncing US citizenship.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I own an LLC that I use to purchase a single-family house to fix and flip. Can I use a 1031 exchange to save on taxes while I look for my next property?" - No, fix-and-flip properties are inventory, not qualifying investments. * "I have five years left of depreciation on rental property. I was looking into a 1031 exchange but didn't realize that the depreciation schedule remains. Can I do a 1031 to defer some capital gains but no longer depreciate and/or buy another property and get new depreciation schedule for that one?" - You get carryover basis plus new excess basis depreciation. * "What are some of the rules regarding a 1031 exchange when selling a rental home in one state, but purchasing the replacement property in another state?" - Allowed, but watch for clawback rules in four states. * "If I buy a car with a weight more than 6,000 pounds for my newly incorporated business and have not earned any income in the first year of business, can I use it to reduce taxes against my spouse's W2 income?" - Yes, through S-corp with material participation and 50% business use. * "I own a rental house and a management corporation, which is a C corp. How do I deduct mileage for my rental activity?" - Use accountable plan reimbursements from C-corp for tax-free money. * "How does one qualify for 0% capital gains?" - Single filers need taxable income of $48,350 or less. * "I invested in an ATM syndication. It was a Ponzi scheme and all investment was lost. The K-1s I received for previous years were fraudulent. How do I file my taxes for those years that I received a fraudulent K-1?" - Use IRS safe harbor provision for 75-95% ordinary loss deduction. * "What are the tax implications of doing a deed in lieu for a timeshare?" - Creates cancellation of debt income taxed at ordinary rates. * "What happens to your real estate if when you move outside of the country, is it deemed disposition?" - Only if expatriating citizenship, then exit tax applies.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=1031-exchange-rules-when-buying-in-a-different-state&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=1031-exchange-rules-when-buying-in-a-different-state&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson Business Advisors’ Barley Bowler and Eliot Thomas, Esq., tackle complex listener questions covering bonus depreciation regulations, short-term to long-term rental property transitions, and the intricate tax ordering rules for combining stock losses with real estate gains. They explore nonprofit structures for foster care services, explain 1031 exchange debt requirements for orthodontic practice sales, and provide guidance on entity selection between partnerships and S-corporations for different business types. You’ll hear how and when to handle Ponzi scheme theft loss deductions, corporate trading structures for stock income reduction, and the critical tax implications of providing company cars to family employees for personal use. Tune in for expert insights on these advanced tax strategies and planning considerations!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "Regarding section 168 bonus depreciation, it says to qualify for 100% the property must have been purchased after January 20th, 2025. Does that mean property purchased in 24 but not put into use till 2025 would not qualify?" –This is proposed legislation, not current law yet. * "What are the tax implications of shifting properties from short-term rental to long-term rental after leveraging cost segregation reports to accelerate depreciation to offset some W2 income?" – Cannot do both in same year; changes passive loss treatment. * "Can you use short-term stock loss carryover to offset real estate depreciation recapture and capital gains?" – Yes, but only after specific tax code ordering rules. * "In the state of Florida, could parent fostering be conducted as a nonprofit business entity?" – Cannot earmark nonprofit funds for specific individuals or children. * "My husband's selling his orthodontic practice using a 1031 option. Can he pay off the existing loan before reinvesting the profit?" – Yes, QI will pay off debt; need equal/greater replacement debt. * "My S corporation business doesn't have cash flow to reimburse me for all benefits. Can I add unpaid reimbursements to my balance sheet like an owner loan?" – Need specific analysis of cash flow and reimbursement timing. * "My wife and I have a holding company LLC and multiple subsidiary LLCs currently taxed as partnerships. Should they be changed to S-corp?" – Real estate stays partnership; operating businesses - consider S-corp election. * "In a Ponzi scheme, does the discovery year have to be the year charges are filed?" – Discovery year when you become aware through government notification. * "Would establishing an LLC help me reduce tax on income from stock trading?" – Consider corporate trading partner structure for meaningful capital gains. * "Our C corp employs our son part-time. What are the tax implications of buying him a car for personal use only?" – Buy in his name, increase salary; avoid corporate ownership.
Resources:Schedule Your Free Consultation
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=why-you-should-trade-stocks-through-an-llc&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., explore the limitations of renting home office space to yourself as a sole proprietor and explain superior alternatives through S and C corporations that unlock better deductions and reimbursement opportunities. The attorneys provide detailed guidance on properly paying children through family businesses to maximize tax benefits while avoiding employment taxes, and discuss the complexities of transferring real estate to children through gift strategies. They dive deep into syndication investments, explaining passive income treatment, cost segregation benefits, and how real estate professional status can transform passive losses into active deductions. Other key topics include the master lease strategy for short-term rental owners seeking to optimize tax benefits, the mechanics and restrictions of 1031 exchanges, medical expense reimbursements through C corporations (including controversial deductions for specialty foods and safety equipment), and the proper setup timeline for nonprofit organizations. Tune in for expert insights on these advanced tax strategies and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "Can I rent my home office to myself as a sole proprietor?" - No, use home office deduction instead. * "I know an owner of a small business can pay their kids to work for their company. I've heard several different facts about how exactly to do that, which contradict one another. Can you please explain the proper steps?" - Pay kids W-2 from sole prop, avoid taxes. * "We were advised to transfer real estate to our children up to a certain limit using the parent-child transfer provision form 709. Can you please discuss the advantages and disadvantages? Any limitations on the amount of equity transfer and any IRS requirements, etc.?" - Not recommended, complex bookkeeping, lose stepped-up basis. * "I want to join a syndication as a limited partner. What tax implications do I face at the time of distribution of profits and how does it change if they do a cost segregation and bonus depreciation while I'm still part of this syndication? An additional fact is that this person has their own long-term rental." - Passive income, and cost segregation create offsetting losses. * "Are you entitled to cost segregation benefits if you invest in a syndication with your IRA/401k funds?" - Yes allocated, but no tax benefit in retirement. * "Please explain the C Corporation Master Lease strategy for short-term rental owners. I own a short-term rental but was unable to capitalize on the short-term rental loophole because I had used professional property management. Does this strategy provide any advantage to somebody in my situation or allow me to take advantage of the loophole in a different way? How would the tax breakdown work in this case if I created a management C corporation?" - C corp manages property, shifts income, enables reimbursements. * "What is the downside of using a 1031 exchange to avoid taxes in a profit transaction? Are there any benefits?" - Strict deadlines, higher debt required, but defers taxes. * "What are the medical expenses aside from doctor visits and out-of-pocket medications allowed as reimbursable from the C corp? A doctor has recommended including antioxidant foods in our diet to improve my spouse's diet due to a specific condition. Is it reimbursable if we buy foods that are not really on our regular grocery list? Only because our doctor suggested it. Additionally, the other day, my spouse slipped on one of the floor mats, so I had to buy rug grippers. Is this also reimbursable?" - Doctor's note rule applies, antioxidants questionable, grippers no. * "I would like to know if I can start a business as a nonprofit before I begin doing the work. Or do I have to already be up and running?" - Set up a nonprofit entity first for protection.
Resources:Schedule Your Free Consultation
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Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-legally-pay-your-kids-through-your-business&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode of Tax Tuesday, Eliot Thomas, Esq. is joined by Anderson CPA Barley Bowler. They explain how transfer-on-death titles still provide beneficiaries with stepped-up basis advantages and clarify that short-term rentals don't qualify for real estate professional status. You’ll hear proper entity structures for rental properties, recommending against holding appreciating real estate in C corporations. They thoroughly explain the 280A "Augusta Rule" that allows tax-free rental income from personal residences to your business for up to 14 days annually. With input from bookkeeping expert Troy Butler, they recommend QuickBooks Online for tracking rental property finances. Additionally, they cover Roth IRA conversions, tax withholding strategies, and 1031 exchange rules for deferring capital gains.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "When a house is under a transfer on death title, does the beneficiary still get a step-up in basis?" - Yes, they still get a stepped-up basis. * "If I already qualify as a real estate professional rep status via short-term rentals and add long-term rentals to the mix. Can I lump the two kinds together? And does having an S corporation that manages everything affect my rep status?" - Short-term rentals don't qualify for REP status. S-corps generally don't affect REP status. * "Where real estate properties are in individual LLCs, disregarded and owned by my C corporation, does the C corporation maintain one bank account and collect rent for all individual properties?" - Not recommended. Use a management company instead. * "If you get started in wholesaling, should you file as an S corporation?" - Yes, use S or C corp. * "What kind of bookkeeping is needed for rental real estate? Do you have any bookkeeping software to suggest?" - QuickBooks Online is recommended. Track properties separately. * "When doing an IRA to Roth conversion, are there any limits? Are pre-tax conversions always treated as ordinary income? Is it true that the IRS does not know or care when the conversions were done during the year?" - No limits. Yes, ordinary income. IRS treats as earned throughout year. * "How does tax work if a business owner is paying himself as an employee, do we have to tax twice? Once for the business income and once as an employee?" - No, payroll is deductible business expense. * "How do I do a 1031 exchange? And how do I maximize real estate property depreciation after I do a 1031 exchange? Am I stuck with the previous depreciation rate and amount of the previous property?" - Use a qualified intermediary. Trade up for more depreciation.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=can-you-boost-depreciation-after-a-1031-exchange&utm_medium=podcast
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=can-you-boost-depreciation-after-a-1031-exchange&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Clint Coons, Esq., interviews Kathy Fettke, founder of Real Wealth Network and a seasoned real estate expert with over 20 years of experience. They discuss current market conditions, with Kathy explaining how real estate's slow-moving nature provides stability compared to the volatile stock market. She shares that recent decreases in mortgage rates have already increased pending sales and mortgage applications. Kathy reveals her top investment markets, emphasizing the Southeast (particularly Texas and Florida) for growth and appreciation, while the Midwest (parts of Ohio and Indianapolis) offers better cash flow. She explains the importance of property type selection, market dynamics, and long-term strategy, highlighting how newer properties in growth markets typically outperform older properties in stagnant markets, even if the latter initially show better cash flow. Kathy also discusses the current opportunity with builders offering rate buy-downs on new construction, property management considerations, and the importance of avoiding markets with unfavorable landlord laws. This episode provides valuable insights for both new and experienced real estate investors looking to build wealth through strategic property acquisition.
Kathy Fettke is Co-Founder of RealWealth.com, helping busy professionals acquire turnkey rental properties in fast-growing U.S. markets. She also leads RealWealthDevelopments.com, offering passive build-to-rent syndication opportunities. Kathy hosts The Real Wealth Show and Real Estate News for Investors podcasts, and co-hosts BiggerPockets: On the Market. She authored the bestsellers Retire Rich with Rentals and Scaling Smart with her husband, Rich Fettke. A frequent speaker and media guest, Kathy has appeared on CNN, CNBC, Fox News, NPR, and CBS MarketWatch.
Highlights/Topics:* Current real estate market conditions and mortgage rate sensitivity * Top investment markets: Southeast for growth vs. Midwest for cash flow * Importance of property condition in investment returns (newer vs. older properties) * The danger of focusing solely on cash flow without considering long-term appreciation * Current opportunity with builders offering interest rate buy-downs * Millennial demographic demand driving rental housing needs * The importance of proper property management selection * Avoiding markets with unfavorable landlord-tenant laws * Long-term vs. short-term real estate investment strategies * Closing comments, final words of advice
Resources:Real Wealth
Real Wealth Developments
https://realwealth.com/real-estate-syndications/
https://www.instagram.com/realwealth/
https://www.instagram.com/kathyfettke/
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Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., address several listener questions on a variety of tax topics. They cover the tax implications of selling stocks to purchase rental properties, explaining capital gains strategies and depreciation options. The duo discusses using LLCs and management corporations for rental properties, including how property management fees can generate tax-free income. They explore inheritance tax considerations for 401(k)s, the benefits of short-term rentals for generating tax losses, and the implications of moving back into a rental property. Other topics include setting reasonable salaries for S-Corporation owners, maximizing depreciation to offset W2 income, claiming natural disaster losses, depreciating remodel costs for rental properties, and properly implementing the 280A/Augusta Rule for tax-free home rentals.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I would like to sell my stocks and use the money to help purchase a rental property. Is there a strategy to minimize or avoid paying taxes on capital gains or any other tax-saving advice?" - Loss harvesting and short-term rental tax benefits. * "Would a rental property not in an LLC also be reported under the Management Corporation or a 1040?" - Report rental on 1040, management fee on 1120. * "What would the tax implication be when a spouse passes and the surviving spouse inherits a 401k?" - Lump sum, continue distributions, or rollover options. * "What would be the tax consequences concerning W2 income, depreciation, etc., of purchasing a rental property, using it as a short-term rental with material participation in the tax year that it was purchased, then selling it the following tax year?" - First-year losses, later depreciation recapture on sale. * "What are the tax implications if I've moved back into my rental and use it as my primary residence? I'm not planning on selling anytime soon." - Reduced Section 121 exclusion, depreciation recapture later. * "What is a reasonable salary range we should set for ourselves to remain compliant but still maximize our S Corporation Tax savings?" - 30-60% of net business income typically. * "If a person is a W2 wage earner and wants to start real estate as a side job, what needs to be true when picking real estate options to maximize asset depreciation to help offset my W2 taxes owed?" - Short-term rentals with material participation (100+ hours). * "If I experienced a loss from a flood that was declared a natural disaster in 2024, how do I take that credit on my taxes?" - Personal: federal declaration required. Business: none needed. * "How do you depreciate remodel costs for an income property? So, a rental property. You purchased the property, for example, 10 years ago for 100k, and began depreciating it. This year, you put 30K into a remodel that included floors, paint, kitchen cabinets, and appliances." - Separate depreciation schedules for each improvement type. * "I'm interested in using the 280A/Augusta rule rental of my home for an upcoming seminar that I'll be attending online. Am I allowed to use this strategy since I'm the only one attending? Also, I reviewed the document that Anderson put together for the 280A. It mentions getting three quotes. If I call a hotel and ask for a conference room quote for one person, I imagine I won't be taken seriously. Do you just request a small conference room for five people or less?" - One-person meetings allowed; request quotes for small groups.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-sell-stocks-tax-efficiently-to-buy-rental-property&utm_medium=podcast
Tax and Asset Protection Events
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Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, welcomes David Pelligrinelli, a professional asset recovery expert from ActiveIntel. They dive deep into the alarming reality of employee theft and embezzlement in businesses of all sizes. David explains the "fraud triangle" concept—opportunity, pressure, and justification—that enables employee theft, sharing real-world examples of trusted employees who stole hundreds of thousands of dollars from their employers. They discuss essential prevention strategies like having owners open all financial mail, requiring employees to take vacations so others can review their work, and implementing proper checks and balances. The conversation reveals sophisticated theft techniques, including ghost vendor schemes and credit card fraud, while emphasizing that even trusted employees can succumb to temptation when proper controls aren't in place. David also shares fascinating stories about asset recovery investigations and explains how counter-investigation tactics can help those being investigated unfairly.
Highlights/Topics:* Introduction to employee theft and embezzlement as a common business problem * The "fraud triangle" concept: opportunity, pressure, and justification * Best practices for preventing employee theft (opening mail, mandatory vacations) * Ghost vendor schemes and sophisticated theft techniques * Long-term financial impact of embezzlement on business profitability * Examples of elaborate asset concealment by debtors * Employee dishonesty insurance coverage options * Counter-investigation tactics and illegal investigation methods * Share this with business owners you know
Resources:Email: dave@activeintel.com
https://actualhuman.com/
https://riskcoverage.com/
https://telemediator.com/
https://www.activeintel.com/
Schedule Your FREE Consultation
Tax and Asset Protection Events
Anderson Advisors
Toby Mathis YouTube
Toby Mathis TikTok
Clint Coons YouTube
Tax season is in full swing, and in this Tax Tuesday episode, Anderson Advisors attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle numerous listener tax questions with practical advice. They discuss the Section 121 exclusion for primary residences, explaining how married couples filing separately can each qualify for the $250,000 capital gains exclusion. They outline strategies for converting personal residences to rental properties using S-corporations and installment sales to maximize tax benefits. Amanda and Eliot clarify 401(k) withdrawal rules, explaining when penalties apply and options like the Rule of 55 and hardship withdrawals. You’ll hear recommendations on optimal entity structures for real estate syndications, explanations of the short-term rental "loophole" for active income classification, and when to use trading partnerships versus simple LLCs for investment accounts. The episode concludes with a breakdown of key Tax Cuts and Jobs Act provisions set to expire in 2025, including individual tax brackets, standard deduction changes, child tax credits, and bonus depreciation, highlighting potential impacts for taxpayers.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:
- "I understand that you can sell your primary residence and receive an exclusion from capital gains taxes on the first $250,000 if you're single and $500,000 if you're married filing jointly. However, I can't find any rules regarding if you're married filing separately. Could you please confirm if married filing separate also qualifies for the exclusion? Also, could you talk about how making improvements adds to the basis?" - Yes, both spouses filing separately can each get the $250,000 exclusion. Only one spouse needs to be on the title, but both must use it as a primary residence for 2 of the last 5 years. Improvements (new floors, additions, HVAC systems) add to your basis, which reduces taxable gain when you sell.
- "Can I use both cost segregation and bonus depreciation from an S-corp you sell your personal residence to for the Section 121 exemption? Also, what is the accounting treatment if you sold your personal residence to an S-corp using an installment sale?" - Yes to cost seg, no to bonus depreciation (not allowed for related-party transactions). For accounting, record the property as an asset on the S-corp with a liability for the note owed to you personally. You'll recognize all gain in year of sale (which is actually beneficial to utilize the Section 121 exclusion), and interest payments will be recorded as interest income.
- "Do I have to officially quit my job and be retired to take disbursements from my 401k? At what age can I take disbursements from my 401k? Are there any negative tax implications from taking early disbursements?" - You don't need to quit your job to take distributions if you're 59½ or older, though your specific plan may have different rules. Early withdrawals before 59½ incur a 10% penalty plus ordinary income tax, unless you qualify for exceptions like the Rule of 55 (if you leave your job at 55+) or hardship withdrawals for specific situations.
- "What is the best entity for tax purposes to invest in real estate syndications?" - A Wyoming LLC (disregarded) or partnership is typically best. This gives liability protection while letting income/losses flow directly to your personal return (important for using passive losses). Avoid S-Corps (reasonable wage requirements) and C-Corps (trap gains/losses on corporate return).
- "Regarding bonus depreciation and the short-term rental loophole, are either the 500 hours or 100 hours and, more than anyone else, material participation tests prorated for the year? For example, if a property is purchased and put into service in November, those hours would be difficult to achieve." - No, these hours are not prorated. You must meet the full hour requirements between purchase and December 31st. Consider using the "substantially all participation" test if you personally perform nearly all work needed, even if under 100 hours.
- "If I purchased an investment apartment and repaired windows, floors and incurred other miscellaneous expenses to make it ready for renters, can I write the expense off on my Schedule E? I didn't receive any income for that apartment as of yet." - You can only deduct expenses after the property is "placed in service" (available for rent). If not in service yet, these costs must be added to the property's basis and depreciated. The $2,500 de minimis rule lets you expense (not capitalize) individual purchases under $2,500, but only after the property is in service.
- "I'm starting to do wholesale investments. I'm still a W-2 employee, yet I will resign soon. Is it recommended that I start my LLC now, and why?" - Yes, start your LLC now for liability protection when entering contracts. Begin with a disregarded LLC in the state where you're wholesaling. Once established and generating consistent income, consider making an S-Corporation election to save on self-employment taxes.
- "I have a trading account, but I do not actively trade in it. Should I set up a trading partnership for it?" - If you're not actively trading, a simple Wyoming LLC for asset protection is sufficient. For active traders with significant expenses, consider the limited partnership structure with a C-Corporation general partner to shift some income and deduct expenses that aren't allowed on personal returns.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=the-best-entity-for-real-estate-syndications-and-maximum-tax-benefits&utm_medium=podcast
Tax and Asset Protection Events
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Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today, Anderson Advisors attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., discuss topics including navigating inherited IRAs and potential Roth conversions to understanding crucial deadlines for spousal and non-spousal inheritances. The questions explore filing for trading LLCs with expenses but no income, leveraging C-Corps for medical cost reimbursements, and addressing real estate tax considerations including depreciation recapture. Key insights include combining 1031 exchanges with 121 exclusions when converting investment properties to primary residences, maximizing education and travel deductions in real estate transactions, and utilizing strategic business entities, defined benefit plans, and 401(k)s to shelter active income.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics:* “Can you roll an inherited IRA into a Roth IRA before the 10 year liquidation time limit is over? If so, will it be a taxable event?” - Typically no, especially for non-spousal inherited IRAs. * “I took 2024 off, had no W-2 income, and did no trading.” “However, I had some trading expenses, monthly subscriptions. Do I need to file an individual 1040 return and/or Form 1065 for my trading LLC, even though I had no W-2 income and did no trading?” - Yes, file to account for trading expenses. * “I am in the process of creating a trading partnership with the C-Corp. Due to an accident 20 years ago, I have high medical expenses and want to use the C-Corp to reimburse my out-of-pocket medical expenses. I have caregivers who work three hours per day. Can I reimburse myself for the salary? I pay them through the C-Corp. What other medical expenses can I reimburse?” - Yes, using Section 105 plan for reimbursements. * “I have short-term rental property managed by a management company. Before the end of the year, I’m taking over management duties. Does the passive income switch to active or does the passive income stay passive?” - No, managing yourself doesn’t change income to active. * “When selling a rental property, do you have to pay 25% depreciation recapture tax on things that have been depreciated down to zero and have been gone or deleted for over a year?” - Yes, recapture applies to fully depreciated assets. * “Can I apply both 1031 like-kind exchange and 121 exclusion to an investment property? Yes, with strategic planning for property transitions. * “Can I sell my investment home, apply 1031, and make the replacement home my primary residence?” * “When selling my primary residence, do seller concession expenses help stay within the $250,000 capital gain exclusion? Example, help buyer with closing costs, any repairs, et cetera. I have spent over $3000.” - No, concessions don’t impact the exclusion directly. * “I have spent over $3000 on different online real estate education programs. Can I deduct these as business expenses, or are only education expenses that are not online deductible?” - They are deductible only if related to continuing existing business education. * “I attend a lot of investor’s meetings in person, travel with my personal not business automobile. How can I deduct these costs as business expenses,” - Track mileage and use accountable plans for deductions. * “How do I save on taxes when wholesaling properties?” - Use business entities and retirement plans strategically.
Resources:
Schedule Your FREE Consultation
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Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today, Anderson Advisors attorneys Barley Bowler, CPA, and Eliot Thomas, Esq. discuss topics including how 401(k) funds can be borrowed up to $50,000 without tax penalties while confirming that backdoor Roth IRA contributions made in 2024 but converted in 2025 still allow for additional 2025 contributions. Eliot and Barley discuss why S-corporations cannot deduct wellness expenses through accountable plans unless medically prescribed, and confirm the 20% Qualified Business Income deduction applies across multiple businesses. For entity structures, they recommended against holding appreciating real estate in corporations, favoring disregarded LLCs for asset protection. Regarding trading partnerships with C-corporations, these need written contracts for guaranteed payments, and confirmed short-term rental owners can switch to self-management to claim material participation benefits and accelerated depreciation through cost segregation.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics:* "Are there ways to withdraw funds from a 401(k), a retirement account, without moving it into an IRA?" a sponsored plan versus an individual plan? "We're also starting a nonprofit business. And how can we avoid that 10% early withdrawal penalty?" - Take a loan from your 401(k) for up to $50,000 without tax/penalty. * "I attempted to do a backdoor Roth IRA conversion. On December 24th, I did it at the end of the year. I'm a high-income earner, was not aware of the financial institution, and had made a temporary change. There was some hold time for the funds. We made a deposit contribution at the end of the year. The question here is, the $7000 post-tax contributed to the traditional IRA in December was not available to convert? We went over the past the end of the year to the 2025 tax year, and we're wondering how that's treated since the conversion was completed in 2025, but the contributed contribution occurred in 2024. Is another $7000 contribution allowed?" - Yes, you can make another $7000 contribution in 2025 for another conversion. * "Can we use this to reimburse for gym membership, supplements, wellness plans, stuff like that?" - No, wellness plans aren't tax-deductible unless medically prescribed. * "My S-corporation provides financial services." Another question. We're talking about the qualified business income deduction, that 199A. That's a pretty good deduction, 20%. Good chunk of deduction. "Can we take that if we have two different businesses? How does that work? What's that look like?" - Yes, you can take the 199A deduction for both businesses simultaneously. * "I have two LLCs holding trading accounts, so a couple of different LLCs." We're going to talk about our trade structure a little bit differently. We also have just what we call a safe asset holding straight. If we have a brokerage account, high-value collectibles, or something like that. "Does putting a rental property into a disregarded LLC have any tax benefits?" "Can I transfer the interest of a disregarded to a holding company or to a living trust?" - Yes, with in-kind transfers; check with a broker; generally no tax consequences. * "I have a trading partnership." "Do I need a contract?" We're talking about guaranteed payments here, a very unique payment to a partner. - Yes, need a written contract detailing services between a partnership and C-corp. * "What are the pros and cons of holding real estate investments in a disregarded LLC, C-corp versus S-corp?"- Avoid S/C-corps for appreciating property; use disregarded LLCs with management entity. * "We're buying our first short-term rental this year. Considering using a third-party property manager, can I manage the property next year with material participation?" - Yes, you can manage it yourself in year two and claim cost segregation benefits.
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-use-401k-funds-to-start-a-nonprofit&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-use-401k-funds-to-start-a-nonprofit&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Real estate visionary Neal Bawa, CEO of Grocapitus and MultifamilyU, returns to the podcast. Neal always presents a compelling data-driven forecast that should capture every investor's attention. Despite current market uncertainties, Bawa reveals a significant 5-million-unit housing shortage alongside plummeting inflation rates, positioning the US as the strongest performer among developed economies. Most notably, he predicts a dramatic surge in both single and multi-family rent growth during 2026-27, driven by high interest rates creating supply gaps. With homeownership projected to decrease to 60% within a decade, the rental market is poised for unprecedented strength. This perfect storm of undersupply, shifting demographics, and economic conditions suggests a golden opportunity for strategic real estate investors, particularly in the multi-family sector, with promising rent growth anticipated as early as late 2025.
Highlights/Topics:* Hard data trumps market fear: why the numbers tell a different story * US economy dominates globally as inflation drops from 6% to 2.4% * Rising national wealth meets housing crisis: housing investment opportunity * New construction wave promises better prices for entry-level housing market * Five million unit shortage creates perfect storm for 2026-27 housing gap * Massive rent increases predicted across all housing sectors in 2026-27 * Historic shift: Homeownership dropping to 60%, rental demand soars nationwide * Real estate investments outperform during global inflationary cycles and market shifts * 2025 forecast: Interest rates and delinquencies reshape investment landscape ahead * Strategic opportunity: Significant rent growth predicted for late 2025 market * Visit multifamilyu.com to dive deeper into these insights!
Resources:MultiFamily Website
https://multifamilyu.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=predicting-2025-real-estate-trends&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=predicting-2025-real-estate-trends&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
We have now hit 237 episodes of Tax Tuesday! Today, Anderson Advisors attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., discuss topics including depreciation strategies, with detailed explanations of how bonus depreciation differs from cost segregation analysis. The conversation also covers real estate professional status requirements, home office deductions, and the strategic use of management C-corporations to maximize tax benefits. Other key topics included the limitations of 1031 exchanges for partnership interests, tax strategies for international property purchases, meal expense deductions under current tax law, and the benefits of a stepped-up basis for inherited properties. You’ll hear practical strategies for leveraging existing properties rather than selling them and included insights on how to minimize tax exposure through various investment structures and borrowing strategies.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics:* In 2024, I spent most of my time managing rental properties under our LLC (not in a C or S management corp). I will claim real estate professional status for 2024 tax returns. What home office expenses can I deduct from rental income? Should we consider creating a management C corporation to maximize deductions? - You can deduct a portion of home expenses (mortgage interest, property taxes, utilities, etc.) based on either square footage or number of rooms method. * Is 100% bonus depreciation available in 2025? Is this the same as cost seg? - Cost segregation breaks down property components into different depreciation schedules (5, 10, 15 years) while bonus depreciation allows immediate write-offs of qualifying components. * If you meet 750 hours as a real estate investor and own both commercial/non-residential real estate property and residential rental property, could you use Schedule C or Schedule E on your tax return? - Generally, long-term rentals go on Schedule E regardless of real estate professional status. Schedule C might be used for short-term rentals (average stay less than 7 days) with significant personal services provided. * Does selling a partnership interest in a hotel business qualify for a 1031 exchange? How can you save on taxes on capital gain when you sell your partnership interest? - A partnership interest generally doesn't qualify for 1031 exchange (though the partnership itself could exchange the building). * If I inherit a property and now use the property as Airbnb, do I need to depreciate the value of the property? - You should depreciate the property because the IRS will assume you took depreciation when you sell and tax you accordingly (recapture). You'll get a stepped-up basis at inheritance value to depreciate from. * Can you comment on food and meals? When can those be expensed and how much? - Business meals are generally 50% deductible. Company-wide events like holiday parties or open houses with unrestricted attendance can be 100% deductible. Entertainment expenses are no longer deductible. * I'm a full-time employee receiving W2 income and own two rental properties which I manage myself. Can I use the qualified business deduction (QBI)? - Yes, you can potentially qualify for the QBI deduction. The safe harbor rule requires 250 hours of rental services, but you may still qualify even without meeting this specific threshold if you can prove it's a trade or business. * How can I avoid capital gains if I sell my rental home in the U.S. to purchase a multi-family home in Costa Rica? - Options include: living in the property for 2 of the last 5 years to qualify for primary residence exclusion, leveraging the U.S. property instead of selling, harvesting capital losses to offset gains, or investing in tax-advantaged opportunities to create offsetting losses. * I have two rental properties in SoCal owned since 2009 using straight-line depreciation. If I 1031 exchange these properties into replacement properties of slightly higher value, can I start depreciation over and do it correctly? If I 1031 these properties into replacement properties of slightly higher value, does that mean I can start depreciation all over and do it correctly? Getting more tax benefit. How does this affect my basis? What about any recapture when I then sell later? - In a 1031 exchange, you'll have carryover basis from the relinquished property. The basis in the new property will be its purchase price minus deferred gain. Instead of selling, consider leveraging existing properties to buy additional real estate for more depreciation opportunities. * What are the benefits of the step-up basis evaluation for a person's residence and investment property? - When inherited, properties receive a stepped-up basis to fair market value at death, allowing heirs to depreciate from the higher amount and potentially eliminate capital gains tax on appreciation that occurred during the deceased's lifetime.
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=bonus-depreciation-in-2025&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=bonus-depreciation-in-2025&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, chats with Atticus LeBlanc, CEO of PadSplit. Toby and Atticus discuss the innovative approach PadSplit is taking to address homelessness and provide affordable housing. They dive into troubling statistics about homelessness in 2024 and how rising home prices and interest rates are impacting the housing market. PadSplit’s model—offering multi-room rentals—provides a solution for both underserved communities and real estate investors, creating a two-sided marketplace. The conversation covers the operational benefits for landlords, the low turnover rates, and the impact PadSplit has on helping residents transition out of homelessness. Learn how this model offers affordable housing in 24-48 hours for under $300, while benefiting investors by reducing costs and increasing revenue. It’s a win-win for both society and your investment portfolio!
Highlights/Topics:* Toby’s PadSplit experience, frightening stats on homelessness for 2024 * Increasing home prices, interest rates are not helping single-family residences * PadSplit rooms are a great solution for the underserved, and for investors * Reducing barriers to entry for the unhoused, revenue increases for landlords * How PadSplit operates as a two-sided marketplace * Different scenarios using PadSplit for multi-room home rentals * Standard costs for a “turn” as a landlord, saving with PadSplit * Early intervention for issues is easier with a PadSplit scenario * Residents have thousands of options if they don’t care for the room * What are the eviction rates with PadSplit? * What percentage of residents move from unhoused situations? This is the “invisible working population’ - not people on the street with a cardboard sign. * Residents can get a room within 24-48 hours, for under $300 * So something good for society, and something good for yourself * Share this with investors you know
Resources:Atticus LeBlanc LinkedIn
https://www.linkedin.com/in/atticus-leblanc-3960466/
PadSplit
https://www.padsplit.com/
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=1-real-estate-strategy-for-2025&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=1-real-estate-strategy-for-2025&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Welcome to Tax Tuesday. Anderson Advisors attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., tackle various tax-related questions. Topics include retroactively claiming real estate deductions and depreciation, handling health insurance premiums for an S-corp, understanding the rules around setting up a trading account under an S-corp, and how to qualify for Real Estate Professional (REP) status while working a W2 job. The attorneys also discuss deadlines for S-election, converting properties for tax purposes, alternative methods for substantiating business expenses, and more. Tune in for valuable insights on managing your tax strategies effectively.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics:* "I need to retroactively claim my real estate deduction or depreciation for my 2022 and 2023 taxes. I actively manage my own rental and have over 700-plus hours per year for real estate management. How do I claim accelerated depreciation for the past years?" - Yes, you can go back and retroactively capture previous depreciation, including accelerated depreciation or bonus depreciation, you do it n the current year. It's a form called 3115. * "I didn't have my health premiums added to my payroll statements for 2024. I have an S-corp and pay myself and another employee but wanted to deduct health insurance payments. Is there anything I can do at this point? Regarding asset protection, we have a rental property. We'd like to move this to a trust and then to an S-corp. Would that work?" - If the S-Corp it paying the premiums, on our 1040, we can make an adjustment on Schedule 1 for the insurance premiums because we're considered sole proprietor. * "I have seen some of your videos and had a question about setting up a trading account under an S-corporation. Is this correct? Can I pay my wife $15,000 from it and then match that amount toward a 401(k)? "My wife is a homemaker with low income. If we file just married filing jointly, are there any implications with this move? We are not traders but more investors."- Typically no, we would put it into an S-Corp. * "My employer recently went through a restructuring. They offered me one year's pay as severance. My last paycheck will be January, 2026. I feel confident that I'll be able to fulfill the REP status requirement for time spent on material real estate management activities in 2025. I will not make more money from my real estate investments as compared to my severance pay. Can I still qualify for the REP status? I used my solo 401(k) to invest in a real estate deal as a passive investor. The bank recently foreclosed the deal. It was a total loss. Is there any deduction that I can take for the loss?" - It’s a common misconception that you can’t get REP status with a W2. It’s about time, not how much you make. * "When is the deadline to make an S-election for 2025? Can you switch back to sole proprietorship after you elect S-corp in the same year or future years? Do you have to run payroll as an S-corp LLC? What are good indicators or reasons to switch to an S-corp for taxation?" - there's something called late election, very common, we do it all the time. The IRS is very good about allowing it. To be safe it should be done by March 15th. * "I'm converting a barn on my property to an auxiliary dwelling unit for realm purposes. I also have a separate building on the property that I use as a shop office for my construction business. How do I treat these properties for liability and tax purposes?" - the ADU, the Auxiliary Drilling and Dwelling Unit, that's going to be either a long-term rental or a short-term. You could use the shop office as an admin office. I’d wrap it in an LLC and strip the equity out. * “My business doesn't have traditional receipts for its expenses. We primarily rely on bank statements to track our spending. What supporting documentation would I need to provide to the IRS or my tax preparer substantiate these expenses and ensure accurate tax deductions? Are there any alternative methods to proving these expenses without traditional receipts?" - A bank statement, credit card statements, can be used, proof of payments, cancelled checks, etc. * "My business partner and I co-bought a condo in New York City by paying $900,000. He put in $700,000 and own 75%, and I put in $300,000 and own 25%. I'm deeding my ownership to him for $0. What would be his cost basis for future resale?" - Basically this is a gifting, it wasn't, they didn't sell it. So for any amount, so you just carry over the basis. File a 709. * Check out our free Emergency Binder on our website!
Resources:
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-move-a-rental-property-to-a-trust-s-corp-for-asset-protection&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-move-a-rental-property-to-a-trust-s-corp-for-asset-protection&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today Clint Coons, Esq., sits down with Winston Templet, a seasoned real estate investor, developer, and contractor with over 20 years of experience. Based in Tennessee, Winston shares insights from his extensive career, including his early days as a reluctant real estate investor, where he began with trailer parks. They dive into the state of real estate investing in 2025, with Winston emphasizing the shift toward building rather than buying. Winston explains his approach to finding profitable properties, partnering with land sellers, and navigating complex regulations, zoning, and permits. He also offers valuable advice on selecting general contractors, financing options, and how to avoid common pitfalls, particularly for first-time investors. Throughout the conversation, Winston highlights the importance of education and building strong community relationships as keys to success in real estate.
Winston Templet is a seasoned real estate investor, developer, and contractor with over two decades of experience in the industry. Based in Tennessee, he has built a substantial real estate portfolio, demonstrating a keen ability to identify and capitalize on lucrative opportunities in the market. Winston co-founded "The Real Estate Templet," a platform dedicated to educating and empowering individuals of varying experience levels on real estate investment and development. Winston's passion for real estate is matched by his commitment to educating the next generation of real estate professionals. It is his firm belief that education is the key to success.
Highlights/Topics: Clint’s introduction of guest Winston Templet * A reluctant real estate investor - the trailer park story * The state of investing in 2025, builds instead of buying * How Winston finds properties, sharing wealth with land sellers, partnering for success * Regulations, zoning, permits, etc. * How to approach city and municipal offices, proposing zoning changes * Key costs that must be considered - engineering fees, sprinkler systems, green energy requirements * Financing recommendations, building relationships with community lenders, cash refi’s from other properties * Selecting general contractors - it is crucial* to research, get referrals, and hire the right people, never pay money upfront! * First-timer mistakes to watch out for * Setting up protections from liability with the right business entities * Closing comments, final words of advice
Resources:Real Estate Templet on IG
https://www.instagram.com/realestatetemplet/
The Real Estate Templet On YouTube
https://www.youtube.com/@UCs57I294Kvkpwtw3PQoaXGQ
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=the-real-estate-investing-strategy-that-is-taking-off&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=the-real-estate-investing-strategy-that-is-taking-off&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Welcome to the first Tax Tuesday episode of 2025. Anderson Advisors attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., discuss topics including whether hours spent on personal and rental properties count towards real estate professional status, the tax implications of using an LLC for a brokerage account that generates short-term capital gains, and how to handle HOA dues when calculating the cost basis of a condominium. They also discuss the consequences of failing to issue a 1099 to contractors, how to navigate a tricky 1031 exchange, and strategies to minimize capital gains taxes when selling a rental property. You’ll hear about ways to structure personal and business finances for educational deductions, managing a 401(k) loan from a tax perspective, and tips for maximizing tax benefits as a 1099 medical professional.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics:* "I have a solo handyman business, do my hours performing services for homeowners and real estate investors properties count towards rep hours. Do my hours working on my residence count towards rep hours if I plan to move out and rent the house?" - Absolutely. That's exactly what you're supposed to do. That time is exactly what we're looking for to get over 750 hours of material participation in the management of your properties, et cetera. * "I am selling weekly options and was advised to put my brokerage account into an LLC taxed as a partnership. Doesn’t this expose me to the same tax liability I have now with no LLC? What is the best tax strategy for a brokerage account that is making a large profit that is all from short-term capital gains?" -No, you're not going to have the same tax liability by putting it in that type of partnership. But there's a lot of other things you can do. * "When calculating the cost basis of a condominium, how does one identify and add the portion of HOA dues spent for capital improvements to the property?" - If it's your personal residence, we don't deduct HOA costs. * "What happens if I don't issue a 1099 to an outside contractor? How do you spend a virtual assistant who made over $15,000?" - You can get penalized up to $600, perhaps more, if you don't get the 1099 out. VA’s overseas, if not a US taxpayer, you don’t need to send a 1099. * "How many properties must I acquire to meet the real estate professional status?" - The number of properties is irrelevant. You could have one, you could have a hundred. It's how much time you put into it. * "I have a rental property that I would like to sell. I purchased it in 1999 for $175, 000. The current value is $450,000–$500,000. How can I reduce capital gains taxes?" - The quick, real easy, no brainer answer, you could do a 1031-like kind of exchange. * "I'm in a 1031 exchange gone bad. The funds are with the intermediary in the escrow account. The replacement property seller did not cooperate and the deal is falling through. Now what can I do?" - Quick answer, you can pay tax. You could try and make the payments in installments. * "Can I structure and set up something through my business and nonprofit or personally that will allow me to deduct my child's college education expenses." "I'm aware of state-specific 529 programs." - You don't get a tax deduction for a 529 plan. * "I currently have a loan on my solo 401(k) and I want to pay it off early and turn around and take out another loan. How do I handle that from a tax perspective?" - You need to check with your particular plan. I just throw that out there for people who are thinking maybe of doing the same. * "I am a 1099 medical professional. What can I do from now on to properly prepare myself to maximize my tax situation? I'm on the payroll for my S-Corp and managing the 1099 income through the S Corp." "I don't know if I should be doing anything else." - Quarterly tax meetings. That's always the answer. Putting it in an S-Corp was the right thing.
Resources:
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-to-reduce-capital-gains-taxes-when-selling-a-long-held-rental-property&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=how-to-reduce-capital-gains-taxes-when-selling-a-long-held-rental-property&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
It’s our last Tax Tuesday episode of 2024! In this episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., address several listener questions on a variety of tax topics. They cover the tax implications of moving into a rental property, including how it affects capital gains and depreciation. They discuss the possibility of using an LLC as a management company for rental properties, allowing for contributions to a personal IRA. Eliot and Amanda also explain how negative cash flow from rentals can affect deductions and tax filings, the importance of staying organized with rental property expenses, and the consequences of transferring ownership in a 1031 exchange. Other topics include options for offsetting passive income with retirement accounts, consolidating LLCs under a Wyoming holding company, deductions for 529 plans, and the stepped-up basis for gifted stocks. Tune in for expert advice on these and more!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* What are the tax implications of moving into one of our rentals? Bought the property 13 years ago, have never lived in it, taken expenses and depreciation on the returns or should we just rent it from ourselves through our property manager? - Just moving in, no real tax consequence. Once you move in you’re not paying capital gains. The 13 years will be considered ‘non-conforming use’. Don’t rent it to yourself. * I own three rental properties. Can I use that LLC as a management company? Take a 10 to 15% management fee and use that money as an earned income to allow contribution to my personal IRA. Would that contribution be deducted from my rental income as cost to the rentals and Schedule E? When is the deadline for the contribution. My LLC has some expenses too. If my net income is only $3,000, can I still contribute $7,000 to my personal IRA and deduct that amount? - You’re running passive rental income through a mgmt company to make it ‘active’ income, yes you can do this. You need a management agreement that you actually pay before December 31st. * Can I use negative cash flow as a deduction towards income /capable gains? I'm in California and nothing cash flows for at least a few years. If I'm negative $1,000 or more cash flow, is this a deduction against passive income or capital gains? - Capital gains come in when you sell the property. You can pull passive losses from other properties you own. * What expenses are incurred for rental properties or tax deductible and what is the best way to stay organized when keeping records of bills and expensive for rental properties to make it easier at tax time? - Google IRS Schedule E page 1. There is a list there to refer to. Good bookkeeping is essential. * Can I transfer the ownership of a property owned by an LLC tax as a partnership that I purchased as a replacement property in a 1031 exchange or will that trigger a taxable event? - Yes you can transfer, but it will trigger a taxable event. * My wife receives income from multiple sources, real estate rental, consulting, etc. We plan to set up a C Corp to consolidate the passive income and offset some of that income with retirement contributions into a solo 401 (k). Unfortunately, we did not set up the C Corp in time for the tax year 2024. What options do we have with respect to retirement accounts to offset her passive income for 2024. What can we still do? - Consulting is not usually passive income. * Can multiple individual LLCs mix of small business and rentals be consolidated into one tax return under a Wyoming holding company? If so, is that a recommended practice? Adding in a small business? - For rentals this is a standard protection structure, one property per LLC. You can add the active, but we would not recommend it. * How much can we deduct with a 529 plan for our kids?- Some states may give you a deduction, but at the federal level there is no deduction. * If I gift my stock to my aging dad and become the beneficiary the stock when he passes will I get the stepped-up basis after I inherit them? - This is fantastic. Yes, you can do this. This is great, but they have to live for at least one year after the gift, and you have to make sure he’s actually going to leave it to you upon his death!
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/strategy-session/?utm_source=consolidating-llcs-under-a-wyoming-holding-company&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=consolidating-llcs-under-a-wyoming-holding-company&utm_medium=podcast
Bookkeeping Packages from Anderson Advisors
https://bookkeeping.andersonadvisors.com/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode of Tax Tuesday, Anderson Advisors attorneys Clint Coon, Esq., and Eliot Thomas, Esq., discuss essential tax strategies for business owners and investors. Topics covered include late S election strategies, the best approach for payroll and officer compensation, and the benefits of Solo 401(k) plans over Roth IRAs. You’ll hear about how to tackle tax implications for cryptocurrency staking, offshore trusts, and real estate professional status. Additional insights include structuring holding companies for real estate investments, deducting rental expenses, and handling business losses. Tune in for expert advice on navigating complex tax decisions.
Send your tax questions to taxtuesday@andersonadvisors.com.
Highlights/Topics: * "I'm considering a late S election effective January 1st of 2024." Okay, so we're going back in time here for an LLC. "I understand it's late in the year to get everything in order. I've heard others recommend an option to avoid payroll for 2024 by issuing a 1099 miscellaneous as officer compensation in lieu of a late payroll, then get payroll set for 2025. Would you suggest this 1099 approach, or is there still time to get payroll done for all of 2024?" - We don't advise this here at Anderson. We want you to roll the proper W-2 payroll. Yes, there's plenty of time. * “What type of businesses do I need to set up a Solo 401(k) or Roth IRA?” - Look at the Solo 401(k) and use the Roth component built into the Solo 401(k) versus doing a Roth IRA because it gives you a little more flexibility in the control of those funds. * "Can you review the contribution rules for a Solo 401(k) and for an IRA in 2024? For instance, when you defer income at year end and make a company match, then also the IRA contribution if possible?” - You can contribute up to $23,000 as the employee, and then the employer can contribute up to 25% of your earned wages * "I invested in a cryptocurrency a few years ago. I have been staking it directly on the network, and in return, I receive a staking reward. How is the crypto activity taxed?" - The staking is usually considered ordinary income. That means it's going to be taxed at ordinary rates and very likely is subject to employment taxes. * “I've been considering opening an offshore trust that owns an offshore LLC that engages in forex day trading business in the Cayman Islands. I only pay taxes on distributions received from the trust that way, I can grow capital outside the US. Am I on the right path here? And are there other consequences that I should consider?” - The way the US taxes individuals is that when we say worldwide income, it's not the income you earn in your own name. It's also the income that you earn through entities that you hold an interest in. * "I have a real estate professional status." (We call it REP status for short.) "I have invested in both traditional, rentals, and syndications, both use cost segregation and bonus depreciation. Can I claim the paper loss from real estate syndications together with our other rental activity after electing to aggregate all real estate activity? Is it allowed to claim all losses, or the ones from syndications disallowed?" - You have to work over 750 hours in a real estate trade or business that you ‘materially participate’ in. That could be I sell houses, real estate agent, things like that. I manage houses, anything like that, and that has to be over 50% of your work week. Typically, it's difficult to do if you have a W-2 job. * "I own three separate holding companies, LLC taxed as a partnership for my real estate." We'd always recommend that, some oil, and mineral rights. "A second taxed as a partnership for active real estate flips." We might have an issue with that. "S-corporation for technology consulting." "I saw Anderson videos on holding a passive brokerage account, not active trading, in an LLC for asset protection. Where do you recommend I'd place this? Would it go into one of these other LLCs or some other holding company? I would prefer to avoid an extra annual federal tax filing if possible." - I would keep it completely separate because you've got this one set up for the oil, this one set up for the real estate, this one here is our active business. Putting your brokerage, your savings account into any of those entities just wouldn't make sense to me. * "I have a primary residence that I plan to rent after one year, which would be in December. If I put it into service this year, can I deduct expenses that were needed to make it ready for that rental, such as a cost seg for this year?” - It’s a question of when it is placed into service. If we've already placed it in the services and we start, depending on what we're doing to improve on it, if it is just an improvement, that's still just going to go to basis, and we would depreciate it now that it's a rental. * “Clint recommends using a partnership holding company for residential real estate investment. "Do I need to start a new IRS filing submission with a partnership holding company or keep it on my existing Schedule E, personal IRS filing? I have 25 investment homes, so I'd like to minimize the amount of work for this change. I'm not sure how to do this accounting change." - You can write out 25 little boxes down here that all lead up to just one entity, Wyoming holding. We'll make them do all 25. * "I have a relatively new corporation whose expenses exceed income," so we've got losses. "Can these expenses be used to offset income in 2025? If so, how would I indicate this on this year's tax return?" - If we have more expenses than income, it's a loss, it can carry forward into the next year.
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=staking-crypto-how-are-rewards-taxed?&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=staking-crypto-how-are-rewards-taxed?&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
In this episode of Tax Tuesday, Anderson Advisors attorneys Eliot Thomas, Esq., and Amanda Wynalda, Esq., dive into various tax strategies. You’ll hear about renting property to your business, self-rental rules, and IRS grouping options. Then, we address the sale of a California primary residence, including the $500,000 capital gains exclusion for married couples. We’ll explore cost segregation for landlords and the 1244 stock loss provision for individuals. We also have answers about tax implications for C Corps, including reimbursement rules for accountability plans and transitioning from LLCs. Lastly, we touch on Opportunity Zones, rental property sales strategies like 1031 exchanges, and the tax impact of converting a rental to a primary residence.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* So can I rent real property to my business? - Check self-rental rules, and the ‘grouping’ option from the IRS * Just sold our primary California residents in July for a million and ninety thousand dollars. We purchased it five years ago for six hundred and fifty thousand, with three hundred thousand down and a three hundred fifty-thousand-dollar mortgage. Any taxes due considering the 121 married filing joint exclusion of five hundred000 capital gains. - We're going to look at the sales price, less our ‘adjusted basis.’ * Could you give an example about cost segregation? Have you heard? I have heard you talk a lot about it and they're kind of confused. I'm thinking about becoming a landlord. How can I do a cost segregation on, for example, the appliances that come with a purchased property? - The building itself has straight-line depreciation over many years. Contents of the building are depreciated at different rates. * Is the 1244 stock loss provision, a $50,000 tax credit, that is dollar for dollar, against your 2024 interest, social security and passive incomes on your 1040 for 2024. - 1244 is only applicable to individuals, as a deduction/loss. It reduces your taxable income. * When using the accountability plan for a C Corp, do the charges have to be made from the employee's personal account to qualify, and what happens if those charges are made on the company credit card? - The individual needs to pay for them first personally of their own pocket for a reasonable business expense, then submit for reimbursement. * We purchased our first commercial building this year. Even though I knew in the back of my mind the property was in an opportunity zone, it did not hit me until a couple days ago. Is there still an advantage for us to go into the opportunity zone route? I believe the only benefit at this point is a 10-year mark and step-up in basis. Is this correct? I believe there would be some elections we would have to make in a fund. Can you explain how it all gets set up and what we would need to do? - Once you obtain that property, a stopwatch starts, and you have 30 months to substantially improve it. You had to put the funds into the Opportunity Zone fund, which is the business entity, and then purchase the property there, not going to be able to back into it. * We are changing our LLC from being disregarded to being a C corporation. Over the year we have moved substantial money from our LLC to our personal accounts as distributions. Do we need to relabel those as dividends and would we be able to transfer the funds back, or does the C Corp election only affect forms from the date of transition, meaning we'll file a split return 1040 for a disregarded entity, 1120 for the C Corp? Thank you for all the great media you guys put out. - Nothing happens with the previous activity, but going forward you can’t take money out in the same way. * We have rental property bought originally in 1991 as our residence. The current tenants want to purchase the property. What is the best way to approach this? To lower capital gains, we are considering using the funds either to purchase another property or invest in tax liens and deeds. - You have a lot of options. Installment payments, interest from seller financing, or 1031 exchange * What are the tax implications of moving into a house that has been held as a rental for 12 years? They've never lived in it themselves. - What is your value/investment in the house? That becomes your adjusted basis when you move in, for future tax purposes. Many items are no longer deductible if they become your personal residence.
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=demystifying-cost-segregationt&utm_medium=podcast
Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
n this episode of Tax Tuesday, Anderson Advisors attorneys Eliot Thomas, Esq., and Toby Mathis, Esq., tackle a variety of listener questions. Topics include strategies for managing cryptocurrency gains, converting a primary home to a rental without losing the 121 exclusion, and navigating the primary residence exclusion when selling a home. They also discuss the benefits of forming an LLC for consulting income, handling rehab costs for a fix-and-flip property, and meeting the Real Estate Professional criteria for tax purposes. Toby and Eliot dive into depreciation recapture, 1031 exchanges, and how to structure property ownership to avoid taxable events. Tune in for expert insights on real estate and tax strategies for investors and homeowners alike.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* By crypto, I bought $125,000, $24,000 invested $30,000 is now over $1 million, scared to sell because of the 35 % tax. Hold on until $125,000, $25,000 for 20%, but I'm scared the price is in my portfolio. How can I get around the 35 % legally? - If you will have other losses from other sales, you can use those to offset in the short-term… * How do I convert my primary home into a rental without losing the 121 exclusion? - You can do this but you must meet the 5-year primary residence provision. * My wife and I are selling our primary residence. We'll be listing the house for sale before we have lived in it quite two years. But assuming that closing takes about 90 days, it'll be over two years at the closing. Will this be acceptable for using the primary residence exclusion? - The clock starts when you have the title in possession, so the clock also STOPS when the new buyer takes possession of the title. * I will be starting a consulting position in December. Is it better to create a LLC to receive wages or should I receive funds in my name? What are the benefits of creating the LLC? - If your employer agrees to pay you with 1099, you should have an S or C Corp LLC to protect your wages. * We haven't sold our fix-and-flip property After one year and are considering renting it instead How should we handle the rehab costs and office expenses and our tax return? The property is held in a disregarded LLC. - First we have to establish your “intent” - if you weren’t sure… you’re ok to leave it in that disregarded entity. * I've never been able to claim real estate professional due to a full-time W2 job. As of December 31st, 2023, I took early retirement. However, I was paid a severance until December 2024. During 2024, I have been leasing, advertising, physically rehabbing new property, responding to maintenance, etc. I'm also a licensed real estate broker in Kentucky where my properties are. I materially participate in 100 % of the rental activities. Can I claim real estate professional for 2024, even though I was being paid severance but not working my previous corporate job? - Yes, you can, as long as you meet the REP criteria. * When calculating capital gain from the sell of a rental property is the gain from the depreciated cost basis or cost basis after the depreciation recaptured. It's the gain from the recapture cost basis or cost basis. For example, I bought at $100,000, sold at $200,000, that's how you're supposed to do it, had $50,000 in depreciation. Woo. Would it be $100,000 capital gains tax plus the tax on the $50,000 depreciation recovered or $150,000 capital gains? - The first 50,000 is what's subject to depreciation recapture…the 100K is “straight capital gain” * I know it's a broad question, but would love for you guys to discuss depreciation recapture at sale after cost segregation has been formed on an investment property. If it helps, you could do, it could be a cost segregation on a pizza shop. - it depends on the different categories of whatever was in the building. * Our rental LLC owned by a Wyoming holding LLC sold a Toronto property for a huge gain. We hear all these huge gains today. Like all you guys are making money, but we plan to 1031 rates. Our qualified intermediary informed us that the replacement party property should be under the name of the same LLC that sold the property. How can we move the ownership of the 1031 new property into a new LLC without triggering a legal and /or taxable event, how can we protect the assets of the new property if we can only be under the name of the old rental LLC? We want to dissolve the old rental LLC. - if you do this properly through a qualified intermediary, that's a neutral third party that handles all the funds, you may be able to defer all the gain. * We are a group of four investors and we have an apartment rental complex, 12 units, and a separate single-family rental. We would like to exchange both of those properties and invest into a motel. Can we exchange the residential rental properties for a business real estate property? - Yes is the quick answer, must be “used in a trade or business”
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=turning-your-home-into-a-rental-keeping-your-121-exclusion-intact&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=turning-your-home-into-a-rental-keeping-your-121-exclusion-intact&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, chats with Tyler Surat of One Tree Advisors. Tyler is a seasoned expert in tax mitigation and land conservation strategies, who is helping clients utilize conservation easements to preserve land while mitigating taxes. You’ll hear the definition and benefits of conservation easements, the challenges posed by IRS scrutiny on certain easements due to misuse by "bad actors," and the importance of understanding state-specific tax laws. Tyler emphasizes the necessity of due diligence before pursuing an easement, considering factors like property registration and the differences between group and individual applications. Tune in for valuable insights into navigating the complexities of conservation strategies and tax implications.
Highlights/Topics:* Toby introduces Tyler, from CPA to CFO * What is it, and what’s covered under a ‘Conservation Easement’? * The IRS is contesting some easements from ‘bad actors’ in the real estate business * Groups vs. individuals * Is the property on a National Registry? * Tax laws in your specific state need to be considered * Audits can be a risk due to past individuals who have misused this tax break * Due diligence is essential before requesting an easement * Get in touch with Tyler at his email below with your questions * Share this with new investors you know
Resources:Connect with Tyler Surat
Email: tsurat@onetreeadvisors.com
tsurat@onetreeadvisors.com
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=conservation-easements-in-crisis&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=renting-out-a-property-without-an-llc&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode of Tax Tuesday, Anderson Advisors attorneys Eliot Thomas, Esq., and Toby Mathis, Esq., tackle a variety of listener questions related to tax deductions and property management. They discuss the implications of evicting tenants and the possibility of deducting repair costs, as well as how homeowners can deduct home office repairs. You’ll hear about the process for amending tax returns to include rental properties and explore the tax consequences of receiving large gifts from non-U.S. citizens. Additionally, they cover topics like the advantages of S-corp versus C-corp structures, the requirements for achieving real estate professional status, and the nuances of short-term property sales, including 1031 exchanges. Tune in for expert insights that could impact your tax strategy!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "We rented our house last year due to damages caused by the tenant violations of the agreement. We evicted them." "The tenant abandoned the property with their belongings." "With proper judgment and the sheriff's help, we evicted them and cleaned the property. The tenant caused too much damage. Can we include the cost of fixing it on our taxes?" - yes, and we have two categories, repairs or improvements. * "I work from home. I already take deductions for my home office. If there is a repair in the house like plumbing or an appliance repair, am I able to take a percentage of that repair off as a deduction?" - As a general matter, yes. * "In 2022, I bought and rented a rental property, but I never put the property on my tax return. Can I now add this property to my tax return and take advantage of the tax deductions, cost of ownership, et cetera? Is there a limitation on how far back someone can amend a tax return or add a rental property purchase in the past?" - yes, you can. Is there a limit to how far back? Yes, I'll hit the limit first, three years from the date that you filed. * "My parents live in Singapore and are not US citizens. They want to give me and my kids $200,000.”“They have not previously gifted us any funds. Will any of us need to pay tax on this?" - Generally speaking, I don't know of a tax necessarily if you have non-US citizens giving cash gifts over to their children or family. * "Is there a different procedure to buy a residential multifamily with a pizzeria?" "Is there a different procedure to buy a multifamily with the pizzeria running downstairs?""We have our long-term rental properties with LLC. How should we proceed with this? Can we do a cost segregation study and take bonus depreciation on this type of property and take advantage of the passive deductions?" - For both, you can go ahead and do a cost segregation study, see if it would be in your favor—usually it is * "What type of activities can I log toward REP (real estate professional) status, as a real estate agent? For example, working at home on my website, market research, advertising. Does having a home office mean my time driving to and from showings counts as time? Is education either required or optional?" - If you meet the criteria, then that turns it from passive to non-passive. if you spend over 750 hours in a particular trade or business * "What are the tax consequences if I sell a property in less than a year of purchase? Does the same apply to manufactured homes? And would they be able to do a 1031 exchange if there's profit on the sale?" - What was your intent? Was it to flip? That is a different scenario than short-term gains. Manufactured homes need to look at state laws. * "Why should I open an S-corp versus a C-corp?" - There are many differences to consider. * "Can you please explain the 100-hour material participation in detail? You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual, including individuals who didn't own any interest in the activity for the year." "For example, if I materially participated in my rental activity for 100 hours during a tax year, can I claim 100% tax deductions on my losses, expenses, and my business activity under this test alone?" - No, it doesn’t work that way. You need REP status.
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=can-you-deduct-tenant-damage-and-cleanup-costs-on-your-taxes&utm_medium=podcast
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=can-you-deduct-tenant-damage-and-cleanup-costs-on-your-taxes&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, sits down with Mike Sullivan from Alliance Virtual Offices to discuss the evolving landscape of workspaces. Mike details five compelling reasons to abandon traditional office spaces, highlighting Alliance's impressive 40 years in the industry, with 20 years dedicated to virtual solutions. The discussion demystifies the concept of a "virtual office," likening it to the 'Airbnb' of office rentals. Listeners will learn about the array of services offered, including phone support, professional addresses, receptionists, and flexible meeting spaces—all for a budget-friendly monthly cost.
Virtual offices can mitigate risks associated with rising rent and personnel disputes, providing the flexibility needed for businesses to thrive. Ideal for those navigating talent needs or seeking cost-effectiveness, Alliance also offers rental agreements that start with a six-month minimum, transitioning to month-to-month options. Tune in to discover how virtual offices can transform your business strategy!
Highlights/Topics:* Five key reasons to ditch your office space * Alliance’s 40 years in the business - 20 years virtual * Ambiguity – exactly what is a “virtual office”? * The ‘Airbnb’ of office space * Services available - phone number, operators, address, receptionist, meeting space, workspace * Monthly cost of $50-$70 per month globally * Rent on an as-needed basis, for example, attorneys are the largest percentage of renters * Mitigating risk/credit - eliminating rising monthly rent, credit, personnel disputes or conflicts, separating business from personal * Flexibility is key for hiring and cost-effectiveness * Talent needs - if employees are unable to work from home * Rental agreements - 6-month minimum, then month-to-month is available * Utilizing space for private interviews * Share this with new investors you know
Resources:Alliance Virtual Offices Offer for Listeners
https://www.alliancevirtualoffices.com/lp/anderson-advisors?gspk=YW5kZXJzb25hZHZpc29yczUyNDA&gsxid=YHqclhuYOPk8&pscd=ps.alliancevirtualoffices.com
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=5-reasons-to-ditch-traditional-office-space&utm_medium=podcast
Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
This episode of Tax Tuesday with Anderson Advisors attorneys Eliot Thomas, Esq., and Toby Mathis, Esq., tackle pressing issues faced by business owners and real estate investors. From the implications of switching health care reimbursements from a C-corporation to an LLC, to short-term rental strategies, Eliot and Toby discuss the 100-hour participation test and how to select the right property. Other topics include the intricacies of real estate professional status, the deductibility of expenses for damaged properties, and the mechanics of Qualified Business Income (QBI) deductions. Finally, listeners learn about tax management for online businesses (at 46:17) and the potential tax liabilities of renting secondary homes through an S-corp.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "I currently reimburse myself for health care expenses through my C-corporation. I have another completely separate business that I run through an LLC registered in Wyoming. Are there any issues if I switch my health care reimbursement from the C-corp over to the LLC?" - It depends- who is it disregarded to? A C-corp can reimburse health expenses. * "We want to take advantage of the short-term rental loophole strategy. If we buy a house in October and close in November, would I have enough time to reach the 100-hour test? What kind of house should we focus on?? - There are several different tests for material participation, one of them being at least 100 hours and more than anybody else. But there are 7 total tests. * "Regarding real estate professional status, the code says you have to participate 500 hours materially or have been rep for the last five years." Actually, there are seven tests, but we'll get into that. "Does that mean if a spouse has been a rep for the past five years, he or she can be hands-off for the next three to five years and still claim rep to offset the other spouse's W-2?" - Long-term rentals are passive income normally, but REP status changes that, although it has certain requirements * "We bought a small house. The house was in a fire and had a lot of damage. We spent a lot of money on structural engineering, services, roof, and other support of construction. This was needed for the safety of workers. They would not be able to work otherwise. My CPA told me I can't take any of those expenses as deductions because I have not rented the house yet. Please be so kind and tell me why I can't deduct structural engineering expenses of more than 12,000. My CPA told me I can only deduct utilities such as water and electricity. That's it." - The code is the code, you can’t deduct for a rental until it is in service…the write-off comes over cost seg * "Can you go over QBI in detail? And do I deduct 20% QBI from net or gross profit? Also, do I deduct 20% first, then my expenses, or do I choose either 20% or my expenses?" - First you find your net, then there are five different qualifications * "If I sell a house on an agreement for deed, how are the monthly payments that I receive taxed?" - If you used it as a rental, you’ll have depreciation recapture. “For deed” means you’re selling it over time. * [46:17] "I'm considering starting an online business. I'd like to know strategies and how to manage taxes as best as possible."- Start by putting it in an LLC, tax it as S or C-Corp, be aware of state requirements… * "Could I have my S-corp rent my secondary home when the business takes clients on retreat? While this may create an expense on the business side, does it also create a tax liability on our 1040?" - How is the second home currently being used? If it's already a rental, you may hit some limitations… * "Does changing the floor and painting the walls count as repair, or is it a renovation?" - Painting is usually a repair, you can write that off. Flooring has other requirements. * "Can I take a six-figure distribution from my S-corp and have it not affect my social security? If the corporation shows a profit and I'm the CFO, will this affect my social security?" You have to take a reasonable wage in order to get that credit.
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=tax-strategies-and-tips-for-starting-an-online-business&utm_medium=podcast
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https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=tax-strategies-and-tips-for-starting-an-online-business&utm_medium=podcast
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode of Tax Tuesday with Anderson Advisors attorneys Eliot Thomas, Esq., and Amanda Wynalda, Esq., we dive into essential real estate investment strategies and tax implications for property owners. Discover why selling a rental property to your LLC is considered a prohibited transaction and learn how to protect capital gains from your primary residence using the 121 exclusion. We discuss the limitations of 1031 exchanges for properties flipped within a year and outline how to determine a reasonable salary from your S-Corp while considering payroll taxes. Additionally, we clarify the requirements for maintaining real estate professional status, the treatment of capital gains within an S-Corp, and the nuances of deductions for short-term rentals. Tune in for valuable insights to optimize your investments!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* I just purchased a property through a self-directed IRA and LLC. I own a rental property. Will I be able to sell the rental property to my LLC? - No, you cannot personally benefit, this is a prohibited transaction. * How can I protect the capital gains from selling my primary residence after adjusting the cost basis? And after taking the 121 exclusion and utilizing that money for investment purposes. - If the home was used as a personal residence for two of the last five years, you might be able to take some money off - it's 250,000 if you're single, 500,000 married filing joint. * Can I use the 1031 exchange when flipping properties under one year of ownership? - The IRS looks at the property as “inventory.” So although it is being used in a ‘trade or business’ you can’t use the 1031. * How do you determine the right pay for yourself? Is it worth the taxes you pay into Medicare and Social Security? So far, we've paid $30,000 in payroll taxes. Will that go towards our tax bill at the end of the year? - You have a ‘reasonable salary requirement’ from an S-Corp. It ranges from 38% to 60%. * What minimum must you do to maintain your real estate professional status and not be considered a dealer if you intend to flip a house? - REP status is when you spend 50% of your personal services time and at least 750 hours in your real estate trade or business. * What happens with the capital gain from stocks or from the sale of a rental property when inside of an S-Corp? - It is not ‘ordinary income’- the building is under “separately stated”. * What is the list of deductions with a STR that's a short-term rental for those of you in the know in the REI, as passive income when material participation is not met compared to a list of deductions when material participation is met? - There is no difference between passive and non-passive deductions. Google IRS PDF Schedule E. * If I volunteer my work or time at a nonprofit, is this tax-deductible? - the short answer is no, but you can deduct things like mileage * I have a W-2 and 1099 income. Bought a house to flip. How can I best take advantage of this financially to save on tax? - you may be able to run certain deductions against your income. * How does rental property via an LLC affect personal taxes? - we get this question all the time recently. Set up in a disregarded LLC, no impact at all on your personal taxes.
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Today Clint Coons, Esq., speaks with Aaron Kancevicius, the Lead 1031 Advisor/Director of Lending at Plenti Financial. Aaron takes us through the ins and outs of navigating the IRS’ 1031 exchange guidelines for investment properties.
Today Clint Coons, Esq., speaks with Aaron Kancevicius, the Lead 1031 Advisor/Director of Lending at Plenti Financial. Aaron takes us through the ins and outs of navigating the IRS’ 1031 exchange guidelines for investment properties. Aaron and Clint discuss the essentials of setting up a 1031 exchange, the importance of consulting with a CPA, and the necessity of a qualified intermediary. Aaron clarifies the complexities of depreciation, depreciation recapture, and the "like-kind" property rule. He outlines the critical timelines, including the 45-day identification and 180-day closing periods, offering tips for effective portfolio diversification. Additionally, you’ll hear advanced strategies like standard and reverse exchanges and transitioning properties to personal residences, making this episode invaluable for serious real estate investors.
Aaron Kancevicius is from Plenti Financial, a leading 1031 exchange consulting firm in Southern California with over 20 years of experience in real estate finance. Aaron has helped countless real estate investors evaluate deals from as little as $100K to over $100 million.
Highlights/Topics:* Clint’s introduction of guest Aaron Kancevicius * How you can arrange for a 1031 exchange * When in the process do you need to apply for a 1031? * Debt, loans, timing * Parameters for avoiding capital gains taxes * Are there complications with cost segs on properties? * Complexities of the “Like/Kind” IRS regulation * Diversifying with a 1031, limitations * Working with contractors on improvements * Related party transactions * Cash-out refi’s * Considering exchanges from US to International * Drop-n-Swaps, reverse exchanges, selling multiple properties, combo exchanges * Can you use a 1031 to purchase a primary residence vs. an investment properties? * Other uncommon situations, mistakes Aaron has witnessed * Closing comments - contact an expert before you embark on a 1031 exchange
Resources:Plenti Financial
https://www.startmyexchange.com/anderson
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=1031-exchange-for-real-estate-Investors-HUGE-TAX-SAVINGS&utm_medium=podcast
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https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In this episode of Tax Tuesday with Anderson Advisors attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., the pressing tax questions from listeners have a special focus on real estate issues. They dive into the complexities of tax benefits for short-term and long-term rental properties, addressing specific monetary scenarios. Toby and Eliot also explore the nuances of passive losses and real estate professional status, evaluating how a limited partnership investment and syndications impact tax strategies. Additionally, they clarify the effects of installment sales on capital gains tax, the tax implications of long-term capital gains for incomes below $93,000, and strategies for reducing tax liability as a real estate flipper. You’ll hear about the mechanics of 1031 exchanges, the use of solar credits against passive income, and the treatment of repairs versus improvements on rental properties. Tune in for expert advice on optimizing your tax situation in the real estate world.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "Professor One has three short-term rentals, seven days or less." "He generates $20,000 of profit from each one, but each generates $60,000 of losses, cost seg plus bonus depreciation." "Can he use 20% QBI?" that's 199A. "Can you use it on the $20,000 profits, or will those be offset by the $60,000 losses, and the net will be $40,000 each?" –We can't. We have to take in the $60,000 loss that's associated with each of those buildings. We don't take QBI against the loss. No, QBI would not be available here. * "Professor Two has four long term rentals, and he used line depreciation for all of them." "His wife is a real estate professional, but there's not enough losses to offset his $300,000 grand in income. The CPA suggests putting $200,000 in a syndication as an LP. K1 will generate $150,000 of losses. As long as his wife is REP, he can use those passive losses to offset his W-2. Is that true?" – Because we're introducing a syndication, and this is a limited partner, that's the LP here at K-1, we're going to have to meet that test, the 500-hour test. In other words, to get our REP status, if we didn't use the 500-hour test, we may not be able to do that. That's why I say it depends. * "Professor Three has one passive long-term rental and just bought two short-term rentals with seven days or less with cost seg plus bonus depreciation. Next year, 2025, his wife plans to retire and claim real estate professional status. The plan is to keep those short-term rentals as Airbnb with eight days or more, a.k.a passive, and keep the long-term rental as is. The first question is, can the wife manage, clean those Airbnbs and claim the 750 hours without touching the third long-term rental that is far away and group them all together?" – I'm going to say no, because remember, a short-term rental isn't rental activity. It's the pizza shop, okay, that Toby keeps talking about. But we have other ideas. * “The second question is whether we can still use the losses from the cost seg we conducted on those two short-term rentals this year." – Losses will stay passive into the future, so no. * "I have a question about capital gains tax. I'm selling a property with an installment payment plan. Only two installments to be received. The first will be received December of 2024, the second and last payment will be January 2025. How will this affect my capital gains tax?" – Simplistically, it's just going to split them. * "Paying tax on real estate long-term gain. If my net income is under $93,000 in 2024, will I owe taxes on long-term capital gains from the sale of real estate, a vacation rental? The gain itself is over $93,000." – if you are below approximately $94,000 in 2024, it's going to be taxed at zero. * "How do I reduce my tax liability as a flipper?" – Do it in a C-Corp or S-Corp, besides just immediate tax deductions, we want to avoid dealer status. * Reverse exchange 1031. "Please help us understand it. How do I choose a QI, which stands for qualified intermediary? Any recommendations for first-time 1031 exchangers?" – you're first buying the replacement property and then you're deciding within 45 days which you're going to give up. And so it's just the opposite direction. You have 108 days total from close to close. * "Is it possible to use solar credits against passive income from real estate rent income?” – Yes. You can have a solar credit. You could do it on your personal home, which would create an ordinary loss. The nature of the activity that the solar is attached to might have something to do with its tax treatment. * "How do you determine if a repair and a rental property can be treated as an expense in the current year or must be depreciated?" – If you're making the property more valuable by doing it, that's not a repair. You're making it more valuable. * "Hi, my husband and I want to sell a new construction home business to become full-time investors and manage our five large commercial properties. In the past, we've had real estate professional status because we self-managed our commercial properties. If we sell our construction business, do we still qualify for rep status if we start a management company to manage our commercial properties and earn W-2 income from this new company? What type of entity would be best to set up a management company, LLC, S-corp, or C-corp? – using that management company that you own yourself, certainly you can use that towards your time.
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In this episode, Toby Mathis, Esq., of Anderson Business Advisors, sits down with Brent Nagy, a highly accomplished real estate investor with over 20 years in the industry. Brent, who retired by the age of 40 with a portfolio of more than 50 cash-flowing properties, shares his expertise around the critical importance of proper asset protection, cautioning against owning real estate outside of a formal LLC or entity. He discusses common pitfalls and liability issues associated with residential properties, highlighting that a well-structured investment strategy can significantly reduce stress and risk. With a wealth of experience, Brent underscores that good intentions alone are not enough—talking to other investors and understanding protection as a vital cost of doing business is essential for long-term success.
Highlights/Topics:* Toby introduces Brent, his back story and progression * Making money passively, “Rich Dad Poor Dad”, becoming an investor * Owning real estate outside of an LLC or entity - NEVER * Proper structure and proper protection is paramount for investing in real estate * Residential properties - liability examples and faulty advice * So much stress can be avoided with the right structure in place * Good intentions can never trump experience * Talk to other investors, protection is the ‘cost of doing business’ * Share this with new investors you know
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Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
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Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., answer listener questions with a focus on various strategies for minimizing estate and income taxes. You’ll hear about how to use non-profits or irrevocable trusts to avoid estate taxes, structuring an assisted care business with asset protection strategies, and setting up single-member LLCs taxed as S-Corps. For short-term rental tax deductions, it's clarified that a property can’t serve both vacation and business purposes. The questions also address investment in qualified opportunity zones or QOZ’s, 1099 tax options for truck drivers and other independent contractors, deducting home improvement costs, and alternatives to 1031 exchanges.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* What is the best way to avoid estate tax? - Setting up a non-profit, or an irrevocable trust. Currently, only estates over $13 million get a federal tax * I'm a nurse. I'm interested in starting an assisted care business in my home. Any recommendations to use for taxes or startup strategies? - Focus on asset protection - separate your building vs. operations in an LLC. You’ll need good insurance and other protections for anyone coming into your home. * My wife has a single-member LLC engineering firm and it's taxed as an SCorp. I plan to open my own business. Would I be able to open my own single-member LLC tax as an S -Corp? My CPA advised me to run my business through hers so that only one 1120S is filed. - Yes to the SCorp and NO to running through your wife’s LLC. If you get sued someone can take everything from you. * Can I use my vacation home as a short-term rental to tax write-off? So how do we do that? - it's either vacation or it's business, you don't do both, okay? * I hear a lot about seven average days, but there is a lot of confusion behind those seven days. - The only reason there's confusion is because people don't know how to read the regs… * I’ve realized capital gains from an installment sale in 2023. I've not received capital gains up to my basis yet. I will have a chunk every year up to the next five years. Can I still invest in a qualified opportunity zone? - QOZ’s are ending at the end of 2026 * I would like to focus on 1099-related options. I'm a truck driver, and I feel I'm paying very high taxes. - This is broader than just truckers, but don’t start a sole proprietorship, try a C or S- Corp to cut down employment taxes. * Sold our investment property in 2023, which was previously our residence for 10 years. When we started renting out our property about five years ago, our CPA did not advise us on updating the cost basis because you don't. Right. We have done many upgrades to the house during the 10-year stay. So this year, when we file our taxes and report the sale, we will be using the initial cost basis for the home. My question is, any way to deduct the expenses we had when it was our residence? - See form 315 to capture that missed depreciation. * I see different ads from others saying there are options other than a 1031 exchange to defer taxes. Looking for any viable options, please. - We can look for UPREITS, Umbrella, partnership, real estate investment trust, things like that. * Being a senior over 70, I really enjoy the videos I watch on YouTube as it's never too late to learn and try to understand real estate investing in taxes. But even if I do pick up some of the things, I still would need experts to do the job for me. What would it cost for Anderson's group to follow my future investments? I want to do this for my daughter who is now in her second year of college. - If you want turn-key investing, come to infinity investing
Resources:How to Avoid Taxes When Selling Your Rental Property
Infinity Investing
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Tax and Asset Protection Events
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Toby Mathis YouTube
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In this episode of Anderson Business Advisors, Toby Mathis, Esq., speaks with Jeff Mason and Chris Hammond from Redwood Retirement on the intricacies of $100,000+ cash balance retirement plans, focusing on how innovative solutions can benefit business owners. They explore the key aspects of these plans, including what can be paid and deducted, the hurdles involved, and the flexibility they offer. The discussion covers the effectiveness of Redwood's solutions, highlighting when payments are due for the tax year and showcasing best-case examples of significant tax savings achieved through cash balance plans. Chris and Jeff also clarify the differences between Cash Balance Plans and Defined Benefit Plans, explain the limits and maximum contributions, and introduce a sample plan for effective modeling. With insights into flexibility, payroll funding, and real-world case study outcomes, this episode is a comprehensive guide to leveraging cash balance plans for optimal retirement planning and tax efficiency.
Highlights/Topics:* Chris and Jeff intro, Redwood Retirement and their cash balance plans * Liability - what you can pay and deduct, hurdles, flexibility * Redwood’s solutions, proof of effectiveness * When are payments due for the tax year? * Best case examples of cash balance plans and their tax savings * Definitions and differences - Cash Balance Plan vs. Defined Benefit Plan * Limits and maximum contributions * Modeling a ‘Toby Mathis plan’ * What all this means for business owners * Flexibility, funding with payroll * Favorite case study outcomes * If you want to speak with Jeff and Chris - click the link below to see if their services can help you!
Resources:Do you want to discuss if a Redwood Retirement Cash Balance Plan Design is right for your company?
👉 Visit: https://redwoodrs.com/tobypodcast
https://redwoodrs.com/tobypodcast
Email Jeff Mason
jmason@redwoodrs.com
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In this episode, Toby Mathis, Esq., of Anderson Business Advisors welcomes Erik Dodds- a seasoned financial planner, fiduciary, and active trader. Together, they delve into the anticipated pivot of the Federal Reserve from a hawkish to a dovish stance and its potential impacts on the market.
In this episode, Toby Mathis, Esq., of Anderson Business Advisors welcomes Erik Dodds- a seasoned financial planner, fiduciary, and active trader. Together, they delve into the anticipated pivot of the Federal Reserve from a hawkish to a dovish stance and its potential impacts on the market. Erik provides an in-depth analysis of historical trends and recent economic indicators to forecast future market movements, particularly focusing on the S&P 500 and its ETF proxy, SPY. He shares valuable investment strategies for both traders and long-term investors, including the use of covered calls, caller strategies, and understanding option Delta for optimizing strike selection and income generation. To stay informed and proactive, Dodds offers insights on how to prepare your portfolios for financial fluctuations and maximize returns amidst market volatility.
Highlights/Topics:* Toby introduces Erik Dodds to discuss the Federal Reserve's pivot * What a Fed pivot involves, shifting interest rates * Fed's current interest rate status and lack of recent changes * Rate cuts might appear in September or December 2024 * Market expectations for Fed rate cuts fluctuate with economic data * Historical Fed pivots often lead to market downturns * Options strategies can protect portfolios during market declines * Wealthy individuals are most impacted by market volatility * Long-term investors should focus on portfolio protection and consistent buying * Advice for investors on protecting portfolios and managing risk
Resources:Join our FREE Infinity Investing Basic Membership and get a complimentary digital copy of the Infinity Investing book!
https://infinityinvesting.com/pricing/?utm_source=how-the-federal-pivot-could-shake-up-the-stock-market&utm_medium=podcast
Schedule Your FREE Consultation
https://andersonadvisors.com/strategy-session/?utm_source=how-the-federal-pivot-could-shake-up-the-stock-market&utm_medium=podcast
MarketWatch Article
https://www.marketwatch.com/livecoverage/stock-market-today-s-p-500-futures-inch-higher-as-ai-frenzy-continues/card/stocks-fell-21-on-average-after-first-fed-rate-cut-since-the-1970s-says-comerica-xr9yBoZ9PeIkFpOeqfE8
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Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., answer listener questions with a focus on optimizing tax outcomes for real estate investors and crypto enthusiasts. We explore strategies for handling income through complex entity structures, such as using an LLC and a C-corp to manage staking income and fund a 401(k). We also discuss the timing of LLC formation for crypto investments and how flipping houses can be structured within a C-corp or S-corp to minimize taxes. Listeners will learn about managing losses on short-term rental cabins, the implications of renting out a portion of your home, and the nuances of filing multiple LLC tax returns. Plus, we address how to handle passive losses if you're a real estate professional.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "As a tax strategy, let's say let's say I set up a trading LLC entity and a C-corp entity that owns 49% of the trading LLC. If the trading LLC makes around $10,000 in staking income, and the C-corp gets its $4900 as a partner in the trading LLC, then can the $4900 be used to fund a 401(k) owned by the C-corp? Is the income considered earned income or ordinary income? If it is ordinary income, can it be used to fund a 401(k)?" - By doing this, putting in the structures, we kept $4900 off the personal return. That's a victory. * "I currently invest in crypto. I anticipate selling some of it sometime in 2025 with gain over a hundred thousand dollars or perhaps far greater." It's crypto. You could quadruple in a day. "What would be the best move for me right now? If I were to create my LLC, would I be taxed when I moved my crypto to the wallet for the LLC, all crypto would've been bought more than a year prior to selling? Should I create an LLC this year or wait until next? - If this was just a disregarded LLC, meaning it doesn't file its own tax return, it's basically that taxpayer, either way, when we put the money in, it's not taxable. * "How do I save taxes on flipping houses? We have three houses we are flipping in the next few months." "How can we reduce the taxable income on these properties?" - We often would put our flipping activity maybe in a C-corporation, possibly an S-corporation. Why? A lot of ways to mitigate taxes with reimbursements, corporate meetings, wages that you use to contribute to a retirement plan. * "I bought a short-term rental cabin in May of 2022 using 1031 funds. Rentals are beyond disappointing at this point. If we sell for at least $200,000 loss more than the gain on the 1031 funds, how does this play out regarding taxes?" - we may not know exactly what our loss is. Let's just assume we do have that loss. When we have losses, one thing we don't have to worry about is depreciation recapture because we have no gains. * "I have multiple LLCs. Do I have to file multiple tax returns?" - it depends on how the LLC is taxed. If it's a disregarded entity, means it doesn't file a return. If I have seven LLCs and you're doing seven different tax returns, that doesn't make a lot of sense when you could set up a single entity to own them all. * "I've had my primary residence for the past 21 years. If I rent it for three years or more and sell it, would I be taxed on the depreciation I take over those 3 years, or would it be included in the 121 exclusion?" - If it was exactly three years, then they could take advantage of that 121 if they were to sell it and maybe even 1031. * "If I have a two-level house and I live in the upper level but Airbnb on the lower level, can I deduct the depreciation repair management of the lower level? Does it need to be a legal unit and have its own address?" Same question, but what if it was a long-term rental? - Because you have rental income coming in, you will be able to take these expenses - the depreciation, repair, and management. It's just a matter of how much. * "If I am a real estate professional with over 750 hours actively acquiring properties, and I sell my other long-term rentals non-real estate investments, such as stocks, private equity, and venture capital investments, can the losses from my active or passive real estate investments offset gains on my other long term non-real estate investments?" - if you have passive income, it's passive income. If you have losses, it's passive losses. You can only use the passive losses to offset other passive income. So you may get losses trapped. We call it suspended passive activity loss rules.
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Today Toby Mathis, Esq. speaks with Lauren Robins, Esq., a senior real estate attorney with Anderson Advisors, about helping savvy investors use land trusts in the right scenarios. Lauren explains how land trusts act as a versatile tool for investors, likening them to a ‘Swiss army knife’ due to their broad range of applications. We explore what land trusts can and can’t do, including the intricacies of trust ownership and beneficiary roles. Lauren details how land trusts can help avoid unnecessary taxes, clarify sale clauses, and offer homestead exemption benefits. We also discuss equity stripping and how land trusts serve as a protective measure for investment properties. Additionally, Lauren sheds light on the Garn-St. Germain Act and how land trusts can be utilized effectively for flips, wholesaling, and ‘subject to’ deals.
Highlights/Topics:* Land trusts - a ‘Swiss army knife’ for investments * What land trusts can and can’t do * Trust ownership, beneficiaries * How land trusts can be useful * Avoiding unnecessary taxes, sale clause confusion * Homestead exemption benefits * Equity stripping * Land trusts as protection for investment properties * The Garn-St. Germain Act * Using land trusts for flips, wholesaling, and ‘subject to’ deals * Not all investors know about this extremely useful tool * Share this episode with someone who might be interested!
Resources:Schedule your FREE consultation
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Anderson Advisors Podcast
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Toby Mathis YouTube
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Today Toby Mathis, Esq. speaks with Karim Hanafy, Esq., a leading expert on non-profit law at Anderson, to explore the intricacies of starting and managing a charity, be it a public or private organization. Karim shares invaluable insights on navigating IRS regulations, the differences between public and private charities, and the implications of donations and tax deductions. The conversation delves into privacy concerns for board members and family, the challenges of fundraising for public charities, and the complexities of annual filing and reporting requirements. Karim also discusses potential tax burdens, dissolution clauses, and prohibited transactions. Tune in for expert advice on effectively starting, running, and sustaining charitable organizations.
Highlights/Topics:* Get advice from someone who knows the IRS, like Karim * Examining reasons for starting a charity * Donations and tax deductions - public vs. private * Privacy concerns - board members, family * Dealing with making donations - public vs foundation * Potential tax burdens and rates * Dissolution clauses * Fundraising can be a challenge in public charities * Annual filing and reporting requirements * Prohibited transactions * Private operating foundations - museums * Share this episode with someone who might be interested!
Resources:Schedule your FREE consultation
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Anderson Advisors Podcast
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Toby Mathis YouTube
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Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., delve into listener questions including - how gains from crypto investments are classified as either ordinary income or capital gains. For property sales, we explore strategies to avoid capital gains tax, such as donating to a private foundation, and we clarify the impact of marriage timing on capital gains claims. We also cover tax implications for rental property expenses, including the timing of write-offs for losses and the criteria for short-term rental deductions. Additionally, we touch on medical reimbursements for C-corps, renovations for Airbnb setups, and backdoor Roth IRAs.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics: "What are the basic principles to keep in mind with gains derived from investing in crypto?" - gains from a “personal asset” need to be identified as ordinary income or capital gains * "Is there a legal way to sell a property through a charity to avoid a capital gain and have the charity provide us with a small monthly retirement amount?" - If you already have a private foundation, you could still do this transaction as long as you gave* the property to the private foundation. * "My fiance and I purchased a property together. He is selling his property that he has owned for over 10 years. We are not married yet, but intend to get married this year. If we get married after he sells his property, can we still claim status for capital gains? He will have a significant amount of capital gains on his property. His property will sell in August, and we weren’t going to get married till October. We just want to make sure we’re okay to claim status for capital gains." - I think what we're getting at here is the 121 exclusion, if you meet the criteria. * "I purchased a duplex and we’ll list it as a short-term rental in August." I want to buy furniture and supplies and do both major and minor repairs before the listing is active. Can I write off these expenses before the Airbnb listing is active?" - Generally speaking, no, you're not going to write it off before it's active. * "I bought an investment property for $260,000. It’s only worth $200,000. If I sell it, can I take a $60,000 loss?" - If we bought it as investment, maybe it was a flip or something like that, we can take it as an ordinary loss. * "For short-term qualification, do we need to add it to Airbnb or Vrbo, or can we just rent it out to friends and family for three rentals of less than a week and still qualify for the deduction?" If yes, how do we show proof?” - there's no requirement that you specifically set up an Airbnb or VRBO, but you can’t rent to friends and family or “related parties” - that’s personal use. * "Can you reimburse medical costs if organized as a C-corp?" - Simple answer, yes, if you have a medical reimbursement plan. * "Can I make renovations to my personal residence to establish an Airbnb and write off the costs?" - yes you can, depreciated over time. It must be in service to deduct. * "What is a backdoor Roth?" - You can put it in the Roth after you pay taxes on it, if you make an income over the typical limit for Roth contributions. * "What is a good way to plan when converting a primary residence into a rental property and have a tax-wise setup for the transition? Do we sell the property to the LLC or transfer sign the loan to the LLC? How will the capital gains be treated?" - you could do either one.
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Toby Mathis YouTube
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In this episode, Toby Mathis of Anderson Business Advisors welcomes Neal Bawa back to the show for another eye-opening appearance. Neal is the founder and CEO of Grocapitus, a commercial real estate investment company, and CEO of MultifamilyU, an apartment investing education company.
In this episode, Toby Mathis of Anderson Business Advisors welcomes Neal Bawa back to the show for another eye-opening appearance. Neal is the founder and CEO of Grocapitus, a commercial real estate investment company, and CEO of MultifamilyU, an apartment investing education company.
Neal reports some jaw-dropping stats: 18 million families are priced out of homeownership due to salary versus mortgage disparities. Landlords are poised with a peak supply of 673,000 apartments in 2024, but the market will experience a shortage and price hikes in 2025-2026. The Federal Reserve's interest rate policies aim to balance inflation and affordability concerns, potentially influencing market dynamics. Investors are advised to target multifamily properties and land purchases, focusing on 5-unit properties over smaller units and considering assumable loans for strategic advantages in the current market landscape.
Highlights/Topics:* Market progress since Covid * Increases - Salaries vs. Mortgages * 18 million families have been priced out of home ownership * Opportunities for landlords - supply is peaking - 673,000 apartments in 2024 * 2025-2026 will see extreme apartment shortages and price hikes * Interest rates and the Fed * Inflation vs. rate cuts, affordability may improve * Possible zig-zagging market price fluctuations * What should investors do “right now”? * Current advantages in the multi-family market, land purchases * Why you should be looking at 5-unit properties, not 1-4 units * Look for assumable loans * Time is your friend in today’s market
Resources:Gro Capitus Website
https://www.grocapitus.com/
MultiFamily Website
https://multifamilyu.com/
Watch Neal Bawa “Feds Broke the Bank- Is Real Estate Safe?” March 2023
https://www.youtube.com/watch?v=v-zObxj7NPk
Anderson Advisors
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Anderson Advisors on YouTube
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Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Welcome to another episode of Tax Tuesday. Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., delve into listener questions around various tax and business strategy questions. Topics include the active vs. passive income classification for S-corp distributions in a physical therapy home health business, the optimal timing for cost segregation and bonus depreciation in short-term rental activities, and the tax implications of transitioning from short to long-term rentals. Other discussions delved into Opportunity Zones, S-corp taxation for owner draws, classification of employees, IRA to foundation transfers, tax-saving strategies for property flips, overlooked investor deductions, 1031 exchanges for rental properties, and the feasibility of lease options in Roth IRAs.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* "We are starting an S-corporation for physical therapy home health business. My wife and I will be the only shareholders. My wife will run the business and see patients. I only plan to invest into the business. We'll be a limited partner. Will my distributions from the S-corp be considered as passive income since I am not materially participating in the business?" - No. It's all going to be active income. * "If you started short-term rental activity in November 2023 when the property was purchased, can you use cost segregation and bonus depreciation in 2023, or is it still better to wait until 2024?" - more than likely, you're going to be better off in 2023. * "If I buy a house in September, use it as a short-term rental for a month until October, and then do long-term rental starting in November for the STR, short-term rental, I or my spouse will actively manage the property, can I still take the bonus depreciation in first year and offset my W-2 income?" - It's all going to look at how much time did you rent it and what was the average stay. * "If I put money into an opportunity zone and then sell after 10 years, does it all come out tax-free or just any growth? - If you've had capital gains, you sold some stock, sold some property, you have true capital gains, you can invest them in what's called an Opportunity zone fund. * "If you are an S-corporation and pay yourself a regular salary, but also take money from what Intuit calls ‘owner draw’, how is that taxed?" * "Do all employees have to be W-2 employees under an S-corp, or can they be contractors?" - the W -2, as we pointed out earlier, that's going to be subject to employment tax. All of this income is subject to income tax, whatever your bracket's at, both streams. * "Can an IRA balance be transferred to a foundation tax-free and also allow the owner a tax deduction? Can I create the foundation and operate the foundation receiving the contribution?" - there's two ways to do it. I receive the money, pay tax on it, then contribute to a charity and I would take a deduction. Or I could put up to $100,000 a year of my distributions directly into the charity and now I don't pay tax on it, * "We sold our first flip at the beginning of the year and would like to know if there is any way at this moment to save as much as possible from being taxed, i.e. invested in the next flip or something else to avoid the "loss". Also, if we have a loss for our S-corp in 2023, could we see that capital gain to be offset in 2024?" -it's easy to get these things kind of mixed up. Flips are ordinary income, not capital gains. * "What are typical operating and general expenses you've seen overlooked when investors file deductions?" - The way you avoid missing deductions is you have good bookkeeping, okay? * "Can I move into a rental house I have for 15 years? Does it still qualify for a 1031 at a later date? I assume you mean when you move into it, it says a primary residence. Does it qualify for a 121 exclusion after two years?" - if we've moved into it, I'm assuming we made it our primary residence, it's no longer in a trader business, So you lose 1031 capability. 121 is for a personal residence. * "Can you do a lease option assignment in a Roth IRA? Can you do a sandwich lease option in a Roth IRA?" - Yes and yes. if we have a true option, true sandwich leases option, my understanding is yes, you can do them.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/
Tax and Asset Protection Events
https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today Clint Coons, Esq., speaks with Christian Allen and Rod Zabriskie from Money Insights about the strategic use of life insurance policies for real estate investments. Learn how to maximize your financial resources by putting money to work through optimized contributions and leveraging the tax-free advantages of life insurance. Explore the flexibility of funding ranges tailored to your goals and discover how quickly you can access funds. Understand the process of taking loans from your policy to invest and the impact of simple versus compounding interest.
Christian Allen is the founder and CEO of Money Insights. He launched Money Insights in 2014 after working in the financial services industry for over a decade. Christian’s mission is to help high-income earners accelerate their wealth building, optimize their investing, and find new and innovative ways to go from high income to high net worth! He is passionate about entrepreneurship and helping others. He enjoys playing pickleball, watching sports, and spending time with his wife and children.
Rod Zabriskie is the President of Money Insights working directly with clients and the team to create an enjoyable environment for all. He has worked in financial services since 2009, after a decade of working in small businesses for others. He holds an MBA, with an emphasis in entrepreneurship, as well as an undergraduate degree in Marketing Communications. Rod is married to Jodi, and they have 7 amazing children.
Highlights/Topics: Don’t just save money to invest, put it to work * Utilizing the tax code, life insurance as a vehicle * Optimizing contributions to your policy * Flexibility - creating funding ranges for a policy * How soon can someone access these funds? * How to take out a loan from your insurance policy to invest * Simple v Compounding interest in this scenario * Examples of how this concept can work and ‘what if’s’ * Utilize up to 95% of your policy amount - think of it as a line of credit! * Money Insights can easily* help you structure these setups * Tax-free benefits * Phase two of the investment optimizer - creating tax-free income * What happens if you actually DIE? * Case study - wild client story * Contact Money Insights to get started
Resources:Money Insights
https://moneyinsightsgroup.com/aba
Schedule Your FREE Consultation
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=the-most-profitable-self-storage-investing-strategy
Tax and Asset Protection Events
https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Anderson Advisors Tax Planning Appointment
https://andersonadvisors.com/ss/
Today, attorneys Toby Mathis, Esq., and Amanda Wynalda, Esq., delve into listener questions around topics like the benefits of LLCs for real estate investors, income-shifting tactics, and the implications of the Tax Cuts and Jobs Act on small business owners. The conversation also delves into the complexities of Qualified Business Income (QBI) deductions, using self-directed IRAs for real estate investments, and the tax implications of transferring appreciated property into LLCs. Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* Have you attended an in-person or virtual Tax and Asset Protection Workshops? * Anderson Advisors has done a great job of creating all the pieces of my estate, but I have no idea how to put it all together. All right, that's a great first one. In particular, how do the holding LLCs flow into my personal tax return and how does the LLC tax as a C-corp get reported on my personal returns? - if your entire structure is disregarded and you're reporting your rental properties on your Schedule E, page one, you would continue to report that exact same thing on Schedule E, page one. * Can I expense my breeding stock as a dog breeder rather than do depreciation? - They have a seven-year useful life, as “business property” * Can you please speak about QBI and how it is often missed by business owners? W-2 employees are not allowed to use it. Who else? On the one hand, S-Corps can claim 20% right away. Is this true? - C-corps are separate entities, this is geared to the small business owner * As a real estate professional, can I also take the depreciation expense from syndications? * How do I use my self-directed IRA to invest in real estate? - if you have a self-directed, then you can invest in what's considered, I guess, non-traditional types of investments, including real estate * What is the tax impact of moving an appreciated property into a LLC? - you have like four choices disregarded partnership, S-corp, C-corp. But there's no such thing as LLCs for tax purposes. So we need to know a little more information. * What are the differences between an HSA and an HRA Health? - HSA is a health savings account and an HRA is a health reimbursement account. So there's actually a number of differences. * I have been depreciating my rentals for tax purposes. How can I benefit or switch to cost segregation? - They're business property and so residential real estate is depreciated on a 271/2 year useful life and commercial is 39 years. * How should I set up my stock investing to avoid huge tax penalties? Penalties, yeah, don't worry about the penalties, it's the tax liabilities of making too much money. * Do you have to be an LLC to get all the tax benefits from purchasing investment properties? - If we're talking about all the tax benefits, probably. But you don't have to have an LLC to own rental property.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=how-to-use-your-self-directed-ira-for-real-estate-investing
Tax and Asset Protection Events
https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Have you ever worried about protecting your wealth during a volatile election year? Wondering what the rest of 2024 holds for the market? In this episode, Toby Mathis, Esq. chats with Kevin Simpson, founder and chief investment officer of Capital Wealth Planning, LLC. Kevin is a $10.3 billion wealth management expert, and shares insights from his book "Walk Toward Wealth" on navigating market uncertainty. Learn how to manage risk, write covered calls to hedge against volatility, and discover the surprising truth about election year performance. Kevin will also delve into the Madoff scandal, helping you identify a trustworthy custodian for your hard-earned money. Don't miss this opportunity to gain valuable advice and protect your financial future!
Highlights/Topics:* Market volatility in an election year * Predictions for the market through the end of 2024 * What’s driving the earnings? * Statistics around the economy * Capital Wealth manages $10.3 Billion * Managing risk * Writing covered calls, managing volatility * How presidential elections affect the market * Stories from Kevin’s book “Walk Toward Wealth” * What duty should you be looking for? * The Madoff scheme, finding a reputable custodian * Advice for Kevin’s younger self * Send us your questions and ideas for future show topics!
Resources:Schedule Your FREE Consultation
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=investing-with-confidence
Kevin Simpson Capital Wealth
https://capitalwealthplanning.com/team/kevin-simpson/
Book: Walk Toward Wealth
https://www.kevinsimpson.com/walk-toward-wealth/
Anderson Advisors
https://andersonadvisors.com/
Tax and Asset Protection Events
https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., delve into listener questions around topics like borrowing from your QRP (Qualified Retirement Plan) without it being considered income, utilizing depreciation from syndications as a real estate professional, and writing off Airbnb setup costs. Learn how to establish accountable expense reimbursement plans for your C-Corp, handle taxes for disregarded property holding entities, and calculate depreciation post-1031 exchange. Discover efficient strategies for paying kids in your small business and choosing between S-Corp and LLC structures. Simplify the complexities of C-Corp taxes and learn how to invest in real estate via self-directed IRAs without UBIT implications.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* I am 65. If I borrow $30,000 from my QRP, would that be considered earned income?- No. You have to pay back with interest, but it is not income. * As a real estate professional, can I also take the depreciation expense from syndications against my spouse's K-1 income? - Generally yes, if you are a REP, and it’s non-passive activity, if there was an overall loss, it can go on your return. * Can expenses for building and outfitting an Airbnb spent this year be written off next year when the unit is rented? - yes, but it can only be written off after it has been “placed in service” * How do I establish an accountable expense reimbursement plan for my C -Corp and a medical reimbursement plan? - Have a corp meeting, and adopt the plans with documentation of that meeting. * If a disregarded property holding entity isn't taxed when our individual property expenses like taxes, insurance maintenance, and depreciation considered for income taxes? - Any income/expenses must be reported, flowing up into your 1040. * How do I calculate depreciation after a 1031 exchange? - It’s your original property purchase price, plus any improvements, less depreciation. This again is on the original building you had, the one that we're going to relinquish. * I want to include my kids as employees for my small business and I want to pay them in a lump sum annually. What would be the most efficient way to structure that? - If they are under 18 there’s no employment tax, if you are paying them through a partnership or a disregarded entity. * Is it beneficial to be an S-corp or an LLC if making under a certain amount of money? - You want to be in some kind of entity, to protect yourself from lawsuits. * What are the tax differences between an S and a C corporation? How hard are a C corporation's taxes to do? - Yeah, so the biggest tax differences between an S and a C then in a synopsis is the S corporation doesn't pay taxes, it passes it to its owners. * How can I use my self-directed IRA to invest in real estate deals without being subject to UBIT? - don't buy any real estate with any debt or anything like that and make sure it's a long-term rental, and not a flip.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=the-main-tax-differences-between-an-s-corporation-and-c-corporation
Tax and Asset Protection Events
https://andersonadvisors.com/live-tax-and-asset-protection-workshops/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Today Clint Coons explores the evolving landscape of the self-storage industry with guest Ryan Gibson, CIO of Spartan Investment Group. Topics include shifts in customer demographics, such as millennials becoming the largest segment, and the impact of the 4 "D's" (death, divorce, dislocation, and downsizing) on demand. They also discuss rising rents despite a decrease in demand, innovative revenue streams beyond traditional storage, and the crucial role of facility management in investment success. Technological advancements and future investment opportunities, alongside considerations like market conditions and customer needs, round out this insightful exploration into the future of self-storage.
Ryan Gibson serves as the co-founder and Chief Investment Officer (CIO) of Spartan Investment Group, specializing in acquiring and developing self-storage facilities. With a track record of organizing more than $200 million in private equity, Ryan oversees investor relations and capital raises for SIG projects. His expertise extends to managing complex developments in diverse markets. Alongside his role at SIG, Ryan brings extensive experience as a commercial airline pilot and holds a bachelor’s degree in Business from Mercyhurst University, with concentrations in Marketing, Management, and Advertising.\
Highlights/Topics:* Changes in the self-storage industry, changes in the 4 “D’s” * Specials for first-timers, increases in rent * Industry stats - less demand, but more revenue * Millennials are the largest customer segment * Other revenue streams in self-storage * Logistics and timing around building new facilities * Considerations - the market, your customers, raising rents * Clint’s self-storage investment - facility management is key * Flipping storage properties * Challenges and failures, interest rates, * Tech advancements in the industry * External access vs. internal buildings in the same facility * Looking to the future for investing
Resources:Spartan Investment Group
Clint Coons YouTube
Schedule Your FREE Consultation
Today on Tax Tuesday, Anderson attorneys Eliot Thomas, Esq., and Amanda Wynalda, Esq. delve into listener questions around inheritance taxes on property and stocks, strategies to minimize capital gains when relocating homes, and the intricacies of 1031 exchanges and syndication investments.
Welcome to another Tax Tuesday episode of the Anderson Business Advisors podcast. Today on the show, attorney Toby Mathis, Esq., is joined by Scott Estill, Esq., a former senior trial attorney with the IRS. Scott and Toby dive into how to defer capital gains taxes on real estate with a 1031 exchange and discover the best way to leverage your LLC for tax savings. You’ll hear about maximizing contributions to solo 401ks, deducting startup costs, and the tax implications of fix-and-flipping properties.
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:* 1031 exchange - What are the other options besides investing in one single property and how do I find them? - a 1031 is basically just a way to defer taxes and with proper planning. Up to 200% of the amount is what you can identify as other potential properties. * As a 1099, what is the best way to leverage my LLC to save money on taxes. How can I save on self-employment taxes? - We need to know what type of LLC you have set up. If you set up an S-Corp, your salary can take out the employment taxes. * I have a C-Corp that allows reimbursements for medical expenses. Is there a limit to the scope of the type of medical expenses eligible for reimbursement? I plan to reimburse for monthly premiums, plus out-of-pocket co-pays for annual procedures, checkup, etc – Your C-Corp is correct, and you’re limited to what the IRS Pub 502 lists out. (No weed, no cosmetic surgery!) * I've just set up my entity with you guys, but I've already been doing business. Will I be able to write off startup costs that predate the actual formation of my entity? - You can write off $5K first year, and amortize the rest. * How do I pay myself from my LLC if it is taxed as a partnership? In other words, what tax forms do I fill out to show the IRS that my LLC paid me for my work? - In a partnership you don’t issue a W2, but you get a “guaranteed payment” - You use a K-1, not a 1099. * Can you use credit card statements as proof of expenditures? - Be prepared, the statement itself is not sufficient for the IRS, you need an itemized list. Write notes on all your business expenses so you have a record if audited. * When calculating employer contribution to solo 401k, how does bonus depreciation affect the number? What if I do cost seg and wipe out most my income? Can I make an employer contribution? - Not sure how these elements are related, but the employer could contribute up to whatever you got as wages, period. But they can only deduct 25%. * Would I be able to donate a property to a nonprofit organization and get the tax right off the sale year if the property was purchased in the same year? - So you have to look at any donation. the calculation here is fair market value on the date of the donation. * What tax implications, inefficiencies do I need to keep in mind when doing a fix and flip?- There are some pretty serious tax implications if I don't structure the business properly. If you’re doing multiple, you’re a dealer, and you will have self employment tax.
Resources:Schedule Your Free Consultation
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=how-do-i-pay-myself-from-my-llc-taxed-as-a-partnership
Scott Estill, Esq.
https://scottestill.com/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=what-is-the-best-tax-efficient-way-to-purchase-an-existing-business
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Are you tired of struggling to open a bank account for your business or personal needs? In this podcast, Clint Coons addresses this common challenge and offers a better solution with Barry Sloane, Chairman and CEO of NewtekOne. Before becoming a part of NewtekOne, Mr. Sloane served as the Managing Director at Smith Barney, Inc., overseeing the operations of the Commercial and Residential Real Estate Securitization Unit.
Clint and Barry will shed light on the benefits of opening an account with NewtekOne as the premiere banking option built for businesses. Learn why NewtekOne stands out as a superior choice, offering specialized services tailored to the needs of entrepreneurs, real estate investors, and business owners. Accelerate your journey towards savings goals with a specialized business account tailored for growth.
Learn More about NewtekOne
https://partners.newtekone.com/andersonadvisors/
*Annual Percentage Yields (APYs) advertised are valid as of April 30, 2024, and are subject to change at any time without prior notice. Certain accounts require a minimum and maximum deposit amount required to open an account. Penalties may apply to early withdrawals. Fees may reduce earnings. To learn more, visit NewtekBank.com.
If you are a current Anderson Advisors Platinum Member and would like information about setting up a bank account with Newtek please reach out to your team.
Welcome to another Tax Tuesday episode of the Anderson Business Advisors podcast. Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., delve into listener questions around how real estate investors can maximize their returns and navigate the often-overlooked tax benefits associated with oil and gas investments within retirement accounts.
Have you ever been caught off guard by the fine print in an insurance policy? Clint Coons, Esq. and Shawn Woedl of National Real Estate Insurance Group uncover the often overlooked details of property insurance that could spell disaster or salvation for your investment portfolio.
On today’s Tax Tuesday episode of the Anderson Business Advisors podcast, Eliot Thomas, Esq., is joined by Anderson CPA Barley Bowler. Barley and Eliot will cover some listener questions including strategies around deducting startup costs and choosing a business structure for loan eligibility, tax breaks like depreciation and claiming real estate professional status, paying taxes as a contractor on 1099 NEC forms, and when capital loss carryover deductions can be taken.
Welcome to another Tax Tuesday episode of the Anderson Business Advisors podcast. Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., explain tax strategies for listener-submitted questions. The conversation digs into S-Corp vs. C-Corp for property management, understanding Unrelated Business Income Tax (UBIT) for non-profits, qualifying for Real Estate Professional status, and cost segregation and bonus depreciation for rentals.
Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: "Is it better to have an S-corporation or C-corporation as your property management company managing your land trust and property held in your disregarded LLC? Are you required to have payroll with the S-corporation?" - With the management corporation, S or C, I personally like the C-corporation better. * “Where and when does UBIT apply to real estate investing and generally to alternative investments? - You're going to run into this when you have exempt groups or we'll call them entities, nonprofits are also exempt. * Does an accountable plan have identical benefits when comparing a C-corporation versus an S-corporation for a new business?" - being a new business or not shouldn't change too much. It's just a C Corp versus S Corp. * "How do you know how much you can convert into a Roth IRA from a traditional one without getting pushed into a higher tax bracket when you don't know what your investment gains will be?" - we don't look at the taxable gains - whatever your tax bracket is, that's what’s going to determine. * “Augusta rule. I am my own real estate broker office scene out of my home. I just hosted a large client appreciation party at my house using rooms in a garden that are not my office. Can I apply an Augusta rule to it? If yes, could applying the Augusta rule increase my chances for an audit and to what percentage? - Augusta rule is 288. You can rent out your home up to 14 times a calendar year. This is entertainment, you could maybe deduct 50%, I wouldn’t use Augusta for anything entertainment. * “My question is I've never been able to take real estate professional status due to full-time employment as a W-2 employee. I took early retirement on January 2nd of 2024 of this year. I am still being paid the remainder of 2024 biweekly, but not actually working. I'm a licensed real estate broker and spend a lot and most of my time on real estate rentals, subdivision development, et cetera. With this payout biweekly for the remainder of the year, can I qualify as REP (real estate professional) status for 2024?" - The prohibition to having W2 income is if you are actually working* at your W2 job. Here, we're not doing any work for that check. You're just getting paid free money for 2024. You can go out and put your time into real estate. * “Given the time of the year that we're getting into with taxes being due especially in the fall, what are the first three steps in the tax planning process, and how does one approach the process differently for clients that earn less?" – Start with having excellent bookkeeping, identify where you are today, and plan where you are going in the future. * "What is the best way to purchase an existing business for tax purposes?" - You're going to buy the assets, you want to buy the assets because now you're going to be able to get those at your fair market value that you pay for them. We call it stepped-up basis in your assets… * "If I buy a short-term rental and do a cost seg the next year, I bought it, and listed it on Airbnb, can I rent it long-term for the following year or would that interfere with the cost seg done the prior year?" –This is a common strategy, there's nothing wrong with that - you want to at least rent it once in year one as a STR. * "If I claim bonus depreciation on my rental property, do I need to return or reverse it when I sell the property? What happens with bonus depreciation when I sell a rental property, or I necessarily have it in current?” - It depends on the transaction. If you sell a property then you have to have gain. If you don't have gain on the sell, there is no depreciation recapture.
Resources:Get Your Free Emergency Binder
https://andersonadvisors.com/emergency-binder/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=what-is-the-best-tax-efficient-way-to-purchase-an-existing-business
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq. chats with Jeffrey Cottle, Esq., Senior Attorney at Anderson Business Advisors, about the world of house flipping, with a focus on how to handle the tax implications. It emphasizes the importance of avoiding "dealer" status with the IRS and explores strategies like asset protection. Toby and Jeff discuss limitations placed on frequent flippers and analyze the pros and cons of different business structures like LLCs, C-Corps, and S-Corps. It concludes by examining the most common scenarios Jeff encounters at Anderson Advisors when working with house flippers.
Highlights/Topics:* Jeff Cottle intro * Flipping all comes down to ‘intent’ with the IRS * Avoid “dealer” status, and consider asset protection when flipping * 1031 exchanges, installment sales are not available to dealers * Flipping risks increase with each new property you purchase * Pros and cons to LLCs, C-Corps, S-Corps * What is the “typical” scenario Jeff sees for flippers? * Send us your questions and ideas for future show topics!
Resources:Schedule Your FREE Strategy Session
https://andersonadvisors.com/ss/?utm_source=aba&utm_medium=podcast&utm_content=how-to-structure-your-real-estate-flipping
Jeffrey Cottle LinkedIn
https://www.linkedin.com/in/jeffrey-cottle-019a75a2/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
In this episode, Toby Mathis, Esq., and Eliot Thomas, Esq., bring more of their tax knowledge to the masses, answering questions on HSA contributions, employing your children in your business, and keeping your assets in a self-directed IRA. Be sure to check out our FREE virtual events happening this month. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "For an LLC that opted to be taxed as an escort is it better to not just. the profits and let retained earnings grow on the balance sheet and invest retained earnings in stocks or other investments in the name of the LLC? - the profits are automatically going to come down to hit your return. You're going to have to pay tax on those * "I am considering signing up with Anderson and contemplating having you amend the last three years as I don't think my CPAs or TurboTax gave me all the write-offs that I was eligible for as a real estate investor.I think I may qualify for a greater return, but also don't want to automatically trigger an audit. - the “triggering an audit” that's, I think, a really common scare tactic that's out there…amending is not going to create an audit. * "Can I continue funding an HSA account if I am no longer employed by the company that offered it but still have the account? Does it make sense to place it into a HSA investment account? - You certainly can continue with that HSA. Even if it's an employer-sponsored HSA, it is the employee's property, should they choose to leave. * "I have a K1 that will be late from the sale of an apartment complex in Georgia. I am a married filing separately tax payer. I will do an extension but still have to pay tax in April How do I know how much to pay without the K1? I Went through a similar sale last tax season and had to pay a late fee due to the late K-1. I'd like to avoid that again.- There is a safe harbor. If you've paid in at least 90 % of what will be due during your time period before April 15th, * "What are the benefits of having children as employees? Are there education expenses eligible for payment by the company? - if kids are paid underneath the standard deduction for that particular year, then there's no federal income tax on it. There are many benefits to shifting income to your children. * "If we live in our rental house for two of the prior five years to avoid full taxation on capital gain, take advantage of the $500,000 exemption for married joint-filing, can the remaining amount that we, remaining amount we will pay in taxes be offset? Can the remaining amount we will pay in taxes be offset by losses in our other rental properties? Capital if we qualify as real estate professionals during the year for filing. For example, if we purchase another property, and cost seg it, can those potential deductions be used to offset the taxes paid on the primary residence sale? - As long as they're in there for two of the last five years, they are eligible for ownership and use. * "How long do I need to have a property in service to rent to be able to deduct bonus depreciation from a cost segregation study? - you want to be reasonable, probably a reasonable amount of time, but if it was available for rent. That's it! * "My asset is in a self-directed IRA, so when you see SDR at IRA, that means self-directed. I am assuming if I sell it, the money is considered income and I'm taxed on it like any other income. Also, if I use the money from the sale of that property for the purchase of a different property, not kept in the self-directed IRA, can I avoid taxes? What is your suggestion in this type of situation? - there's a whole lot of misconception going on in this question. So no, we are not taxed on it like any other income. It's quite the opposite. * "Just started an ink taxes as C Corp What is an accountable plan? Is it something I need to join before I can get the benefit of it? Can any reimbursement be an expense with my personal name and get reimbursement like health dental vision cell phone, etc Do I need to have my cell phone account in the business name? - an accountable plan just means reimbursement. It's a fancy IRS term. * "Does the assignment of beneficial interest in a land trust count as an installment sale for tax purposes? Who's responsible for the property taxes in such a transaction? - another one with some misunderstanding here.
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=can-i-contribute-to-my-health-savings-account-after-leaving-my-employer
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Today Toby Mathis, Esq. speaks with Karim Hanafy, Esq., Anderson’s non-profit expert, about the top ten types of non-profits you can form to access tax benefits for your charitable activities. These range from familiar causes like humanitarian aid (both domestic and international) to education (including scholarships) and even combating social issues through activities and therapy animals. Research, veteran/elderly assistance, and various housing needs rank high, as well as animal welfare, environmental causes, and empowering communities. Finally, the importance of supporting other nonprofits, regardless of their specific cause, is also an option.
Highlights/Topics:* Karim’s background/expertise in non-profits * Top ten types of nonprofits * Humanitarian relief - domestic/international - food, clothing, shelter, medical care, housing * Education and scholarships- trade schools etc. * Activities to combat obesity, depression, and isolation - social and outdoor activities, therapeutic animals * Research - medical and financial support * Assistance for veterans and the elderly- medical, counseling, jobs, housing * Housing - this used to be number one - recovery from abuse, elderly, vets, under-resourced * Animals - sanctuaries, animal therapy programs * Miscellaneous - pollution, ministries, waste reduction, empowering the underserved, disaster relief * International giving - orphanages, food, clothing, shelter, animal sanctuaries, clean water * Supporting any of the above activities, or supporting other organizations that provide the previous support
Resources:Email Our Team To Get Your Nonprofit Started
Schedule Your Free Strategy Session
Tax and Asset Protection Events
Anderson Advisors
Anderson Advisors Podcast
Toby Mathis YouTube
Clint Coons YouTube
Welcome to episode #214 of the Anderson Business Advisors podcast. Today, experts Toby Mathis, Esq., and Eliot Thomas, Esq., explain tax strategies for common questions concerning how to write off business travel that includes personal days (hint: business days have to be more than 50% of your trip), how and when you can qualify as a real estate professional, investing in real estate from your investment accounts, and some of the helpful tax benefits of creating and using a Health Savings Account.
Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- "Can I deduct travel expenses to rehab rent rentals that are in other states than my primary residence?" - Yes, but you have to spend more days doing work (more than 50%) than personal days.
- "If we convert our traditional IRA to a Roth IRA with the same provider, do we have to file any forms with the tax return or otherwise? If so, what forms?" - You’ll receive a 1099R - the converted amount is taxable.
- "Do we have to make the REPS election every year? And how do we make the election?" – That's real estate professional status. Does one spouse qualify? Is he/she spending 750+ hours on the business?
- "Last year we neglected to register as real estate professionals. We ended up owing a substantial amount in taxes. Can we register as real estate professionals this year and carry over the expenses that were disallowed for 2022 and 2023?" –in '23, if we make the status and we, the real estate professional status and we aggregated, we got everything done properly in return, it's not gonna help us. for those prior losses.
- "For Augusta rule payments, what documentation is required beyond meeting minutes? Do I just write myself a check? Should Augusta rule go in the memo? Do I need to send myself an invoice? I am the owner and employee of an S-corporation?" – You always want to send an invoice. I would recommend it. You want to have that paper trail.
- "Can investment income be used to fund a health savings account? The deductibles are so high. We are always paying out of pocket." - So you don't need any type of specific income to fund an HSA health savings account. Limits for 2023 are 7750 for a family, 3850 for an individual.
- "I plan to buy a rental property using my 401(k). I'm 65 and set up my solo 401(k) for rollover. My question is, if I convert to a Roth 401(k) and purchase the rental, does the rental income and future equity gain become tax-free?" – Yes, it does, that's a quick answer.
- "Should I have my rental income funneled into an LLC, business, or corporation to save money in taxes?" - how is it taxed? And it can be what we call disregarded, which means it's taxed. Could be a partnership, could be an S corp, could be a C corporation, and all those have different answers.
- "What are the tax and legal benefits of making an owner loan to my LLC rather than capital contributions?" - just like the last question, how is that LLC taxed? We would do something different, perhaps if it was a disregarded entity or partnership versus an S -corp or a C -corp. They can all have different outcomes depending on how we do it.
- "Can you write off 100% of your trip to Las Vegas all expenses? I'm a realtor licensed in both Nevada and California. Any other tax deductions?" - You're going to have to qualify it as business travel. That means more days of business than anything else…
Resources:
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=write-off-travel-expenses
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq. chats with fellow attorney John Anderson, Esq. of Anderson Business Advisors about the pros and cons of establishing trusts in Nevada. The discussion digs into Nevada trusts' specific functions and benefits, including the "seasoning period" and the role of trustees. Toby and John explore how a third-party trustee can offer protection, methods for withdrawing funds, and the power of appointment in Nevada trusts. Additionally, they touch upon safeguarding your home with a trust, using a trust for essential expenses, and the potential risks of insolvency and bankruptcy. The conversation highlights the likelihood of lawsuits settling against a Nevada trust while acknowledging the absence of tax advantages.
Highlights/Topics:* Trusts - to revocable or irrevocable? * Advantages to setting up trusts in Nevada and South Dakota * The “seasoning” period * Trustees and their functions in these states * Protection through a third-party trustee * Filing taxes and withdrawing money - Nevada trusts * Power of appointment * Protecting your home with a Nevada trust * Using an asset protection trust to pay for essentials * Risks of voluntary insolvency and bankruptcy * Most lawsuits will choose to settle against a Nevada trust * Tax advantages - there aren’t many * Pro-rata vs. non-pro-rata * A high-profile divorce case with a Nevada trust, and the outcome * Not subject to the Corporate Transparency Act * Setting up a Nevada trust, statute of limitations
Resources:Email John Anderson for a consult
estateplanning@andersonadvisors.com
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-form-a-nevada-asset-protection-trust
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Clint Coons, Esq. and Greg Helbeck from Velocity Home Buyers tear down the facade that wholesaling is a no-risk investment, exposing the legal snares and fiscal sinkholes that might just catch you off-guard. Hear about Greg's near-miss disaster when a contracted property burned to the ground, a story that underscores the need for bulletproof business strategies to safeguard your ventures against the unpredictable foibles of real estate.
Lastly, we traverse the digital landscape of virtual real estate, covering the essentials for managing sales and renovations without once stepping foot on the property. There's a treasure trove of insights on direct mail marketing too, proving the worth of printed marketing in a world enamored with digital solutions. Whether you're looking to hone your marketing tactics or fine-tune your remote investment strategies, this episode is a vault of expertise for any wholesaler eager to secure a fortune in the ever-evolving real estate market.
Highlights/Topics:* What is wholesaling and why is it so appealing? * Greg’s hair-raising wholesale tale of woe * Structuring deals through an LLC * Other risks in real estate contracts * Wholesaling across state lines * Motivation behind seller's decision * Direct mail marketing strategies for success * Success through uncomfortable actions
Resources:Greg on IG
https://www.instagram.com/grego_37/
Velocity House Buyers
https://www.velocityhousebuyers.com/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-wholesale-real-estate
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Clint Coons, Esq. speaks with Kenji and Letizia Alto, who are both MDs and founders of Semi-Retired MD. They share their journey from being high-income physicians to achieving financial freedom through real estate investing. The episode delves into the mindset shifts required to excel in the property market, overcoming common obstacles, and utilizing strategic tax benefits. The couple also introduces their new fable-like book, contrasting the financial paths of two couples. You’ll hear about building a strong investment team, identifying hidden equity, and leveraging techniques like cash-out refinancing and 1031 exchanges to maximize returns and accelerate the journey toward financial independence.
Highlights/Topics:* Kenji and Leti's journey from physicians to real estate investors * Mindset shifts essential for real estate success and tax reduction * Introduction to Kenji and Leti's book * Overcoming fears and hurdles in out-of-state multifamily investments * Building a strong team for informed decision-making in real estate * Hidden equity and trusting instincts for better returns * Real estate for significant tax benefits and wealth growth * Profiting from real estate through various streams like cash flow * “Lazy equity” via cash-out refinancing and 1031 exchanges * Fast FIRE concept for accelerated financial independence * Resources for high-income earners
Resources:Book: Life on Your Terms
https://www.amazon.com/Life-Your-Terms-Investments-Themselves/dp/154453096X
Podcast - Rich Doc Poor Doc
https://podcasts.apple.com/us/podcast/rich-doc-poor-doc/id1506849313
Semi Retired MD FB
https://www.facebook.com/semiretiredmd/
Semi Retired YT
https://www.youtube.com/channel/UCibjmeDUNn568Egl5TppnPg
Semi Retired IG
https://www.instagram.com/semiretiredmd/?hl=en
Semi Retired Website
https://semiretiredmd.com/
Semi-Retired MD LinkedIn
https://www.linkedin.com/company/semi-retired-md/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=investing-in-cashflowing-rentals
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Today, experts Toby Mathis, Esq., and Elliot Thomas, Esq., explain valuable tax strategies for real estate investors, traders, and various income earners. You’ll hear about the optimal tax classifications for short-term rentals, using retirement funds for real estate investment, and the transition from W-2 to 1099 income for tax benefits. Additionally, Eliot and Toby discuss maximizing deductions through trading partnerships, the benefits of Health Savings Accounts, vehicle write-offs, and home office deductions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* Is short -term Airbnb and VRBO (short term rentals) under Schedule C or Schedule E? - if it’s just bare oversight management, etc. That might put it on Schedule E. Schedule C is if you have more substantive activity you're putting into it. * I was told I could use my company assets of 401k to loan money to buy real estate investment. Is that true? If so, how? - its true, one is allowed to take a loan out by law, if your plan allows for it. If you don’t pay it back it becomes taxable income. * How how can I position my child's college tuition as a business expense? - let's say your child's handling the bookkeeping for your corporation, and they're taking accounting classes, then you can deduct the classes related to what that child's already doing in the corporation. * What percentage of gains do I need to pay tax on if I trade for it, if I trade forex and if I put money into a holding LLC? Can I minimize it? - often it's gonna be section 1256, and You get a treat 60% as a long-term capital gain, and the other 40% is gonna be short-term capital gains, which means you're at your ordinary tax bracket rates. * How do I deduct expenses if I have a W2 and a 1099? - generally speaking, on a W-2, there's nothing you can deduct business-wise against. If you had expenses that you incurred in order to get your W-2 income, they took that section away with the Tax Cut and Jobs Act back in 17. * I just started my small business of being a mortgage broker. I own a single family rental about an hour from my house. Can I take a tax deduction for mileage expenses if I use my vehicle for both businesses? What about taking deduction on one car for mortgage and take deductions on the other car for the rental property? - We're going to recommend your vehicles be titled in your personal name. Usually we're going to deduct that mileage. * If I purchased a property to rent it and I have it as an Airbnb and I did a lot of work in 2023, can I claim all the expenses for 2023 tax year, even if the house was not rented at all in 2023 because of work is estimated to be complete in quarter one of 2024. - You can in 2024, but we can't go back to ‘23, when the expenses were incurred, because it wasn't placed in service yet. * Can I make charitable contributions from my business LLC income and take it as a business tax deduction? Due to the standard deduction, I can't deduct them from my personal return. - If it's a C corporation, then the C corporation can deduct up to 10% of its net income. Used to be 25% during the CARES Act but they've moved it back to the traditional 10% of your net income * Started regular 15-year depreciation for capital improvement of rental property in 2021, didn't know any better. I switched to bonus depreciation and claimed the remaining amount in 2023. Are any home improvement projects tax deductible? - At its base level, no. But if you happen to have a home office, and you have a C corporation or an S corporation, then any your home improvement projects, yes, they will be deductible in the sense that if it's directly related to the office
Resources:Free Emergency Estate Planning Kit
https://aba.link/nzj
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-report-income-from-a-short-term-rental-property
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Have you ever wondered how flipping the script on profit can revolutionize your business? Mike Michalowicz joins Toby Mathis, Esq., to dissect his innovative 'Profit First' formula, a game-changer for entrepreneurs swimming against the tide of traditional financial management. Mike, the sage behind several seminal business books, engages in a no-holds-barred discussion about the essentials of a prospering business—prioritizing profit, pinpointing pressing needs, and strategies for organic growth. You’ll also hear the details of Toby’s own multi-million-dollar tumble and the invaluable lessons that journey taught me, all of which dovetail with Mike's profound insights.
Highlights/Topics:* Mike intro and background * Books by the guest and their basic message * Past failures, “face plants,” losing millions * Competitive advantages in today’s market * Camps in the sports industry - employers should take note * Home Depot’s employment recruiting ‘camps’ * Examples of offering education for recruitment * What is ‘collective psychological ownership’? * Using these techniques as an employee * Company culture- diversity builds community
Resources:All In by Mike
https://allinbymike.com/
Mike Michalowicz Bio
https://mikemichalowicz.com/bio/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=profit-first-and-beyond
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
This episode of Tax Tuesday, Toby Mathis, Esq., and Eliot Thomas, Esq., cover topics including paying your children from your business, when you can write off meals as “business” - (hint: it all comes down to ‘intent’), and how often you should meet with your CPA. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "Does my S-corporation where I am the sole owner and sole employee have to issue a 1099 to me as an individual?" - In general, you're S-corporation, you're an employee, so you would get a W-2. It's what we call reasonable income. * "If my husband and I, both shareholders of our C-corp, discuss business over dinner, are we able to be reimbursed for our meals? Is there a list of reimbursable expenses for employees/owners of C-corps that is easier to read than the tax code?" - If the intent was to talk about business, then generally speaking, you can deduct it * "Can I sell my solo 401(k) held property, do a 1031 into another investment, and then buy the property back with an LLC?" - first of all, we wouldn't have a 1031 going on with a solo 401(k). We don't have deductions, we just have cash in cash out with our retirement plans. * "How are taxes handled differently with capital assets versus repairs, maintenance, and labor of rental properties?" - Every time you lay out cash for one of these repairs or labor, that's going to be an immediate deduction for the full amount. * "How do I get tax benefits from paying my children for doing work in the business?" - basically you can just pay them out whatever entity you have. * "Are the costs of education specifically related to starting a business deductible, specifically paid webinars or courses taken online. I've read that they are, but apparently many say they are not. Is there some special way to categorize them so that they are deductible?" – If its in a C-corporation or an LLC taxed as a C-corp, we're allowed to deduct the training as training our employees, which you would be an employee of. * "I recently purchased a small camper trailer to rent out, my camper rental side hustle per se. "Does this type of rental count as an STR, short term rental, as far as taxes are concerned? Some suggest filing Schedule C while others say Schedule E might be more appropriate. We are not going to use this camper personally. It is for rentals." - If you rent it for 14 days or less, you don't have to report it. It's covered under 280A subsection G2. If you rent it for more than 14 days, it is an investment property. * "If I put my rental properties into an LLC, do I have to file both personal taxes and business taxes?" - how is that LLC taxed? It can be a sole proprietorship. It can be a partnership if we had another member, two or more members. It could be an S-corp, could be a C-corp. All those make a difference. * "How often should I be meeting with my CPA a year?" - I'm going to really recommend having quarterly meetings with your CPA just to make sure everything's on track. * "Can I file my taxes for my LLC as a corporation to get a lower tax percentage? I run short term rentals. I host short term rentals for other owners. I also run short term rentals in the properties I own. I have an S-corp with my husband and I work from home. My accountant said, I cannot deduct my home office expens - we never want to put appreciable real estate into a corporation, S or C, if we're holding onto it for a long time. * "Can someone file their taxes through your company?" - Yes, you can. You have to be a tax client
Resources:Request a Free Cost Segregation Study
https://andersonadvisors.com/CSA/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=are-educational-courses-tax-deductible
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
This episode of Tax Tuesday with Toby and Eliot is brimming with strategies to supercharge your financial savvy. From unlocking the mysteries of deductions and depreciation to turning real estate activities into a tax-saving powerhouse, we dissect the fine print of the tax code and transform it into actionable advice. The episode covers various topics including handling missed 1099 deadlines, gifting to clients and its tax implications, maximizing deductions, the benefits of cost segregation studies, combining short and long-term rentals for tax advantages, and the intricacies of aircraft depreciation for a flight instructing business. Remember, knowledge is power, especially when it comes to dealing with Uncle Sam. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* Do I have to get a 1099 to every sub who worked on a single family home we are rehabbing? Do I have to send a 1099 to them? And if we do have to get 1099s to parties, I'm assuming we have to get a W-9 from them first? - the duty to send a 1099 is when you pay $600 or more to a contractor. * Hi, I am new to setting up a business for real estate investing. My taxes will be startup and training fees. At what percent can I expect there to be write-offs to the business? – If it's a business expense, you'll be able to deduct 100% of that expense. * I hadn't claimed depreciation in earlier years, thinking that I wouldn't have to have my basis reduced in the future sale. Is there a way to claim those earlier years that it hadn't been taken, or did my 27 years just begin when I started taking it? - form 3115 can catch all that depreciation back up. * Is it too late to do a tax seg on a previously purchased rental property for tax year 2023? And what would be the advantages of doing it for 2023 versus 2024? - It can be done all the way up to the time your return is due the next year with extension. * How can I use real estate profits to pay for kids’ college without paying taxes? - If it's in an entity, an LLC, just pay them directly from that business. * Are gifts to clients, vendors, employees, and members tax deductible,” “If yes, what is the threshold that we can spend on gifts? - it's such a horrible rule. People really don't believe me when I say it's a $25 limit, and yet that's what it is. * My tax preparer died a few years ago." "I have not been able to find someone to help me with my taxes. Can I file 2023 before I file 2021 and 2022? Or do I have to file their tax returns in order? - There's no rule out there that you have to do this return or that return. * Can you aggregate short-term rentals and long-term rentals together in your portfolio to meet material participation requirements for REPS? - as they are, no, they're two different things. A short-term rental is a different type of business. It's actually not a rental activity, it's just a trade or business. * Our LLC installed a $84,000 solar system on a rental property in 2023. Can we take the 30% energy tax credit and deduct the entire 59,976 basis? 84,000 minus 50% of the 30% in 2023 using bonus depreciation. - Quick answer, yes. I did check, $25,200 is correct at 30% * Started a small flight instructing business in 2023 and purchased a plane in 1223 Finance. What depreciation options are there, and what would be the best approach if the income stream will not begin until 6/24? - It'd be a 2023 asset, and you can do the bonus depreciation we've talked about.
Resources:Request a Free Cost Segregation Study
https://andersonadvisors.com/CSA/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=are-gifts-to-clients-and-employees-tax-deductible
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Welcome back to another engaging session of Tax Tuesday from Anderson Business Advisors, where your pressing tax queries meet expert insights! In this episode, host Toby Mathis, Esq., welcomes regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors. This week, we explore the benefits of strategic corporate partnerships in investments, the allure of residential assisted living businesses, and the unique tax considerations for collectibles like wine. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- If I purchase a vehicle in 2023, primarily for my business, is there a percentage I have to use for business versus per personal to deduct the amount I paid for I paid cash. and how will that affect other depreciation and such for my business? I guess I'm asking what is the best way to deduct this? -the better solution for our clients is often using just a standard mileage reimbursement and that or deduction in the case of a sole proprietorship.
- With bonus depreciation being reduced to 40% next year and 20% the year after that, then ending in 2027, what are the alternatives for investors who have been using bonus depreciation through real estate purchases to reduce taxable income? - the first step before you get there is you're doing cost segregation.
- I have an LLC C Corp with an accountable plan including medical reimbursements good. I have a high deductible insurance plan and an HSA better. Would it make sense to use the medical reimbursement from the C Corp for uncovered medical expenses instead of paying With the HSA, letting the HSA continue to grow? - So the simple, direct answer is yes and yes, you can do that. You can have the medical reimbursement and an HSA.
- I have owned a residence for 10 years. I lived in it for the first year and then rented it out. We have recently moved back into it and want to live there for at least two years so as not to pay tax when we sell it. I will potentially profit about 350,000 and am married. Is this a wise action of 76 years old? I plan on moving into our other rental at that time and perhaps selling it after two years there. - Remember you did rent it out for nine years. You had depreciation and if you didn't take depreciation you will be treated by the tax code as if you did.
- I am a real estate professional and bought many real estate homes the rental homes from 2018 to 2022. My account and encouraged me not to use my real estate professional status to depreciate faster. Now I regret it. Should I just do amended returns? I paid a lot of taxes that I could have avoided in those years. - There's a form 3115 and that has to be done on a timely file original return. So we can't amend and go back and do that. But what we can do is go back and look at the related cost segregations
- I have a partnership set up with my stock trading management company. Does it still make sense to distribute income to my trading management company, structured as a C-corp, for taxes if most of my trading gains this year will actually be long-term capital gains and therefore would actually be taxed at a lower rate than the corporate rate? - we don't know specifically with your situation, but more than likely there's still benefit to doing so.
- How do you determine the best structure for a residential assisted living business that will be located in Florida and Georgia, buying the home and running it to the business? –if we had the business and it owned the home, you always run the risk of having someone like me being in that business and I sue you and I take the whole thing. I take the house and the business. So we separate.
- What are the tax implications of investing in wine? This is for clint. Yeah, that's going to say it doesn't count if you drink at all. Right, all right. For example, like using a platform like vino vest, I made 20-something percent last year in my whiskey, yes, and I don't even drink much. Is One able to write off losses from the sale of wine or offset these losses against taxes owed? Any sort of tax loss harvesting way interesting. - this is a 28% bracket and it's called collectibles. This is gonna be your art, your fine alcohols and things like that, and so there actually is a unique category of capital gains for this…
- Is there a difference between filing taxes with an October deadline Versus an April deadline? If yes, what are the advantages or disadvantages of each? -we are always gonna recommend that you extend, and that would extend your April deadline out to October. Gives you more time to clearly see what's going on and it gives you more time to get all things properly put into place.
Resources:
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-structure-a-residential-assisted-living-business
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
Join Toby Mathis, Esq., as he speaks with international tax expert Jimmy Sexton, LLM., the Founder & CEO of Esquire Group, about unraveling the enigma of offshore banking and its impact on US taxpayers. Despite popular belief, Jimmy reveals that the era of offshore banking providing substantial tax benefits is over, with the true perks lying elsewhere such as asset protection and market access. We navigate through the murky waters of tax evasion myths and scrutinize how various income structures, including disregarded and taxable entities, bear on one's tax obligations. Moreover, Jimmy illuminates the effects of the GILTI and Subpart F tax regimes on foreign company profits, stressing the importance of understanding the intricate US tax code to avoid hefty penalties and ensure compliance.
Highlights/Topics:* Offshore banking myths vs. reality for US taxpayers * Tax advantages from asset protection, not tax savings * Misconceptions about offshore tax evasion * Implications of GILTI and Subpart F tax regimes * Complexities of international business operations * Benefits of Foreign-Derived Intangible Income (FDII) * Major corporations adapting to tax law changes- Google and Amazon * Tax reforms encourage repatriation and competitiveness * Severe penalties for non-compliance with FBAR regulations * Compliance demands of offshore structures versus domestic * Corporate Transparency Act and international standards
Resources:Esquire Group
http://www.esquiregroup.com/
Email the Esquire Group
info@esquiregroup.com
Call the Esquire Team: UAE: +971 4 517 8458 | US: +1 480 525 4829
Learn Next Level Passive Income Strategies Through Real Estate Investing
https://infinityinvesting.com/infinity-investing-workshops/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-do-offshore-corporations-and-trusts-work-in-the-us
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Ever wonder how cryptocurrencies and real estate investments play together in the sandbox of taxation? Or how to pay your family members through your business in a way that could benefit everyone's wallet? We've got answers to these questions and more. Welcome to another episode of Tax Tuesday, where tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, and CFO of Anderson Business Advisors share their expert advice. This episode delves into the nuances of crypto transactions and the impact on your tax bill, along with a deep dive into payroll complexities that could save you a headache—or better yet, a hefty fine. Plus, we discuss why paying children through your business isn't just a clever maneuver; it's a strategic move that could pave the way to a tax-free goldmine.
Submit your tax question to taxtuesday@andersonadvisors, and check out our new “knowledge room” available to Platinum members, from 9a-2p daily.
Highlights/Topics: * I owned a condo for the last 28 years and depreciated it down to zero. In January this year I sold the condo to the renter and installment sale. For the next 10 years, I'll receive monthly payments, with a balloon payment at the end of 10 years. My question is as follows Do I have to recapture the depreciation and pay tax on it? Am I too late to do a 1031 exchange at this time? - If you’ve already sold it, it’s too late. 1031s do not work well with installment plans. * What would be the best way to sell a small business and limit as much as possible the tax implications? - a stock sale is best, but almost no one will go for that…. * When are crypto earnings taxed?- When you sell it, you pay capital gains tax on the difference between your buy and sell. * What activities classify for the 750 hours? Does training, traveling, searching for properties? - It's going to be real estate activities in your real estate business. Training, traveling, and searching for properties is “investor” activity * I self-manage a single short-term rental that I own. I want to pay my kid, who is 16 years old, for doing legit work for the Airbnb at a reasonable rate. Do I just write them a check every month based on the hours they log, or do I have to hire a payroll company to issue them a check? I do not have any other employees. If I don't hire a payroll company, how do I issue them a W2 form? - you really should hire a payroll company, if you 1099 them, they will have to pay tax. * I'm planning to start lending money to real estate investors. Other private money lenders I know do their lending businesses through an S-Corp. I currently don't have an LLC or an S-Corp for lending. I have a Wyoming Hold LLC that I opened to use for real estate investing. Which would you advise is best for private money lender an LLC, an S-Corp, any other, and why? - Do not do it through your Wyoming LLC. I like the S corporation rather than the LLC… * I have a 50-50 partnership with a friend and we own two short-term rentals together. Each of us is maturely participating in one short-term rental each. Is there a way to take full cost-seg advantage against our respective W-2s or can we only take 50% of one property against your W-2 and the other person? It will go to the passive bucket and vice versa for the other property. - Couldn't we both get that deduction? Yeah, you probably could if we go back to the aspect that it's a trade or business * I am a W-2 earner. Can I save taxes if I buy a long-term rental? - Probably not. Probably not at this time. Unless you’re a real estate agent. * I'm getting a lot of pushback against cost segregation from my accountants. They say that it could trigger personal property issues in Maryland and that the cost of the study is prohibitive. - So what? The personal property taxes and most states is based on The Advalorium they call it. It's based on the current value. They usually have depreciation schedules of their own and it's not that much property tax.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=when-are-crypto-earnings-taxed
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons Youtube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq, of Anderson Business Advisors welcomes Jen and Stacy Conkey, the founders of Remote Multifamily Investing Academy.
As the visionaries behind the Remote Multifamily Investing Academy™, Jen and Stacy have disrupted the status quo. They've developed the #1 Multifamily Academy for scaling in multifamily real estate, emphasizing the underestimated power of joint ventures before diving into larger syndications. With Jen & Stacy, you're not just getting advice; you're getting a transformative experience. They're not just knowledgeable; they're relatable, enthusiastic, and ready to make a real impact.
Highlights/Topics:* Three important roles to make a team * Finding the role that appeals to you, joining a team * The state of multi-family right now * Interest rates and the economy * What to look for when underwriting * Cash flow and property values * Seller financing * Overcoming mental blockages- the arrow-breaking experience * Favorite success stories * Build your wealth in multifamily first!
Resources:Remote MultiFamily Investing Academy
https://rmfiacademy.com/training-library/
RMFIA Training Library
https://rmfiacademy.com/training-library/
RMFIA Before you book
https://www.remfia.com/before-you-book-a-call
RMFIA Classes
https://bit.ly/jenandstacy
Learn Next Level Passive Income Strategies Through Real Estate Investing
https://infinityinvesting.com/infinity-investing-workshops/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=10-ways-to-reap-huge-benefits-from-a%20-501(c)(3)
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to our last Tax Tuesday for 2023, where tax experts Eliot Thomas, Esq., Manager of Tax Advisors at Anderson, and returning guest Jeff Webb, CPA, CFO of Anderson Business Advisors share their expert advice on topics like crypto taxes, reimbursement for moving expenses if you’re in the military, and investing in real estate with your IRA. You’ll hear how to protect yourself when flipping houses, by creating the right kind of entity to hold those properties. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "How can training costs including travel be tax deductible? If we got some costs regarding starting up our corporation, maybe some education or something like that, can we deduct it? If so, how?" - training costs can be deductible in certain cases. * "We've been engaged two years. I want to get married in July of 2024. I make $85,000 a year, and he makes $120,000 with W-2 jobs. I'm wanting to become a real estate professional next year and make income from my for-rentals. Am I able to keep more of his income if we file jointly after we're married? What type of strategy would help him keep more of his money?" - There’s a lot that can be done here - retirement plans, S-corp, hiring your spouse, etc. * "Once the purchase of a property is finalized, should cost seg study process be started immediately after? And can you double dip the cost segregation process, meaning before and after upgrades/repairs?" - If I am not a real estate professional. If I do a cost seg, I might just be creating a giant passive loss that I can't use… * "Does depreciation taken from a syndication have to be paid back when the property is sold?" - You will receive a K-1 from the partnership that is a syndication, and it will show your gain on the property. Yes, you’re going to have to recapture. * "Are there advantages of investing in trading securities, stocks, bonds, commodities, futures, et cetera, in an entity account rather than in an individual account? Any kind of benefits, maybe setting up certain structures for that?" – There is, and it primarily comes from income shifting. * "How do we do real estate investing if we have an IRA fund?" - You can invest, but you cannot be involved in any way in the running of that property * "When are crypto earnings taxed?" - It depends on where the income is coming from. * "As a member of the armed forces, are my travel expenses from overseas location back to my property location stateside tax deductible? If we're doing some traveling there, we're in the armed forces, what can we do as far as any deductions if possible?" - If you have overseas travel on a change station, make sure you're seeing an accountant to do your taxes that knows what the heck he's talking about and what you're doing. * "Is it better to have a separate entity for flipping, such as an LLC or corporation, or should I report it as an individual?" - do not flip in your own name. There’s plenty that can go wrong… * "I am a new real estate agent. Does the time I spend searching for a property in my local market, including travel time, and my family count towards the 750 hours needed to qualify for rep status, even if we end up not buying the property this year?" - first of all, we can't use travel time usually as far as rep status. * "Is it possible, feasible, or legal to incorporate yourself and transfer all your assets to the new company while also deducting expenses used to support the new business, in other words, yourself?" - No, you can't make your personal expenses into business expenses. The real answer is just a flat-out no.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-select-the-best-entity-for-flipping-houses
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons Youtube
https://www.youtube.com/@ClintCoons
In this episode, Toby Mathis, Esq, of Anderson Business Advisors welcomes Karim Hanafy, Esq., head of Anderson Business Advisors’ Non-Profit Division. Karim and Toby will go over ten benefits of either donating to, or setting up your own 501(c)(3). From donor-advised funds to public vs. private foundations, Toby and Karim explain all the pros and cons.
Karim is a nonprofit attorney with over 20 years of experience forming nonprofit organizations, obtaining 501(c)(3) tax-exempt status, advising with ongoing compliance, and assisting with annual tax reporting. Karim previously worked in the Tax Exempt Division at the IRS, and he uses his IRS experience to advise nonprofit organizations on the application process and ongoing compliance.
Highlights/Topics:* End-of-year tax reductions by donating to charities * Setting up your own 501(c)(3) can be your legacy * Giving through a donor-advised fund with Vanguard, Schwab, Fidelity, etc. * Tax benefits of donating to a public charity * Cash, appreciated assets, public and private foundations * Tax deductible items, time, travel, and expenses paid on behalf of a non-profit * GoFundMe donations and tax deductibility * Managing and controlling the spending of your own 501(c)(3) * Timing of tax benefits for contributions * Public charity vs. private foundation * Contact Anderson Business Advisors or come to our Non-Profit Workshops
Resources:Karim Hanafy LinkedIn
https://www.linkedin.com/in/karim-hanafy-3561b71b0/
Start Your Non-Profit in 45 Minutes with Anderson Business Advisors
https://andersonadvisors.com/nonprofit-501c3/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=10-ways-to-reap-huge-benefits-from-a%20-501(c)(3)
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In today’s episode, Toby Mathis, Esq. welcomes Tyler Sasse (“Sassy”), owner, founder, and lead instructor of Western Welding Academy in Gillette, Wyoming. Voted "#1 Welding School in the World", Western Welding Academy is the only pipe welding school in the country solely owned and operated by real pipeline/pipe welders. Toby and Tyler discuss teaching work ethic and integrity, how welders can make huge annual salaries after the academy’s 6-month program, the deficit of skilled workers and needs within the construction and other industries, and how to apply to attend this valuable trade school program.
Tyler Sasse’s well-earned nationwide reputation is one of quality and knowledge. He holds American Welding Society (AWS), Certified Welding Inspector (CWI), and many other welding certifications. His ability to lead and manage people allowed him to be involved in some of the country’s largest construction projects.
Highlights/Topics: * Tyler’s path to building his school * How much money can you make welding? * Teaching work ethic and integrity * The tuition cost of welding school that includes 7 certifications * Employer programs that will pay back your tuition * Income share agreements- you only pay when you’re working * Student numbers and industry stats * The ‘blue-collar tour’ speaking with high school students * How to apply and what to expect * Learning welding vs. working at entry-level jobs * Ratio of women to men at the school
Resources:Western Welding Academy
https://www.westernweldingacademy.com/
Western Welding Academy YT
https://www.youtube.com/channel/UCKNdRVnrxkYIeV5HAmPvzww
MiaShare
https://www.miashare.com/
The Blue Collar Tour
https://www.westernweldingacademy.com/events/blue-collar-tour-2024?utm_source=Website_direct&utm_medium=homepage&utm_campaign=Website_direct_homepage_who_we_are_button__who-we-are_financial_aid_button__financial-aid-options_2024_blue_collar_tourlearn_more_button
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=welding-podcast
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to another episode of Tax Tuesday, where tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, CFO of Anderson Business Advisors share their expert advice on writing off business expenses, end-of-the-year options for saving on tax deductions, inquiries about organizational vs. startup expenses, and how to borrow from your life insurance policy to invest in real estate. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * All my LLCs are disregarded…. I’m in the process of setting up…What are some of the write-offs for 2023? - You normally can’t write off until the business has begun operating, but the cost of setting up, you can grab that, but you have to have income to benefit from those write offs. * Can I 1031 a long-term rental single-family residential.. into short-term AirBnB rental.. Then do a cost seg? - Yes, but there’s a timing issue…the long-term rental cannot extend into the next/same year. * How do I write off biz expenses before the bix makes money? - There are ‘organizational’ and ‘startup’ expenses that you can write off, of $5K each….but it also ‘depends’ * If we are flipping a home within 6 months, can we write off depreciation, closing costs etc.? - The home is considered ‘inventory’..if you bought it with intent to sell, no matter how long you own it, it is ‘dealer property’ * My husband owns and operates an electrical business… if a client doesn’t pay, is it considered a loss? Is it tax deductible? - You don’t recognize income until it is paid to you. You can only write off expenses. * Please discuss pros and cons of borrowing from my life insurance to purchase real estate? Is any of the interest tax deductible? – The interest on the property is deductible. Different policies have different ways of accounting for the loan. I don’t see a lot of ‘cons’. * How do I offset passive losses other than increasing rents and paying off debt?.. What can I do before the end of the year so I can use this year’s taxes? At this time of year, there’s very little you can do, you only get the portion from now until the end of the year. * I am a licensed contractor working part-time as a salaried employee… am I a real estate professional for tax purposes? - Yes… if you’re the owner, and you have 750+ hours working in the real estate business… more than 50% of your time. * Can I create a 401k for my real estate biz? Will this affect my employer’s 401k- Yes, but you can only contribute the total amount allowed by the individual by the IRS. You have to have an ‘active’ business, not passive income. * Is there an age limit for hiring our kids? We have 6 and 13-year-olds. - Yes, but you have to have them working on actual tasks to be paid. Sweeping, modeling, acting, etc. What is the market value of those tasks? Labor laws don’t apply - you can put YOUR OWN kids to work, and pay them, at any age.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons Youtube
https://www.youtube.com/@ClintCoons
In this episode, host Toby Mathis, Esq., welcomes regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to discuss several questions about taxation and S-Corps. Other topics include paying your children to work on your real estate properties, paying medical deductibles with your HSA, and of course minimizing capital gains taxes on stocks you’ve purchased. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* Is there any differences between bonus depreciation and 179 depreciation and, if yes, what are the differences? - They are completely different, though easily confused, and you can use them together. * if I set up my LLC for real estate investing but I have not bought anything yet, can I ride off the courses I have enrolled in to educate myself and equipment? - if it is true investing, then probably you wouldn't be able to deduct. There isn't any place in the tax returns to deduct something like that. * Can I run a payroll payroll for my son, who was 18 years old, to manage my real estate properties? What is the maximum amount that I can pay him to support me in my business? - There isn't necessarily any limit. It's just that, whatever you have to be reasonable for the services that the child is providing. * Can you pay the high deductible health insurance premiums from the HSA? - you can pay ANY deductible out of an HSA. * I'm a Big Dog and I have lots of questions about forming my LLC for a fix and split business and how to effectively write off expenses for 2023. I haven't set up my LLC yet and I'm in the middle of rehabbing a house that we won't be able to put on the market until next year. Is it too late to set up the LLC and get those write offs for this year? Does it matter if I'm not making any money yet? Should my LLC be filed as an escort? But I would have to be earning income and paying myself something, right? Can you explain how it all works? - So lawsuits are all over a place when you're rehabbing. So get that set up. All your costs that you're incurring are inventory, which means we don't get it deduct anything until a year you sell it. * What are the benefits of taxing my beauty salon as an S-corp? -you can write off like the percentage of the use of the home under many different theories. You could be using net square footage, you could be using the room methodology, you could be using gross square, or whatever is your best interest. * Can you roll over money from a current 401k account into a solo 401k account to invest in real estate? Can you please explain the taxes I would be responsible for paying on any gains made on a real estate investment using money in a solo 401k? - typically you can’t move it if you’re still employed. There aren’t any taxes. * what is the tax way to invest in the stock market and protect capital gains to minimize them? - we like to set up a partnership, put the trading into the partnership, and that partnership will be composed of a portion that goes to the individual, maybe 80, 90%, the rest to a C corporation. * I own rental properties and manage them myself Currently. I don't need the income right now. That's a great situation to be in. What are some strategies to get that income into a retiring account such as a solo 401k, since it's not earned income? - if it's a rental, you're going to want to hit in your 1040, which means it's probably a partnership. * I am looking for tax treatment benefit of a DST Stands for Delaware statutory trust, not a deferred sales trust, delaware statutory trust. It would be done through a 1031 exchange, so I understand that part, but it sounds like not only would I get a new depreciation schedule, but I get more. Granted, I should get more just due to the new asset purchase price. Right, what are the flags for a DST investment? - What are red flags? I think the things we always talked about is - it's just not very liquid when you have that Delaware statutory trust.
Resources:Tax and Asset Protection Events
Anderson Advisors
Toby Mathis YouTube
Toby Mathis TikTok
Clint Coons YouTube
In today’s episode, Toby Mathis, Esq. welcomes Shane Sams, CEO and Co-Founder of Flippedlifestyle.com. Shane is one half of the dynamic duo at FlippedLifestyle.com with his wife Jocelyn. The Sams Family built an online membership business that generates hundreds of thousands of dollars per year in profit, while only requiring a few hours of work per week. Now they help other people build & grow online memberships of their own.
Highlights/Topics: * Shane’s path to finding his own side gig * Librarians and their challenges * Selling what you know and solving problems * Startup costs and hosting platforms * The moment Shane decided to change paths * Yard sales to get start-up money * The Toddler Apocalypse blog * Some great monetization ideas * What are people charging per month? * Crazy ideas that worked - chickens and needle felting * You can probably achieve your goals with an online business * First steps to take
Resources:Flipped Lifestyle
https://www.flippedlifestyle.net/a/2147732658/ZQEgEiNx
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Infinity Investing
https://infinityinvesting.com/
In this episode, Clint Coons, Esq. speaks with Seth Williams and Neil Clements, experienced real estate investors who are joining us to discuss land investment deals that may be a little off the beaten path. From sending out blind offers by mail, to water and mineral rights, to subdividing parcels, Seth and Neil give you the inside track on challenges and opportunities within this lucrative space in real estate investing.
Seth Williams is the founder of REtipster.com; an online community that offers real-world guidance for real estate investors.
Neil Clements is an avid real estate investor who builds his wealth by capitalizing on investment opportunities no one else pays attention to. He is passionate about teaching wealth-building strategies through real estate and how to find opportunities off the beaten path.
Highlights/Topics:* What’s the state of land deals today? * Make sure you have a ‘pivot’ once you purchase * Parent and child land parcels * Sending offers by mail, text, and ringless voicemail * Perc tests, subdividing, water and using AI * Mineral rights in TX land deals * Some typical numbers on recent deals * Time frames on turning deals * Explaining ‘entitlements’ * Due diligence * Doing land deals remotely, Land ID mapping software * Blind offers, how to find the right agent * How Neil and Seth started working together
Resources:RE Tipster
https://retipster.com/
Email Neil
neil@swiftlandoffers.com
Realtors Land Institute
https://www.rliland.com/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=land-investing-demystified-proven-strategies-for-finding-lucrative-deals
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Did you know you could be sued if your tenant’s dog bites someone? In this episode, Toby Mathis, Esq. welcomes Shawn Woedl, President and CEO of the National Real Estate Insurance Group. Shawn is an industry-recognized speaker and educator with an emphasis on Commercial Property and Premises Liability, and shares the top four lawsuits his company sees every day. From slip and falls to discrimination and dog bites, tune in to find out how to protect yourself from these common scenarios.
Highlights/Topics: * Top lawsuits as seen at National Real Estate Insurance Group * Lawsuit sizes - how much is being paid out? * The cost of carrying insurance and deductibles * Submitting claims and potential policy increases * Umbrella and excess coverage * Tenant discrimination * Dog bites and “vicious breed” exclusions * Renovations and contractors * Mold
Resources:Connect with NREIG
https://affiliate.nreig.com/Anderson
Download the PREMISES LIABILITY Policy PDF
https://drive.google.com/file/d/16iz1d8almLd2sgENkWFXQUA-sxe3vI6x/view?usp=sharing
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In today’s Tax Tuesday episode, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, the CFO of Anderson Business Advisors, discuss some interesting tax questions including questions around gifting your home or property to your children while you’re still alive (tip: don’t do it), passive vs. active income on rental properties, and how/when you’re able to use a loan from your investment accounts to purchase real estate.
Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "Could I still qualify for the Qualified Business Income Deduction for rental activities even if they do not have the real estate professional status?" – Qualified Business Income Deduction, 199A. Could you still qualify for QBI for rental activities even if you don't have real estate professional status? The answer is yes. * "I have a question about incurring expenses and paying them with my personal credit card. How do I recoup that money that was used for my business but charged to my personal credit card? My LLC is less than a year old." The simple answer is yes, you can pay for stuff with a personal credit card and deduct it in your entity. * "Suppose a Florida LLC has a piece of land bought three years ago and hired a construction company to build a single house when the house is sold." Can I allocate part of the profit to the sale of the land, long-term capital gain, and the other part to ordinary income?" - You've now converted it into inventory that you're selling, so no. As a matter of fact, it doesn't play off against ordinary income, it is ordinary income. The entire sale of this property is ordinary income. * "How do I use my 401(k) or IRA to invest in real estate?" - If it's an IRA, you need a self-directed IRA, where you're pretty much the custodian. * "My husband's father wants to sign his house over to us. My husband's sister also owns 65% of the property." What tax advantages are there for us, his dad, and his sister? And what tax issues does it raise for us? Should we start an LLC or some other structures?" - I'm not a fan of signing over a principal residence to my children. If Dad gives it to you before he passes, he just made it all taxable. * "What is the best way to use funds from my S-corp to pay taxes? Since the corporation taxes flow through to my personal taxes, I understand I need to pay my personal taxes for my personal account, but the money is really in the business account. Can I use a distribution? And is there a dollar amount limit for such a transaction?" – if you're profitable and distributing money, you really need to pay some kind of salary. * "If I elect to aggregate rental properties into one activity, for example, managing, operating single-family homes as rentals and limited partnership interest in a multi-family syndication. What happens if years down the road, one of the assets is sold from the aggregate group? What are the tax and legal implications?" - If I sell a property that I've aggregated with other properties, just treat it like any other sale of property. * "Is it tax-wise to pass on single-family rental home properties before my death to my kids? We have plenty of income, and passing on a few of them to our two kids might even lower our tax bracket. Each rental property is in a separate LLC, and we've owned them for 7–8 years now." - Based on the way we answered the previous question about gifting, I think it's a bad idea, especially if you had it for seven or eight years. * "If I elect to aggregate rental properties into one activity, for example, managing, operating single family homes as rentals, limited partnership interest in a multifamily syndication, and electing all of my investment real estate as one activity,” which you can do, it's called an aggregation election, “what happens if years down the road, one of the assets is sold from the aggregate group? What are the tax and legal implications?" - you wouldn't aggregate into those circumstances. If you’re going to be selling it soon, but you don't lose the loss carry forward, you use it against passive income. * "We have two newly opened short-term rental Airbnbs. We want to do cost segregation and do bonus depreciation for the 2023 tax year. We're logging our time for the 500 hours rule. I heard that a small business should be taxed as S-corps to save on self-employment taxes, but others say don't put Airbnbs in an S-corp because they're passive. What to believe?" - Short-term rentals are a trade or business. If you are materially participating in them, then it's active ordinary income or loss. * Send us your questions, and check out the event schedule listed in the resources section.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-use-your-401k-or-ira-to-invest-in-real-estate
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In today’s Tax Tuesday episode, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, CFO of Anderson Business Advisors, discuss the usual mix of complex and simple tax questions including questions around paying minor children through your LLC, gifting vs. inheriting property, structuring your stock trading business, and how and when to use cost segregation to get the biggest tax benefits. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* “When dissolving a C-Corporation with a single share holder and having a net operating loss, does the loss go on the shareholder’s personal return and can the loss be offset against personal income?” No, because that C-Corporation is its own entity. However you probaby finance some of those losses. Anything that you invest in the company that you don’t get back will be a capital loss to you. * “I jointly-own an inherited property that is currently on the market. Can the expenses that I have (utilities, staging, maintenance, repair, taxes) be added to the cost value?” It depends on how the property is being used once you inherit it. * “Can I deduct expenses for working at home and what forms can I use?” That depends. If you’re an employee, then no deduction anymore for employee work expenses. * “My wife’s father wants to sign his house over to us and her brother. What tax advantage is that to her dad? And what tax issues does it raise for us? Should we start an LLC or some other structure?” No tax advantages for Dad. When dad transfers the property over, it’s a gift. And when you give an appreciated asset you receive the basis of the gifter. If it is an investment, it is best to start an LLC. * “When you have a C-Corp (no income at this point, a Wyoming LLC that owns two LLCs with rentals), which entity pays for general expenses like memberships, cell phones, internet, education, etc?” When you have an LLC with rental (C-Corp), then you pay the C-Corp and management fee. The C-Corp then covers all the expenses. * “How does paying for your child (under 18) help with taxes, if any?” If under 18 through LLCs, there is no employment tax. * “Can you benefit from cost segregation at any time?” The longer you wait, there’s nothing left to depreciate. A tiny benefit, if any. * “Need to move from sole proprietorship to some form of business entity. [...] C-corp? Something else?” Jeff is not a fan – there’s a lot of landmines out there. If you’re doing well, you want the capital gains. Put your cash in an LLC with an 80/20 split. Watch how to structure a trading business! * “I currently own a home in one state (Oregon) and I am looking to purchase an investment property in another state and plan to do so using an LLC or an S-Corp. [...] What would be the easiest way to go about this?” Do not own in an S-Corp! Buy the AZ property in a land trust and LLC. Have someone guide you through this process * “If I invested $30,000 in a marketing class to start a marketing company, do I have to amortize it over 15 years to see any of it back? Can it be a business investment and get it all back?” The only ones that can do this are C-Corps. * “Is 1245 property subject to depreciation recapture if the rental property is sold with capital gain?” Gain is subject to recapture. You’re going to pay ordinary income tax. * Send us your questions, and check out the event schedule listed in the resources section.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Toby Mathis, Esq. welcomes Jason Zundel, Esq., an asset protection and estate planning attorney with Anderson Business Advisors. Jason and Toby discuss all the aspects of lawsuits, including getting served, things to worry about, protecting yourself, being actively involved, and possible outcomes. Protect your assets with Anderson’s asset protection services.
Highlights/Topics: * You need to receive a Service of Process for an actual lawsuit * Default judgements * Case studies from Toby and Jason - suits can haunt you for decades * Next steps when responding to a suit * Timeline to expect * Pursuing YOUR rights with a lawsuit- first steps * The ‘hurry up and wait’ period * Initial discovery can last 6 months to a year * Make sure you’re involved every step of the way- don’t be passive * Reminder - first, take a deep breath!
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=what-steps-to-take-when-facing-a-lawsuit
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In this episode of Anderson Business Advisors, Toby Mathis, Esq., welcomes Anderson Attorney Jonathan Evans, Esq., to dig into the ins and outs of using the IRS’ 1031 exchange in your real estate investment toolbox. Jonathan shares what a 1031 exchange is, how it works, what types of real estate investments you can exchange, the potential pitfalls, using a qualified intermediary (QI), and more.
Highlights/Topics: * Light/kind or 1031 exchanges * Using 1031 as a tool – only for trading real estate investment properties * Carrying out the transfer - using an intermediary or ‘accommodator’ * Other rules and requirements - timeframe and number of properties * Debt and the 1031 - mortgage boot * Pitfalls and potential problems - what you can’t do * Qualified intermediaries - check references * Intent vs. hard rules * Drop-n-Swaps, multiple owners/syndicates, LLCs * Have a structured game plan before entering a 1031 * Share and subscribe
Resources:Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YT
https://www.youtube.com/@TobyMathis
Tax & Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-use-the-1031-exchange-to-avoid-taxes-in-real-state-investing
Learn Next Level Passive Income Strategies Through Real Estate & Stock Investing
https://infinityinvesting.com/infinity-investing-workshops/?utm_source=aba&utm_medium=podcast&utm_content=is-airbnb-dead-the-numbers-nobody-is-discussing
In this episode, Clint Coons, Esq. speaks with Shannon Robnett, a 4th generation real estate professional who has built his deal network by being THE BEST resource for ‘connections.’
For more than 30 years, Shannon Robnett Industries (SRI) has built a strong reputation as a leading commercial real estate investment group by investing in multi-family properties in the Treasure Valley. Their family of subsidiaries, including My Vertical Equity, Phoenix Commercial Construction, and Executive Management Services (EMS) Property Management, have grown to become a substantial earner in multi-family real estate syndication, investing in and around Boise, Idaho.
Highlights/Topics:* Robnett’s family generations of real estate professionals * How Shannon built his source list and later diversified * Building your network - be everyone’s best resource for connections * Learning from more experienced investors * Cash flow, deal parameters, long-term debt * Solving the seller’s problems * Moving up to bigger deals, becoming part of a bigger machine * Finding deals in non-local markets - how to drum up referrals through experts * Questions to ask when vetting realtors, leveraging out-of-state connections * Money or deals, which comes first? * Aggregating capital first - creating your investor list * Helping to structure the deal - creative financing, options for sellers * Learning this process, the jargon, doing the homework * Reach out through his website to get on to Shannon’s calendar! * The 2008 crash could have been averted if we had these podcasts at that time
Resources:Shannon Robnett
https://shannonrobnett.com/
Robnett’s Real Estate Rundown Podcast
https://open.spotify.com/show/0JiVrqBwzZQinfzD3DReef
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-elevate-your-real-estate-investing
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In this episode of Anderson Business Advisors, Toby Mathis, Esq., welcomes Jamie Lane, the Chief Economist and SVP of Research at data aggregator AirDNA. Jamie’s research leadership has helped the whole STR (short-term rental) industry understand the drivers of success. He is a leading voice of authority on the health and outlook for the STR industry: on top of hosting AirDNA’s own podcast, STR Data Lab, he is a regular contributor to international media outlets such as Wall Street Journal, New York Times and Bloomberg, providing exclusive analysis and forecasts of the industry to global audiences. Jamie delves into the cold hard numbers, percentages, and facts from this market, which are actually very encouraging. Tune in to hear how STRs remain a strong space for investors and where you can look to find the best markets for your rental.
Highlights/Topics: * Short-term rentals are seeing record numbers but normalizing * Stats in the short-term rental space * Market and season-specific occupancy * Rentals in the top 25 Metro Statistical Areas (MSAs) vs. high demand secondary destinations * Revenues per unit * Second home statistics and short-term rentals * How rentals are being used - not just for tourists * Laws and restrictions on STRs in some metro areas * Looking forward into 2024 - many new areas for STR investment
Resources:Jamie Lane Twitter
https://twitter.com/Jamie_Lane
AirDNA LinkedIn
https://www.linkedin.com/company/airdna
AirDNA
https://www.airdna.co/
STR Data Lab Podcast
https://www.airdna.co/podcasts
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YT
https://www.youtube.com/@TobyMathis
Learn Next Level Passive Income Strategies Through Real Estate & Stock Investing
https://infinityinvesting.com/infinity-investing-workshops/?utm_source=aba&utm_medium=podcast&utm_content=is-airbnb-dead-the-numbers-nobody-is-discussing
On today’s Tax Tuesday, host Troy Butler, Senior Manager of Bookkeeping at Anderson, speaks with Jeff Webb, CPA, Vice-President of Professional Services at Anderson about some timely tax questions around deductions and payroll. The discussion also addresses some detailed information around bookkeeping including services offered by Anderson, and other apps and software that are best for certain situations. Submit your tax questions to taxtuesday@andersonadvisors.
Highlights/Topics: * "How do you write-off classes or courses, cars, equipment, or anything in general? What is the process? What do you keep? How do you show your proof of funds spent?" In a C-corp, you're allowed to take education for new lines of business. Other entity types, you're only allowed to deduct education for business tha you’re already doing. * "What's the best way to get payroll started? I want to start with hiring a couple of part time employees." - I highly recommend using a third-party for payroll. I don't recommend that you do it yourself, unless you have a full-time dedicated bookkeeper that this is their job. * "Can I deduct expenses for working from home, and what forms can I use?" - What we recommend, typically, is that if you have an entity such as a corporation or even a partnership, you do administrative home reimbursement. * "What's the best way to record startup expenses incurred on your private accounts?" There's a lot to read there, so we'll go on to the next one. - Startup costs, organizational costs are actually intangible assets, and those intangible assets get amortized. * "Which bookkeeping app would you recommend for four units or less landlords to make our tax preparation easier for all of us?" - QuickBooks is always good. I like QuickBooks Online. * "Can we discuss how our bookkeeping service works?" I can do that pretty well. "We're drowning in Excel and Quicken." - We have several different services we offer here at Anderson. The flagship one is called full service bookkeeping, and that's where we're going to do your books on a monthly basis. * "What are common expense categories I should use?" - There are lots and lots of templates of charts of accounts out there that can give you a good baseline. For our Platinum members, we offer some generalized templates. * "Can I discuss some big picture strategies to help with bookkeeping automation/AI?" * “We have a physician set up their PLLC in New York State. Do I need to set up payroll, give myself W2? How much do they pay themselves to avoid an IRS audit? What's the bookkeeping needed? How do I take the remaining money out as a distribution?" That's seven questions in one. They're getting their money's worth out of that one. * “What are the minimum requirements to do so and suggested curiosity of tasking?" – If you have a ton of activity, and a week's worth of transactions takes you four hours to do, then you probably shouldn't wait a whole lot of time to do your bookkeeping. At the minimum, I would recommend doing your books quarterly. * "If our business is still paying off business debt from previous tax years, how do we account for that as far as bookkeeping and reporting?” - If you take out a loan, and you're making payments against that loan, those loan payments aren't expenses, except for the interest on that loan. * “How does the bookkeeping service integrate with the accounting service?" – If you're using us for bookkeeping and using us for tax, we will coordinate your tax return with your tax preparer. Your bookkeeping team will work with your client tax coordinators/tax preparer
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-write-off-general-business-expenses
Anderson Advisors
https://andersonadvisors.com/
In this episode of Anderson Business Advisors, Toby Mathis, Esq. welcomes back Trent Lee of First Choice Business Brokers (FCBB). Trent has been ranked NUMBER ONE in business brokerages for the last five years in a row. You’ll hear Toby and Trent discuss the latest industry stats and requirements surrounding the purchase of small businesses. From restaurants to medical facilities to construction companies, there’s something for every interest in this space. Get in touch with Trent if you want the expert in the business broker space.
Highlights/Topics:* Trent’s the number one business broker in the country by volume for the last 5 years in a row * Higher interest rates don’t mean that great businesses are not available * Good businesses in their industry, bad owners * Motivated sellers * Case study - an urgent care facility * Cap rate vs. multiples * Case study - EBITDA to determine value * The SBA, deals, and some positive changes * Case study - a paving and grading company and the SBA * Buying franchises * Follow Trent on socials to hear about deals
Resources:Trent Lee YT
https://www.youtube.com/channel/UCncOtmBY1gbuE6wDyaFfwBw
Trent on Facebook
https://www.facebook.com/TrentLeeBizBroker
Trent on Twitter
https://twitter.com/TrentBizBroker
Trent on IG
https://www.instagram.com/trentleebizbroker/
Business Brokers Las Vegas
https://businessbrokerslasvegas.net/c/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YT
https://www.youtube.com/@TobyMathis
Tax & Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-big-changes-to-sba-rules-can-make-that-a-reality
In this episode, Clint Coons, Esq. speaks with “Mojo Michael” Gefteas about real estate wholesaling. Clint has been working with Michael for many years in the wholesaling space. After 25 years in the ‘corporate world,’ Michael went out on his own, building a huge buyers list over most of the last decade, and fine-tuning the way buyers and sellers approach wholesale deals. In this episode, you’ll hear about what wholesaling is, why you should consider investing this way, and some of the pitfalls and advantages of purchasing real estate with these methods.
Highlights/Topics:* What is wholesaling? * Contracts in Texas * Do you know your real ARV to market at the right price? * Finding sellers and the right price * Once you’re in the contract - how can you maintain the sale? * Memorandums of Contract and “cloud on title” * Tips and advice for potential wholesalers * com and what it offers
Resources:Mojo Michael
https://www.mojomichael.com/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=real-estate-wholesaling-how-to-safeguard-your-deals-from-sellers
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Toby Mathis, Esq. welcomes Preston Knight, Esq., Senior Attorney at Anderson Advisors to the show to discuss some of the tax implications around crypto mining. You’ll hear how and when transactions are taxed, how the IRS views crypto and mining as a business entity, and some tips and tricks for avoiding and minimizing short and long-term capital gain and other taxes.
Highlights/Topics: * Taxable events * How the IRS views your work * Capital gains hit when paying with bitcoin * Short vs. Long term gains * ‘Staking’ and how it is taxed * Working through an S-Corp * How to use a Roth to avoid taxes * Using depreciation * Writing off business expenses * Airdrops and forks - what are the tax implications? * Tracking and bookkeeping
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-crypto-mining-sales-and-staking-is-taxed
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Host Toby Mathis, Esq. speaks with Bill Mencarow, founder of The Paper Source and 30-year veteran of real estate note investing. Bill writes for Think Realty magazine and has authored several guides and seminars on notes. He has been interviewed on numerous radio and TV programs including “Good Morning America,” national networks and in major U.S. newspapers and magazines.
You’ll hear Bill and Toby discuss the pros and cons of note investing, including how and when you can buy and sell, getting cash out of your note, and what to look for when buying a note - including the three P’s - Property, Paper, and Payer.
Highlights/Topics: * What is note investing? * Selling notes for cash * Pros and cons, options for using this ‘negotiable instrument’ * Selling your property using a note * Where can you find notes to buy? * What you should avoid- rules of thumb * Slicing and dicing your note for sale * Why go to a megabank corporation when you can get a note with someone in your community? * Sign up for Bill’s free eCourse or email him for advice * 3P’s - Look at Paper, Property, and Payer
Resources:Unlock the secrets of note investing and become a savvy investor with our exclusive 360 Pro Membership!
Infinity Investing Membership
https://infinityinvesting.com/pricing/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-to-be-a-note-investor
The Paper Source
https://papersourceonline.com/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
On today’s Tax Tuesday, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA of Anderson Business Advisors, share their expert advice on tax strategies associated with setting up a home office, the potential consequences of being classified as a real estate dealer instead of investor, and how the IRS can view real estate flips as inventory and treat you as a dealer, leading to self-employment tax and other repercussions. Listeners are also guided through minimizing stock gains as a day trader and understanding rental property ownership. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * What are the requirements for bonus depreciation? - Bonus depreciation applies to tangible personal property with a depreciation life of 20 years or less. * Can I 1031 exchange the entire proceed from the sale of a property with two structures, one rented and one as a main house? - Yes, you can 1031 exchange the rental portion, and possibly the entire property if it is converted into a rental before sale. * Can I still invest in the 2022 tax year such as starting a solo 401K if I extended my tax return filing to October 2023? - Yes, you can make retirement contributions for 2022 up until your tax return deadline, including extensions. * What are the benefits of an S corporation status for a small business owner versus sole proprietorship or LLC? - S-Corp can provide tax savings through reduced self-employment taxes, and may have lower audit rates than sole proprietorships. * Can first-year business expenses be carried forward to the following year if there is no income in the setup year? - Yes, you can carry forward business losses to offset future income. * Can I have a home office deduction if I rent the property? - Yes, renters can take a home office deduction if they meet certain requirements. * How can I minimize day trading stock taxes? - Strategies include careful risk management, using tax-advantaged accounts, and offsetting gains with losses. * Can I deduct expenses from my LLC registered as a partnership for fix and flip houses? - Yes, expenses related to the business operation can generally be deducted, though there may be limitations. * Are all expenses related to the purchase and rehab of a rental property included in the basis for depreciation? - Yes, purchase price and most rehab expenses are included in the depreciable basis of a rental property. * What's the best way to minimize the loss of passive losses on rental activities due to the AGI phase-out? - Carry forward passive losses until passive income is earned, become a real estate professional, or dispose of the activity.
Resources:Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=how-day-traders-can-reduce-taxes-legally
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Should you be terrified by the IRS’ new league of 89,000 agents that they claim they’re hiring to do audits on people who make over $400K? Host Toby Mathis, Esq. and Lauren Robins, Esq., a Senior Attorney at Anderson, discuss the reality of what these numbers mean, and what they could mean for the average Jane and Joe Taxpayer.
Highlights/Topics: * What is actually happening with 89,000 new agents? * 89K agents is actually the number being hired over 10 years * Funding for agents is going to “taxpayer services” like answering phones * Low-income resource centers being opened * Business expenses - have the paperwork, and you have nothing to worry about * Taxing you now vs. your retirement funds later * Audit rates and ‘proportionality”- the poor always get audited more often * Fear-mongering vs. reality
Resources:Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=what-you-need-to-know-about-the-irs-crackdown
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In today’s episode, Toby Mathis, Esq. welcomes Carter Coons, Esq., an attorney at Anderson whose last name you may recognize… he is also the son of partner Clint Coons. Carter shares some of the benefits of utilizing a Wyoming Statutory Trusts (WSTs) as holding companies for your California LLCs to avoid the $800 per entity tax that is due annually. You’ll hear how to layer these protections to secure your anonymity and save money.
Highlights/Topics: * California properties and LLCs * How can we avoid this franchise tax? * Wyoming Statutory Trusts (WST) are exempt * WST as a holding company * How does California feel about these trusts? * Protections you can benefit from with a WST * There is no reason that you shouldn’t take advantage of this protection * Integrating out-of-state LLCs * If you’re not a CA resident, all you need is the WST to own titles to your properties * This strategy is legit, inexpensive, and has worked for decades * Share this with someone who could benefit
Resources:Carter Coons LinkedIn
https://www.linkedin.com/in/carter-coons-708629117
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=avoid-the-ca-franchise-tax
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In today’s episode, Toby Mathis, Esq. welcomes Joshua Robertson, Esq., Senior Attorney at Anderson Business Advisors, to the podcast to discuss different approaches to protecting your property and assets from liability and lawsuits.
Josh shares three important strategies for building a structurally sound legal protection plan that will prevent your assets from appearing in public information records and protect them from being targeted. From setting up LLCs as owners, to separating ownership of your assets and the ‘use’ of those assets, Josh explains some simple tactics that take simple “anonymity” a step further - building additional legal protection behind the scenes.
Highlights/Topics:
- Control everything, own nothing directly
- Business entities that own your assets
- Member vs. manager
- Using strategies creatively to enhance your protection
- Splitting ‘ownership’ from ‘use’ - separate LLCs
- Separating LLCs in property ownership
- Isolating substantial assets
- Anonymity is not protection in itself, it is the undergirding legal structure
- Understand where your potential risk lies!
Resources:Joshua Robertson LinkedIn
https://www.linkedin.com/in/joshuatrobertson/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=3-ways-to-keep-your-assets-hidden
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In this episode, Clint Coons, Esq., speaks with Richard Advani, VP of Mortgage Lending at Guaranteed Rate. You’ll hear about specific loan and mortgage products, tactics, and insider information to help real estate investors looking for advantageous methods to invest in or buy primary homes and investment properties.
Highlights/Topics:* Intro and background - Richard Advani * DSCR loans - the details * Other loans - assuming the seller’s mortgage * Can you target these assumable loans through public information? * Once the seller transfers, they are off the hook * Equity - what to look for in loan products * Credit checks on multiple property loans * Marriage and mortgage qualification - what’s the ideal set up? * Income vs. asset-backed loans * Liabilities and LLC’s * ‘Forward commitment’ builder programs * Contact Richard for a no-commitment consultation
Resources: Richard Advani
http://www.richardadvani.com/
Email Richard
Richard.Advani@rate.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=low-interest-rates-are-available
Anderson Advisors
https://andersonadvisors.com/
Clint Coons YouTube
https://www.youtube.com/@ClintCoons
In this 201st episode, Eliot Thomas, Esq., hosts, along with Jeff Webb, CPA, Vice-President of Professional Services at Anderson Business Advisors. The looming filing deadlines in September and October are almost here, but we’ve still got our experts online to help answer your questions. In this episode, you’ll hear answers to questions about HELOCs, when to take social security, the Augusta rule, bad debt, and legacy planning tools, to name a few. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* “What’s the best structure for a management company? C-corporation or partnership? Also, if you were not concerned with obtaining loans, is it more advantageous to have a holding company as an S-corp or a partnership?” – My rec is C Corp, not partnership, the downside is creating passive deductions and income at the same time…and anytime you take those properties back out, and sometimes you have to do that to refinance, that’s a taxable transaction. * “I have a HELOC on a rental property. I used the funds from it as a gift for a down payment on a home purchase for a family member. Can I use the HELOC interest payments as part of an expense for the rental property?” - You shouldn’t be gifting money from your HELOC. Can you take money out? Yes, but it’s a distribution; it’s not a gift. * “I’m getting ready to retire in three years. I own a small business that’s a sole proprietorship. As a single proprietor, when I receive social security, will this show up as personal income?” - What you don’t want to do is start taking social security before your full retirement age while still earning money from a wage or from self-employment. * “Can you use the administrative office and Augusta rule deduction? Or is that considered double dipping when purchasing a property? - commonly referred to as 280A. That’s the corporate meetings. You can rent your house out for 14 days a calendar year—no more—and the income that you receive is tax-free. * How does bonus depreciation affect a present tax bill for back taxes owed to the IRS? So if we took bonus depreciation in the current year without [...] with the prior liability I have with the IRS.” - IRS will keep taking your refunds before they ever touch your bank accounts until they have that back liability paid up. * “We made a $5000 business loan. The business shut their doors. How do we document this bad debt? Is it bad debt loss or is it a tax write-off?” - Yes, it is a write-off, but the question is, how do you write off… * “Is a charitable remainder trust a good legacy and tax planning tool?” - I like the CRUT (Charitable Remainder Unitrust). It’s considered a split-interest trust. The tax returns are very complicated. Don’t ever, ever, ever try to prepare one yourself. * “I bought a house last year with the intention of renting it out. I bought rental property insurance and never lived in it. It was so expensive to repair everything that I sold it before I could rent it. Can I still deduct my expenses on my taxes? I read that there has to be income to be deductible, and I didn’t get it to a space where it was rentable. Please help. I wasted a lot of money on this house.” –Your intention was to rent. The more you can have to substantiate that intention, the better off you are…But yes, you would write it off as a capital gain or loss… * “Could you please explain what basis is? I recently became an S-corporation after 12 years as a sole prop. I can take out tax-free my equity injection of money I put in to start the new S-corp, and the inventory that I basically carried over from my sole prop days into the new S-corp. We have no debt on the S-corp, other than the inventory and cash injection. It owes me back.” - Basis typically is your cost…it could be your entity, it could be a property, it could be any kind of asset. * “Can an LLC taxed as a partnership write off travel and other expenses to intend to invest in seminars such as Alpine CFS, where one would look at several properties, perhaps commit to purchase? - Basically the code says you cannot deduct the expense of any education that is helping you to do something new, that you didn’t do previously. * Check out our events coming up later this month.
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=the-right-structure-for-a-management-company
Anderson Advisors
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Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
In today’s episode, Toby Mathis, Esq. welcomes his long-time business partner, Anderson Advisor’s Michael Bowman, Esq., back to the show.
Michael shares four of the top mistakes he sees when people file incorporation papers to set up a business. From simple things like using a business (not your home) address, to utilizing the correct paperwork and formats, to keeping excellent records and bookkeeping, Michael and Toby discuss interesting real stories they’ve witnessed or been part of, to illustrate each point.
Highlights/Topics: * Many mistakes will end up in court * The top 4 repeated mistakes- incorrect address is number one * Registered agents * Banks need a business address in order to loan you money * Organizational paperwork - By-Laws vs. Operating Agreements * Co-mingling - Business vs. Personal * Books and recordkeeping
Resources: Michael Bowman LinkedIn
https://www.linkedin.com/in/michael-bowman-318492a/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=costly-mistakes-to-avoid-when-creating-your-business-entity
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In this episode, host Toby Mathis, Esq., joins regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to discuss several options that can protect homeowners and investors from paying exorbitant taxes on the sale of property. Eliot and Toby share important information and tactics for passive losses, installment sales, 121 and 1031 scenarios, Delaware Statutory Trusts, UPREITs (Umbrella Partnership Real Estate Investment Trusts), and opportunity zone funds. Highlights/Topics: * Passive losses and gains * Spreading gain over several years * Can homeowners save taxes on the sale of their home? * The 121 exclusion and its rules * Changing your home to a rental property - 1031 exchange and the rules * The DST Delaware Statutory Trust and 1031 exchange * UPREIT- Umbrella Partnership Real Estate Investment Trust * Qualified opportunity zones and qualified opportunity zone funds * Recapping all the options
Resources: Tax and Asset Protection Events Toby Mathis YouTube Toby Mathis TikTok Full Episode Transcript: Toby: Hey, guys. Toby Mathis here, and I'm joined by tax attorney, Eliot Thomas. We are going to dive into how you can avoid paying tax on your real estate when you sell. Eliot, are you ready to go?
Eliot: I'm ready to go.
Toby: All right. What are the strategies we're going to hit today just to give everybody a roadmap?
Eliot: We're going to start off with talking about the release of passive losses, something that people are very common or familiar with in real estate, then we're going to hit on installment sales, deferring some tax gain there. We're going to jump over to 121. If you sell your primary residence, we're going to talk about 1031, like kind exchanges.
We're going to marry the two, 121 and 1031 and see what that looks like. We're going to jump over to working with Delaware Statutory Trusts, then maybe looking at UPREITs (Umbrella Partnership Real Estate Investment Trusts). Lastly, we're going to talk a little bit about opportunity zone funds.
Toby: All right, you just gave us a mouthful list. Let's dive into strategy number one, if you want to avoid the payment on tax. A lot of people may not realize this, and their accountants may not realize it. But if you have passive losses that are floating forward, those may be used. How does this work?
Eliot: That's a great opportunity. You've been hounded by having these passive losses that have been suspended on your return that you haven't been able to take advantage of. But if you sell the property that created those passive losses, generally speaking, those are all released, and they'll offset your gain. Indeed, if you have more passive losses than you do have gain, that extra gain will go off against other income on your return, maybe even your W-2 income.
Toby: That's number one. If you have passive losses in the release, they become ordinary losses. I probably just lost half the people. The easiest way to think about this is if you're an investor into real estate, and you hear your accountant say passive losses only offset passive gain, there are a couple of exclusions to that as active participation or real estate professional. But most of us mere mortals, we're not going to qualify.
We're just sitting there and they're like, hey, you're not going to get to use it, but it gets released. Let's say you bought a big property and it's got $150,000 of passive loss carry forward, that $150,000 gets released as ordinary loss. It can be used against the capital gain on that property to offset it. But more importantly, the capital gains on that property is passive.
This is what's weird. Ready? Twist your mind. You have passive capital gains, which means any other passive losses you have. If you have a bunch of other real estate, guess what's happening to those passive losses. They're going to be used against that property you just sold, and it's going to keep it from being taxable to you.
Now, we're going to use this in another way. You can marry this with an installment sale, right?
Eliot: That's right. First of all, let's back up and just get a quick definition of an installment sale. That's simply the IRS saying that you received payment from selling your property over more than one period. You sell it, maybe you take payments over five years or something like that a little bit each year. We'll call that installment. Take an element of gain each year on each payment, a little bit of interest.
Toby: Different tax years. If I have a six month installment sale, that's not going to do anything for me, unless it goes from year one, and then you go across December 31st into another year. All we're doing is spreading that out, but most installment sales, where they're going to be 5–10 years, something along those lines.
Eliot: Correct. Just as Toby was talking about under the passive losses, you sell that property or you sell other properties, your passive losses from those properties will be released and will help offset. That will come into all of the calculation against these passive capital gains. It's a win-win. You really want to check. All of a sudden, now those passive losses really become our friends.
Toby: I'm just going to give an example. Let's say that you're selling a property. You got $500,000 of gain. You're like, oh nuts. It's long-term capital gains, so it's going to be 0%, 15%, or 20%. Let's say you're in a higher tax bracket, and you're going to be getting hit at the 20-plus net investment income tax, you're at 23.8 plus your state, you could be sitting there at about 37%–38% if you're in California.
You're saying, you know what, I don't want to pay tax on that. One of the things you could do is say, instead of half a million dollars all in one year, let's spread it out over multiple years. Now, this does not work on your depreciation recapture. You have to recognize that in year one, boom. You're going to have to swallow that bullet, but you could spread out the gain, the rest of it over multiple years.
Because it's passive, you can buy other real estate, depreciate it, and take those losses and offset them. Or if you have some carry forward passive losses from other properties, you can use those to offset that gain. Again, you're spreading it out over years. It's almost like you're going shopping with discounted money because you're like, here's what my tax bill is, but if I buy this property, I avoid the tax.
Let's say it's over five years, half a million dollars, so $100,000 of gain every year, I get to avoid and save myself $20,000–$30,000 whatever it might be by buying a property and using that depreciation to offset that capital gain. That's actually a really ingenious way to look at it, but you better be working with somebody who knows what they're talking about.
Let's dumb it down a little bit, Eliot. What's another one that's simple? For me, I'm just a homeowner. I just own my house. What's in it for me? Are there other ways for me to avoid the capital gains on the sale of my property?
Eliot: Absolutely. Probably one more popular part of the code is section 121. That's the exclusion. This isn't just a deferral, Toby. This is an exclusion of capital gains, you don't pay any tax on it. It's $250,000 if you're filing single, $500,000 married filing jointly, really only two requirements are that you own the property, and you use it as your primary residence for two of the last five years. You meet that, you automatically could exclude completely capital gains.
Toby: Now, it's two out of the last five years. It's not the last two years. If you lived in a house and it was your primary residence, and you made it into a rental property. Let's just say for example, I lived in a house, I have some gain, and I'm sitting here wondering, hey, I don't really want to sell it yet, but I might want to turn it into a rental property. Does that screw up my 121 exclusion?
Eliot: Not necessarily. You can still as long as you sell within two of the last five years. You can rent it out for one or two, maybe up to three years would be the theoretical maximum. Now you've turned it into a business property, but you can still qualify for 121 because you've owned it for two years and used it as your primary residence for two years within the last five years.
Toby: What if I had a rental property and I converted it into my primary residence, do I have any issues there? I had it for a rental property for five years, and then I turned it into my primary residence. If I live in it for two years, does that automatically mean I can use my 121 exclusion?
Eliot: You're still going to use the 121 as long as you meet that two of the last five years. However, we call that non-conforming time when you were renting it out. We go back and it's a fraction. Total number of years, divided into the number of years that it was rented out. You get a fraction. We take that fraction times the exclusion, the $250,000 or $500,000 married filing joint. That will show us how much of the exclusion you cannot take. You'll only get to use the percentage, if you will, of the exclusion representative of the years that you did use it as a primary residence.
Toby: All right, now I'm Joe taxpayer. I'm just like, hey, you know what, I just lived in my house, and I'm going to convert it. What about those folks that bought a house on the West Coast, and they paid $300,000 for it, and now it's worth $1.5 million or some silly number, and they're selling it and they're like, how do I avoid capital gains? The 121 is not going to get it done. Let's say they're married, they have a half a million dollar capital gain exclusion. But under that example, there's another $700,000 of gain on top of it. What's the strategy for those folks?
Eliot: There, we can use both. We can use the 121. If you turn it into a rental for a little bit, now you're showing it as a business use. You'd have to move out, but you rent it out. Now you can use the like kind exchange deferment on our section 1031.
It's now a business property, but you still had two of the last five years, so you can use your 121. Here, you're going to exchange it for another property that you would use typically in business, rental, or something of that nature. Like kind exchange basically means they take the basis of the property that you gave up. We call it the relinquished property. You roll that over into these properties that you pick up, the replacement properties. Government allows us to defer that gain.
Toby: Okay, a 1031 exchange is a fancy way of saying, I sold some real estate and I bought more, but it requires that it be investment property. Let's say I had a house, I lived in it, I turned it into a rental. Do I lose my 121 exclusion if I turn it into a rental? Let's say that I sell it two years later. I lived in it two of the last five years, so I meet that requirement. Can I still use my 121 exclusion, but use this like kind exchange where I buy more real estate? Can I do that?
Eliot: Yes. You're going to use the exclusion to wipe out gain. That's going to be the first part of the calculation. You're not going to be able to use it against any depreciation recapture, but you'll be able to wipe out gain on that. Once those calculations are done depending on the numbers, the rest of it will go into the 1031 calculation for deferment.
Toby: All right. 1031, let's just knock a couple of things out of the way there. It has to be an investment property. Let's say it's a single family house. Can I buy commercial property, land, or storage? Can I buy two duplexes? Can I buy three single families out of it, or do I just have to go one to one?
Eliot: No, you can get multiple properties. If you have a single family, you can still get into commercial. Really, the only requirement is real estate.
Toby: It just has to be real estate. It can even be land.
Eliot: Yes.
Toby: Here I am. I'm looking at this going, all right. I'll interpret what Eliot just says. I have a house that I bought for $300,000. It's now worth $1.5 million. I lived in it two of the last five years. Two years ago, I moved out and I made it into a rental.
What this means is that I can use my $500,000 exclusion. Let's say I'm married. All of a sudden, my basis of the new property I buy is going to be $800,000, and then I could 1031 it into more real estate. Let's say that I bought two properties, each were $750,000. Boom, I pay zero tax. Is that how we just worked it, plus my basis stepped up in those properties to that $800,000 or $400,000 amongst those two properties?
Eliot: Exactly right. You just grew your rental portfolio.
Toby: Absolutely. That's why people love the 1031. Coincidently, getting out of that 1031, most people would say, all you got to do is die. You step up in basis once you die. But what if I am just sick and tired of managing rental properties and I say, you know what? This is for the birds. I want to be able to enjoy my retirement. What's the option for somebody like that who's been doing 1031 exchanges their whole life, and now they don't want to sell and get a taxable event? Is there a way for them to get out of that 1031 exchange by doing something else?
Eliot: There is. Enter the Delaware Statutory Trust, DST often referred to. In a 1031, the government will look at that as an exchange for real estate. In other words, we did the 1031, we sold our property. That's the relinquished property. Now, instead of picking up other properties that we have to manage, you can just get an interest in a Delaware Statutory Trust. You don't have to manage anymore, you just collect the checks.
Toby: A Delaware Statutory Trust sounds like a fund that holds real estate. But the IRS has touched it with its magic wand and said, this is the same as owning the real estate. You can turn 1031 into a DST, but that sounds illiquid. Am I missing that, or is it pretty tough to get out of a DST?
Eliot: Traditionally, it has that stigmatism to it that you can't get out that well. There are other options, though. You're able to defer your gain by getting into the DST, but some of these DSTs are able to move over. You can exchange it to an interest of something called an UPREIT.
Toby: Tell me about that. What's an UPREIT?
Eliot: Umbrella Partnership Real Estate Investment Trust. That's a different type of vehicle, lots of properties in it, much, much broader portfolio than what you typically see in a DST. Tax-free typically will move from your DST into ownership of an UPREIT. Same idea. You're not managing anything anymore if people are handling it for you.
The thing about an UPREIT is typically, they are part of a structure that has free trading stock through its general partner. What does that all mean to you? Much easier to sell those and things like that. It's just a broader category of different types of real estate products in there and more freely trading.
Toby: The holy grail is still, you hold these things until you die, and then they step up in basis. What that means is the fair market value is the date you're passing. It's what that value is. It's what that basis is on that property for your heirs. If they sell the property, they sell the upgrade, they sell the DST, or they sell the real estate, after you die, they're probably not paying any tax.
That's our end goal. But if you need to get cash and you want to get out of the real estate, the UPREIT is actually a nice tool because you could just sell individual securities under that situation. You're just selling it out on the free market. Hey, I need $50,000. Instead of having to sell the whole piece of real estate, you could just sell that much and recognize whatever portion of the gain is attributed to that piece, right?
Eliot: Correct.
Toby: All right. I've heard a lot about these qualified opportunity zones and these qualified opportunity zone funds. Do they have a place in this mix when it comes to real estate?
Eliot: They can, maybe not as attractive as they were when they first came out. The tax code has progressed past a time period where you got some of the benefits. But still, if you have capital gains now, generally speaking within 180 days, you can invest them into a qualified opportunity zone fund. The fund goes out there and buys land or what have you in these areas that have been designated as such.
If it's barren land, and you're making improvements, or if you already got a house or a building that's there, you may have some additional qualifications. Within about 30 months, you have to add more to it. It could be from your capital gains.
Toby: Double the value.
Eliot: Exactly right.
Toby: The improvement, not of the entire land. If you buy a big chunk of land with a little structure on it, as long as you've doubled the value of the structure, you're going to meet the requirements.
Eliot: The key here is that the deferment—and this is just a deferment—only goes until the latest December of 2026. That time, you will have to pay the capital gains on that deferred.
Toby: You're going to have a taxable event.
Eliot: Right, you're going to pay that. But if you hold on to the whole project for 10 years at least, then all of a sudden, the cost basis in your project goes up to what's the fair market value. Tax-wise, it just means you pay no tax. You could sell over 10 years, it goes up in value, and you're not going to pay any tax.
Toby: Let's make this into English. Let's say we have a $300,000 property that's now worth $800,000. We sell it, but we have all that capital gain. We have $800,000. Do we invest that into a qualified opportunity zone fund? Is that what we do?
Eliot: Just the capital gain amount.
Toby: So the half a million?
Eliot: Yup.
Toby: We have half a million of gain. We put that into a qualified opportunity zone.
Eliot: It will be deferred until the end of December 31st, 2026.
Toby: All right, let's just say I put half a million dollars in, you could put other cash in. I could put the whole $800,000, but the only portion that's going to be relevant for the opportunity zone is that half a million. You have two different types of basis there.
Let's just say that we buy a property, $800,000, it goes up, and now it's worth $2 million. At some point in 10 years, let's say it's worth $2 million. In the meantime, I've had to pay tax on that half a million dollars in what year? In 2026?
Eliot: Correct.
Toby: I'm going to have a capital gain hit in 2026. Is this also the depreciation recapture and everything that I'm deferring, or is it just capital gain?
Eliot: It would be just the capital gains.
Toby: Okay. I'm pushing that down the road, and now I'm getting hit at some point in the future with the gain recognition. Eventually, I will probably never going to sell, but I will hold on to it for 10 years. Now it's worth $2 million. I only paid tax on that half a million dollars of capital gain. Now I sell it 10 years later for $2 million, and I have no other tax, right?
Eliot: That's correct. You basically walk away with a pocketful of cash, no tax consequence.
Toby: All right. We just hit a whole bunch of different areas. Let's go back. Unless there's anything else that I’m missing, are there any other strategies that you got up your sleeve?
Eliot: No, I think that's plenty.
Toby: All right. We just hit the unlocking of passive losses that are carried forward. We hit that. We talked about spreading that capital gain and using passive losses by using an installment sale to avoid taxation. We went over 1031 exchanges.
We went over 121 exclusions on your primary residence. We went over using both a 121 and a 1031 Exchange. We went over using a Delaware statutory trust. We talked about using an UPREIT for a little bit better liquidity than a Delaware Statutory Trust. And then we finished off with a qualified opportunity zone. We just hit quite a few areas.
We haven't even dived into Charitable Remainder Trust, or using charities, or some of the other more creative vehicles as well. But I think you have an absolute mouthful of strategy that just got thrown onto your plate that you can explore as to ways that you can avoid tax when you sell real estate.
Eliot, thank you for joining me. Thanks for laying those out for us.
We’ve reached quite a milestone - our 200th episode! For today’s Tax Tuesday, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, Esq., CFO of Anderson Business Advisors share their expert advice on tax strategies and navigating economic uncertainties, with a focus on rental property and financial diversification. You’ll hear about the complexities of non-recourse loans and taxation, myths and strategies for day traders, taxes on land flips, the best time to do a cost seg, and more. Three lucky listeners will receive copies of our ebook in the episode. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is there a minimum net income where it would be beneficial for a single-member LLC to file as an S corp rather than a disregarded entity? - It depends on individual circumstances, but if your income is quite low, you may be able to save a bit if you file as an S-corp. * Can my rental income be directed into a self-directed IRA and what are the advantages to doing that? - Yes, rental income can be directed into a self-directed IRA which offers several tax advantages. * I don't understand the difference between owning rentals as a real estate professional (REP) or non-REP. And what, if any, disadvantages are there when buying a rental inside a Solo 401k using a non-recourse loan? - REP status offers tax benefits, while non-REPs face limitations. Buying a rental inside a Solo 401k with a non-recourse loan can limit potential deductions. * How is the land flip taxed? Does land have to be held for a year like a house? - Land flips are taxed as ordinary income and there is no requirement to hold for a year. * Is it acceptable for the IRS to trade futures from a 501c3 or a family foundation entity? Does the entity need to pay capital gains? –Yes, futures trading is allowed but can carry unrelated business income tax implications. * If you form an LLC for rental property, is it best to report the activity on Schedule C or E? –Generally, it is better to report rental activity on Schedule E for tax purposes. * When is the best time to do a cost segregation study? – The best time is usually after renovations are complete but it depends on individual circumstances, some you don’t have to wait on, like a pool. * We fix and flip luxury homes and are thinking about keeping some to rent. We have held some in the past. We have an LLC but the accountant is saying to go to an S corp. - we disagree, investment property should not go into an S corp, it should go into a land trust/LLC. * We are setting up a family trust in Florida and watch your video about trust Wyoming. The attorney says we don't need Wyoming, is this true? – The WY trust is a revocable trust. If you’re working on a living/grantor trust, your attorney is correct. Transitioning to an S corp may provide tax benefits. * What is the best way to pay my children who actively trade in our fix flips bookkeeping? – Consider establishing them as employees and paying them a reasonable wage for their work. * I understand anyone can gift to anyone in a year an amount not to exceed $17,000 per person. Can I gift from a family limited partnership Units not exceeding that amount, giving them a percentage of the LP units each year? Does it avoid the generation-skipping tax? – Yes, but your gift from your interest in the LP…it can be a viable strategy for tax purposes. * Send us your questions, and check out the event schedule listed in the resources section.
Resources:Infinity Investing
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Email us at Tax Tuesday
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Tax and Asset Protection Events
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Welcome to Part III of our recession planning series. Toby Mathis, Esq. and Stefan Whitwell, Founder and Chief Investment Officer of Whitwell & Co., LLC, are back to discuss the facts, statistics, and future trends they see happening in the crumbling commercial real estate market. There are great investment deals out there, but you need to look at facts and numbers. Don’t fall for the bargain investment “story.” Enlist the assistance of a pro to make sure you don’t get in over your head.
Highlights/Topics: * Commercial real estate – current stats and trends * Interest rates are doubling * Commercial building has slowed or stopped- increasing demand, but over 10 years * Is the residential market next? * REIT and risks * Looking at numbers, not the story: history, past cycles and performance * Invest with an advisor’s assistance, and don’t get greedy!
Resources:Whitwell Advisors
https://whitwelladvisors.com/team/stefan-whitwell/
Tax and Asset Protection Events
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Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
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In today’s episode, Toby Mathis, Esq. welcomes Stefan Whitwell, Founder and Chief Investment Officer of Whitwell & Co., LLC, back to the show for Part II of a three-part series. Stefan is a sought-after advisor who works closely with clients at the intersection of health, wealth, and purpose. Toby and Stefan discuss the shrinking assets and lack of funding from big banks and the private funding (as well as investment) opportunities that you might consider instead. Find a fiduciary who is a money manager and get access to these things the right way. Highlights/Topics: * Opportunities in this market * Types of industries private funds are lending to * Bank assets are shrinking * Accessing private funds - different structures are providing new options * Interest rates and rates of return * Using IRA’s to avoid taxes * Risks - higher returns * Top 10 US Metro areas - Office building ‘physical occupancy’ is only at 50% * Bailing out the banks - Feds messed it up badly by bailouts * Be patient and watch for good opportunities
Resources: Whitwell Advisors Tax and Asset Protection Events Toby Mathis on YouTube Full Episode Transcript: Toby: Hey, guys. Toby Mathis here, and I'm joined by Stefan Whitwell. We are talking about private lending opportunities and the related risks of going into that. I'm going to set the table here. First off, Stefan is a CFA, a fiduciary. You're a fiduciary, who is a financial professional who manages large amounts of money, millions and millions and millions of dollars, graduate of the Wharton School, blueblood, knows your stuff, swims in these waters daily.
What we're going to be talking about is the tightening of credit, because banks are losing deposits. They're not lending. I liken this back to the recession. We saw similar activity. Before we started, I was talking about how I was doing a loan with Lehman Brothers on a commercial building. I said to them, it's almost like you don't want to loan the money.
I took my business elsewhere, when a regional bank closed within 30 days. And lo and behold, Lehman Brothers goes bankrupt a couple of months later. I just remember going, Jiminy Christmas, they just can't say they're about to go out of business.
A lot of banks are in that same area. We want to talk about the opportunities that that creates for you. At the same time, what are the risks involved with those opportunities? I'm going to hand it to you. What are the opportunities in this market? And what are you seeing?
Stefan: I think the immediate opportunity is you're seeing investment funds that are stepping in to fill the borrowing needs of legitimate borrowers today, that like you said, it doesn't feel like the bank wants my business, or they're way too slow, and they've got a business to run. You're seeing more and more funds step into that gap and begin to provide those lending needs.
Toby: The lending needs that you're seeing, is it Joe Public or is it Amazon and other companies? Are we talking corporate bonds? Are we talking everything?
Stefan: The biggest opportunity (I think) are the lending to small- and medium-sized companies, as well as real estate–backed loans. These are funds, for example, that are lending as a first lien collateralized by real estate. They typically will specialize in one type of real estate fund that we invest in that does just real estate loans backed by residential real estate. There's another fund that does predominantly commercial real estate.
Toby: Be careful with that one. Commercial is going to be a hot potato, hot potato, hot potato.
Stefan: One of the things that's important is when you're doing this kind of lending, if you're lending now, you have the benefit of knowing that things have changed. You need to be smart about the risk that you're taking.
A lot of these loans are done with relatively short-term tenors. You're not locked in for 5, 10, 15 years. These might be funds that are investing in one- to two-year loans. That helps reduce the risk as well. A lot of these borrowers, again, they're not distressed. They're just stressed by the process of working with banks. They don't want to wait forever to get the loan.
Toby: It goes like this. A bank, you get a deposit, you put your deposit in with the bank, they take that, they're able to do fractional banking, they're able to loan that dollar out. Let's just say in a perfect world, they didn't do that, and all they did is loan your dollar out to somebody else.
Deposits are shrinking. Their assets are shrinking as a result because they showed that as a deposit. Unlike the custodial account at a financial institution, where it's your money and it's bifurcated, in a bank, their assets are shrinking and they're not able to loan.
If you are somebody who needs to borrow to grow your business, you're in, all of a sudden, that weird situation where the bank is talking a good game but they're not moving, you're not getting the funds that you need. So you're going to go to an alternative which is the private market, and that's what you're doing.
These funds that somebody would invest in, are they syndications? Is there something that I could do as an individual? How do I get access to these?
Stefan: They come in different flavors. They're syndications, they're partnerships, different structures of funds. That's where it's helpful to have a team to be able to come to, help you source them, and do due diligence on them. The theme is really where banks are struggling, there are new opportunities that are arising for investors like you and me.
The interest rates now are high enough that the rates of return now are attractive. If you're making 8%, 9%, 10% with either monthly or quarterly distributions on assets that are not levered and where you have collateral, for a lot of people, they say, hey, this serves a good medium risk, medium return, I'm not looking to bet the farm, I just want to stay ahead of inflation, and I want to get some cash flow along the way. This can be very helpful.
Toby: We're seeing this with folks that had, for example, real estate loans that were 2%–3%. They don't want to pay them back, and they have the cash. Basically, they could be paying off that loan. Or they could put it out there to go generate some income.
Then they're sitting there going, should I put it in that CD that's paying me 4½%–5%? Should I put it in the money market that's paying me 4½%–5%. Or should I do this? You're getting 7%–8% returns. Is that the target in these?
Stefan: I think 7%–8% is very doable. If you have access to firms that specialize in this area, there are also ones that are making a little bit more than that.
Toby: Higher risk, obviously.
Stefan: Let's talk about risk in one second. I want to first talk about the tax side of it. When you are making these returns, it's also even more attractive if you can locate this asset inside your self-directed IRA, your self-directed Roth, or even inside your company. It could be a defined benefit plan or cash balance plan. That's the other way that people have been benefiting from using this kind of strategy, because then you're not paying tax on it.
Toby: Let's say that you're invested in a fund and you're making interest, it's ordinary income. If you could put that into an IRA, 401(k), defined benefit plan, or whatever, then it's exempted. It's not going to be taxed. Or it's going to be deferred. It's not going to be taxed. Or an HSA, let's just throw that out. That's the triple threat out there. If you don't know what that is, health savings accounts are awesome, too. Only accredited investors, or can other people participate?
Stefan: Other people can participate, but I would say there's still well over half. You still have minimum requirements.
Toby: That's fair. You mentioned there were two opportunities.
Stefan: Actually, I'm going to go back to your comment about risks. I'm glad you asked about that. Any type of investment strategy has risk, and this is no exception. It's important that you be smart about it.
Let me give you three different things to pay attention to. One is leverage. I see a lot of people out there who are adding a lot of leverage to the strategy because they're trying to make 16%, 17%, 18%, 20% returns, but it's because they're adding a lot of debt inside that investment vehicle. I would be careful about that.
Toby: Don't do that.
Stefan: Don't do that.
Toby: You're not a big debt fan.
Stefan: I think you need to be very, very careful with that.
Toby: They're levering up because the cash on cash return looks better that way. You're like, oh, this is even [...].
Stefan: It makes it easy for them to raise money. People are like, oh, wow, this is great, I'm making a higher return.
Toby: But it's higher risk.
Stefan: It works until it doesn't, and then it gets really ugly fast. Personally, in terms of our practice, I don't want to lose sleep at night worrying about that. I'm sure you're the same, but most people don't want to give up sleep for a few extra points.
Toby: What about the other opportunities? We're sitting in a building here. I don't know if it's financed or not. It's not my building. But let's just say this building here has a loan on it. It's 30% vacant now because businesses are not making employees come into the office. I think that's probably pretty close to the vacancy rate. There are millions and millions and millions of square feet.
Stefan: It's more than that, actually, Toby. I just looked at the most recent statistics. If you look at the top 10 US metro areas and look at the office buildings, their physical occupancy, which is reality, the leases can lag, but the physical occupants today, 50% still.
Toby: 50%? All right, all of a sudden you have a note that might not be performing, or it's going to reset. I think we have over $1.5 trillion of resets coming in the next three years, which means all of a sudden, that debt is going to be much, much higher. The cost of that debt is going to be much, much higher. What's the opportunity there? Are they going to be selling off these notes? Is there going to be an opportunity to come in and buy distressed notes?
Stefan: Yeah. There are two flavors of the opportunity. One, you're going to have professional investors that are just upside down and walk away from it. That property will be taken over by a servicer, and that'll then be sold at a significant discount. We've already seen some examples this year of that happening quite a bit. It's happened with a couple of large scale malls. It's happened with some big office towers in San Francisco most recently and including a couple large hotels, where the professional investors have just...
Toby: They're walking away and they're saying, we're done. Here in Vegas, for example, I used examples of stuff that I dealt with. You had banks that took back a lot of properties. They foreclosed on those properties, but they weren't in the business of being a landlord. They would just sit there with what we call it shadow inventory, all these vacant houses. We would work with the banks to maintain them.
A lot of investors just like myself said, hey, you know what? Let's go out there, we'll mow their lawn, we'll make sure it stays clean, we'll make sure that it doesn't look like it's a vacant property so you don't get squatters. But they weren't in the business of being a landlord, they were in the business of being a bank.
They're going to dump those properties eventually. We were buying them up like crazy. Blackrock was buying them up like crazy. That was an investor who was salivating, saying, give me a bank tape. That was always the thing. Is that going to happen? Are there going to be these types of assets?
Stefan: That's already starting to happen. If you think about it, those assets are failed assets. Think about how hard it would be to take that asset, go to your local bank, and be like, hey, I'd like to get a loan on this failed asset. Your local bankers are going to cringe and pull away from you immediately. Those often are sold all cash, which means there are fewer buyers, and those buyers have even more leverage in terms of negotiating lower prices.
Toby: How do we participate in that? How do I participate in that? If I don't have a banking relationship, I don't know. I'm not going to buy a building that's in distress or whatever, but how do I participate if you're like me?
Stefan: You just mentioned the magic word, that's distressed. There are distressed investment funds that do exactly that. They either buy the hard asset, or as we were talking about earlier, they'll buy that paper, the note from the bank at a huge discount. Because that bank has already taken a write off against that, so the bank will sell that paper for a significant discount. The funds will buy that paper, foreclose on the asset, and then either sell it or operate it for a little while.
Toby: And you can find these funds. You have access to these funds, I take it.
Stefan: There are a number of funds out there. We work with a number of them. It requires a little bit of sophistication because it's a different process than normal. But it's a very, very common strategy that's been around. Every 10-15 years, we have a crisis.
Toby: Close with the cycle. It seems like it's cyclical, and you keep dealing with it over and over again. Last time, the government screwed it all up by bailing out the banks. Instead of letting us just buy the notes and deal with the borrowers, the banks pretended to do the modifications, and they took the government money, and they hosed all their borrowers.
I know it because before the big bailout and after the bank bailout, we were doing modifications, and it was so much easier before the bailout. After the bailout, the banks lied to you through their teeth. They wouldn't mediate.
Stefan: They wouldn't work with you. No.
Toby: There was no incentive for it. The government got involved. Hopefully, the government stays on the sidelines and lets the market do what the market should be doing, which is, hey, there'll be folks like you or funds that come in put together monies to go out and take over these distressed assets in profit as a result.
Stefan: It's funny because the word distressed is scary. But don't let it scare you, because if you're on the right side of that transaction, it can be, in my opinion, less risky than going out there and paying a market price for some asset. You're buying things at significant discounts in complicated situations, and that's why you're getting paid very, very well in those funds.
You have to understand, these funds do not pay out money every quarter or on a regular basis. The way these funds work is you make an upfront investment. You should count on having to hold that fund for three to four, maybe five years. It's towards the end of that, where a lot of these realizations, the profit, then comes back to you, your principal comes back to you. It's just a different style, but those higher return distressed investment-type funds, don't expect cash flow along the way, but they're significant opportunities.
Toby: You're doing a long term play, because the market at this point in time is tight on the credit. Banks are suffering, banks are losing deposits. There'll be more bank failures. They're holding a ton of this paper anyway.
You're going to see the credit markets tighten, and private individuals going to have to step in there. You're going to see funds looking to take over the asset, and you're going to see funds putting together lending opportunities where you can participate and you can become the lender. Hopefully, the government stays on the sidelines with these things. It would have been much better off for everybody, had they not done that. That's my personal opinion.
Stefan: What happens is a lot of these deals start getting marketed, and you start seeing people trying to sell you an investment in a property that...
Toby: We're already seeing it. You see like, oh, here's an office tower. You could own a high rise and all this stuff. I'm like, it's empty, isn't it?
Stefan: There's an old phrase, don't catch a falling knife. It's hard because the initial discounts look really good. It's 30% off, but I just would encourage you to be, as hard as it is, say no more than you say yes. Just be patient. Wait for it.
This is going to be a slow-moving train wreck, not an overnight, oh, I missed it kind of deal. Don't be afraid of saying no. Get an extra opinion if you need to, but don't fall for the hype. The people that are patient and really wait for those opportunities tend to do better.
Toby: That's good advice. Obviously, we're just bringing up something that's going to be an opportunity, and it's making you aware so that you can take advantage of it and benefit as a result.
It just comes down to this. The market needs these products, and they need these funds, and they're willing to pay for it. Normally, they go to source A which might be the banks that's drying up, so they're going to go to source B, which is you and me, as part of these funds. You're going to get introduced to those funds through somebody like Stefan.
Find a fiduciary who is a money manager and get access to these things the right way. Don't go out there and look on the internet and see a soup du jour. Be very, very careful about this and make sure that you have somebody that's guiding you along the way. Thanks, Stefan, for coming in. It's pretty enlightening.
Stefan: Fun to be here.
In today’s episode, Toby Mathis, Esq. speaks with Stefan Whitwell, Founder and Chief Investment Officer of Whitwell & Co., LLC. Stefan leads the overall Firm and its investment practice. He is also a sought-after advisor who works closely with clients at the intersection of health, wealth, and purpose. Toby and Stefan reveal that the “bad stuff” is not over with big banking, and that we will continue to see bank failures and devastating client money losses … so make sure your money is protected, see a professional!
Highlights/Topics: * The state of big banks today * What happens to your $1 Million if a bank suddenly fails? * Custodial accounts to protect your money * SIPC insurance vs. FDIC * Business owners and three things you need to protect * You can end up on the hook to pay your employees * Custodial accounts – you need to do your homework * Bank debt and commercial real estate * Stay informed, make sure your money is safe
Resources: Whitwell Advisors
https://whitwelladvisors.com/team/stefan-whitwell/
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=recession-planning-part-1-3
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In today’s Tax Tuesday episode, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, Esq., CFO of Anderson Business Advisors, discuss several interesting and complicated questions around collecting rent, refinancing your rental home, accountable plan reimbursements, and cost segregation. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * "I am single-family home real estate investor… should I collect the rent in a separate checking account LLC” - a property management entity should be collecting and paying the LLCs. Don’t have renters pay directly to the ‘holding’ LLC. The way you’re doing it is okay. * “If you refi a rental home can you start depreciating at the refi amount?” First of all, why would you refi now at 7%? But let’s say you do refi; your depreciation does not start over. Unless you get cash out to improve the home, that remodel depreciation starts anew. * “Thanks for talking so much about S-corps, literally saving my business. If my business doesn’t have enough to reimburse me after the accountable plan” …no, you can’t deduct it if you haven’t been reimbursed. You can give the money to the company, creating a loss, then reimburse. * “How do you determine the quality of a cost seg vendor… does it even matter.” - you need an actual person that stands behind the analysis, don’t just use software. * “What are the tax benefits to writing off the rental property” - you can identify each part that is NOT 27.5 years… you’re supposed to do 5, 7 years, 15 years, for certain home element improvements. * “I made a loan to an individual from my self-directed IRA. He wants to pay it back from a self-directed IRA. will this create a taxable event to either of us? - for you no, for him yes * “I had a property vacant for repairs until April 2023…can I still claim my expenses?” - ‘ordinary and necessary’ can be, yes - roof replacement, repairs, etc. but not ‘improvements’. Put it into service first. * “Can a self-directed IRA co-invest with you and not create a prohibited transaction, even if you self-manage, and may use the assets?” - yes you can set up a joint venture… but you can’t use the asset, you can’t buy a property and ‘use it’ or do any work on it. * “What biz entity can leverage life insurance as an exec bonus plan for tax deduction?” - we can’t think of any way to leverage it, but there are ways to write it off. Talk to somebody who works on exec compensation plans. * “When taking into account bonus depreciation on investment property - how far back and forward in time?” - net operating losses cannot be carried back…only forward, indefinitely. * Send us your questions and check out the event schedule listed in the resources section.
Resources: Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In today’s Tax Tuesday episode, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, Esq., CFO of Anderson Business Advisors discuss a number of common tax topics including IRA to Roth conversions, real estate depreciation deductions, LLC’s, S-Corps and Sole Proprietorships, gifting vs. inheriting property, and the title question about structuring your real estate business. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * "If I move money from my SDIRA, which stands for self-directed IRA, to a Roth self-directed IRA, can I use bonus depreciation from real estate owned outside of my IRAs to offset the taxes I owe from the Roth conversion?" - It's really going to depend on where that depreciation is coming from. * "I'm new to real estate investing and haven't purchased the property yet. Do I need to have an LLC to claim deductions this year on real estate–related expenses already incurred?" - An LLC really has nothing to do with taxes. It is strictly for liability protection, and asset protection. * "I'm a small business owner with three other employees working for me. I'm trying to open a solo 401(k) or some other retirement plan for myself as an owner. I believe I need to offer the same to my employees as well, which I can but am not interested in offering any matching contributions to other employees. How does it work? What is the best way to set this up?" - yes, you can open up a 401(k) and have your employees participate assuming they're eligible to participate. However, you can't pay yourself a match and not pay them a match. You have to treat everybody equally. * "I won $10,000 worth of furniture from a raffle or gaming event. How do I report this on my income tax?" - Whoever you won it from should be issuing you a 1099 miscellaneous with $10,000 of other income on it. You'll record it on your tax return as other income. * "I'm a realtor operating as a sole proprietor. Should I be operating under a different entity to minimize taxes and liability? Over the years, I've received conflicting information and just don't know." - the math is 14.1% in addition to your state income taxes, in addition to your federal income taxes. The way you nix that is you run it through an S-corp or an LLC taxed as an S-corp. * "At what point in my real estate operation should I move from a single-owner LLC to S-corp for tax purposes?" - If we're talking about investment real estate and rental properties, you don't ever want to put them in an S-corporation. It's a bad idea. * "If I transfer my rental property into an LLC for the purposes of depreciation, will the LLC get a step up and basis to the current market value of the property? Or will the LLC inherit my lower basis? - If you contribute property to any kind of entity that you own, it gets your basis. * “Do unrelated businesses have to have separate schedule Cs or LLCs, or can I rebrand myself on my Schedule C, DBA, JL Enterprises, and put everything together? What are the advantages or disadvantages?" -...most times I don't see a whole lot of advantage to grouping unless it's a real estate activity with an operation or something like that. * "In my father's will, he's leaving me a house." Yes. "I've been living in it for nine years." "If he puts my name on the title now along with his name, will I have to pay more taxes? I prefer to do that now. What would the difference be? He does have a living will." - He would have to file a gift tax return for his basis in that half, or actually its fair market value on that half. I'm not a big fan of mixing things up under these circumstances… * "We are fixing the downstairs area of our home to rent out as a short-term rental. Are there any expenses that can be used in tax deductions? Should we run it under an entity?" - The repairs that you're doing down there would be deductible. If you're doing improvements to the property, it would be depreciable. * Send us your questions, and check out the event schedule listed in the resources section.
Resources: Infinity Investing
https://infinityinvesting.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In today’s episode, Toby Mathis, Esq. speaks with some unique, socially-minded real estate developers - Kevin Cavenaugh and Sujata (Suja) Shyam from Guerrilla Development. Guerrilla is a Portland real estate company focused on creating inventive and experimental projects that use both hemispheres of the brain. Their buildings prove that good design and good financial returns are not mutually exclusive. Success for Guerilla is measured by the social capital their developments produce as well as by the asset value they generate.
Highlights/Topics: * Guest intro and background, what Guerilla is all about * Everything Guerilla builds is an experiment * Stats on low-cost rentals * Building neighborhood-friendly transitional housing in Portland * Jolene’s First Cousin * Public money and the strings attached * Pre and post-pandemic costs and building * Stick-built vs manufactured homes * Working for the Oklahoma Housing Authority * A place between food carts and restaurants * Combining market-rate units and low-cost housing - investment returns * Reverse/legal discrimination catering to certain professions - social workers, teachers, etc. * Rentals for foster kids who have aged out of the system * The American Dream/Your own home - not possible on the coasts or big cities anymore * Affordable housing can be sexy! * Reach out to Guerilla and help your own neighborhoods
Resources: Guerilla Development
http://guerrilladev.co/
Participate! Get in touch with Guerilla
http://guerrilladev.co/investors-20-fall-2017
Infinity Investing Workshop
https://inf.link/iiwyt
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to Episode 197 of the Tax Tuesday show. Host Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, welcomes CPA Kurt Bergfjord to help answer your questions. We send a big thank you to all our people online answering your questions today.
Today Kurt and Eliot answer listener questions on tax liens and wholesaling. They discuss the complexities of property tax implications, the benefits of a C-Corp for property flipping, and the tax implications of inheritance. The episode also answers inquiries about home office expenses, the intricacies of short-term rentals in real estate, and running an active business in a retirement account.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * “Are there any tax implications for wholesaling and tax liens?" - Yes, tax liens can lead to property auctions, affecting real estate investment strategies. * “When I pass on and leave property to my children, are there estate taxes?” - right now estate exemption for a couple is 25 Million dollars. Better to let them inherit than to gift it to them… * "I own properties in two states… any restrictions on travel deductions?” - The IRS would say as long as your trip is more than 50% business days, your travel is 100% deductible. * "We have 8 properties to sell, no longer want to be landlords…but we want cash flow” - Calculate the capital gains…pay or defer, use a 721 exchange to turn rentals into units in an investment trust, which provides more stable cash flow and hands off investments. * "What is the right way to deduct my personal residency expenses, such as mortgage interest, mortgage insurance, real estate taxes, homeowners insurance, depreciation, so on and so forth? How do I do that? Through an accountable plan as an employee of my corporation, or do I do that tax time on my personal return?" - An accountable plan requires a separate dedicated office space/room in your home… * “I own a single member disregarded LLC, which in turn owns a rental property. The rental property provides me with tax Tax deduction, mainly because of depreciation. If I were to take the property out of the LLC as an owner-drawer distribution, would I be liable for any capital gains tax or depreciation recapture?" - In this circumstance, if you’re just pulling it out of an LLC that you own, that is disregarding to you, is not really considered a sale for the IRS purposes. * “When you pay your kids, may that payment come from your personal bank account?" - Generally, it's advisable to pay from a business account for clarity and separation. * "If I use a Sidra self-directed IRA to purchase short-term rental property, does that qualify for me as a real estate professional?" If I use the Sidra self-directed IRA funds plus a mortgage to buy a rental property, once the mortgage is paid off, is the whole property considered property of the IRA?" - No, activities in a retirement account don't qualify towards real estate professional status. If the IRA funded the purchase, the property belongs to the IRA. * “What are the requirements to have a second home be considered a short-term rental? Will I be able to expense furnishing costs and other expenses? Also, how does cost segregation work in this situation? - If you're going to be using any property for more than 14 days or 10 percent of the fair market rental days out there one you have to allocate the expenses associated with the property between personal time and business time. * “I formed my two LLCs last year but haven't funded them or used them in any way. I missed the tax return filing deadline this spring. Now what? File the returns and beg forgiveness to not have to pay late fees, close the business down, start over? So I got some LLCs set up not telling you anything about those LLCs, kurt, but I will tell you that I didn't file the returns. What am I going to do?” - How are these LLCs taxed? Knowing that answer will be the first step in determining what you need to do with your LLCs.
Resources: Kurt Bergfjord LinkedIn
https://www.linkedin.com/in/kurt-bergfjord-cpa-08873053/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Clint Coons, Esq. speaks with Dr. Param Baladandapani, CEO of Generational Wealth MD. Dr. “Bala” went from a ‘burnt-out radiologist’ to a retired real-estate investor in one year, at the age of only 41. Dr. Bala’s advice, methods, and insider information can help you ‘accelerate to financial independence by investing in real estate the right way.’
Param Baladandapani is a radiologist in Southern California who built a multi-million dollar real estate portfolio and financial independence at 41. As Founder and CEO of Generational Wealth MD, she has helped thousands accelerate toward financial freedom through her coaching program and syndication opportunities. She is passionate about paying it forward and has helped establish a nonprofit educational trust in rural India that is focused on empowering and educating children with disabilities.
Highlights/Topics: * Bala’s journey from full-time physician to acquiring rentals for passive income * The mindset shift to real estate and passive income * Reasons that people shy away - time, money, risk, knowledge, team * Time you put in now will multiply exponentially on the back end * There are options and strategies for wherever you are in life * Educate yourself to get started - where can you start? * Finding the right coach, mentor, or team * Stress-testing your properties, cash flow on day one * Short-term, mid-term, long-term rentals * Surrounding yourself with the right people who have the right mindset * Leaving communities that are no longer helping you * Investments right now - syndication opportunities and joint ventures * You’re never going to be “ready” to start - just start with one tiny step!
Resources: Long-Term Rental Calculator
https://www.generationalwealthmd.com/LTR%20calculator
Short-Term Rental Calculator
https://www.generationalwealthmd.com/str-calculator
Financial Independence Worksheet
https://www.generationalwealthmd.com/financial-independence-worksheet
Free E-Book Link
https://www.generationalwealthmd.com/free-ebook
Free Virtual LIVE event is open for registration
http://www.generationalwealthmd.com/event
City Data
http://www.city-data.com/
Generational Wealth MD
https://www.generationalwealthmd.com/
Dr. Bala LinkedIn
https://www.linkedin.com/in/param-baladandapani-md-abb693232/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In today’s episode, Toby Mathis, Esq. speaks with Karim Hanafy, Esq., about the top ten most common mistakes that are made when setting up a non-profit 501(c)3. From issues with state vs. federal requirements, to describing your charitable activities, compensation of your board, and the ever-important asset protection, Karim has seen every mistake possible and wants to help you have a seamless experience when setting up your non-profit organization. See the links below for a free workshop from Anderson Advisors.
Highlights/Topics: * Karim’s background/expertise in non-profits * Top 10 mistakes in no particular order * Accidental setups in the wrong structure: For-profit, B-corps, LLC’s * State requirements for Articles of Incorporation vs. Federal * Describing your charitable activities * Incorrect terminology that triggers investigation and delays * Public charity or private foundation? * Compensation for directors and officers, board members * Filing tax returns * Donating different types of assets - professional appraisals and the correct forms * Donor thank you letters and the IRS-required language * Asset protection
Resources: Start Your Nonprofit Plan in 45 Minutes For Free
https://andersonadvisors.com/nonprofit-501c3/
Karim Hanafy LinkedIn
https://www.linkedin.com/in/karim-hanafy-3561b71b0/
Email Karim Hanafy
khanafy@andersonadvisors.com
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
In this episode, Clint Coons, Esq. and Aaron Adams, CEO of Alpine Capital, discuss how to shift focus in the real estate investment space to maintain double-digit growth. Aaron has maximized investments in a market plagued by a shortage of 6 million homes by purchasing RV parks, KOA campgrounds, and mobile home parks to convert them to long-term manufactured home communities. Check the resource links for upcoming live event dates from Alpine Capital in Indianapolis and Idaho.
Aaron Adams has been a full-time real estate investor since leaving his job teaching high school Spanish in the early 2000s. He has purchased thousands of properties in California, Indiana, Missouri, Texas, Florida, Idaho, Nevada, North Carolina, and Illinois, focusing on single-family and manufactured homes in blue-collar and middle-class neighborhoods.
Highlights/Topics: * Aaron’s journey from the classroom to real estate investment * Shifting direction to find opportunities * The industry is short 6 million homes * Navigating the manufactured home market * Each month, Alpine offers investors a class to learn their methods- in person or live streamed * The emotional risks of “over-rehabbing” rental properties * Affordable housing is at crisis level * Accessory-dwelling units- upping your real estate game * Importing storage units from China vs. stick-built * The impending impact of the commercial crisis * Active and passive solutions at Alpine Capital events * Long-term relationships are the goal at Alpine’s live events
Resources: Alpine Capital Solutions
https://alpinecapitalsolutions.com/
Email Alpine Capital
http://rebecca@alpinecs.com/
Alpine’s Cash Flow Summit - Upcoming Dates
https://alpinecapitalsolutions.com/events/
Aaron Adams LinkedIn
https://www.linkedin.com/in/aaron-adams-621401196/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In today’s episode, Toby Mathis, Esq. speaks with ex-NFL linebacker turned Ivy League professor Brandon Copeland about his financial literacy eCourse program ”Life 101” which was designed to make financial freedom accessible for everyone. The program tackles everything from opening a savings account, to stock market investing, to buying your first home.
In his career and life, Brandon realized that many financial opportunities were inaccessible to most people – if they even knew about them at all. Life 101 provides the resources and information needed to build your financial future. Check the resource links for a free membership to Life 101 available exclusively for our Infinity Investing members.
Highlights/Topics: * Brandon’s background and path to creating “Life 101” * Making money “conversational” with the Life 101 program * Over 90,000 high schoolers have taken this course so far * Why aren’t money matters taught in high school and college? * New money - lottery winners, NFL players, are bombarded with people overnight * Accountability * Changing young lives drastically with Life 101 * Stats on “overnight millionaires” * NFL players, even you, are a ‘walking asset’ or a Fortune 500 business - who are you surrounding yourself with? * Final thoughts around Life 101, the partnership with Infinity Investing, and Cope himself
Resources: Brandon Copeland Profile
https://www.life101.io/about
With your Infinity Investing Starter Membership or 360 Pro Membership, you’ll have access to a complimentary enrollment of Life 101. Become a Member TODAY!
https://infinityinvesting.com/pricing/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to another episode (#197!) of the Anderson Advisors Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions.
On today’s episode, Eliot and Toby answer listener inquiries including the requirements and tax implications for selling your home to a relative in installments, how to minimize taxes on profits from crypto-trading, and the pros and cons to investing in stocks within a Roth or Regular IRA/401K.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * "Is there a tax ramification of selling my personal home to my daughter via an installment sale? I have lived in the home for more than two years as a primary residence. Will I be able to still use their section 121 exclusion, even though I'm selling to a related party?" – You can sell to your daughter and still be eligible, provided we meet all the other boxes…You can sell to a related party, but you have to recognize all the gain up front. * "I'm considering taking a small salary from my stock trading business. It's a dual LLC Partnership, which means a C-corp and a partnership through Anderson later this year if the C-corp ends up with taxable income. What are the tradeoffs of deferring that into a 401(k), both positives and negatives like income, payroll taxes, and benefit of paying those for Social Security calculation, et cetera?" - As Toby always says, this is a calculate, calculate, calculate moment. If you take it out as salary, then one consideration—there are a lot of different variables here—is your personal tax rate below 21%? * "For our C-corp, we're aware that cleaning services of our personal residence can be deducted from our corporate taxes." It can? Well get into that. "Would the total expense of cleaning be a write-off or would only a portion of the total expense be a write-off since the entire house is not used for business? Would lawn services be treated the same way?" – if you are using part of it as a home office deduction or administrative office reimbursement deduction, either way, you can throw in an element for the cleaning… * "When starting my Infinity Investing journey, should I start purchasing stocks inside of a type of retirement tax-deferred account of some sort, or should it be outside of that in order to use it for leverage or some real estate investing later?" - Here's the easy rule. If you're in a higher tax bracket than you will be when you retire, defer it. If you are in a lower tax bracket now than you will be when you retire, then put it in a Roth. * "I have been learning and experimenting with earning dollars through crypto trading. Can you please tell me how to minimize taxes with profits earned through crypto platforms?" – we do the same trading partnership that we talked about earlier. Set up a partnership, put the account into that partnership. * "My California CPA said that regardless of what type of entity I put my California rental property in, California will still want to get the $800 franchise tax board fee." The Board of Equalization fee. That's the minimum fee they charge. "Would that be true even with a Wyoming Statutory Trust?" - Chief Counsel's Office has already said it's treated as a business trust, and it's not taxable. It's not subject to the $800 a year, period, full stop. * "Does a cash out refi adjust my basis and multifamily apartments? If not, how can we step up in basis before I sell if I have a lot of equity and depreciation already taken?" - Generally speaking, a refi, all you've done is you've changed your equity in your house into cash. You're just changing asset to asset. That doesn't change your depreciable basis in that property. * "How does the Corporate Transparency Act impact the timing of real estate investment decisions from a tax efficiency perspective?" - It doesn't have any impact on your taxes whatsoever. This has nothing to do with taxes at all. I just wanted to get cleared out there for those who are listening. * "In creating a living trust, is it necessary to pay capital gains tax on real estate assets as they are transferred into the trust?" - This is really simple too. There's no taxable transaction moving assets into a living trust. It's a revocable grantor trust. You haven't done anything in the way of taxes. * "I have carried a $600,000 loss since 2011. I am a real estate professional with an S-corp. Is there an alternate way to use that? I can't live long enough at the $20,000–$25,000 max deduction." - You need passive income. You need lots of passive income to wipe out that passive loss. You want to recognize that passive income. You probably don't want to be a real estate professional.
Resources: Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Welcome to podcast episode #196 from Anderson Business Advisors, and this week’s edition of the Tax Tuesday show. Host Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, welcomes Kurt Bergfjord, Esq.,Tax Consultant for ABA and CPA for Entrepreneurial Business Services at Mazars, to help answer your questions. We send a big thank you to all our people online answering your questions online today including Dana, Jared, Ross, Tanya, Troy, all from different departments, bookkeeping, tax advisors, the nonprofit department, attorneys, etc..
On today’s episode, Kurt and Eliot discuss the dos and don’ts of business partnerships and the best way to structure them, deducting medical expenses incurred outside the U.S. (along with what the IRS allows as an HSA reimbursement), and the usual array of questions around short-term and long-term rentals.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * "If bonus and accelerated depreciation were taken in 2022 via a cost seg on Schedule C, how many years does the IRS require that property to meet the active short-term rental criteria after the fact?” - There really is no requirement for you to keep it as a short-term rental from year to year to year. It's a year-by-year, a tax year by tax year determination. * "We have a two member LLC taxes a Sub S or just commonly known as an S-corporation. Two members or two shareholders. Each member/shareholder contributed a substantial amount of money of capital over four years. They're putting a lot of money into this S-corporation, both of them, he or she. Can a member be bought out tax-free by the LLC by giving them a sell price in the form of capital distributions?" - It’s really no different than selling any stock, subtracting the shareholder basis… * "If a medical procedure is performed in Mexico, can you use your health reimbursement account from your C-corporation?" - The actual medical expense certainly could be deductible anywhere. But when we talk about other types of auxiliary medical expenses like lodging and things like that, that is where we have to be a little bit more careful about what deductions we're taking. No personal pleasure or vacation along with it. * "Is there a list of IRS allowable health care expenses that can be reimbursed under Section 105 HRA (Health Reimbursement Arrangement), which is what we often set up with our C-corporations? There is a defined list of allowable reimbursements for HSA plans and FSA, cafeteria plans, but I don't see an IRS specific list for 105 plans. Does the employer have some latitude as to what can be reimbursed?" - Publication 502 will give you a list of commonly deductible medical expenses. * "I purchased my first short-term rental property last year. I've spent a year fixing it up, but it's still not out as a rental. Can I write off my expenses from 2022 for a business that isn't making revenue yet? If so, how? There's no LLC started yet, so this would be on my personal taxes for now." - Usually we look at if its available for rent, but the organizational costs may be deductible. You will have to wait until it is rentable/placed into service to get all the expenses deducted. * "I share ownership of a single family rental property 50/50 with a relative. The other owner has not been involved. If I buy her out, step up in basis, or if she passes her ownership share to me by gift, then will I be responsible if I sell the property down the road for any depreciation that she may have claimed on her tax returns while she owned it?" - There will be depreciation recapture, 1250 or 1245, and some capital gains tax when the partner sells their interest if they realized profit. If gifted, the recipient has to worry about depreciation recap later on upon sale. * "Me and my partner purchased, renovated, and set up a property in Houston for short-term rental. We have a 50/50 LLC.” “We've never partnered before. How do we separate the expenses and income? How do we file?" - All income and expenses are reported on one return, a multi member LLC is taxed as a partnership, each partner will get a K1 form detailing your portion - use that on your personal return. * "I'm a 77-year-old newlywed." Congratulations. "My husband has a trust for his family. Do I need one for my family, or is a will sufficient?" - A will can be contested and waste time and money in probate court. A living trust is much more clear and uncontestable. * "I wanted to know if I can write off any stock trading education through my LLC if I pay myself a W-2, have 401(k) deductions taken out, and put into a self-directed Solo 401(k) plan. I am the only employee. I want to start learning about covered calls and so forth." - maybe set up a partnership * "When you pay your kids to work in your business, is this only allowed with a certain type of business structure, such as an LLC versus a partnership?” - No matter what structure you can always pay your kids to do actual work, but some structures are more efficient, like disregarded entities. * Come out to our June Tax Events
Resources: Kurt Bergfjord LinkedIn
https://www.linkedin.com/in/kurt-bergfjord-cpa-08873053/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events in June
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode of Tax Tuesday, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, CFO of Anderson Business Advisors discuss various tax strategies for real estate, stocks, and nonprofits. Online we have Ander, Dutch, Sergei, Ross, Jared, Elliot, Troy and all kinds of staff to help answer all your Tax Tuesday questions.Toby and Jeff cover topics such as 1031 and 721 exchanges, the Section 121 Exclusion, employee stock options, and the tax implications of short-term rentals and Health Savings Accounts (HSAs). They also discuss best practices for reimbursing personal contributions to a business. Submit your tax question to taxtuesday@andersonadvisors.Highlights/Topics:* "Section 721 and 1031 differences” - It has the same effect as 1031 but you don't pay tax on the sale, But you're not exchanging one property for another…it's a tax-free exchange, but it's a one and done. * "Tax benefits of a foundation versus a nonprofit organization?” - The easiest way is - a nonprofit (public charity) DOES stuff, a foundation funds stuff… * "I have two houses I'm selling this year and or at the same time, both were residences for two years at the last five years consecutive. I have just lived in the latest house for the last two years and I've been preparing both to sell. Will I have a problem claiming both of them as residences two of the last five years and I'm selling them at the same time.” - So of the last 60 months, 24 of them you had to have lived in it as your primary residence. That met, then you can exclude, if you're single, $250,000 of capital gain. If you're married, you could exclude up to $500,000 of capital gain. DO NOT SELL AT THE SAME TIME. * “How are stock options taxed?” - Tax treatment varies depending on the type of stock option (ISO, NSO, RSU), time held, and exercise/sale timing. * "LLC taxed as S-Corp with brokerage account….anything similar to trader status?” - I have not seen anything that says any entity can make a mark to market section 475 election. If you're making a mark to market election because you're losing so much money in the market, get out of the market and go do something else. * "Does California's 571L form business property tax apply to short-term rentals? - Yes, as short-term rentals are considered active trader businesses and subject to the tax. * “Who can qualify for an HSA?” - Eligible individuals must have a high deductible health plan (HDHP) and not be covered by another non-HDHP plan. Can I open an additional HSA with my LLC business? - No, you can only have one HSA per individual, but your LLC can contribute to your existing HSA. * "Anderson made me a C-Corp, I put money in from my personal account to pay expenses. I have to take out the initial $7K … How do I legally and ‘tax-friendly’ take the $7,000 back that I need for my personal reimbursement? - If the initial $7,000 was a loan, you can withdraw it tax-free as repayment; if a capital contribution, the process is different. * Send us your questions, and we do about 50 events a year - check out the event schedule listed in the notes.
Resources:Infinity InvestingEmail us at Tax TuesdayTax and Asset Protection EventsAnderson Advisors on YouTubeToby Mathis YouTubeToby Mathis TikTok
Are you struggling to manage your money like the rich? If so, you're not alone! In this episode, we’ll hear from Tom Ferry and Toby Mathis, Esq., to help you learn the proper way to manage your money for success. From investing basics to budgeting for the long term, these tips will help you get your financial life under control.
Tom Ferry is the #1 ranked Real Estate Educator by Swanepoel Power 200 and the best-selling author of "Life! By Design" and "Mindset, Model and Marketing!"
Toby Mathis, Esq. is a partner here at Anderson Business Advisors with years of knowledge and has helped countless clients navigate the complex world of taxation and asset protection allowing them to secure their financial goals. We will teach you how to budget, invest, and live a prosperous life with a well-thought-out plan. This video is a must-watch if you want to learn how to manage your money and reach your financial goals properly!
Highlights/Topics:0:00 - Intro
2:33 - Change Your Mindset
10:20 - Tom's Discovery About the Wealthy
14:18 - 3 Types of Money Managers
20:36 - What Are You Doing with Your Money?
24:48 - Tom's Wealthiest Mentors
34:28 - Investing in Real Estate and Dividends
43:53 - How Do You Make Money?
53:18 - Create Goals
58:38 - Outro
Resources:Tom Ferry IG
https://www.instagram.com/tomferry/
Learn How to Manage Your Money with Tom Ferry
https://aba.link/TFYTTAP
Free Strategy Session with Tom Ferry
https://aba.link/TFYTSS
Book: The Growth Mindset
https://www.amazon.com/Mindset-Psychology-Carol-S-Dweck/dp/0345472322
Andrew Huberman
https://profiles.stanford.edu/andrew-huberman
Anderson Advisors
https://andersonadvisors.com/
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode of Anderson Business Advisors, Toby Mathis, Esq, speaks with Sherri and Frank Candelario, real estate investors who have turned the shady addiction recovery housing industry on its ear. Sherri and Frank became involved in the industry after their adopted daughter Kate developed substance abuse issues.
Frank and Sherri started Kate’s House Foundation, and have trained 1000s of people to duplicate the Kate’s House Model of Level II Medically Assisted Treatment homes in great neighborhoods like theirs in the Seattle area.
We’ve discussed opportunities like this in other episodes - this is a niche segment of real estate investing that can be both profitable and an incredible way to help individuals who are struggling get back on their feet.
Highlights/Topics:* An adopted daughter from Russia with substance abuse issues * The shady underbelly of the addiction recovery industry * Bucking the 50-year system of shared housing * Discovering value in the people society has discarded * Government grants funneled to the Candelarias for their excellent housing * Becoming Federal contractors * Medication and shared housing * Preventing young adults from going to prison * Being able to buy real estate after you obtain a government contract * Focusing on recovery housing and drug courts * Amazing non-profit donations to the Kate’s House Foundation * A goal of housing in every state in the country * February 2024 bus tour of their homes * Reach out to Sherri and Frank and take their course to learn how to do what they do
Resources:Frank and Sherri Candelaria
https://frankandsherri.com/
Kate’s House Foundation
https://kateshousefoundation.org/our-story/
Anderson Advisors
https://andersonadvisors.com/
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Toby Mathis, Esq, speaks with Carl Zoellner, Esq. Managing Attorney at Anderson, to debunk the myth of quitting your job as a means to achieving financial success. They discuss the importance of maintaining a consistent lifestyle and leveraging a good-paying job in order to invest in passive income. The conversation also touches on the potential dangers of following ‘guru’ advice and how to find your passion while focusing on its economic benefits.
Carl and Toby emphasize the significance of channeling your energy into something that can eventually replace your current income while still enjoying the perks of a stable job. They also discuss the concept of tax breaks and how they can play a crucial role in your financial planning journey. Tune in for an insightful conversation on leveraging your employment for long-term financial stability and building a solid financial foundation without quitting your job.
Highlights/Topics:* Debunking guru advice to quit jobs for a better lifestyle * Importance of maintaining a consistent, comfortable lifestyle * Dangers of following unproven investment advice * Leveraging a good paying job to invest in passive income * Understanding hype versus logic in investing * Emphasizing the role of passion in financial success * Importance of living below one's means * Transitioning from active to passive income sources * Creative financing deals in real estate * Staying the course with investment fundamentals * Balancing passion, skill, and economic benefit * Importance of patience in investing
Resources:Carl's Youtube
https://www.youtube.com/@coffeewithcarlaba
Anderson Advisors
https://andersonadvisors.com/
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to another episode of the Tax Tuesday show. Host Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, welcomes Kurt Bergfjord, CPA for Entrepreneurial Business Services at Mazars, to help answer your questions. We send a big thank you to all our people online answering your questions today including Dutch, Sergei, Jared, Kurt, and many others.
On today’s episode, experienced tax advisor Kurt Bergford and Eliot discuss the three capital gain tax brackets, tax tips for real estate investors, S-Corps and LLCs, and financial planning strategies for families.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * Is it true that you don't pay capital gains or dividend taxes if you make less than $40,000? If your total combined income is under 40K, there are no such taxes. * I've been contributing to an HSA for several years. Can I withdraw funds from an HSA for prior medical expenses without a penalty? If so, how far can I go back? - as long as you have receipts, hold on to them and get the reimbursement in later years. * Filing out state taxes. What are the pitfalls? Do we have to submit a whole state return if you have an investment in that state? - Your ‘resident state’ will tax your income from other states. You may have to file a non-resident income tax return in other states. * Our LLCs, taxes of Partnership sold five long-term rental properties and it acquired one new rental property in a 1031, light, kind exchange. The original LLC still owns additional properties. How soon can we move the newly acquired property into a new LLC to be taxed as an S corporation? - Its not so much about the time frame but moving from one taxpayer to another ..it may disqualify your 1031 * We decided to be treated as an S corp. I've heard that we need to determine our W-2 salary based on our level of engagement each of the members have in the business. How can we determine our percentages? - To determine the percentage of ownership in an S Corporation, consider factors such as comparable technical knowledge, experience, and the average wage for the role. * I'm thinking of transferring my primary residency into an LLC that I own and turning it into a rental. Can you explain how I should make the transfer so that I can get the 121 exclusion and have higher basis for the property in the LLC? - The 121 exclusion can be utilized by selling the primary residence to an LLC taxed as an S-corp, allowing for rental property depreciation. * Can you speak about how options are taxed… would I pay capital gains on the spread or the total I received? Is it a capital loss? Is the cost basis lowered? Brokerage displays a lower cost-basis…This is difficult and complex…the credit spread occurs when you sell at one strike price, and buy another at different strike price… * Do you recommend putting a flip into an LLC, If we buy and hold, later decide to sell, how does one change the LLCs, and how important to have the same address on the LLC… Living Trusts- should every property be included? Would you add homes if you’re only going to have them for 6 months. – Yes, if you’re flipping, don’t put it in your name. We want liability to stay in the LLC. You can use the same name but we don’t recommend it. * Filing my 2022 as an S-Corp, my CPA recommended a profit-sharing plan, can I put it into a SEP-IRA, which do you recommend? - You need earned income from the business. * I heard I can pay my kids without tax implications, what can I pay them? - Great strategy, put them to work, it's a tax deduction to your business. They need to do actual work. In 2023 it should be lower than their standard deduction of $13,800. * Rapid-fire chat questions answered at the end of the show
Resources:Kurt Bergfjord LinkedIn
https://www.linkedin.com/in/kurt-bergfjord-cpa-08873053/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Anderson Business Advisors LinkedIn
https://www.linkedin.com/company/anderson-advisors/?originalSubdomain=fr
In this episode, Toby Mathis, Esq., of Anderson Business Advisors welcomes Karim Hanafy, Esq., head of Anderson Business Advisors’ Non-Profit Division. Karim and Toby will go over nine benefits of establishing a family foundation, the various tax benefits, and show you how you can get started today.
Karim Hanafy is a nonprofit attorney with over 20 years of experience forming nonprofit organizations, obtaining 501(c)(3) tax-exempt status, advising with ongoing compliance, and assisting with annual tax reporting. Karim previously worked in the Tax Exempt Division at the IRS, and he uses his IRS experience to advise nonprofit organizations on the application process and ongoing compliance.
Highlights/Topics:* Karim’s background, the IRS, and journey to Anderson * Legacy planning and asset protection * Non-profits are not just for the wealthy * The list of benefits * Annual donation limits - public vs private, cash vs. stock * Growing assets ‘tax efficiently’ * Family can serve as board members * Control is maintained by the family * Payout requirements - private vs public * Working for a foundation after retirement * Deferring your salary from a non-profit * Avoiding estate taxes * Next steps to starting a non-profit * Public charity or private foundation? * File with the IRS - Karim has been getting approved with lightning speed- 100% of Anderson’s filings are approved * Funding the non-profit * Contact Anderson Business Advisors or come to our Non-Profit Workshops
Resources:Karim Hanafy LinkedIn
https://www.linkedin.com/in/karim-hanafy-3561b71b0/
Start Your Non-Profit in 45 Minutes with Anderson Business Advisors
https://andersonadvisors.com/nonprofit-501c3/
Sign Up for Anderson’s Non-Profit Workshop
https://andersonadvisors.com/how-to-start-a-nonprofit-workshop/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions.
On today’s episode, Eliot and Toby answer listener inquiries, including a mother and son who want to set up an e-business together, a question about filing an extension for your taxes, which is almost always a good idea, and a question about writing off a pool that is required for a medical condition, (which is a surprisingly common question!)
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics:* I had to put more money into my LP for stock options trading- what is the easiest way to handle this addition to my LP? - You can put cash in, or capital contribution - there are no tax implications putting money in, or taking money out. * Is it a good practice to file an extension? Yes it is - if you rush, you may have to do an amendment…it gives you time to breathe. I don’t know any instance when it is a bad idea. * If I plan to leave investment property to my children, is it better to purchase and leave it to them in trust, or put their names on title? - They may have stepped up basis issues later on. I don’t recommend gifting things when you are still alive. If the kid is on the title, the child could have liability issues, and you lose the step up in basis. * No activity in LLC for 2022- Do I need to file tax forms? - if its a partnership and absolutely no transactions, file a ‘no activity’ return. S-corps and C-Corps must file. * What is bonus depreciation on residential property? Is there a disadvantage for carrying forward a large loss? - Bonus depreciation is just the ‘speeding up’ of straight-line depreciation. No real issues with carrying the loss forward…but it depends on your income. * What is the best tax structure to set up eBusiness, for a co-owner son and mom - S or C Corp have better tax options than a partnership? Is mom materially participating? * Pool installation for minor son, is it possible to do a tax deduction? - if it is for medical reasons, it is a possibility. You must document that this is the only option. * 1099 income, how much to contribute to solo IRA/401K? Employee and employer contributions? – There is a calculation, and a maximum of 66K in 2023, yes, you can- but I wouldn't. Talk to your tax professional * Federal tax rate for capturing depreciation on property from a previous 1031? - if its 1250 real estate, or 1245, in order to figure this out you have to do a cost seg. * My AGI is 300K, I gifted to charity 90K – and thought I could also gift 90K in non-cash. Tax preparer said non-cash giving. - There is a 60% limit for cash donations. Non-cash has different limitations, depending on the non-profit. * My only source of income is from 4X trading, 5K trades a year, 10 hours a day, what are the benefits in creating an entity to pay less taxes? I’m borrowing 15-30K, usually paying interest of 2K a month. - You want to have a note, and records of the interest. A C-corp would allow for some deductions and reimbursements, and be able to write off expenses.
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Is it possible for government restrictions to kill your business?
In this episode, Toby Mathis, Esq, of Anderson Business Advisors welcomes entrepreneur Lars Jacobson, who purchased an entire town called Jake’s Landing right on the Canadian border. Lars shares his story of how border shutdowns, Covid restrictions, and lack of promised support from the US government have nearly killed the town’s business (and are still being enforced!). Canadians were accustomed to driving just minutes over the US border for cheaper gas, convenient shopping, and for dining and entertainment at the area’s casino. Tune in to hear this real-life story of government restrictions almost wiping out an entire town’s economy. Donate to help this town recover by clicking the Venmo link in the resources section.
Highlights/Topics:* Buying a town- it was a calling from God * Jake’s Landing and its businesses * Charging less for goods and services in town - serving Canadians * Border closing for Covid - it hit the town hard * Unable to get SBA supplemental support * Ridiculous Covid restrictions that have not been lifted at the border * Business has only recovered 30% of the previous levels * News coverage and meetings with local politicians have not helped * The US is still handcuffing our own citizens with outmoded Covid restrictions that are killing small businesses
Resources:Help Support Jake’s Landing USA with Venmo
https://account.venmo.com/u/JakesLandingUSA
Jake’s Landing USA
https://jakeslandingusa.com/
Jake’s Landing Facebook
https://www.facebook.com/jakeslandingporthill/
Toby Mathis on YouTube
https://www.youtube.com/c/tobymathisesq
Anderson Advisors
https://andersonadvisors.com/
Want to invest in real estate, but don’t know how to pick the best city to invest in? Mid-term rentals might be your option. Join Clint Coons, Esq. and Dr. Rachel Gainsbrugh as they discuss the secrets of maximizing mid-term rentals that can generate up to $60,000 a year. Dr. Rachel Gainsbrugh of Short Term Gems to help us explore the benefits of this strategy and its potential for a wide range of investors in the real estate market.
Highlights/Topics:* Gainsborough’s background * Why start with short-term rentals? * The luxury niche and mid-term rentals * What standard “luxury” means in rentals today * Competing with REITs * Your avatar/customer dictates what properties you should invest in * Serving large families for both vacations/displaced * Allowing pets increased revenue by 30% * Most displaced families want to stay near their work/school * Where to list mid-term rentals * How does the revenue/ROI/amount of effort compare – short vs. mid vs. long * How to access training in Dr. Rachel’s methods
Resources:Learn More About Dr. Rachel Gainsbrugh!
https://www.linkedin.com/in/dr-rachel-gainsbrugh
Short Term Gems Website
https://www.shorttermgems.com/
Short Term Gems 75
https://www.shorttermgems.com/75gems
Enroll in the Rental Academy
https://www.shorttermgems.com/join
FREE Top 75 US Cities Report
https://www.shorttermgems.com/75gems
Media Appearances
https://www.shorttermgems.com/media
FB Community
https://www.shorttermgems.com/join-our-facebook-group
Furnished Finder
https://www.furnishedfinder.com/?gclid=CjwKCAjw0ZiiBhBKEiwA4PT9zw4A88skpF6sv-wj39emMCtr5pAq_uIz3_7K8AetwnbT8BLr4Xe0gxoCI84QAvD_BwE
CorporateHousingbyOwner.com
https://www.corporatehousingbyowner.com/
ALEsolutions.com
https://www.alesolutions.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Is it possible for real estate investors to increase their profits with a fractional CFO? The answer is yes. Fractional CFOs can significantly reduce risk and increase profit margins for real estate investors in a number of ways. What is a fractional CFO? The CFO is the Chief Financial Officer and fractional means part-time. A Fractional CFO is a way to utilize the CFO’s skills at a fraction of the full CFO price tag.
In this episode, Toby Mathis, Esq, of Anderson Business Advisors welcomes David Richter, Founder and Owner of SimpleCFO. David empowers business owners to make more profit and live life on their terms with the SimpleCFO Fractional CFO program. He is also the author of “Profit First for Real Estate Investing.” Toby and David discuss the benefits of incorporating a CFO into your real estate investing business. David has an interesting range of solutions that will help investors increase their business revenue, owner’s pay, cash reserves, and more!
Highlights/Topics:* David’s background as an investor, and starting a fractional CFO * What a Chief Financial Officer (CFO) does * 3 reasons investors need these services * The “hope and pray plan” and comparison system * Making money is easy - what to do next is the hard part * Profit first, allocating bank accounts for taxes, etc. * Sales - Profit = Expenses with the Profit First system * Getting clarity around how much you actually need to keep * SimpleCFO’s structure and meeting schedule with clients * At what point should you get in touch with SimpleCFO? Click the link below
ResourcesDownload the FULL Ebook of Profit First For Real Estate Investing
https://simplecfo.com/anderson/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions. Even though it’s tax season, we have nine Anderson staffers on board to answer your questions
On today’s episode, Eliot and Toby answer listener questions including inquiries about purchasing a bar/restaurant and all the aspects you need to take into consideration around this difficult industry, a few questions (as usual) around rental properties and when/if you can take deductions and write off losses, and an interesting code question about oil and gas and intangible drilling costs (IDC).
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics:* If you have a corporation with your children as board members, can you write off vehicle, maintenance, and gas? - If they are not employees, they are eligible for “reimbursements” not written off as business expense. * Spouse and I are filing joint 2022 return, she had a $6000 W2, can I make a $3000 contribution, or must it be made to her IRA because it’s her W2? - If you made less than the $13K deduction, no taxes are owed. If you contribute to a Roth, no taxes…. * Can you discuss Tax benefits of retirement funds to fund/start/loan my business? - buy shares of a C Corp with your retirement fund. * Tax effects of intangible costs for oil and gas? - IDCs can give you a 100% deduction in certain cases * Paid kids $12K for my rental business, should I issue a 1099? If its disregarded or a partnership, kids under 17 can be issued a W2, if under age 18 no taxes due. * Bought a house in 2022 with plans to rent, still working on repairs, do I get tax benefits for this project? - No, it has to be placed into service to be eligible for losses/expenses… * How do I do cost seg if I purchased and rented out in 2022? Accelerated depreciation? - Cost seg is all about depreciation, yes you can do it to take advantage. Once cost seg is done, extend until Oct 15. * I purchased Airbnb 2022, and put into use same day, purchased furniture/renovated, my accountant says I have a loss and am unable to do bonus depreciation? – There are other factors, but did you materially participate? If so, yes that is ordinary loss. * When should I file as S-Corp instead of disregarded entity? not single entity…. - Don’t put real estate rentals in a corporation, when you take it out it’s taxable… * Is there an AGI limit for claiming passive losses on a return? - If you have rental activity, under $100K, you can write off $25K. Can they be carried forward? How to claim next year? - Yes, passive losses can be carried forward as “suspended”. * I’m considering purchasing a bar/restaurant in FL, already established but not doing well, what should I consider before doing this purchase? - Are you buying the assets, or the entity that owns the bar - if the entity, you may inherit any legal issues and no depreciation. If you buy assets, you can depreciate assets at the price you paid.
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Did you know that you can generate great rental income from unusual short-term rentals like tiny homes, yurts, teepees, and Airstreams?
In this episode, Clint Coons, Esq., of Anderson Business Advisors, welcomes Rob Abasolo, creator of the Robuilt YouTube channel, and professional short-term rental coach at Host Camp Coaching. Clint and Rob discuss the process of identifying great locations, building or placing rentals such as teepees and yurts, tiny homes and airstreams on your property (or rented property) near popular cities and tourist attractions to build wealth.
Highlights/Topics:* How Rob left Kansas for LA * Renting on Airbnb to cover the mortgage * Building tiny houses and the challenges involved * Getting started - rules and regs, financing * Calculating your Airbnb potential revenue * Get into the rental business with a house hack * Tiny homes, small homes, regular homes * Get coaching from Rob at HostCamp * Yurts, glamping, teepees, and airstream rentals * Checking your municipalities for rules and regs on unusual rentals
Resources:Host Camp Coaching
https://ogw4vc0ko58.typeform.com/hostcamp#source=anderson
Robuilt YouTube
https://www.youtube.com/channel/UCdIM_XmhsVYbBhl3pgPq3dA
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Have you thought about creating a TV commercial for your real estate business? TV commercials help you build an automated marketing channel, target the demographic you want, and they’re not as expensive as you might think!
In this episode, Clint Coons, Esq., of Anderson Business Advisors, welcomes Tony Javier, founder of the Real Estate Masters (REM) 10X TV Program. Clint and Tony discuss the value of advertising on TV where you can reach 10X more people, faster and cheaper with less effort than many other forms of marketing. Tony can help you appear in your own TV ad within 30 days, and he’s proven that people who see you on TV may not want to work with a realtor, and will begin knowing, liking, and trusting you to buy their home.
Highlights/Topics:* Tony’s entre’ into TV and real estate started with late-night infomercials * First TV spot earned 10X Tony’s investment * Go to remtv.com and get on tv within 30 days * Tony explains who can benefit from a TV spot * The cost of advertising with TV and your target demographic * Should you appear in your own TV commercial? * How many people you can hit with each $5 of ad spend * Reaching a lower-income audience with TV * Advertising on TV is easily scalable * Doing commercials is only for those who know what to do with leads * Limiting ads in each market * Check out remtv.com to start planning your TV spot
Resources:Get Started with the 10X TV Program
https://remtv.com/anderson
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions. We send a big thank you to all our people online answering your questions today - Patty, Dana, Dutch, Jared, Kurt, Ross, Tanya, and Troy.
On today’s episode, Eliot and Toby answer listener questions including inquiries about wash sales, what taxes apply to inherited stocks and real estate and the appreciation on inherited real estate, buying vehicles and how much is deductible and when, and setting up a brokerage account for a charity so it can receive donations of stock.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * If I have a company and want to loan money to another company using a promissory note, but I don’t want to charge them interest to do so, are there any tax impacts to my company? What is the recommended way to do this if so? – if it’s over $10,000 we got to charge interest to what it boils down to. * Do you need to pay both capital gain tax and estate tax for inherited stocks? – Well, typically, if you inherit something, you're not going to pay any tax because of the approximately $12 million lifetime exclusion. If the gift or inheritance was over $12 million, in this case, you're going to receive stocks at stepped-up basis. * Does real estate appreciation restart for 30 years after inheritance? Will real estate appreciation be re-depreciated? – I think what they’re trying to get to here is will you be able to depreciate again at 27 and a half years if it’s a long-term rental and yes, you will. * I have an IRA owned single-member LLC that has invested in three syndications. Two of the three have losses over the last several years, which means it’s just kicking down passive losses, it doesn’t mean you lost money. One was sold last year and has profit, which is fairly common. Do you use a 990T to report both losses and profits? I don’t have to report profits or losses on my 1040, correct? - You don’t have to report it on your 1040 because it’s all in your retirement plan. * Does the holding period for real estate start on the acquired date or the place in-service date? If bought in November 2020 and placed in service, placed in service March 2021, sold December 2021, is this long-term or short-term capital gains? - It’s going to be long-term. We’re going to go from the date where you closed, that’s where the holding period starts. * When will we recoup the loss from a wash-sale if we’re no longer investing? - We wouldn’t run into a wash-sale in this instance because you sold the stock, you take your loss, it’s only if you buy back stock or a similar security that you would run in a foul of the wash rule within 30 days of it. * When bonus depreciation goes away, what will be the process for cost segregation? How is it calculated and how much will be allowed to be deducted at what time or intervals? - we still can do cost segregation which is just an alternative, We’re still going to deduct it. It’s just how much is going to go into that 5-year property pile, the 7, the 10, 27.5. * I have a 501(c)(3) that I started with Anderson—Kareem and his team are killing it by the way. It is ridiculous. The average wait time to get a nonprofit exemption certificate approved by the IRS is right around seven to nine months. We’ve been getting them, in some cases, in a matter of days. I was wondering if you were to donate appreciated stock to the charity, how to donate that to the charity properly and how do you record it as a personal donation, with appreciation? Does the charity need to start a brokerage account to receive this stock? – We certainly want to set up a brokerage account in the charity because when it receives that stock, they’ll have a place to put it. * Should I set up a C-Corp LLC for land flipping business even if I just started, no deals yet? Should I start with the pass-through first then change to a C-Corp once I get more volume? – I would set that C-Corp so you can start building up losses and expenses in that C-Corp. When you flip it and you have that gain come in, you're automatically offsetting against that gain. * When you buy a bigger van for the business, do you depreciate it or show it as an expense on the year you buy? Where do I find a list of business expenses that are 100% deductible and other expenses are not? – Well first of all for the van itself, how you're going to depreciate depends of course on the size if it’s over 6,000 pounds, etcetera. You probably got bonus depreciation a lot more of it. It may not be 100% anymore, but we probably solved the 80% going on. * Is there a maximum number of LLCs that I can use for the IRC-280A deduction? I have two LLCs and I was wondering if I can take the deduction for both? Also, I have a nonprofit and was wondering if I could also have meetings for a nonprofit and the fee for using the space would be a donation from my LLC? - Well, 280A is a provision, it actually comes under a section that is dedicated to not letting you deduct personal expenses in your house particularly. – if you donate $10,000 to your nonprofit, is that the nonprofit can use it for nonprofit purposes. * How do adjusted gross income AGI levels affect capital gains? Is it true that AGI below $76,000 will pay no capital gains? - Actually, AGI doesn’t have anything to do with this. It’s taxable income when we talk about the brackets for capital gains. The $76,000 is an old number. It’s approximately $83,000 I think this year. * I’m opening a new IRA that will be managed by an IRA with custody TD Ameritrade, it will be funding a new IRA from existing IRAs, so it sounds like a rollover from the same custodian. I have a Wyoming LLC Anderson just set up. Should I open the new IRA in the name of the LLC and will it be a problem moving funds from a personal IRA that is titled with my name? - You can roll one over into the other, but what caught my attention was this Wyoming LLC- you can't just have that connected to a retirement plan. Your IRA needs to set up its own LLC that it owns, and then it can transfer funds into that LLC and go do investing in real estate or what have you. But you do not want to take some other outside LLC that we set up for you and connect that with your IRA, we’re not allowed to do that. * Rapid-fire chat questions answered at the end of the show
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Toby Mathis, Esq. of Anderson Business Advisors welcomes Neal Bawa back to the show for his third appearance. Neal is the founder and CEO of Grocapitus, a commercial real estate investment company, and CEO of MultifamilyU, an apartment investing education company.
Neal walks us through the realities we’re facing in the economy right now, discussing the Silicon Valley Bank failure, the Fed and interest rates, the bond and mortgage markets, and when and where to look for real estate bargains in the latter half of 2023.
Highlights/Topics:* The Fed poisoned the banking system by flooding it with cheap money * The bond problems are not the same as 2008 * Preventing bank runs that will domino other banks failing * Reduction of bank liquidity reduces business activity * Price stability and the banking system * FDIC and the Fed dumping cash into banks * Twitter creates bank runs in hours, not days * Western states are down from peak in mid-2022 * One full percent cut in interest rates will start real estate price reductions * Real estate sectors suffering post covid – offices, hotels * Q3 is a good time to buy, with extensions * The ‘spread’ and when mortgages might drop * Big banks will get the deposits when smaller banks fail * The next 6 months are a good time for bargains
Resources:Grocapitus Website
https://www.grocapitus.com/
MultiFamily Website
https://multifamilyu.com/
Listen to Neal’s July 2020 appearance
https://andersonadvisors.com/podcast/real-estate-investing-with-analytics/
Listen to Neal’s Oct 2022 “2023 Housing Market Forecast” appearance
https://podcasts.apple.com/us/podcast/2023-housing-market-forecast-why-real-estate-will-remain/id1446273914?i=1000579549992
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
In this episode, Clint Coons, Esq., of Anderson Business Advisors, welcomes Sharad Mehta, founder and CEO of REsimpli, and full-time real estate investor. Sharad has done over 400 deals in the last 6 years since he started investing full-time. He grew frustrated by how many software systems he needed to run his business and decided there had to be a better way, and REsimpli was born. Sharad is now able to manage 3-4 rehabs a month remotely using REsimpli. Click this link to head over to REsimpli.
REsimpli is an all-in-one software for real estate investors that requires no customization. You simply sign up and start using it in under 1 minute. Everything you need to run a successful business is already built in.
Clint and Sharad discuss who can benefit from using REsimpli, how consistent, ongoing marketing (in whatever channel you are comfortable with) is the way successful real estate investors find more leads and close more deals, and how follow-up using the REsimpli platform can keep your leads at your fingertips, whenever they may be ready to sell.
Highlights/Topics:* Sharad’s background and his flipping success * Who can benefit? Investors interested in off-market properties * Four components to the REsimpli platform: + Data + Marketing + Sales - converting leads in CRM software + Operations * How to start reaching out to leads on off-market properties * Running reports, automating follow-up sequences * Sharad’s global team of assistants and their responsibilities * How the REsimpli platform helps to follow up on leads * Tracking rentals, communicating with tenants * The best marketing channel is the one you’ll stick with the longest * Where to find the best lists, then give your marketing efforts at least 6 months * How much time and investment is required to get started with REsimpli? * Starting with allocation of your dollars * If you can’t commit to working the system, don’t bother - you need to put in the effort * Contact REsimpli with questions or inquiries
Resources:Sharad Mehta LinkedIn
https://www.linkedin.com/in/sharad-mehta-resimpli/
REsimpli Link
https://resimpli.com/anderson/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
How can you protect yourself from bank failures and uncertain foreclosures? There is a lot of confusion around the current crisis, resulting in misinformation leaking to the masses and inciting panic among those who rely on said banks.
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, is joined by Stefan Whitwell, CFA®, CIPM®, founder and Chief Investment Officer of Whitwell & Co., LLC. Stefan leads this wealth management firm and its investment practices. He is a sought-after advisor who works closely with clients at the intersection of health, wealth, and purpose. Stefan has particular expertise in tax planning and alternative investing.
Toby and Stefan will be going over the facts about the most recent round of bank failures and uncertainty. They’ll explain what questions to ask your bank or custodial firm, how multiple layers of insurance protect your accounts, and other information you need to know to make informed decisions on what to do with your money.
Highlights/Topics:* Stefan intro * What happened at Silicon Valley Bank * What should you do? Separate into two buckets - a bank and a custodian * Insured custodian accounts * How banks vs. custodians handle your money * Money market accounts - low vs high risk * FDIC, SIPC, and private insurance coverages * What banks have said about customer’s money- “Don’t worry” * Unadvertised negotiations to segregate your accounts are available on large bank balances * Do your homework, or ask your advisor to do the homework on your investments
Resources:Whitwell & Co. Advisors
https://whitwelladvisors.com/
Stefan Whitwell
https://whitwelladvisors.com/team/stefan-whitwell/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions. We send a big thank you to all our people online answering your questions today - Troy, Tanya, Sergey, Ross, Kurt, Kenny, Jared, Dutch, Dana, Patty, and Matthew are all on.On today’s episode, Toby and Eliot answer listener questions including a very detailed question on inheriting rental properties, a question on crypto-currency and taxes, one on hiring and paying your children, and we answer the title question on structuring small businesses using an S-Corp.If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.Highlights/Topics:* "What is an installment sale on real estate? How do you utilize it within the tax code?" - An installment sale simply means that you're getting payment over more than one year. It could be for two years, it could be for 20. * "What happens to accumulated depreciation on rental property when the owner passes away? Does the person inheriting the property need to account for depreciation recapture from the deceased owner when you later decide to sell that property? If the person inheriting the property gets a step-up in basis, does that new basis now become the basis to calculate depreciation on if you keep the property? Can the person inheriting the rental property also have a new cost segregation done? And would that be affected by any cost segregation done previously? Any other tax considerations to be aware of when inheriting rental property?" — It goes away. Don’t gift it to your kids before you die! Your new value “step up in basis” is what you calculate from. New cost-seg, yes, nothing relates to the old cost seg. * "I received a 1099 INT from a bankrupt crypto company I invested with called Celsius." The money on the 1099 never touched my bank account as it is currently locked in a crypto wallet on their website for the last eight months. It was interest from USDC coins I staked, but I left it all in the wallet to reinvest. Am I supposed to pay taxes on this money that I never received, or can I leave it be and ignore it until the bankruptcy is resolved?" – you need to report it and you need to pay tax on it. * "How does the tax law treat the hiring of children by an LLC? At what age can they be hired? Which circulars discuss this?" - when they're under 18, no Social Security, no Medicare taxes on those, but they must be paid by an LLC that's owned by mom and dad if it's a disregarded LLC or a partnership, and they have to be paid as W-2 employees. * "I'm using the home office and depreciating part of the house. How will it look on the taxes that the year I sell it?" – I like using the administrative office in the home and having an S-corp, a C-corp, or an LLC taxed as an S-corp or a C-corp, reimbursing me for the value of my space because then I don't have depreciation recapture. * "Are there any tax deductions for real estate held in a self-directed IRA?” When you see SDIRA, that just stands for self-directed IRA. - you're going to lose out on those big things like depreciation, et cetera, so no tax benefit. * “I was hit hard with UBIT inside my Roth, where I owed $200,000 on a $400,000 gain. The company is no longer in business, trying to scratch back any part of the UBIT. Is it possible that it happened?”-- It was leveraged. Valerie, this is unrelated debt financed income. Yes, there is something you can do. * "Can you explain S-corp taxes with shared distribution? When it's time to file taxes, do we pay taxes on all shared distributions?" Do you have to pay taxes on everything you receive or just the profits, et cetera? - An S-corp has two primary ways of getting paid as an owner, shareholder. One would be W-2 wages and the other is all the other income. * "I started in LLC, C-corp with Anderson advisors on October 22 for real estate. I have paid $20,000-plus in networks, education, probably getting training. I did not do any deals and 2022 for my new real estate business. Can I still write all that off for the business? I have used my personal credit card to make purchases for the new REI business, real estate business. Since I do not have a business credit card, did I break the corporate veil?" – Yes, you can deduct those expenses. They are going to go on your C-corporation. If they were incurred prior to the date of incorporation, there'll be what we call startup costs. * What org structure for small business is audited the least and provides the lowest tax liability?" – That's going to be your S-corporation, typically. It's going to give you a lot of deductions and reimbursements that you can take advantage of. * "How do I best utilize my C-corp status for tax savings and investing in real estate? We have my 1099 paycheck going to our C-corp bank account and then pay out about half of it to our personal bank account as a paycheck. How do I utilize the other half that's sitting in the C-corp accounts, such as to buy new short-term rental or long-term rental investment property?" - the C-corporation, before you do the loan, you can take a lot of reimbursements—accountable plan reimbursements, corporate meetings for 280A, medical reimbursements. That all gets some money out to you tax-free deduction to your C-corporation. Get these first, then take a loan. * Rapid-fire chat questions answered at the end of the show
Resources:Email us at Tax TuesdayTax and Asset Protection EventsAnderson AdvisorsAnderson Advisors YouTubeToby Mathis YouTubeToby Mathis TikTokFull Episode Transcript:Toby: Welcome to Tax Tuesday, everybody. My name is Toby Mathis.Eliot: Hi. I'm Eliot Thomas, manager of the tax advisors here at Anderson.Toby: We are doing our best to bring tax knowledge to the masses. We'll wait for everybody to fill up. Let's go over the rules. You guys always love hearing about the rules, right? You can ask live questions via the Q&A feature. If I'm going to look up, we could see them over here. In your settings, you're going to go down below and it's going to say Q&A. That's where you leave a question that is a lengthy question, where you're actually asking our professionals a question for clarity. If it's more than a few sentences, that's where it's going to be.On the chat, you can do something like ask for clarification of something we just said, leave a comment, or even better yet, tell me where you're sitting right now today. I don't mean in your kitchen, I mean what city, what state you're in, or what country you're in, just so we get an idea. Somebody says can you please speak on the bank runs and thoughts? We'll do that.Baltimore, Wisconsin, Colorado, Florida, Chico, California, North Hills, California. Los Angeles in the house. There goes Seattle, there goes Washington, DC, Miami, Florida. A couple of Miamis, Loganville, Fort Worth, Vegas. Hey, you're right here with us. Austin, Missouri, Clinton, Maryland, Reno, Oklahoma City.Do I have to mute myself? No, you don't have to mute yourself. Don't worry. Hawaii, hospital outside of San Francisco, Fort Lauderdale. Hopefully you're working in the hospital. New York City, we get them from all over the place. They're pouring through. They're even going into the Q&A too.Anyway, we're here to answer your questions. We got a whole bunch of set questions that you guys email in. Speaking of emailing in, you can always email in questions at taxtuesday@andersonadvisors.com. We get them throughout the week. When we're not broadcasting, then we put them up, so you'll see some here.If you need detailed responses to your specific question, you need to be a client. If you're getting into advising and not just asking a question about a tax rule, then you're going to need to be platinum or a tax client, which if you want to know how to do either those things, just say hey, I'm interested in learning how to become a client or I want to be platinum. Platinum is $35 a month. It's not a break-the-bank and you can ask tax questions in writing. This is supposed to be fast, fun, and educational. Do you have fun doing these?Eliot: It's fun and educational.Toby: Somebody says, oh, my God, I got my first aristocrat today. Thank you, Markay. That's a dividend aristocrat. There are dividend kings and aristocrats. It sounds like you bought yourself a really good billion-dollar-plus company that has been increasing its dividends for at least 25 years. Yes, they're out there. That's awesome. Keep doing it.Even in this market, you never stop buying. I have a little chart that says, when to be buying in the market. Buy, buy, buy, buy, buy, buy, buy, buy. You just don't go crazy at any time. You're not timing the market, you're just consistently investing. Study after study after study has shown that it is the best way to be investing, not trying to time things.Speaking of timing things, this whole bank run, it's not the end of the world. It just seems like it sometimes if your money's in a bank that gets tied up in one of these receiverships. Anything over $250,000 is exposed to loss, but you've seen Biden and the administration coming in and saying, hey, we're not going to allow those losses to occur. We're going to find strategies to allow the banks to continue to operate.What's really happening in my opinion is you have banks that are limited in what they can invest in, and they're investing in bonds. These bonds, let's just say it was a mortgage-backed bond. It was basically mortgage-backed securities. We were getting loans on mortgages, 3%. The coupon rate might be 2%. You invest in one of these things and you're getting paid in the years coming forth at 2%. Who wants that right now? You can go get a CD for 4½ percent, so there's no market for the bond.The bond market just got crushed. You still have a guaranteed return of 2%. The bank is still going to have its money, but it doesn't have any market for it. In my personal view, if I was the Feds, I would be saying, hey, let's do a buyback on those. Maybe you don't even pay the interest, and it works that way. But personally, I just look at the Fed raising interest rates the way they have. They knew they were going to keep raising interest rates until something broke, and we just heard a snap.Hopefully, we're through some of this. Some of you guys went through it in 2008. We had folks here, I think it was Silver State. Was that the one that went under here locally? There were businesses because everybody thinks it's always rich people that have the bigger accounts. They had their payroll in there for about $3 million.They went and talked to the bank, and they said, we're worried about your liquidity. We've read some stuff and the bank assured them everything's copacetic, don't worry, we're fine, and then the Feds came in, shut them down, and they lost their $3 million dollars. You end up dealing with the FDIC, trying to get the $250,000 back. That's a process in and of itself.Best advice to you guys is spread your risk out amongst multiple institutions if you have large balances. If you're below $250,000, you really don't have too much to worry about. What you're going to see is everybody's going to run to Chase, Bank of America, Wells Fargo, who was another big one?Eliot: US Bank?Toby: JP Morgan and Chase.Eliot: This was number 16, I think, ranks of banks. They're up there.Toby: They were large.Eliot: Hit the VC, the venture capitalists or whatever.Toby: They're going to get bailed out. Apparently, they're going to be okay, right?Eliot: Yup.Toby: Then you had the signature top all over, too. We might not be done with it. But if you remember in 2008, 2009, 2010, when these banks were closed, it does cause an issue. The issue in my opinion is because the Fed just started raising interest rates and devalued all the bonds. If you're a nerd, correct me if I'm wrong, but I don't think there's ever been a year where we saw the stock market and the bond market declined. I don't remember a time in anything that I've seen, where you saw 20%-plus losses in the market, plus you saw bonds just get crushed, too.Anyway, that's not why you guys are here. You guys are here about taxes. You can ladder your CDs. If you're sitting on a few million dollars and you're just so worried, what you do is you buy CDs with a bunch of different banks, they're all insured. That way, you don't have to worry, or you go to Schwab where they have extra insurance. I think it's up to $150 million. It's a huge amount.Anyway, let's go to these. "What is an installment sale on real estate? How do you utilize it within the tax code?" That's question number one, we'll get to it, and we will answer it."What happens to accumulated depreciation on rental property when the owner passes away? Does the person inheriting the property need to account for depreciation recapture from the deceased owner when you later decide to sell that property? If the person inheriting the property gets a step-up in basis, does that new basis now become the basis to calculate depreciation on if you keep the property? Can the person inheriting the rental property also have a new cost segregation done? And would that be affected by any cost segregation done previously? Any other tax considerations to be aware of when inheriting rental property?"That is about the most comprehensive question I've ever seen on inherited property. We'll get to that. We get hundreds. I used to just grab 10. I'd be like, here, just grab a row. It's always fun when you grab a long one."I received a 1099 INT from a bankrupt crypto company I invested with called Celsius." This is again relevant to some of the stuff that's going on. "The money on the 1099 never touched my bank account as it is currently locked in a crypto wallet on their website for the last eight months. It was interest from USDC coins I staked, but I left it all in the wallet to reinvest. Am I supposed to pay taxes on this money that I never received, or can I leave it be and ignore it until the bankruptcy is resolved?" Good question and tough answer."How does the tax law treat the hiring of children by an LLC? At what age can they be hired? Which circulars discuss this?""I'm using the home office and depreciating part of the house. How will it look on the taxes that the year I sell it?" Good questions."Are there any tax deductions for real estate held in a self-directed IRA?” When you see SDIRA, that just stands for self-directed IRA."Can you explain S-corp taxes with shared distribution? When it's time to file taxes, do we pay taxes on all shared distributions?" I'm not quite following that, but I think we'll break it down. I think I see what they say. Do you have to pay taxes on everything you receive or just the profits, et cetera? We'll get into that."I started in LLC, C-corp with Anderson advisors on October 22 for real estate. I have paid $20,000-plus in networks, education, probably getting training. I did not do any deals and 2022 for my new real estate business. Can I still write all that off for the business? I have used my personal credit card to make purchases for the new REI business, real estate business. Since I do not have a business credit card, did I break the corporate veil?" We'll have some comments on this for sure, but we'll get to that.What org structure for small business is audited the least and provides the lowest tax liability?" There are stats on this one, guys."How do I best utilize my C-corp status for tax savings and investing in real estate? We have my 1099 paycheck going to our C-corp bank account and then pay out about half of it to our personal bank account as a paycheck. How do I utilize the other half that's sitting in the C-corp accounts, such as to buy new short-term rental or long-term rental investment property?" We'll dive into all those.If you guys are seeing that there's a wide variety of questions, you're probably already thinking to yourself, hey, I have some answers to that. Fantastic. If you like this stuff, go to my YouTube channel. You can subscribe for free. Put notifications on by clicking on that bell because then you know when a new video comes out. More importantly, if you like Tax Tuesdays, that's where we put the recordings. You just pop in there. If you want to know how to get to YouTube, just go to aba.link/youtube.All right. Eliot, "What is an installment sale on real estate? How do you utilize it within the tax code?"Eliot: An installment sale simply means that you're getting payment over more than one year. It could be for two years, it could be for 20. You're just getting chunks of money, typically, the same amount each year or prorated amount for the first year, perhaps a down payment first year, where the payments are generally the same amount, it doesn't have to be.When we talk specifically about real estate, I thought this was interesting because we have to watch out for that. If you're just buying an investment property, then the recipient only has to pay tax on a certain portion of what they receive each year. In other words, you don't have to pay all the tax up front.If you sell it for a profit of maybe $2 million, it doesn't mean you have to pay all that profit right away because you just do it as your chunks of payment come in. That's based on what we call the gross percentage. We just take that, times the amount of payment. There's going to be a game component, there is going to be an interest component, and then there's going to be the principal itself. You'd record each of that each year on your sale on real estate.Toby: If you're a code fanatic, it's 26 USC 453. When you do an installment sale, which means you're taking the payment over a longer period of time than just in one year, so it can be two years, it could be 20 years. You're spreading the tax obligations out over that period of time, unless you opt out.Eliot: That's right. You don't have to.Toby: If you're selling your personal residence on an installment note. Hey, I have $300,000 of gain, I'm married, I don't have to pay tax on it. You may say, I'm going to opt out of the installment sale, even though you're carrying back a note. It's basically having a mortgage on the property and you're the bank, and they're paying you over time.You're going to get the gain back, you're going to get a return of basis which is zero, you're going to get depreciation recapture, and you're going to get interest. Guys like Eliot break it all out and figure out what it's going to look like.Eliot: One thing I just want to also add is that don't mix up this sale on real estate with flipping, because now we have a whole different tax code provision for that. Flipping is considered inventory, and you cannot use an installment sale with inventory. That's an important note.We often get new investors, and we have to warn them about that. If you're flipping a property, make sure you know that you're not taking in the payments on installment, otherwise you're going to get hit with all the gain in the first year. Also, you cannot have installment between related parties.Toby: Somebody says, can I get a recording of this? Yes, we'll put it on the YouTube channel. Are you saying the inventory is the home? Yes, Faith, when you buy real estate to sell it. You're a dealer. Pretend that you're a car dealership and you're having cars on your lot. You have real estate on your lot. The IRS says it's no longer investment real estate, it's inventory, which is not depreciated.Under 453—that's the installment sale code provision—it specifically says that when you are a dealer in real estate, then you cannot use the installment sale. This is relevant to somebody who buys, fixes up, flips, and carries back the note. You might be surprised that you're required to pay the taxes in the year that you sold, even though you're getting the money over 5, 10, or 20 years.It's almost better to not do that if you're a flipper. That's why you don't see too many people that are in the flipping world carrying back notes because I could flip a house, I could have $100,000 of profit I have to pay tax on, but I haven't received my 100,000. I'm going to be receiving it over the next 10 years, but I got to pay the tax this year, which can be a nasty situation.“Oh, my God, I'm so new to real estate investing that what they just said about flipping makes absolutely no sense to me. Can they break it down for a five-year-old?” Yup. Claire, when you buy a piece of real estate, let's say I buy a house, in my intent, when I buy it is to sell it. My intent is not to rent it and hold it for the long term. My intent is to put new paint on it, new carpeting, and turn it around and sell it for $30,000 more than what I paid for. I am a business, I am not an investor. I am considered a dealer, and I am taxed.This is no different than if I had a pizza shop and I was selling pizzas. I am just a business. That's where people make mistakes. Then you'll have gurus out there go out there and say, no, you just hold it for a year and now it's magically an investment. No, the court cases on it go far back. There's one that where it's 10-year hold that they treated the guy like a dealer.The reason they want to is because you don't have long-term capital gains. It's going to be an active ordinary income if you're materially participating. If you're doing the flips and you're working in it, then you're going to have not only your ordinary tax bracket up to 37%, but you're going to get hit with the old age, disability, and survivors' Medicare, the Social Security taxes. That's 15.3%.Somebody says, I'm still working on my diet, easy on the pizza talk. Pizza is diet food, just bad diet food."What happens to accumulated depreciation on a rental property when the owner passes away?Eliot: It goes away.Toby: You have a step-up in basis. All of your accumulated depreciation, all you have to do to never pay it back, is die. That's all you have to do. If somebody tells you to gift your property to your kids right before you die, ignore them. Don't do it. Nine times out of 10, you just completely hosed yourself. I see people do it, still.Eliot: Or at least the kids.Toby: Don't do it. All right. "Does the person inheriting the property need to account for depreciation recapture from the deceased owner when you later decide to sell the property?" It's just a flat out no because it steps-up in basis. The depreciation is gone. You don't have to worry about it. You get to re-depreciate it, and that's going to be the next couple of questions.That's the fair market value. Mom and dad bought a property for $30,000, it's now worth $300,000. They depreciated a big part of that 30, and they die and you inherit it. You now have a property at $300,000. You depreciate it at what amount?Eliot: $300,000.Toby: Yup, you got to start doing it again. "If the person inheriting the property gets a step-up in basis, does that new basis now become the basis to calculate depreciation on if you keep the property?" Yes, absolutely. "Can the person inheriting the rental property also have a cost seg done, and would that be affected by any cost segregations done previously?"Eliot: New cost seg. To my knowledge, the previous cost seg doesn't have any effect. Stepped-up basis.Toby: Yup. All you did is you accelerated your depreciation. Parents got more deduction earlier. It's not like they got more deduction, they're just accelerating that deduction. Instead of taking it over 27½ years, you might have taken about a third of that in one year, sometimes it's stretching. Cost seg is breaking down the years from 27½.Let's say I had a property that's a single family residence, same thing, and we're renting it. Normally, you're depreciating everything over 27½ years, so pretend the carpet in that house. It's going to be depreciated over 27½ years. It doesn't really happen, right?The IRS allows us to do what's called a cost seg and break the components down because that carpet is actually five-year property. You're supposed to be writing it off over five years. It's not like you increase the amount of your depreciation that you would get in 27½ years, you're just front loading it. You're getting a lot more deduction in the first few years than you would normally.No, it doesn't affect it. You can absolutely get your step-up in basis. No, it won't impact you. You'll get to write it off all over again, which is again, that's why real estate is obviously one of the best investments because unlike if I bought shares in Microsoft, I can't write off my shares in Microsoft. I can't depreciate my shares in Microsoft. If I buy a piece of real estate, I get to write it off. Then when my kids inherit it, they get to write it off again at its new value.If Microsoft shares go up in value and they step-up in basis, so what? I'm not going to depreciate it. I'm not taking a deduction for my ownership. In real estate, you are. It's giving us a pretty big benefit."Are there any other tax considerations to be aware of when inheriting a rental property?"Eliot: I don't know about the inheriting, but often the question is, do I gift? As Toby pointed out, don't gift because you don't get that stepped-up basis. Wait until the beneficiaries can inherit. That is after someone dies.Toby: Yup. I've seen it. I actually have a really bad story. It was when the estate tax went away completely, which is a tax they impose on your state if it's over a certain dollar amount. Back in the day, when I first started practicing, it was $600,000, now it's $13 million. It's just some really high number. I think it's 13. Is it 12?Eliot: 12-plus, about 13 now.Toby: Yeah, it's about $13 million per spouse, so $26 million. You go above that. You're going to pay this estate tax, which is going to be about 40%. There was a time when we were worried that we were going to go back down to $1 million.There were clients who inherited property, and it was in the year that it would have been zero estate tax, and the dad gifted just prior, a building that he had had for almost 40 years, to the kids, and he gifted it. They got his basis. Now they have to pay tax and all that gain, they lose the ability to depreciate it, and they didn't get any tax benefit at all. Zero, zilch, none. All they did is cause themselves millions of dollars of extra taxes. I hope they sent their accountant a Christmas dress. It was like, what were they thinking? They thought that it was going to be taxable, blah-blah-blah.Eliot: To that, Toby, we often talk about the upcoming changes potentially in the tax code. Don't just run out on all the talk you'll hear in the press and all that. We really want to wait until it's signed, sealed, and delivered before we're starting making decisions on your tax planning.Toby: Yes, don't react to something that hasn't occurred yet. "I received a 1099 INT from a bankrupt crypto company I invested with called Celsius. The money on the 1099 never touched my bank account. It is currently locked in a crypto wallet on their website for the last eight months. It was interest from USDC coins I staked, but I left it in the wallet to reinvest. Am I supposed to pay tax on this money that I never received, or can I leave it be and ignore it until the bankruptcy is resolved?" What do you say?Eliot: They're going to tell you, you need to report it and you need to pay tax on it. Right now, that's where the IRS position is on this. There could be some unique situations, perhaps, Toby, depending on what happened with that. What got us to this point where Celsius is there?Toby: We've dealt with this over the years with Ponzi schemes, bankruptcies, and stuff. You have two things that occurred. You made money on your staking, it's held on an institution that's become insolvent, and the question is, are you going to get it back? In the meantime, they're sending you the 1099 saying, here's the interest you made. You're saying I don't have access to it, therefore I should not be paying tax on it, and that's not the rule. The rule was, you could have taken that money, you just continued to store it in Celsius, and they ended up going insolvent.The question is whether your money was stolen or whether there was fraud. Your receiver may have opinions on that and they may be seeking direction. The receiver is an extension of the court. Undoubtedly, if there's bankruptcy, there's either a trustee, receiver, or both, and you're probably going to want to get direction from them as to whether they believe that you're able to take a theft loss or whether it was actually stolen, or whether there was fraud. I know that I've seen these before, I can't remember Celsius specifically.Eliot: I don't know, but you do get a letter. I've seen many of those letters where they say, it's from a government institution of some sort of the courts saying that this was part of a fraud scheme, we believe. What kicks it off for your tax preparer to say, okay, well, maybe we can take a loss here. There are specific rules to that as well, which we won't go into here. Aside from that, if there isn't any fraud, then one is required to report that interest income and has to pay tax on them, even though you don't currently have access.Toby: Yeah, and then if you have a loss, you're typically going to have a capital loss. If you're going to lose your cash, there'll be some corresponding loss. The question is, in 2022, did you make money? They say, yes, and then you might have a loss in 2023, depending on what happens in bankruptcy. Of course, you may just get all your money.That's the thing. They're going to say, hey, you need to pay the tax on the properly issued 1099. Your accountant could take the position that it was fraud and that you're never going to get the money back, file your return and put a notation, and see if the IRS catches it.For the most part, you were issued a 1099 INT. It said you made this money, and now that money is in jeopardy. You still pay tax on the money that you made, even though you may not get it back when we know for certain. It's like anytime you've ever had a loan out to somebody, you don't get to write it off when they don't pay it back. You actually have to show that you went through and exhausted all measures of recovery before you can actually take a loss.Eliot: And you want to be documenting.Toby: All right. "How does the tax law treat the hiring of children by an LLC? At what age can they be hired? Which circular discusses this?"Eliot: The big thing people are looking for here, usually, is how do I pay my child, maybe in a manner that I don't have to pay employment taxes on? That's when they're under 18, no Social Security, no Medicare taxes on those, but they must be paid by an LLC that's owned by mom and dad if it's a disregarded LLC or a partnership, and they have to be paid as W-2 employees. It's really critical to hit this. That's up till 18, then up to 21—Toby: That means they have to do something.Eliot: Yes, they have to be working.Toby: There are cases of kids, nine years old, getting paid Screen Actors Guild's wages for being a talent for images and things like that, being a model, for the marketing materials. You have kids that push brooms and do cleaning, you have kids that do tech, that do data entry. You just have to show what they're doing, and it has to be a reasonable amount that you're paying them. If it's a sole proprietor, which could be a disregarded LLC or a partnership, then you have no withholding if they're under 18, right?Eliot: You have to pay their W-2 employees, that's correct. You can't 1099 them. As far as the ages go, the federal government relies on that specific state. Each state has its own different rules. Most of them, the kids are not going to sue their parents. Not too many people look into that, but it is determined by the state rules.Toby: I don't think there's any state where if it's family members. Somebody say, do the grandkids count? I know it's with children, for sure. I'm not sure.Eliot: I don't know about grandkids.Toby: Here's the thing. If they're making less than I think it's $13,850 in 2023, they don't pay tax on federal income taxes. They may still have some employment taxes if you run it through payroll, but what we're talking about is avoiding all taxes. If you pay somebody who's 18 or under, or is it under 18?Eliot: Seventeen.Toby: It's under 18. When you hit the age of majority, now we have to worry about the employment taxes, period. But the federal income tax is going to be next to nothing if you're paying these kids. Let's say you're $10,000 a year, then normally you have to pay their tuition and you have to pay their tuition, and you're in the aggregate tax bracket of your 32%. You're going to have to make over $15,000 just for federal income tax purposes to be able to pay their tuition at $10,000.If you just pay that kid the money, even if they're over 18. We're not worried about the employment taxes here. I'm just saying, if you just pay them even through payroll, it could be a C-corp, S-corp, whatever, pay them and let them pay for their tuition with the money that they earn, they may not be paying any federal income taxes, then the employment taxes don't seem so bad. Your aggregate amount of employment taxes between an employer and employee after deductions is about 14.1%. You're paying a total of 14% on money, where you would be paying, in some cases, 37-plus because you have employment taxes too, so 40%-plus.What you're doing is you're saying, hey, I'm just going to be able to get much better tax treatment here if I let the kids pay for their college and things like that than me doing it. Somebody says, if flipping is like selling pizza—somebody's going back to that 37 and 15—does that mean my aggregate tax amount is about 52%? It can be pretty high. It's not going to be quite there, but it's going to be pretty darn close.If you're 37%, you've actually phased out of the old age, disability, and survivors portion of Social Security, which is right around $147,000. If you're 37%, it means you're making a lot more money than that, then you're looking at 3.8% 2.9%-plus, there's an extra 0.8, so about 3.8%. You're really looking at just over 40%.Eliot: It could be state, too.Toby: It could be state. Claire, that's why you use an S-corp or a C-corp when you're flipping because we want to be able to minimize that and get some of that money into a 401(k) or get it into another business.Eliot: As far as a circular, I didn't know what it was off the top of my head. But I do know, if you just type in the IRS hiring family, it'll take you right there too. They have a really nice website that goes over that.Toby: I'll probably do another video on that, actually. I might dive in there. We've done it before, I'll do another deep dive.All right. "I am using the home office and depreciating part of the house. How will it look on the taxes at the year I sell it?"Eliot: It's going to look like you're paying. That's what's going to look like. It's a tax liability.Toby: I don't like the home office. I like using the administrative office in the home and having an S-corp, a C-corp, or an LLC taxed as an S-corp or a C-corp, reimbursing me for the value of my space because then I don't have depreciation recapture. If you're a sole proprietor, and you are taking a home office deduction and you have depreciation, or if you're house hacking and you're renting out part of your house, you're going to have depreciation recapture when you sell the house.Section 121 of the code allows you to avoid capital gains only, capital gains, specifically up to $250,000 if you're single, up to 500,000 if you're married filing jointly, but does not cover depreciation recapture. If you have a house and you have half the house that you're renting out, or you've been doing a home office for years, you can do a 121 with a 1031 exchange. You can treat the part of the house that was depreciated. When you sell it, you can actually 1031 it into something else if the numbers justify it.For the most part, that's why we say don't do the home office. Don't be a sole proprietor. There are reasons not to be a sole proprietor, partially because they do get poor tax treatment, and they pay self-employment tax in all their dollars, which is the Social Security taxes. It's not good. And they get audited a lot. There's a whole bunch of reasons not to be a sole proprietor, but 70% of the businesses still persist in being sole proprietors. Anything else on that one?Eliot: No, I think that's pretty much it.Toby: The answer to your question is make sure you're talking to a tax professional when you go to sell the house. You may have some recapture, but it's not the end of the world. At your tax rate, up to 25%. If there is some recapture, it might be annoying, but I don't think it's going to be a devastating tax, especially if you can control your income for that year.Speaking of controlling income and learning about all these different tax nuances and how it works with real estate, my partner and I, Clint, we do real estate tax and asset protection every several to a couple times a month. We have one coming up, it looks like on March 25th, and then another one on April 8th. Feel free to register. It's an all-day event. We go from about 9:00–4:00 Pacific Standard Time.These are not recorded events. We don't make the recordings available. There's always something that's an incentive for those who show up. If you want to learn about LLCs, land trusts, living trusts, corporations, S-corp, C-corp, dealer status, cost segregation, accelerated depreciation, 168(k) 1031, 121, all the different fun code provisions, then you want to come to this event. It's actually really fun, and it's always good. Absolutely, feel free. I think Patty already posted the link. Join us. We've been doing them for a number of years and they're always fun."Are there any tax deductions for real estate held in a self-directed IRA?"Eliot: No. When you have something in your retirement plan like that, there isn't the concept of deductions. There's cash flow going out paying for bills, and then there's cash flow coming in your rent or if you sold it. We don't have any tax consequences, so you're going to lose out on those big things like depreciation, et cetera, so no tax benefit.Toby: There is one exception, just to be annoying, and that is if you have a loan on your real estate in your self-directed IRA, then you have something called unrelated debt financed income. In that one, you can use your depreciation to offset. But otherwise, you're putting it in a self-directed IRA, it's exempt. You're not paying any tax.You got your tax benefit either doing a traditional IRA, a 401(k), rolling it into the self-directed IRA. Realistically, if you're doing real estate and you're going to be investing with a self-directed IRA, and if you need debt at all, if you need any loans to buy that property, roll it into a 401(k) because it does not have the same rule. You do not have to pay unrelated debt financed income in a 401(k).If you're going to be buying real estate and you're going to be levering it at all in a retirement plan, make sure it's a 401(k) because it is not taxable. A self-directed IRA is taxable when you have unrelated debt financed income. Excitement?Eliot: Yup, good stuff.Toby: Yup, good questions. "Can you explain S-corp taxes with shared distributions? When it's time to file taxes, do we pay taxes on all share distributions?"Eliot: An S-corp has two primary ways of getting paid as an owner, shareholder. One would be W-2 wages and the other is all the other income. It comes down on a K-1, we call it. Often we'll use the term distribution, but really distribution means that you took the money out. That doesn't have to be the case. You can leave it there and still be taxed, or you will be taxed. Your distribution share, not your W-2 income, is just taxed at your ordinary rates.Toby: Yes, this is a big distinction. Regardless of whether you distribute the money in an S-corp, it flows down proportionately to the shareholders. Distributions have to be proportionate. I cannot distribute.Let's say Eliot and I are 50/50. He can't take money and I don't. They have to be equal distributions on an annual basis. There's always this little game you play, especially if you have a doctor's practice with 10 doctors in it, and there are all these different dollars going on. You have to make sure it matches up because they have to be equal distributions.Regardless of whether you take distributions, you have to pay tax on your proportionate share of the profit, or you recognize a proportionate share of the loss. You cannot do non-pro rata distributions or loss sharing in an S-corp. This goes for an LLC taxed as an S-corp as well. If you have an S-corp, it really doesn't matter whether you take the money out. It just matters whether there was profit.Saying that, I'm going to give you guys one rule that for whatever reason, nobody knows, or the accountants know and they're like, ah. If you have an S-corp and you did not take distributions, you are technically not required to take a salary. That one throws people off all the time because they say you're required to take a salary out of an S-corp. You're required to take a salary out of an S-corp if you take distributions. If you don't take distributions, if you're just growing it, then technically, you don't actually have to take a salary.Somebody says, “I was hit hard with UBIT inside my Roth, where I owed $200,000 on a $400,000 gain. The company is no longer in business, trying to scratch back any part of the UBIT. Is it possible that it happened?” I don't know. Let me see. That was 2020.Valerie, I'm going to see if I can find anything else. If you got hit with unrelated business income tax, was it unrelated debt financed income, or did you get hit with UBIT where you were running an active business in it? It was a business? Ouch. It shouldn't have been gained, it was passive. I wonder what they got hit with UBIT for.Eliot: I don't want to speak for Valerie here, but I have a feeling that they can surpass you in that you didn't do anything, but what you invested in was an operating business and that's active with what they hit it with.Toby: It was leveraged. Valerie, this is unrelated debt financed income. Yes, there is something you can do. The only time you actually run these scenarios in an IRA—it was a Roth, so it's just a typical IRA—is when you have unrelated debt financed income and you can take the depreciation to lower the income. They had a big chunk of the gain. They sold it and it was levered. I don't know a way around that one.That's probably what happened, Valerie. You had leverage and they said, you owed a bunch of tax on the gain. That's a horrible situation because it sounds like you were taxed at. It sounds like it was less than a year. How long did they own the apartment building, or how long were you in it? Because it sounds like it was treated as a short-term.Ten years of capital gains? That doesn't make any sense. I would love to see that one. California [...] says they treat it as ordinary income. They must have treated it as a flip. They must have bought the apartment complex, fixed it up, and sold it. Is that what's happening? It wasn't a flip? Then it's not 37%.Unless they treated it as levered, then they would. They taxed at the highest amount, 10-year hold, and they taxed you on the unrelated debt financed income is what they did. It's at the highest rates. You got hit with that penalty because they levered it.I hate the fact that that happened, Valerie, for you. Realistically, the promoters should be a little more careful. If you did that through a self-directed IRA, then they should have caught it, too. We see that over and over again. It's the difference between an IRA and a 401(k).A 401(k) would not have been subject to that same rule, I think even a Roth 401(k), although it's almost impossible to get a Roth IRA into a Roth 401(k). In fact, it is impossible. You can't roll it. I'm so sorry you got hit with that. It just stinks, but at least you made money. You got killed with taxes, but at least it was a profitable endeavor.We always see something interesting, guys. I can see the chat. We disabled chat for everybody else just because people solicit each other. There's always a Nigerian prince or an MLMer in there that's trying to look for customers. I'm reading the chat as we go along. I apologize that you guys can't see that.All right, let's go back. "I started an LLC, C-corp with Anderson Advisors in October of 2022 for real estate investing. I paid $20,000-plus in networks, education, et cetera." It sounds like you went through one of the bigger education companies. "I did not do any deals in 2022 for my real estate business. Can I still write all that off for the business? I have used my personal credit card to make purchases for my new business. Since I do not have a business credit card, did I break the corporate veil?"Eliot: Yes, you can deduct those expenses. They are going to go on your C-corporation. If they were incurred prior to the date of incorporation, there'll be what we call startup costs. You will be able to deduct up to $5000. Anything over the startup costs will be amortized over 15 years. I was going to say depreciated, but it's almost the same concept, but it's amortized.Anything after the date of incorporation, you'll be able to deduct dollar for dollar deductions. Any loss you have in the C-corporation will just carry forward. The fact that you didn't have any business, don't worry about that. That's perfectly fine. Your loss will just carry forward to next year when you do.Toby: Here's the thing. I don't think that there's a loss in the corporation yet because it's a personal credit card. I think that the corporation will need to reimburse you first before that loss is in there.Eliot: Yes. As far as the personal card, to that aspect of it, you need to turn it in. For reimbursement, typically, we get it on there. These would be the expenses that occurred after it was incorporated, generally. We call it loans from shareholders.Toby: You're going to get to write this off, period. Would you actually grab this as a deduction called a loan from shareholders? Is that what you'll do?Eliot: Yes, we will call it loss from shareholders. We would expense the expenses. We do have to have that payback. That's right.Toby: You're either doing one of two things. You're either saying, hey, I loaned you the money from the credit card to do the purchases, or you're going to loan $20,000 to the corporation to reimburse you for your expenses at which time, then it becomes deductible to the corporation, or you wait until the corporation makes $20,000, and it's just paying you back for the expenses that you incurred on its behalf. It's no different than if your employer did that.If I said to Eliot, hey, Eliot, go get pizzas for the office, and Elliot goes out and buys $1000 worth of pizza, it's not deductible to me yet. He brings the pizzas in, everybody in the business eats the pizzas, and he’s still owed $1000. What it really is is I owe Eliot $1000, I get to write it off the day that I write him a check for $1000. There are actually three or four ways to treat this just to make it really confusing.Eliot: But we didn't break the corporate veil.Toby: You did not break the corporate veil, and yes, you'll be able to write it off. Since you're a cash basis taxpayer, which means the corporation gets to write it off when it pays you for the expense. The only question is, did it pay you for the expense because you said, I'm going to loan you my credit card, I'm going to incur the expenses, you're going to pay me back, and it gets to write it off right now? Or did I incur that expense and it's just an IOU, in which case, then the corporation will pay me back once it makes money? Or do I loan it money that it can then pay me back and write it off? Isn't that fun? Any other scenarios you can think of?Eliot: I think that's about it.Toby: That's what you guys show up.Eliot: Just to that, where you run into the corporate veil scenario is if you have the corporation paying directly for your personal expenses. This is the other way around. You personally paid on behalf of the corporation, that's okay. You can do that all day long. Just don't want the corporation paying directly for your personal expenses, that's where you have that corporate veil problem.Toby: Yours is going to suck. The fact of the matter is these rules are not something that implodes when you don't do something the perfect way. You get to look back quite often. You can fix things, you just document it. You can work with a tax professional, and they usually keep you on the straight and narrow.Generally, you always have the opportunity to fix things. It's not like all of a sudden, it blows up and you have a piercing. No. It'd be years later before piercing would even be relevant.Somebody says, do you have any fun jokes that start something like two CPAs and a lawyer just walked into a bar? No, because that would be the most boring bar in the town when two CPAs and a lawyer walked in.Eliot: From law school, after my student that was taught by my same tax professor. He was in a bar, a guy walks in and starts spouting off about how he was getting around tax provisions here, there, and all that. It turned out that this alumni of my school actually worked for the IRS as an attorney. He just sat there, had a beer with the guy, found out more information, and sent the audit out the next week. That's actually a true story. It's not a joke.Toby: A lawyer and a CPA walk into a bar and only agree on the drinks. That's about right.All right, "What org structure for small business is audited the least and provides the lowest tax liability?"Eliot: That's going to be your S-corporation, typically. It's going to give you a lot of deductions and reimbursements that you can take advantage of. I don't know of any. I look at a lot of tax sources all over the web from all over the world, especially, of course here in the US. I don't know anybody who has hit this more often than this guy right here as far as the statistics, tax wise, these programs and everything else, and his books and all that. I'm going to turn it over to you.Toby: They used to have a specific table in publication 55. In this publication, they give out all the stats every year of who got audited and what happened during those audits. The big thing for me is, I don't care if I get audited if I never lose. If you knew you got audited and you have a one in a hundred chance of losing, you probably wouldn't be scared of an audit. The issue is, if I get an audit and I automatically lose 90%-plus of the time, so remember that.When you look at these old tables, they've discontinued the last two years. We're trying to piece together the data, but we have years and years and years of historical data. Sole proprietors get audited about 800% more than an S-corp when you actually make money. Let's just say $100,000 a year. It's about 1.4%, it's 1.6% the last year that they came out with stats on $100,000, and an S-corp was 0.2 %. It's about 800% more often, so that's not good.The worst part is the sole proprietors lose those audits between 94% and 95% of the time. The S-corps lose about 69%-71% of the time, but then again, it's like 1/8 of the audits. And if you're a sole proprietor, you pay self-employment tax, which is old age, disability and survivors, and Medicare, which is that extra 15.3%. There's a phase out of it, but you pay that on 100% of your net profit.If you make $100,000, you're paying the actual dollar amount is about $14,100 in employment taxes. That S-corp would probably pay somewhere in their neighborhood of $5000 or $6000. You're going to save $8000 or $9000 pretty easily just being an S-corp if you're making $100,000 a year. When I look at those, it's not even close.The actual lowest audit rate, though, of all entities is actually the partnerships, but you wouldn't run an active business out of it. It's much better if you're going to be doing real estate out of the S-corp, but they're almost never audited. We do over 10,000 returns a year in our firm and less than a dozen audits last year. They're so rare when you do things correctly.Usually, there's a way people are getting audited. They're either putting in the wrong numbers. If it's an S-corp, they're not taking a salary and they're taking distributions. In the case of a small business, they're taking crazy deductions, which make no sense, the numbers don't add up, or the 1099s don't add up.Usually, the majority thing about 70% of the audits are just correspondence audits where they send you a letter. It's just very, very, very seldom. Some people are still giving us bad jokes. An accountant was having difficulty getting to sleep at night, so she went to see her doctor. Have you tried counting sheep and inquired with the doctor? Yeah, that's the problem beyond the accountant. When I make a mistake, I spend six hours trying to find it.Eliot: That's true.Toby: That's all right. All right, enough of this nonsense. Let's get in."How do I best utilize my C-corp status for tax savings and investing in real estate? We have my 1099 paycheck going into our C-corp bank account and then pay out about half to our personal bank account as paycheck. How do I utilize the other half that's sitting in the C-corp account, such as to buy a new short-term rental or long-term rental investment?"Eliot: One of the great things we can do here is you could take a loan out to yourself, but you'd have to pay a reasonable amount of interest back. You can take that loan, it gets out of corporation. There's no tax consideration there other than the interest being earned by the C-corporation that's going to do your investing.Alternatively, the C-corporation, before you do the loan, you can take a lot of reimbursements—accountable plan reimbursements, corporate meetings for 280A, medical reimbursements. That all gets some money out to you tax-free deduction to your C-corporation. More than likely, depending on the dollar amount, you're going to use a combination of those two to get the reimbursements first, then the loan.Toby: Here's the one thing. They say, hey, I take my 1099 paycheck. There's no such thing. There's a paycheck, which is W-2 and there's 1099, which leaves you as an independent contractor. Whenever I see those two words used together, just think I'm an independent contractor and my company, the C-corp, is actually the one doing the service. You have to make sure that it's being paid to the C-corp, not to you.If it is going to you, there's a workaround, but you got to make sure that if they're issuing a check, it's to the C-corp, then you take out a W-2 paycheck, and then you have the rest of the money sitting in there. If you just leave it sitting in the corp and you don't do anything, we are taxed at 21%. If you wanted to pay that out to yourself, it's going to be long-term capital gains too, depending on how much money you make. If you're married filing jointly and you make less than $88,000 a year, it's zero.Usually, in this scenario, when we see this type, I'm probably putting a 401(k) or something in place, and you're going to put money into a retirement plan. If you have half the money that you're living on and the other half, let's get more into your 401(k). We can contribute 25% of your paycheck. I forgot the amount this year. It's $22,500 I think is the amount that I could defer directly in.Let's say you're taking $50,000 in payroll, I could defer immediately $22,500, actually $30,000 if you're over 50. You could put a big chunk in there, plus your company can contribute 25% of what you got paid. If it's $50,000, then they could pay another $12,500. Now you just managed to put a whole bunch of money tax free over $40,000. That number to me adds up to $42,500 right into your retirement plan out of the $100,000, so you're going to pay zero tax on it. That's how you do it.If you're making money through your business, if you don't have other employees, then it can be really beneficial. Somebody says, while that gets complex, its numbers, it's just sitting there giving yourself the options, ABC. Eliot here and all the tax analysts, that's what they're doing. They're always going through saying, here are your choices, you could do A, B, C, D, and which one's going to get you the best result for the amount that you're working?It's not that big of a deal. Once you get through one year of doing a 401(k), they're not really that complicated. They're actually pretty straightforward. There's not a lot of paperwork. Why would you want a 401(k)? Because you don't have to pay tax when you put the money into it. If you did long-term rentals in that or short term rentals in that, you wouldn't be paying any tax on it.You could also borrow from a 401(k), and then you can use that 401(k) money to buy other investments. Correct, yup. You don't have to worry about tax on those investments. If you do stocks, you could do covered calls. You could do the wheel strategy we teach in Infinity Investing, and you could just be making money constantly. It's not taxed until you take it out.There's so much stuff we could do. Again, it is somewhat complicated, but that's why you work with somebody who can give you the scenarios. For us, it's, hey, A, B, C, D. Hey, look, C's obvious or B's obvious. You could always play around with it.Patty's pointing out, you could always go to my YouTube channel. Hey, there it is. There are a ton of different strategies sitting on there. Faith, it's a process. I always tell people, it's about a year-and-a-half of getting used to the vernacular and talking tax, and all of a sudden, it just starts to go click, click, click. Once you do it for yourself and you see tax savings, it becomes relevant, and then it becomes more interesting.If it's something you just want to hand off to somebody else, you can certainly do that, but you really should know some of the basics. We do a tax-wise workshop. These guys do it about every two weeks, where they're going through the strategies and break it into bite-sized pieces. We have tons of content, where we will teach you how to do this stuff. Once you do it a few times, it just becomes second nature, and you think it's not really that. It's like compound education, there you go.What I care about is just the benefit. Once I start seeing benefits, then it becomes important and relevant to me. Think of it like this. If somebody walked up to you and said, I'll pay you $1000 an hour to learn something, that's about the return that tax education is. What they don't tell you is it'll end up being $1000 an hour every year for year after year after year, and it really starts to add up when it comes to retirement. It's the difference between having $10,000 in your account and having a million dollars in your account over a long enough time horizon. That's all it is.There's YouTube, it's free. You go in there. I always have fun stuff that I'm posting. We have a really good group. I see a ton of questions they've answered, by the way. I got to just shout out to my team. Let me just tell you guys how many folks are answering your questions right now. We've answered over 200 complicated questions.Troy, Tanya, Sergey, Ross, Kurt, Kenny, Jared, Dutch, Dana, Patty, and Matthew are all on. It's not like we're paying them. Okay, we're paying them, but it's not like you guys are having to pay them. They're answering your questions and trying to do the best that they can to give you some clarity.We know it's complicated out there. They passed, how many tax acts in the last three or four years? They keep changing. They keep moving the goalposts. They change stuff on a continuous basis. It's nonstop because they're always doing regs, always giving additional guidance, they contradict themselves, and a court case comes out that poops right on everything.You're always trying to do the best you can, and we're just trying to make sure that people are going in with their eyes open so that they're able to take things into account when they're deciding what to do, so that they can do things in the way that's best for you, as opposed to just giving it over to the government.We happen to believe that money is better off spent at home in your hands than it is giving it to the government. As much as we love the government, we think that you're a better steward of your money than any governing agency or any governing body. The tax code is written for your benefit, so we may as well utilize it. They just make it a little bit complicated.I'm just telling you, we got a lot of folks out there to help you. Even right now, they're all just churning away trying to answer all your questions. What we're going to do now is say, thank you for joining us. Send in your questions at taxtuesday@andersonadvisors.com. You may see it posted here. We may be answering it live. If nothing else, we'll make sure that we get a response to you. Anything you want to add?Eliot: Thank you so much for joining. I look forward to seeing you again.Toby: All right. What I'll do is you're going to see us go mute. But for those of you who have unanswered questions in the Q&A, hang on. They will answer them all before we are done.Thank you, guys. Make sure that you come to the tax and asset protection events that we hold. Clint is an amazing speaker. They'll get there. As far as tax wise, I think it's in the tax toolbox. Go to the tax and AP event, learn about the business essentials package, or ask your rep about the tax toolbox. You guys may have access to it, you may not even realize it. It'll be sitting in there and you'll be able to continue to do all sorts of fun stuff. We'll make sure that we're helping you out.By all means, join us for those workshops. Just plug in. You don't have to become a client till you're good, set, and ready, but you can absolutely learn together with us. We'll always be giving you relevant information that hopefully puts more money in your pockets. We will see you next time, in two weeks.
Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions. We send a big thank you to all our people online answering your questions today - Troy, Tanya, Sergey, Ross, Kurt, Kenny, Jared, Dutch, Dana, Patty, and Matthew are all on.
On today’s episode, Eliot and Toby answer listener questions including a very detailed question on inheriting rental properties, a question on crypto-currency and taxes, one on hiring and paying your children, and we answer the title question on structuring small businesses using an S-Corp.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics:* "What is an installment sale on real estate? How do you utilize it within the tax code?" - An installment sale simply means that you're getting payment over more than one year. It could be for two years, it could be for 20. * "What happens to accumulated depreciation on rental property when the owner passes away? Does the person inheriting the property need to account for depreciation recapture from the deceased owner when you later decide to sell that property? If the person inheriting the property gets a step-up in basis, does that new basis now become the basis to calculate depreciation on if you keep the property? Can the person inheriting the rental property also have a new cost segregation done? And would that be affected by any cost segregation done previously? Any other tax considerations to be aware of when inheriting rental property?" — It goes away. Don’t gift it to your kids before you die! Your new value “step up in basis” is what you calculate from. New cost-seg, yes, nothing relates to the old cost seg. * "I received a 1099 INT from a bankrupt crypto company I invested with called Celsius." The money on the 1099 never touched my bank account as it is currently locked in a crypto wallet on their website for the last eight months. It was interest from USDC coins I staked, but I left it all in the wallet to reinvest. Am I supposed to pay taxes on this money that I never received, or can I leave it be and ignore it until the bankruptcy is resolved?" – you need to report it and you need to pay tax on it. * "How does the tax law treat the hiring of children by an LLC? At what age can they be hired? Which circulars discuss this?" - when they're under 18, no Social Security, no Medicare taxes on those, but they must be paid by an LLC that's owned by mom and dad if it's a disregarded LLC or a partnership, and they have to be paid as W-2 employees. * "I'm using the home office and depreciating part of the house. How will it look on the taxes that the year I sell it?" – I like using the administrative office in the home and having an S-corp, a C-corp, or an LLC taxed as an S-corp or a C-corp, reimbursing me for the value of my space because then I don't have depreciation recapture. * "Are there any tax deductions for real estate held in a self-directed IRA?” When you see SDIRA, that just stands for self-directed IRA. - you're going to lose out on those big things like depreciation, et cetera, so no tax benefit. * “I was hit hard with UBIT inside my Roth, where I owed $200,000 on a $400,000 gain. The company is no longer in business, trying to scratch back any part of the UBIT. Is it possible that it happened?”-- It was leveraged. Valerie, this is unrelated debt financed income. Yes, there is something you can do. * "Can you explain S-corp taxes with shared distribution? When it's time to file taxes, do we pay taxes on all shared distributions?" Do you have to pay taxes on everything you receive or just the profits, et cetera? - An S-corp has two primary ways of getting paid as an owner, shareholder. One would be W-2 wages and the other is all the other income. * "I started in LLC, C-corp with Anderson advisors on October 22 for real estate. I have paid $20,000-plus in networks, education, probably getting training. I did not do any deals and 2022 for my new real estate business. Can I still write all that off for the business? I have used my personal credit card to make purchases for the new REI business, real estate business. Since I do not have a business credit card, did I break the corporate veil?" – Yes, you can deduct those expenses. They are going to go on your C-corporation. If they were incurred prior to the date of incorporation, there'll be what we call startup costs. * What org structure for small business is audited the least and provides the lowest tax liability?" – That's going to be your S-corporation, typically. It's going to give you a lot of deductions and reimbursements that you can take advantage of. * "How do I best utilize my C-corp status for tax savings and investing in real estate? We have my 1099 paycheck going to our C-corp bank account and then pay out about half of it to our personal bank account as a paycheck. How do I utilize the other half that's sitting in the C-corp accounts, such as to buy new short-term rental or long-term rental investment property?" - the C-corporation, before you do the loan, you can take a lot of reimbursements—accountable plan reimbursements, corporate meetings for 280A, medical reimbursements. That all gets some money out to you tax-free deduction to your C-corporation. Get these first, then take a loan. * Rapid-fire chat questions answered at the end of the show
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors YouTube
http://aba.link/youtube
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Clint Coons, Esq., of Anderson Business Advisors, welcomes Jonathan Farber, a successful real estate investor who is helping others achieve financial freedom with Short-term Rentals. Jon currently owns 8 STRs, a 24-unit rental property, and continues to add properties year after year. He is the host of “Millennial Millionaires Through Real Estate” podcast, has amassed over 167K followers between TikTok and Instagram, and he sends a weekly newsletter to nearly 14K contacts.
Clint and Jonathan discuss how Jon decided to opt out of the corporate world at age 21 to create wealth with real estate investing, and how he screens, hires, trains, (and sometimes fires) virtual assistants to help him do all the tasks that he either doesn’t enjoy, isn’t very good at, or simply doesn’t have time for. You can learn exactly how Jon does all this by checking out his extensive content on just about every social media platform.
Highlights/Topics:* Jonathan’s origin story and how he took a different path than “Corporate America” * House-hacking at age 21- a great jump start * Getting into the Short Term Rental market * Beginning with a VA- choose one task - some people love to do the things you hate * Delegate more to VAs as your business grows * Finding off-market deals with VAs * The process of finding the right VA- Loom videos for screening, “test/screening” emails set up in Gmail * Training and onboarding VAs - Loom videos of each “repeatable task” * 10-14 days will show if your new VA can cut it * Creating content to teach others these systems and methods * Reach out with a DM to Jonathan on any social platform to learn more
Resources:Jonathan Farber LinkedIn
https://www.linkedin.com/in/jonathanfarber1/
Jonathan Farber Instagram
https://www.instagram.com/jonjfarb/
Jonathan Farber Twitter
https://twitter.com/jonjfarb
Jonathan YouTube
https://www.youtube.com/channel/UCZSsPp1_ZwurdZZAKYNo1nw
Jonathan Farber TikTok
https://www.tiktok.com/@jonjfarb
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
It’s Tax Tuesday again, and today we’re mixing it up – this episode is hosted by Anderson Advisors’ Michael Bowman, Esq, who welcomes two of Anderson’s expert tax pros, Eliot Thomas, Esq., and Kurt Bergfjord, Esq. And as always we’ve got our talented and experienced tax advisors manning the chat questions in the office.
On today’s episode, the guys review all the documents and receipts that you should be gathering up in preparation for filing your taxes, and answer multiple listener questions around the pros and cons of C-Corps, S-Corps, Partnerships, and the audit magnet - Sole Proprietorships. The discussion also covers our episode title question - are there benefits to putting your primary residence in a trust - which is really only for asset protection and estate planning - there are no tax benefits to doing so.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics:* "Even if I show income on my tax return from rental and business activity as a sole proprietorship, and self-employed but no taxable income because I use my large net operating loss to cover all taxes, is my income still considered income or will it be a hindrance as far as getting an investment loan or home equity line?" – It depends - Some are going to look at this, it will ding you, and you won't be able to get a loan. Others will take it into consideration and analyze the tax return. * "I currently have two LLCs in California that I file as a partnership. Should I create another LLC as a holding for both LLCs? And should that be disregarded or filed as a partnership as well? Of course, there is the additional cost of $800 for California as well. What's your suggestion?" – from the legal point of view, it might be a better idea to have that holding company and all those assets coming into it. * "How can a full-time LP investor in private equity in real estate syndications as well as stock investor utilizing options for income, structure such as to offset income of these activities with expenses, syndication conferences, to vet sponsors, subscription services, travel for investment briefings, computer equipment, expenses, et cetera? Assets are held in a Wyoming LLC and property trust for the stocks. Would a management C-corp make sense having one ‘client?’ I am aware of people in my circumstances that write off expenses on their schedule C, but I recall Anderson doesn't recommend that." – If we could utilize that management corp, maybe we can capture some of those benefits that you otherwise wouldn't be entitled to. * "How is REPS applied to a tax return?" – If you are a real estate professional (REP)for all intents and purposes, then you can actually turn that otherwise passive income into non-passive income. I's going to be on Schedule E page one or Schedule E page two if you have a K-1 * "We have seven rental properties set up with the ABA structure. My husband works full-time for the government. I manage our home and rental properties. Two properties are mortgaged, the rest are paid for. Now, both in our 50s, we're financially comfortable with a large cushion. We got retirement funds, mutual funds, properties, kids, education funds, et cetera, but we are getting killed in taxes every year. I feel like we are working to pay taxes. We don't live extravagantly, and still drive the same cars for 10–15 plus years. Taxes feel like a punishment for saving when we were younger." - Ideas to save on taxes include becoming a REP, depreciation, cost-seg study, there's even a nickname- “short-term rental loophole” * "What are the tax benefits of putting my primary residence in a trust?" There is no asset protection, but if it's in the right kind of revocable trust, then we still get to take advantage of our section 121 of tax exemption from gains on the sale of your primary residence—$250,000 single, $500,000 married filing joint. * "I want to be as anonymous as possible. What is the best business structure and ways to submit taxes? I do not want the tax info to flow down to my personal taxes." - When we talk about anonymity, anyone looking at your personal tax return is really not going to have too much of a purview into your business activities. * “Should I do a cost seg for a condo?” It depends - Have you had it for a while? are you a REP? Are you renting it out? Have you been appreciating for a while? * "What is the best corporate structure to have in place that can also allow for tax savings?" We've covered this - C-corp, S-corp, partnership, and then the worst would be sole proprietorship. * "What tax incentives are there for real estate investors to not have to pay an absurd amount in taxes?" - REP status, short-term rentals, cost seg studies, 1031 exchange, keep good books! * "As a real estate investor opening my first LLC, which is the best for me to use, S-corp or C-corp? - it depends - do not put appreciating property in a C-Corp, but C is good for short terms or flips. * "I started my LLC last year to begin my search for buying a business or real estate. Currently, I am a W-2 employee while I get started. My question is, can I write off any expenses since I did not make any money in my LLC? We've incurred expenses, but I don't have any income.” - was it open for business, or are you in the exploratory phase? timing on when to deduct may be more important.
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, is joined by Doug Sandler, CEO of Turnkey Podcast Productions. Doug co-founded Turnkey to help individuals build community, grow influence, and make money using podcasting. Doug is the author of Amazon best seller “Nice Guys Finish First,” and hosts his own podcast “Nice Guys on Business.”
Doug and Toby discuss how Doug went from being a highly paid bar mitzvah DJ to a successful podcast coach, who should and should not be trying to monetize their podcast with Doug’s program, and you’ll hear a few success stories of Doug’s former clients who created huge revenue streams using his methods.
Highlights/Topics:* Promoting his book “Nice Guys Finish First” * “Podfade” at around episode 10-11, many quit * Revenue is not going to come from advertising * The “golden opportunity” is the guest in the guest seat * Asking questions – interviewer vs. salesperson * Ideal candidates to create a podcast * “Lifetime value” of a guest to invite on your podcast * Monetizing in different time frames and diversifying * Success stories - Lou Diamond and Stan the Annuity Man * Working with Doug requires an open mind and blank slate * Know your “MOM” - Market, Offer, and Message * 5 Ways to Make Money Podcasting – the call to action on today’s show
ResourcesDoug Sandler LinkedIn
https://www.linkedin.com/in/doug-sandler-1a346649/
Free PDF 5 Ways to Make Money Podcasting
https://turnkeypodcast.com/toby
Turnkey Podcast Website
https://turnkeypodcast.com/
Nice Guys on Business Podcast
https://www.niceguysonbusiness.com/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
It’s Tax Tuesday again, and Toby Mathis, Esq., hosts, with special guest Eliot Thomas from Anderson Advisors, and they are here to help answer your questions.
On today’s episode, Eliot and Toby answer listener questions including what can be written off as far as expenses for the preparation costs of setting up an LLC, several questions (as usual) around short- and long-term rentals, real estate investments, passive vs. active income connected to your properties, and quite a bit of information about cost segregation – who to work with, what you can deduct, the timelines, etc.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * "If I put a short-term rental in operation in October or November, does the bonus depreciation get prorated accordingly?" We're looking at whether or not we prorate from October November for the rest of the year, or how do we handle that? – It doesn't matter whether you bought it in January or December, you put it into service before the end of the year, not prorated. * "Useful strategies for pulling money out of a small business tax-free, not being double taxed?" - The only time you ever worry about a double tax is when you have a C-corp because they're taxed at the corporate level. * "Mileage deduction in a partnership, does this go on a Schedule C?" - No, it doesn't. * Number four, "Is the expense related to the preparation of your LLC tax deductible such as travel costs to go see a property, et cetera?" – The expense relating to the preparation of your LLC is absolutely deductible. It's going to be an organization expense up to $5000 for the year, and that includes the state fees, the registered agent fees, accounting fees, attorney's fees. * "Please talk about the $25,000 deduction for real estate investing. Where does it apply and where doesn't it? I have only one rental single-family home at this time." - When you have passive losses, normally, they only offset passive income. One of the exceptions is this $25,000 active participation. * "How should I set up my taxes on my properties?” – We're looking at an LLC (Limited Liability Company), probably one that's what we call disregarded. Disregarded means it just doesn't file a tax return. * “I have two rental properties in California I've been managing full-time since 2021. I have been working more than 700 hours per year. Do I qualify for real estate professional status? If so, what is the process at the time of filing the 2022 taxes?" – It's 26 USC 469(c)(7). You can go straight to it. You need to aggregate those two properties as one activity. Otherwise, you have to meet that test for each property. * "What is cost segregation?" - Cost segregation is a fancy way of saying you're breaking a piece of property that's real estate into its pieces, as opposed to just treating it as one uniform structure. (Picket fence, sidewalk, driveway pavers, new carpet, new appliances, etc.)...you need to do what's called a cost segregation test or report, which is what cost segregation refers to, which means having an accountant pop out to the house, and break these down into their pieces. * "Is it more beneficial as an LLC owner to pay myself as a W-2 or 1099 employee?" - There's no such thing as a 1099 employee, The correct term is a W-2 employee or a 1099 independent contractor. I would say it depends on how that LLC is taxed. If you are an LLC that's disregarded and your sole proprietorship, you cannot pay yourself a salary. * "What are some creative ways to save money on the gains from real estate investing?" - Here are some cool ones - (1) The low-lying fruit, 1031 Exchange and you defer the gain. (2) You can also still do this thing called a qualified opportunity zone. * Lastly, "Hi. How are crypto gains taxed? When? At the time of selling the crypto to convert back to cash? I have been doing short-term trading with my own account. Please advise the best strategies to minimize taxes. My hubby is W-2 and I'm a real estate professional with three rentals. Thank you." – Once you own the crypto, it's when you sell it or when you convert it, or trade it for something else of value. Protect it with a partnership LLC, or put it in a Roth, or deferred retirement account. * Rapid-fire chat questions answered at the end of the show
Resources:Cost Seg Authority Website
https://costsegauthority.com/
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Toby Mathis, Esq., of Anderson Business Advisors, is joined by Atticus LeBlanc of Padsplit. PadSplit was founded in 2017 to leverage housing as a vehicle for financial independence for low-income workers that serve our communities.
Toby and Atticus discuss how using Padsplit solves problems for renters and real estate investors, providing affordable weekly rate room options AND increasing your net income from your investment property by splitting it up into multiple one-room rentals. Padsplit takes care of all the logistics so you don’t have to – applications, approvals, collections, house-rule complaints, renter ratings, and more. While they currently only operate in a few major metropolitan areas, if you reach out to them, they will explore expanding and operating in your area.
Highlights/Topics:* Think about the unused space in your home - like a formal dining room * The market is full of single renters looking for affordable rooms * Issues - lack of inventory, the affordability crisis, and builders are creating giant homes * Padsplit - what is it, and how is it different from AirBnB? * Padsplit handles all the logistics that you don’t want to - applications, approvals, collections, house-rule issues, etc. * Weekly rentals have had a false stigma of being for transients * Turnover costs of one single room is simply a mattress cover * Hosts provide only wi-fi - but things like a smart tv creates a ‘premium’ rental price * Why doesn’t everyone do this? Hiring a property manager and Padsplit can be more work than a traditional rental * Advice - get out there and help solve the affordable housing crisis!
Resources:Padsplit Website
https://www.padsplit.com/
Atticus LeBlanc LinkedIn
https://www.linkedin.com/in/atticus-leblanc-3960466/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
In this episode, Toby Mathis, Esq., and Clint Coons, Esq., attorneys at Anderson Business Advisors discuss the pros and cons of investing during a “recession.”
Right now there are some great deals in the market for investors. Home values are being forced down by rising interest rates, there is an extreme lack of supply and plenty of demand, and rents are very high due to inflation (creating that all-important cash flow from investment properties.) Toby and Clint tell you what to look for (raw land, manufactured housing, tax liens etc.) and what to avoid (flipping homes and adjustable rate mortgages) in the current real estate market.
Highlights/Topics:* Recession effects on real estate- get those great deals! * Increased interest rates - forcing down home values * What are some of the risks of investing right now in this market? Avoid flipping, avoid Adjustable Rate Mortgages (ARMs) * Opportunities: Raw land investing, manufactured housing, “subject to” deals, and tax liens and deeds * Protecting yourself in case of recession, now rather than later - implement your LLCs, trusts, separate the personal from business, etc. * Cash flow is more important than the home’s value * Post-recession, the market will stagnate, then climb again * Join us at one of our free events
Resources:Infinity Investing
https://infinityinvesting.com/
Infinity Investing Free One-Day Workshops
https://infinityinvesting.com/infinity-investing-workshops/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Today we’ve got another interesting episode of Anderson Business Advisors. Host Toby Mathis, Esq., speaks with special guest Rabbi Natan Alexander from Israel. In recent years, Rabbi Natan has taken all his collective experience and education to work with Leader of the Pack, which he founded in 2018. Leader of the Pack is a Brotherhood, a movement, created by Rabbi Natan Alexander to re-empower men to become the great individuals that God designed them to be. The group is a tribe of men constantly working on themselves and holding each other accountable to Stand Up, Lead and Protect.
You’ll hear how the men in the program learn a wide range of skills such as Krav Maga and other self-defense tactics, weapons training and practice, heightening your awareness of potential threats in your surroundings, and other methods that enable men to be aware of, and trust, their instinct, and learn to be violent [when it is called for], to keep themselves and their families safe.
Highlights/Topics:* The resistance to training men to be better men * Rabbi Natan’s story * Men and their roles - changing through the decades * Religion is not the main focus of LOTP * The type of skills and training provided * Women also want to learn these skills * A story about maintaining honor in the global LOTP weekly calls * Keeping yourself and your family safe means forgetting about legal or religious rules – it should be pure instinct * An exercise in being aware of potential threats and questioning aberrations * Listening to your instincts * Live event costs are all-inclusive and very affordable
Resources:Email Rabbi Natan
ravnatana@gmail.com
Register for Live Events with Leader of the Pack
https://leaderofthepack.co.il/event-specials/
Leader of the Pack Website
https://leaderofthepack.co.il/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Welcome to another Tax Tuesday show. Toby Mathis, Esq., hosts, with special guest Eliot Thomas from Anderson Advisors, and they are here to help answer your questions. On today’s episode, Eliot and Toby dig into some listener questions surrounding the differences between an LLC and S-Corp and the pros and cons of each, avoiding capital gains taxes, and the usual assortment of questions about short-term rental properties (ie AirBnB), cost segregation, and qualifications to claim Real Estate Professional status.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * "If I choose cost segregation, do I have to apply the cost seg to all properties purchased in the same year, previous years, and future years? What are the disadvantages—tax aspects and non-tax aspects—of doing a cost segregation?" – If you do a cost seg, you're not required to use it on your other properties. That's very specific to one property. * "I bought an apartment to fix it and put it up in Airbnb and to get the advantage of new business tax deductions. But now that we are thinking of renting it to regular tenants, this will be an investment instead of a business, correct? What are some of the deductions that we can take advantage of if we rent it to regular tenants instead of Airbnb such as renovations, expenses, travel expenses, furniture, and so on and so forth?" – Turning it into a long-term rental, you pretty much get some of the same deductions you would as a long-term versus short-term. They're the same. * "Is it beneficial to set up an LLC versus an S-corp? And are you able to pay yourself a reasonable salary through an LLC?"- There are rules behind that. If you don't choose a tax status forth, the IRS will choose for you the basics… like Eliot said, it depends on how the LLC is taxed. * "How should I hold my stock positions? What is the best way to deal with high capital gains consequences?" - We often talk about setting up a trading partnership, that might be one option. * "My husband will work as a real estate agent to qualify for the IRS’ definition of real estate professional, and potentially use the passive losses from our rental property to offset my W-2 income on our joint return. The IRS rule says my husband has to own at least 5% interest in the real estate company employing him. Does he need to form an S-corp to sign the contract with the brokerage firm so that he owns at least 5% interest?" - Yes, that's exactly right. You're going to want to have his earnings, if you will, from there being paid through an S-corporation that he owns, theoretically 100%, hopefully. * "I sold an investment property on October 21 and paid a very heavy capital gains tax. Can I get some of that back if I buy another investment property today or now?" - No. We missed the boat on that. We can't carry back on any of these items at this point in the code. Maybe that'll change in the future, but right now, we don't have the ability to go back and change anything. * "How many years can we go back without showing a profit?" - If you have too much of a loss, the IRS could come in and say, hey, is this really a for-profit business venture that you have going on here? * "Is it okay to do your own taxes as a business owner if you had a CPA for 20 years?” Why is it a questionable call there? - We just had a massive overhaul of our tax code. You're going to want a CPA, somebody who does taxes, EA, tax attorney, whoever it is, to walk you through some of those things. * "I bought a single family rental in November and am still repairing. No income yet. How do I record depreciation and costs for 2022?" - If we didn't have it available for rent in 2022, there isn't any deduction to take in those as far as operational, depreciation, or anything like that. * "How to save taxes by flipping and renting houses?" - We're going to recommend a C -Corp probably as a management company so you can do all your activities that you're overseeing of your rentals through a C-corporation. * "I just started my business in August of 2022. I would like to understand what from a tax perspective should be on the top of my mind as we prepare the first returns." - It depends on your business, but you're going to want to categorize and have an idea of what expenses are, to determine whether it's a net profit or net loss. * Lastly, "If an investor purchases a property that is lower in value than the property sold in a 1031 exchange, will the IRS disqualify the exchange entirely?" – No. What's going to happen is you just may not have full deferment of the capital gains, but they're not going to disqualify it on that premise. Work with a qualified intermediary! * Email us with your questions, and be sure to subscribe to our podcast. And if you are already a subscriber, please provide us a review of what you thought!
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
In this episode, Toby Mathis, Esq. and Clint Coons, Esq., attorneys at Anderson Business Advisors discuss all things real estate investing in Q1 2023. The fear that is prevalent around the housing market indicates that now is a great time for investors to grab some great deals.
The guys then go on to a discussion about luxury builders whose properties are simply unaffordable right now, and in fact, affordability is at one of the worst levels in history. The lack of supply vs. demand is also a huge factor, potential homeowners are becoming renters instead, there are lots of tech layoffs, and the ripple effect from all these factors is still going to be playing out over the course of 2023– creating opportunities for investors if you know where to look.
Highlights/Topics:* The attitudes around the market today * Cash flow is king for investors * Strategies for eight months to a year from now * Inventory is at half the normal levels * The Harvard report - increasing needs for housing * Building for renters vs selling on comps * Affordability is at the worst point in history * Buying land for manufactured housing is interesting * Bread and butter homes are becoming unaffordable * WSJ article - cutting big salary employees, remote work issues * Anderson's sister company Infinity Investing
Resources:Infinity Investing
https://infinityinvesting.com/
Infinity Investing Free One-Day Workshops
https://infinityinvesting.com/infinity-investing-workshops/
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/@TobyMathis
Toby Mathis TikTok
https://www.tiktok.com/@tobymathisesq
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In this episode, Clint Coons of Anderson Business Advisors welcomes Kevin Kiene of ezlandlordforms.com. Kevin has appeared on many different podcasts and is a familiar name in the real estate rental space.
You’ll hear about Kevin’s start as a landlord at the tender age of 18, how he kept finding things he needed to add to his lease agreements (the genesis of EZLandlordforms), tips and tricks regarding what to look for when screening applicants, different clauses and protections available through EZLandlordforms, and what to do if things take a turn and you need to send notices or evict tenants.
Highlights/Topics:* Background – how Kevin got into real estate * What to look out for in the application screening process * Mistakes to avoid and things to include when creating a lease agreement * Help with the processes - notices, eviction, lease enforcement, etc. * The state of real estate rentals today
Resources:EZ Landlord Forms Website
https://www.ezlandlordforms.com/?ref=andersonbusinessadvisorsandersonbusinessadvisors
EZ Landlord on Facebook
https://www.facebook.com/ezLandlordForms
EZ Landlord on YouTube
https://www.youtube.com/user/ezlandlordforms
EZ Landlord on Instagram
https://www.instagram.com/ezlandlord/?hl=en
EZ Landlord on TikTok
https://www.tiktok.com/@ezlandlordforms
Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
In this episode, Toby Mathis and Clint Coons of Anderson Business Advisors discuss the new Corporate Transparency Act, and what it means for investors. The CTA is meant to prevent fraud within business entities by requiring everyone involved to report all their personal information, but Clint and Toby agree it’s mainly another way for the government to try to grab a few more dollars.
The guys then go on to a discussion about separating, isolating, and hiding assets within different kinds of legal trusts to prevent losing everything in the case of a lawsuit. All of this extremely valuable information is also available for FREE at the monthly asset protection events. See the link in the resources section below.
Highlights/Topics:* With the Corporate Transparency Act, all LLC’s will require reporting your personal information to the government * No matter when you set up your entity, you will have to report * Fraud will continue to happen, regardless of the laws * Trusts often are not subject to taxes at the state level- and can provide anonymity * Franchise fees - there are legal ways to avoid it with trusts * Land trusts * Asset protection from lawsuits - separate, isolate, and hide your assets to limit losses * Entities - a better protection than insurance * Unfortunate stories of unprotected asset losses * Come to one of our free asset protection events!
Resources:Free Asset Protection Workshops
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Clint Coons YouTube
https://www.youtube.com/channel/UC5GX-U6VbvMkhSM1ONBiW8w
Today we’ve got another unusual and inspiring episode of Anderson Business Advisors, Toby Mathis speaks with Joey DeMaio of Valhalla Studios in New York. As you may know, Joey is the guitarist from the popular and long-lived metal band Manowar. Joey’s career has spanned over 40 years at this point, and as an artist and businessperson, he has a fascinating story to tell.
You’ll hear how Joey joined a band days after seeing The Beatles on Ed Sullivan, some insider tips and advice about the “business” of music, how Manowar has survived and thrived for four decades and continues to perform around the world to huge crowds, and Joey’s many successes in and around the music business - running a studio, scoring movies, touring, and much more.
To most, DeMaio is known as the internationally acclaimed and award-winning virtuoso bass guitarist, founding member, composer, lyricist, engineer, and producer for the world-renowned Rock/Heavy Metal band MANOWAR, who have sold over 30 million records to date, and continue stunning their audiences with sold-out festival and solo performances ranging from 10,000 to 80,000 people a night. Since their inception, DeMaio has successfully steered the career of MANOWAR, who today are more popular than ever, all over the world.
Highlights/Topics:* Joey's history with Manowar and myriad of amazing accomplishments in business and music * Seeing The Beatles on Ed Sullivan - Joey’s future was clear * Surprising insider nuggets about the music industry- musicians MUST know the business, and the band feeds an enormous network of people * Manowar and their more than 40-year career– still going strong * Breaking into the music business today- are you a ‘musician’, or a ‘performer’? * Monetary scenarios - earning a living in the music business * Manowar - what’s new, what’s next?
Resources:Joey DeMeDaio Linkt.ree
https://linktr.ee/realjoeydemaio
Manowar Website
https://manowar.com/
Valhalla Studios NY
http://valhallastudiosny.com/
Magic Circle Entertainment LinkedIn
https://www.linkedin.com/company/magic-circle-entertainment/about/
Anderson Advisors
https://andersonadvisors.com/
Toby Mathis on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Tax Tuesday is here again. Toby Mathis hosts, with special guest Eliot Thomas from Anderson Advisors, here to help answer your questions.
On today’s episode, Eliot has grabbed a bunch of great questions for us to answer. Toby and Eliot will talk about the Augusta rule, easy tax deductions against W-2 income, cost segregation, bonus depreciation, real estate professional status, active participation, S-Corp, C-Corp and partnership advantages. Online, we have Ander, Patti, Ian, Dana, Matthew, Jared, Piao, Tanya, Troy, and Dutch, a multitude of CPAs, by the way, in our Q&A. If you ask questions in Q&A, you're going to get really, really smart people answering that question. Toby sends out a a huge public thank you to all these talented people.
If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * "I'm selling a property that was willed to be in 2019. I've been renting this property out since receiving it. It will sell for a profit of over $360,000. Would I pay taxes on the full profit or the difference between value at the time the property was willed or do I pay taxes on the difference between the profit and $250,000?” - You inherited it in 2019. It says you've immediately started renting it out, so it's an investment property. It's not going to qualify for the capital gain exclusion of living in our primary residence for two of the last five years. * "What are some simple easy things that can be done to reduce taxable income and reduce taxes paid on each of my paychecks?” Donate to charity in large chunks, HSA, IRAs, etc. * "Options for tax write-off, reducing tax burden if I have rental real estate, but I am not a full-time real estate professional. Both my wife and I have W-2 jobs that we don't foresee leaving anytime soon to become real estate investors." - See the answer to previous question, and also you want to look at if your AGI (adjusted gross income) is a little bit lower, maybe under $100,000, you can take up to $25,000 of the passive losses. * "Augusta Rule: We have put our properties in a Wyoming entity and the Texas series LLC in late December of 2022, but have not started using it yet. Can we use the Augusta Rule in 2022 throughout the year for our business purposes, even though we've not completed setting up the business?" Augusta Rule, that's just what we call 280A most often. That's the ability to rent out your home. Dwelling is the proper term for no more than 14 days a calendar year. The income you receive, you don't have to pay tax on. * “When a rehab required property acquired for long-term hold, when is the right time to do the cost segregation study? Before the rehab or after?" - Once you purchase a property or after the rehab, you could do it either way. If you don't do what's called a cost seg study, the IRS will let you treat it all as 27½ years… * "Anderson created my S-corp entity in November of 2022. I've only had expenses for the year-end 2022, but no income or property purchases yet. What am I required to file for my S-corp regarding the expenses I've incurred?" – You're going to have to file your tax return for that S-corp. It is what we call an informational return. In other words, your S-corp doesn't pay any tax, but it does have a tax return called an 1120-S. * "I created my two LLCs both with real estate assets with rental income in 2022. Also, I created a holding company that holds both the LLCs. I have a W-2 job. When do I file the tax for the holding company? Is it one tax filing that combines all the LLCs and my W-2?” - We recommend that the holding company becomes a partnership. Also, it helps from a lending standpoint. Typically, lenders are able to lend more to you being that the property is in a partnership than if it had been in a direct disregarded LLC. * "Curious to hear an open discussion about one and how to utilize section 179 and/or bonus depreciation for vehicles." - Why not just do mileage reimbursement? It's like 65.5¢ a mile right now. It's your car. You can use non-commercial insurance. It could just be your car that you use. If you let employees use it, that goes out the window. * "What are the steps to take in order to withdraw money from a C-corp account? Are there any tax consequences involved?" - With a C-corporation, the first thing I'd like to look at are the reimbursements… * "How to save taxes as S-corp, and is it better to do an STD deduction?" - The S-corp has a lot of advantages to it to save on taxes. Standard deduction is huge for most people. But “it depends”. * "Can you please touch upon what depreciation recapture is and how it impacts taxes?" - Basically, when you have an asset that's been used in a trade or business, we don't deduct the full cost of it immediately. We take a little bit over time, we call it depreciation. Then when you resell, you might have what's called depreciation recapture on that depreciation that you took over the years. It does depend on what kind of asset it is. * "I work from my home office. How do I claim this?" - If you have a sole proprietorship, you can take a deduction for basically the percentage square use of that house, that’s an easy way to describe it. If you could get reimbursed, then it could be 20% of your house. By the way, that includes mortgage interest, property taxes. If you have somebody coming in cleaning your house, your utilities. * Be sure to subscribe to our podcast. And if you are already a subscriber, please provide us a review of what you thought!
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this special episode of Anderson Business Advisors, Toby Mathis speaks with Jim Richardson and Diane Lawson of Front Porch Co-Housing about a growing issue in our country - the lack of independent, affordable housing opportunities for neurodivergent adults.
This is an opportunity for our listeners to help solve. There are 5.4 million autistic adults in the U.S. today, and 87% of these individuals live with their parents. It is crucial that there be a plan for those adult children when their parents are gone. Investing in real estate used for this purpose is an amazing opportunity to be “more than a landlord” and the non-profit status of the Front Porch Co-Housing organization can also offer the investor certain advantages.
Highlights/Topics:* Diane’s experience with a neurodivergent son being denied housing * Jim’s background - also has a son with autism who was denied housing * The scope - millions of adults with neurodivergent issues * A unique approach - co-housing neurotypical and neurodivergent adults - “neuro-inclusive living” * Millennials (22-40), are experiencing unprecedented levels of loneliness and isolation * The expansion plan for Front Porch Housing * Costs for neuro-inclusive living - planning for an entire lifetime * No state funding assistance – not classified as a ‘group home’ * Real estate investors can help their communities and be more than “just a landlord” * Sponsoring a neurodivergent person in your community - visit the Front Porch link below * Donations can also be land, real estate, vehicles to sell, and other assets - email Jim with the link below
Resources:Front Porch Co-Housing Website
https://frontporchcohousing.org/
Donate to, or Support Front Porch
https://frontporchcohousing.org/support-us/sponsor/
Email Diane
diane@frontporchcohousing.org
Email Jim
jim@frontporchcohousing.org
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode of Anderson Business Advisors, Toby Mathis speaks with Eliot Thomas, Managing Tax Advisor at Anderson Business Advisors. There are lots of people helping to answer questions online - Patti, Ander, Matthew, Troy, Jared, Piao, Ian, Dutch, and Dana are on. There are so many people here. You have a whole bunch of tax professionals that are here to answer your questions. You can just go into the Q&A and put in a question.
You’ll hear Toby and Eliot discuss several listener questions around how to report capital losses in the stock market, a few questions on real estate and business LLCs vs. S-Corps, C-Corps, and Sole Proprietorships, disregarded entities, entertainment meals vs. business meal write-offs, and an in-depth discussion about a real estate contractor not filling out a W-9 and all the difficulties that might present. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "Hey, I'm looking to start a new business. I need to choose a correct business entity in order to maximize my tax benefits, so I need to know if starting the business as an LLC and potentially working the business out of my home would be the best option for me." – by all means, you want the LLC for that asset protection, but the S-corp or the C-corporation—have those great reimbursements. * "Can I write off my stock holding loss at the end of the year to reduce my W-2 earnings?" Yes, but we're limited potentially just to $3000 of capital loss that will offset against ordinary income, that being your W-2. * "What are the rules for HSAs for people over 62?" – For 2023, the amount is going to be $3850 if you're single, and I guess it'd be $7750 for a family plan. If you are on Medicare, you can not contribute tax-free to an HSA. * "I became a real estate professional in 2021 and have a significant net operating loss due to depreciation. What are the limitations of carrying the NOL backward in 2020 and 2019 to use that to lower taxes in the previous year?"-- As of right now, we don't get to carry back NOLs. We just carry them forward. * "If my partnership LLC did not conduct any business this year, do I still need to file a Form 1065? -- You don't have to file 1065 for that first year. * I'm in the process of setting up my real estate business. I already have a Wyoming LLC as a holding company. It's treated as a disregarded entity, but I have no investment in real estate yet. If I file my taxes this year before I acquire an investment property, what is the process for changing the filing election of the LLC from disregarded to a partnership for the new property?" – You don't have to do anything but file that return, or you could file the Form 8832 and declare it as a partnership. * "I am new to real estate flipping and started my first flip last year. Construction was completed this year, and it closed this year. I asked my contractor if I need to complete a W-9 last year, and he told me not until the project was complete. Now, I'm realizing that I should have had him complete the form in 2021 for the amount I paid him and again this year. Can I now ask him to complete the W-9 and file the form for 2021 and 2022? The other issue is I had issues with this contractor for faulty workmanship he did on the flip and in the process of filing suit. What if he refuses to complete the W-9?" If you're dealing with a contractor who's organized as a business, chances are you still want that W-9 to prove that they're a business. * "What forms do I need to fill out for my accountant to show capital loss in the stock market?" – Usually, you're going to get a 1099-B from your brokerage house. They can just use that, and that's really all you need. * "As an owner-operator trucking company designated as an LLC, can you write off 100% of the operating fuel costs?" – If the truck that was burning that fuel was used 100% for business, absolutely. * "I am a lender on a note to an LLC. What are the best practices for collecting payments and tracking interest payments for reporting purposes; separate bank account for the payments or create an end-of-the-year interest statement for myself?" - I like the separate bank account. Keep it separate from your personal obviously. * "I attended your Las Vegas event. Please confirm if we are to refrain from listing items as entertainment when filing taxes." - They're probably referring to the Tax Cuts and Jobs Act getting rid of entertainment. There is no deduction for entertainment. If you are getting a meal that is for entertainment purposes, you cannot write it off. Business meals only for 2022. * "I'm looking to convert from an LLC-S to a C-corp in 2023. Should I stay on a calendar or fiscal year schedule? What are the pros and cons?" – I like the fiscal year for C-corp because it tends to give you more flexibility, especially when it comes to payroll items or contributing to, say, Solo 401(k)s or something like that. * Visit us at andersonadvisors.com. Grab one of the free events. We're going to do a ton of them this year.
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode, Toby Mathis of Anderson Business Advisors welcomes Jose Luiz Morales, a self-made wealthy real estate professional who made many sacrifices at a young age in order to build a lifetime of wealth. Jose is a Real Estate Advisor with Morales Group, Brokered by eXp Realty, he has a podcast called “The Residual Real Estate Agent, and he belongs to a number of mastermind and mentoring groups based around investing and real estate.
You’ll hear the inspiring story of how Jose decided to stop hanging around with “knuckleheads” at age 23, and his life changed focus. By sacrificing a lot of the fun and frivolity most young people have in their 20s, Jose became a millionaire and built a foundation of assets that will not only allow him and his family to live a comfortable life, but they could feasibly even retire before age 40.
Highlights/Topics:* Jose’s origin story * Jose’s parents taught him the most valuable lessons, but never helped him financially * At age 26 Jose’s monthly income was $6000 * Making sacrifices at a young age allowed for building wealth * Moving out at age 27 * Everything Jose put on his vision/dream boards came to fruition * Coaching, mentorship and mastermind groups * Advice for young people - don’t hang around with knuckleheads * Reach out to Jose to learn more about his methods and successes
Resources:Jose Luiz Morales on LinkedIn
https://www.linkedin.com/in/joseluizmorales/
Jose on TikTok
https://www.tiktok.com/@joseluizmorales805
Jose on YouTube
https://www.youtube.com/@joseluizmorales
Jose on Instagram
https://www.instagram.com/joseluizmoraies/
The Residual Real Estate Agent Podcast
https://podcasts.apple.com/us/podcast/the-residual-real-estate-agent-show/id1560901602
EXP Realty
https://exprealty.com/
Collective Genius
https://www.collective-genius.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode of Anderson Business Advisors, Toby Mathis speaks with Trent Lee of First Choice Business Brokers (FCBB).
You’ll hear Toby and Trent discuss all the ways you can slice and dice the numbers to value a business. From EBITDA to discretionary earnings, normalizing value over the past few Covid years, using the SBA database, etc. Trent shares many stories from his experience both good and bad about how to value, run, and sell a business – from a small $70K pizzeria, to larger operations valued in the tens of millions, Trent is the expert in the business broker space.
Highlights/Topics:* Trent’s the number one business broker in the country by volume * The SBA database as a tool * Seller’s discretionary earnings * Recasting financials to normalize for Covid years * Using multiples for valuation * A few success stories from Trent’s experience * Showing profit in your business for valuation vs. saving money immediately with tax write-offs * The pizzeria story * Matching business purchases to the background of the buyer * Don’t touch anything on a profitable business for at least 6 months * The mistakes - leaving value and profit on the table * If you want to buy a business, call Trent
ResourcesTrent Lee Email
trent@fcbb.com
FCBB Website
https://fcbb.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Today’s Tax Tuesday episode is your 2022 send-off with a series of rapid-fire questions around year-end tax situations. Toby Mathis hosts with a few staff available to answer online.
In this episode, you’ll hear our advice on combining multiple businesses and making sure they are incorporated and isolated from you personally which protects you from liability, opening a 401(k) by the end of the year vs. before the tax deadline, purchasing cars under a business umbrella to make income with Turo, and various other valuable end-of-the-year tips on tax strategies that you should do before January 1st, and a few that you can still take care of in early 2023 before the tax deadline. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* “Last year was the first time I wasn't able to take investment real estate depreciation or deduction due to AGI over 150. I don't have too many necessary losses or even losses that I don't know or don't think will get back up, but it seems like a way to reduce my AGI. How do multiple-unit landlords do it? I'm thinking five houses without stock could get you up over the limit." - You've probably been phasing out, you just didn't realize it. Maybe your loss was small enough.You could do certain things to lower your AGI. Harvesting capital losses is one of them. * "My husband and I have full-time corporate jobs, but also have small side businesses—remodeling, party rentals, and online sales—which are really diverse, that are in different categories. How is it best to structure everything for easy accounting and tracking of funds from all of these? - The general rule is you want to isolate any business that's doing business with somebody else. You probably want to isolate them from each other. Keep your structure simple and have one set of books, just have one business. I would have it as an LLC. Isolate it from YOU. * "Do I have to open a 401(k) by the end of the year to make contributions?" – If its your salary deferral, yes, if its employer, you can do it after the next year starts. * "My CPA has suggested I take the late election of an S-corp. C-corp was formed on June of 22. I've had plenty of expenses building the foundation of a wholesaling business, but no deals yet. With tax filing, I assume I do a late election of an S-corp. Will my taxes be filed as an S-corp or as a C-corp? And how does that impact the business startup expenses I've had since March of 2022?" - My suggestion is that C-corps are a trade or business the day that they started. * "How can I make sure our Utah-based kids pay minimal tax on the sale of our property in California when we die? We know it will be stepped up in value. When I sold my own dad's property in California when he died recently, we paid a big tax on it to California as non residents. Should we sell it and do a 1099 exchange?" - California doesn't have an inheritance tax, period. They haven't had one since the 80s, so I'm trying to think of how they taxed you. Send us an email I would like to find out more and answer this! * "I lived in a condo for nine years and bought a house last year with a 5% down payment. The condo was rented out. If I sell it now, will I have to pay capital gains tax? If so, how can I avoid paying capital gains tax?" 26 USC 121 - It says that if you lived in a property as your primary residence for two of the last five years, if you're single, you get a $250,000 capital gain exclusion. If you're married, you get a $500,000 capital gain exclusion. * "Looking for the best ways to protect net profits. I've seen 401(k) contributions, IRA contributions, investment and materials equipment, owner distributions, We are uncertain of future events and would like to keep what we've earned without paying it all to the government." - If it's net profit from the business- use all the business expenses. Look at a defined benefit plan, charity, accelerated depreciation...a lot of things you can be doing. * "If I'm using a private lender to buy a property and borrow $10,000 more than my purchase price, is the additional $10,000 taxed as income?" The answer is no. You can always borrow money, and it's not taxable to you. * "This year, we made a little more money and wanted to know if your service will help us offset anything with my somewhat new business before the end of the year is over. I currently have a massage, esthetician business that I opened in October 2018. Then the pandemic hit in March of 2019, in which my state licensing demanded we stop all services or we'd get our license taken away causing me to go in the red for 2019, 2020, and 2021. Moving forward, my business has been slowly coming back but still struggling. During the pandemic, I went back to school getting certified to work in the holistic health care setting. I'm in the process of adding that business to my existing, so I wanted to get advice on the best way to set things up if I have multiple businesses." That's a question I cannot answer for you. But make sure they are isolated from YOU like my previous question. * "My husband and I are wanting to take advantage of the equity in our home and would like to invest into some rental properties to start to dabble in real estate investing and Airbnb. I also wanted to know if your company will be there for us on any financial advising and legal advising in our planning on this new venture." This is exactly what we do. Rental properties are different from Airbnb. As it is all real estate - probably want to isolate A, B, and C from each other, and we want a structure that allows us to get the maximum tax benefit in isolating that liability. * "We are dabbling in Turo. So far, it's been doing well. We're interested in expanding it with more cars to add in. However, we now would like any new cars we added to be purchased under the business name." - Depending on the type of car, it could be a deductible in one year. If you're doing this in your name, you're exposed. You have a ton of exposure. You need a business name on it. * There are a lot of things that are not time-ish critical before the end of the calendar year, but the big ones are salaries, reimbursements, charitable giving. * Check our YouTube channel for more on end of the year tax strategies. * We hope you have a great start to the new year!
Resources:Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Today’s Tax Tuesday episode answers several listener questions around end-of-the-year strategies for reducing taxes. Toby Mathis hosts with special guest Jeff Webb, CFO of Anderson Business Advisors. Online we have Ian, Troy, and Eliot helping answer your questions.
In this episode, you’ll hear our advice on the following: selling stock and how you can minimize capital gains taxes, setting up trusts - including dynasty trusts and how estate taxes are assessed there, buying a vehicle for business use and the requirements for writing off depreciation and mileage, and as always there are listener questions about real estate investments and tax scenarios, including LLC’s, partnerships, and long and short term rentals. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:* "What is the best strategy for hiring your kids?" - If your kids are under 18, you do not have to pay withholdings or Social Security. If less than $12,950, it doesn't matter whether they're my dependents or not. They don't have to file a tax return. * "How was a 'dynasty' set up so it is not taxed at the estate rate after the death of the creator? Are both the trust and the beneficiary taxed in any year funds are distributed?" - The answer is probably not if you're distributing all the funds. If I just own a bunch of stock and I don't sell any, there's no income. There's no tax. They don't care what you sell it for. What they care about is what its fair market value is on the date of your passing. * "I have substantial credit card debt and private debt amounting to $120,000. I own a few rental properties. Currently own six long-term incomes and two Airbnbs. Two properties are mortgage free, and one of the current long-term tenants wishes to buy the property." They're asking for an opinion here. "Should I sell and pay off consumer debt? Should I owner-finance? If I sell and owner-finance, can I avoid capital gains?" - I would sell and pay off the consumer debt. It's probably costing a lot of money. Or, I might just refi it and pay off my consumer debt. HELOC would work. * "We want to sell some stocks to pay off some debts, but we know that if we do, we're looking at a huge capital gain. What can we do to lessen the tax that we have to pay on the capital gains?" - If you have stocks, especially stocks with big gains, there's a good chance that your brokerage house will give you a line of credit against those stocks. But, I'm probably not going to do it right now just to pay off debts. But I could borrow tax-free against those same stocks and do it. * "Is Anderson Advisors training recommending to have an operating agreement that allows the non-pro-rata and discretionary authority to make distribution on a regular timeframe or amount? For a multi-member LLC, how do we deal with yearly taxes in this case?" - We want to make sure that we have an operating agreement that says, I get to decide if I distribute money or not. * "What options are there to save money on taxes if you own an LLC? Can passive income be used to fund a retirement account such as a solo 401(k)?" – you have to get wages of some sort to fund a Solo 401(k). You cannot have wages out of a sole proprietorship. If the sole proprietorship is a passive activity, there's no way to convert that. * "I'd like to take advantage of Section 179 before the end of the year and buy a business vehicle. Can you talk in more depth about Section 179 and how depreciation and bonus depreciation work? Also, what kind of vehicles qualify for this?" – If it's under a 6000 GVWR (gross vehicular weight rating) vehicle, your limitation is $19,200 of depreciation in that first year. That includes bonus depreciation. If it is over 6000 pounds, then your bonus depreciation is pretty much unlimited. It all comes down to are you actually using it for business? And what percentage? * "What is the best way to get money from my entity, a C-corp, while limiting the amount paid in taxes personally and as a corporation?" - Repay your shareholder loans. That’s the best way to get money out of your C-corp if it already owes you money. * "If my bill would be over $500,000, what can I do before the end of the year to reduce this?" - Look at retirement plans and advance retirement plans, charitable donations, and cost segregation. * "I'm looking to attain two or more rental properties within the next year or so. Is it better to create an LLC for each property or take title under my current S-corp? I have an S-corp retail classification that I am considering dissolving. Should I just reclassify my S-corp as a real estate investment and take title in the name of the S-corp?" - Since this company was already in existence doing something else, I do not favor reclassifying. I would dissolve it. * Send us your questions, and we do about 50 events a year - check out the event schedule listed in the notes.
Resources:Clint Coons’ Book on Amazon
https://www.amazon.com/Next-Level-Estate-Asset-Protection/dp/1950863883
Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode of Anderson Business Advisors, Toby Mathis speaks with attorney Jonathan Evans from Anderson Advisors. You’ll hear Toby and Jonathan discuss all the pros and cons of LLCs – they are expensive in some states, more affordable in places like Wyoming and Delaware, they don’t provide the stock tax breaks that other entities do, and there are some investment restrictions. However, the name itself shows one of their greatest benefits which is “Limited Liability” and separating you personally from your business entity. They are flexible, offer a lot of choice, and in the end, are still a good option for setting up your business.
Highlights/Topics:* Jonathan’s background * The problems with LLCs - expenses in certain states * LLCs don’t have stock - but there are huge tax breaks for businesses that DO have stock - the 1244 and the 1202 * Olmstead v. The FTC in Florida’s Supreme Court - opening single -member LLCs to creditors * Wyoming is a leader for affordable asset protection * Investment restrictions in LLCs vs. corporations * LLCs and international investors * Disregarded entities and active businesses * Some redeeming qualities of LLCs - “Limited Liability” being number one * Flexibility and choice in operations with LLCs * The LLC is still a valuable entity for your business - work with a professional
Resources:Jonathan Evans LinkedIn
https://www.linkedin.com/in/jonathan-evans-a3640895/
Email Jonathan
jonathanevans@andersonadvisors.com
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Today’s Tax Tuesday episode answers several listener questions on HSAs, S-Corps vs. LLCs, and reducing your taxes with rental properties. Eliot Thomas hosts, along with Jeff Webb, CFO of Anderson Business Advisors. Online we have Dana, Dutch, Piao, and Troy - all kinds of resources there to help answer some of your questions.
In this episode, you’ll hear our advice on the tax benefits gained from being an LLC, S-Corp or C-Corp, and we’ll answer a couple questions concerning HSAs - their contribution limits and investing with that HSA money. There are also some questions answered about home offices, ITIN numbers, bitcoin and of course a little bit about short and long-term rental properties and their tax implications. Submit your tax question to taxtuesday@andersonadvisors. Highlights/Topics: * "Can you please explain the difference between an LLC, a C-corp, and an S-corp? Can an LLC also be a C- or an S-corp? I understand that C-corps and S-corps are tax elections, but are they also a type of entity?" –LLC is a legal entity, it is not a tax entity. If you want anything else like an S-corporation or C-corporation, you actually have to tell the IRS that, make an election. * "Are the limits for contributions a monthly or annual amount? On irs.gov, the limit as listed is $3200 for single and $7200 for family." - the contribution limits are annual amounts. * "My accountant thinks I should switch from an S-corp to a Schedule C," that's a sole proprietorship on the 1040, "because my profits are below $80,000–$90,000, and the S-corp is expensive, and I'm just one person, so I do not want to grow any bigger, and I'm happy with the sales. My question is, what is best for me, not the company? What happens if I switch? What is better for retirement and social security as I am 56 years old?" - You are going to pay for a tax return to the S-corporation that you wouldn't have to pay for extra on Schedule C. There's some work to do to put that Schedule C together. Your 1040 may get a little more expensive. If you have a health insurance plan for yourself that you're paying for, that should be paid for by the S-corporation. It will save you a good deal of money. * "Can you convert a personal vehicle into a business vehicle if you only use it for business? What if you only own one vehicle? Can you deduct mileage, gas, or anything else?" - You can do that, but you have to actually contribute the vehicle to the business. Because what we don't want is any personal use of this vehicle. The solution is to track your mileage. If you are one who drives a lot, the more you drive, the more mileage, the better this comes out - keeping it in your name as a personal vehicle. * "Can I reduce my W-2 taxes for my job by owning rental property?" – If you are materially participating in your short-term rental—it's not really a rental to trade or business—yes, the losses from that could reduce your W-2 income. It's plausible, but you're going to have to be within these parameters, short-term rental, or long-term rental and meet the criteria for it. * "I have a C-corp staffing business. Since Covid, I've been using my home office. The home is in mine and my son's name. How can I count for the space used as an office for a tax deduction? * “What is your advice for a small business owner on employing people who only have their ITIN number pending the social security number?" -Basically, you're not allowed to have people with an ITIN as employees. They have to have a social security number and be registered in the US to be here. * "Can you discuss the step-by-step process of completing a 1031 exchange? - The forward 1031 makes more sense, because keep in mind, you cannot touch the cash. You also need a Qualified Intermediary. Determine if you want to do a forward 1031, a regular 1031, or do you want to do a reverse? * "I have a question regarding investing with my HSA. Does an HSA function like a Roth IRA in terms of paying UBITs (unrelated business income tax)? In other words, if I invest my HSA in crowdfunding or syndication, for example, will I have to pay UBIT?" - You need to be very careful with the investments that you're going into. To your question, yes, it's subject to your HSA, it's subject to UBIT. If you invest in a real estate syndication, those typically run for four to five years. That money's going to be locked up in a hard asset that you can't get to. * "Can I write off a loss selling my bitcoin with a $10,000 loss? I bought it at $26,000 and bought it right back at $16,000." - It's not allowed for you to recognize a loss on that. You’ve got to wait 30 days. * "My understanding from a tax perspective, an LLC taxed as a C-corp and a traditional C-corp receive the same benefits such as medical reimbursement, administrative office, retirement plan, et cetera. (1) Can you explain the positions of the LLC taxed as a C-corp? Do I still need a president, vice-president, treasurer, secretary, or just member managed? - Those positions are usually required by state law. It has nothing to do with how they're taxed. It has to do with how they're formed. (2) Why would anybody form an LLC taxed as a C-corp over a regular C-corp? If there is no plan to take it public, why choose one over the other? Cost to maintain, paperwork required, et cetera?" - Yeah, easier form, less criteria behind it, a C-corp is required to have certain meetings, et cetera. You don't necessarily have that with the LLC. * "Is it best to start an Airbnb business now or wait until the beginning of the next year for tax purposes? What do you think the best options are?" – You don't need to do cost segregation. It's not going to help you, unless you're renting this property out for a lot of money, like it's a beachfront property and a primary or something like that, and you're getting $10,000 a week for it. I would conserve it or save that cost seg for potentially 2023. * Check out our events coming up later this month.
Resources: Email us at Tax Tuesday Tax and Asset Protection Events Anderson Advisors Toby Mathis on YouTube Full Episode Transcript: Eliot: Good afternoon. This is our Tax Tuesday coming from Anderson. I'm Eliot Thomas, manager of the tax advisors here at Anderson, joined by our CFO, Jeff Webb.
Jeff: Hello.
Eliot: And this is where, as Toby says, we bring the tax knowledge to the masses, so this is driven by your questions.
We pick out a few questions. We got 11 today that will go through. Of course, through the chat, people will be coming in. Please, if you would, submit your questions through actually the question section. We have a question section on Tax Tuesday. It's a little bit different, like I say, than the Zoom meetings that we do.
We do have a group that will answer your questions consisting of some of our CPAs or EAs. We got Dana, we got Dutch, we got Piao, we got Troy. Bookkeeping, all kinds of resources there to help answer some of your questions. We'll get started right away.
First of all, the rules. If you could ask it through the Q&A feature. If you have any questions, please submit them through the email. Email questions to taxtuesday@andersonadvisors.com. That's where we get the questions that we'll be asking today.
If you need a more detailed response, please feel free to become a platinum client or a tax client, and we'll be able to assist you with that. We try to make it fast, fun, and educational. It's our way of giving back a little bit of education and help to our clients, and we appreciate you joining us today. We'll go through, first of all, the opening questions. Just walk through the questions that we'll be answering today.
First of all, "Can you please explain the difference between an LLC, a C-corp, and an S-corp? Can an LLC also be a C- or an S-corp? I understand that C-corps and S-corps are tax elections, but are they also a type of entity?" Very good question. Very popular question we get asked a lot.
Next for an HSA (health savings account). "Are the limits for contributions a monthly or annual amount? On irs.gov, the limit as listed is $3200 for single and $7200 for family." We'll talk a little bit more about that.
Number three, "My accountant thinks I should switch from an S-corp to a Schedule C," that's a sole proprietorship on the 1040, "because my profits are below $80,000–$90,000, and the S-corp is expensive, and I'm just one person, so I do not want to grow any bigger, and I'm happy with the sales. My question is, what is the best for me, not the company? What happens if I switch? What is better for retirement and social security as I am 56 years old?"
Next, "Can you convert a personal vehicle into a business vehicle if you only use it for business? What if you only own one vehicle? Can you deduct mileage, gas, or anything else?"
Next, "Can I reduce my W-2 taxes for my job by owning rental property?" That's a broad question there. We'll certainly have a lot to say about that one.
Next, and it's a two-part here. "I have a C-corp staffing business. Since Covid, I've been using my home office. The home is in mine and my son's name. How can I count for the space used as an office for a tax deduction? Number two, what is your advice for a small business owner on employing people who only have their ITIN number pending the social security number?"
Jeff: I'm curious if we're going to come down on the same landing spot on that one.
Eliot: Not sure.
Jeff: We'll see. Go ahead.
Eliot: The anticipation builds. What are they going to say? "Can you discuss the step by step process of completing a 1031 exchange?
Next, "I have a question regarding investing with my HSA. Does an HSA function like a Roth IRA in terms of paying UBITs (unrelated business income tax)? In other words, if I invest my HSA in crowdfunding or syndication, for example, will I have to pay UBIT?"
Next, "Can I write off a loss selling my bitcoin with a $10,000 loss? I bought it at $26,000 and bought it right back at $16,000." Getting into the wash sale rules there.
"My understanding from a tax perspective, an LLC taxed as a C-corp and a traditional C-corp receive the same benefits such as medical reimbursement, administrative office, retirement plan, et cetera. (1) Can you explain the positions of the LLC taxed as a C-corp? Do I still need a president, vice-president, treasurer, secretary, or just member managed? (2) Why would anybody form an LLC taxed as a C-corp over a regular C-corp? If there is no plan to take it public, why choose one over the other? Cost to maintain, paperwork required, et cetera?"
I think last, "Is it best to start an Airbnb business now or wait until the beginning of the next year for tax purposes? I'm estimating two more weeks of getting ready. December 1st is my goal. Some details, nothing major like a roof or air conditioner was needed in 2022 to get it ready.
Next year, I will do some major upgrades, but the house is actually looking pretty good, super clean with new paint and beautiful terrazzo floors." I won't say that in Italian. "Didn't buy any major tools or capital equipment. I didn't buy a 6000 pound vehicle either. No income this year except for social security retirement. Going to refinance in 2023. What do you think the best options are?" Quite a bit there.
All right. Before we begin, just remember, you can get through our YouTube. Subscribe on aba.link/youtube. We do have a whole YouTube channel with a lot of training videos and things like that, which again, we are towards the education side, so that'd be a great resource. We also have our podcasts at andersonadvisors.com/podcasts. Lastly, we will have the replays for all this in your platinum portal.
Opening question. "Can you please explain the difference between an LLC, a C-corp, and an S-corp? Can an LLC also be a C- or an S-corp? I understand that C-corps and S-corps are tax elections, but are they also a type of entity?" What say you, Jeff?
Jeff: Welcome to Tax Turkey Tuesday. I've been waiting all day to say that.
Eliot: Right, there you go.
Jeff: We'll get LLC out of the way first. LLC is a legal entity, it is not a tax entity. When you create an LLC, if you don't tell the IRS how you want it to be taxed, it's going to depend on whether you only have a single member—it's going to be disregarded to you—if it's got multiple members—it's going to become a partnership. If you want anything else like an S-corporation or C-corporation, you actually have to tell the IRS that.
Eliot: Make an election.
Jeff: Yup. What else have you got?
Eliot: To the second part of the question, yes, an LLC could be an S- or a C-corp. It could be either one, depending on the election to make. As Jeff points out, it can be disregarded, partnership, C-corp, S-corp. It's got a lot of flexibility is the bottom line. If you don't do anything, it goes through those defaults. Disregard for one person, partnership if there are multiple players in it, members in it.
I think the confusion that happens is that also at state common law, you have traditional C-corps and S-corps. Those really aren't any different than an LLC taxed as a C or an S. They both have the same tax treatment. The only distinction between them is a C-corporation is a true C-corporation which would be a common law corporation that's something that's not an LLC taxed as a C. It has stock, and we can use something called 1244 stock loss.
Jeff: We're going to talk about that later. There is another question on this.
Eliot: Yup. We'll get into more depth about that. But really, there isn't a difference from a tax standpoint between the LLC taxed as a C-corp.
Jeff: You're saying there's no difference for tax. What about legally?
Eliot: Legally is what we're going to get into. This is one of our future questions that we have here today. It's considered a little bit easier to run with the LLC because it doesn't necessarily have the requirements. Most states don't have overbearing requirements for meetings and things like that. It's supposed to be a lot easier to run. We're going to learn that that's not necessarily a good thing.
We look at another question, but it is considered a little bit more simplistic with the LLC. Again, it is a state creation. Every state actually has different rules for how they treat their LLC, but most of them are in conformity with each other.
Jeff: Let's say I form a corporation in one state and then move to another state. How easy is it to convert it to that other state if it's an LLC versus a corporation?
Eliot: Conceptually, it's not all that difficult. You just go to the state. Each state will have its own rules on how they do that conversion from an LLC to a proper C-corp. Not every state necessarily offers that, so you do have to look at the state.
There is a great deal of flexibility as far as moving entities across the various states in our country. But every now and then, you just really have to know the state you're leaving from and the one you're going into, what the rules are on that.
Generally, it's the state you're going into that's going to control that situation. As you can imagine, if you look at some of those, California can be a little challenging if you try and leave, whereas they typically will allow anybody to come in. Everybody can go into the black hole, but can you get out?
Jeff: Just speaking of moving, it's usually not necessary. If I'm incorporated in (say) Kentucky and I moved to Nevada, there's not necessarily a reason to move where I'm incorporated.
Take for example, national banks in this country, 99.9% of them are incorporated in Delaware. Even though US banks are headquartered in Minnesota, I believe, Minneapolis, Bank of America is headquartered in California and so forth, but they're all incorporated in Delaware if they were banks as far as laws go.
Eliot: Especially if you have a trading stock, you're going to see your Delaware entities. But as Jeff said, you can be set up in one state and actually live in another. We might have to file a form if you are receiving a W-2 income because you become an employee in that other state. These things that can be done, certainly. Maybe it is easier to move it, maybe you don't want to move it. You might go back and forth between the two states.
I've had jobs where I went between Nevada and Arizona, back and forth, et cetera. Sometimes that happens. Maybe you want your entity in both states and consider employing both. There is some flexibility out there.
But if you ever got into the situation and really wanted to know what's going on, of course, a lot of this depends on what actually is going on in your world of investment if we would choose one option over the other, but for all intents and purposes, you can feel pretty much secure that the LLC taxed as a C or an S is primarily the same as a regular S-corp or C-corp.
All right. "For an HSA, are the limits for contributions a monthly or annual amount? On irs.gov, the limit is listed as $3200 for single and $7200 for family." I didn't get a chance to really check those numbers. I'm not sure those are actually up to date.
Jeff: No, I want to say it's $3350 and $7700 for 2022. I think it's going up fairly significantly in 2023. But to the question, the contribution limits are annual amounts. What some employers do who have employees is, if they're going to fund the HSA for the employees, they may be doing this at the first of the year. The reason for that is then that money is available to use for medical expenses as the year goes along.
Eliot: A very popular benefit to give to your employees and a deduction to the person paying for it.
Jeff: It's so hard to take that medical deduction on Schedule A anymore because of the high standard deduction and then the limitations on the medical deduction. This is actually a nice benefit to have. You do need a high deductible health plan to go along with this. I don't remember what the definition is of that.
Eliot: $1400 for an individual, $2800 for a family.
Jeff: Are you talking about the deductible?
Eliot: Yup.
Jeff: Okay. What the HSA allows is, if you're putting money into an HSA, it either comes out pre tax, like through a 125 plan. Anyway, it reduces the amount of taxes withheld. That includes medicare, social security, federal, and state. If your employer doesn't do a pre tax, you still get to deduct it, but it gets deducted on your 1040. Whereas if you just tried to put these payments on your Schedule A, you have a good chance you're not going to get to deduct any of them.
Eliot: Yeah, almost the word impossible comes to mind. You have to get over that. That's such a burden. You have to be itemizing to begin with. Not everybody's itemizing. Then you have to get over 7.5% of your AGI as Jeff's pointing out. HSA is a nice option, I guess I would say.
Jeff: I think I calculated. For me to be able to deduct a penny medical on my Schedule A, I'd pretty much have to die. Then at that point, it doesn't benefit me anymore.
Eliot: A whole lot, yeah. Usually, death and taxes. What do you want? They walk hand in hand. Hopefully, that helps out with the contributions. Yes, it is an annual amount. I don't think one actually usually contributes monthly, they just write a check. Again, it can be you as an individual putting into this as long as you have a high deductible plan.
Jeff: If you're involved in an HSA that you're contributing to through your employer, you may get to the end of the year and have not hit these limits. Most employers will allow you to put in a lump sum to hit the limit so you can take advantage of that deduction. Where's that money go?
Eliot: It's in adjustments, above the line adjustment to your income.
Jeff: Any money you contribute that's your money to pay for your future medical bills.
Eliot: Exactly. We're going to learn, maybe you can do some other things with it too on one of our future upcoming questions here in the next half hour.
All right. "My accountant thinks I should switch an S-corp to a Schedule C,” that's a sole proprietorship on your 1040, “because my profits are below $80,000–$90,000. The S-corp is expensive and I'm just one person, so I do not want to grow any bigger, and I'm happy with these sales. My question is, what is best for me, not the company? What happens if I switch? What is better for retirement and social security as I am 56 years old?"
Jeff: Let's talk about a few things. First, the expense. If this is an LLC taxed as an S-corporation, the filing fees with a state is going to be the same, regardless.
Eliot: Often, you're looking at the same amount. However, there are the states out there that have peculiar S-corp rules, so you want to be aware of that. I don't know what state we're talking about here, but I know New Jersey has special rules, Massachusetts. But usually, Massachusetts, you have to have quite a large amount of income, so I don't think that'd be applicable at $80,000–$90,000.
Jeff: Californian that avoids $800, it's not going to matter. You're going to pay the $800, regardless. You are going to pay for a tax return to the S-corporation that you wouldn't have to pay for extra on the Schedule C.
However, having done this for quite a while, there's some work to do to put that Schedule C together. Your 1040 may get a little more expensive.
Eliot: And your S-corp runs properly, you can take advantage of an accountable plan for reimbursement for administrative office, mileage, and things like that. You don't have to pay all $80,000–$90,000 as wage, whereas you would in Schedule C. It's going to all be subject to employment tax, 100% of it. Yes, you will get 50% of it back for an adjustment again on your AGI.
Your S-corp has things like the 280A corporate meetings and things like that that can help reduce that $80,000–$90,000 maybe realistically down by $20,000. If we reduce $80,000 by $20,000, we're looking at $60,000, and that would have been money you've got in your pocket for reimbursements. Now your reasonable range may only be $30,000.
It's difficult at $80,000–$90,000 for me to see where the S-corp is more expensive than a Schedule C if it takes advantage of all these things like the accountable plan and corporate meetings.
Jeff: If you have a health insurance plan for yourself that you're paying for, that should be paid for by the S-corporation. It will save you a good deal of money.
Let's talk about the downside if you take your LLC that's an S-corp and revoke the S election to make it a Schedule C. There are a couple of steps there. You have to revoke the election, and then you have to file 8832 to say it's a Schedule C now, it's not a corporation. You cannot change back to an S-corp for five years.
The other thing is if there are any appreciated assets, you're going to have to pay. You may have to pay tax on that. Likely, you’ll have to pay tax on that.
Eliot: It does. We're jumping out as we just talked about one of the previous questions here. If we're talking about an LLC taxed an S, it is as Jeff pointed out, you're going to do the revocation letter to the IRS, and then you're going to do an 8832, because that 8832 form is built. It's called the check the box form for LLCs only.
Jeff: Literally, it's called check the box form.
Eliot: Yeah, because you just check the box. But if it's a regular S-corporation, then the revocation would turn it into a C-corp, and we don't get to check the box. That is another factor here as well. We jumped to the idea that it was an LLC, but I guess it doesn't have to be. Now you really have to just dissolve.
You can't go from a corporate form. Okay, well, maybe some states will allow it. You have to check your state. They may allow you to transform from a corporation into a limited liability company, but that would be very state-specific.
Jeff: Yeah, I don't think you want to do that. This is going to make it more expensive to do, because if it is a true S-corporation that started out as an Inc, you're going to have to dissolve that entity. You're going to want an LLC for your Schedule C, and that's going to cost you a lot, about $1500.
Eliot: Yeah, I would think. Not to argue with your accountant, but you might want to run through these things and see if it's really a better move or not. I would suggest that probably if you're taking advantage of an accountable plan, which you cannot do on a Schedule C, if you're doing your corporate meetings, which you cannot do on a schedule C, then it’s probably going to come out ahead. Stay in S-corp.
Jeff: I want to address social security. If you're worried about social security and you want to put more into it, just pay yourself more through the S-corp. Any payroll taxes you pay like the other half of the social security tax, that's a deduction to the S-corporation, so it lowers your income all around.
I think for $80,000 or $90,000, I probably would have switched to an S-corporation at this point. I don't think there are enough savings here to make it worthwhile, if any savings, to change it back to a Schedule C.
Eliot: Exactly. I would keep it as an S. I think you have more potential problems. Like I said, if you have to go from S to C and then you dissolve, I think you're looking at far more problems and headaches, so I would probably just keep it.
Jeff: And you don't want to create a new LLC because you may have accounts and stuff tied to the old LLC. It may be merchant accounts, it may be bank accounts.
Eliot: Big headache.
Jeff: A huge headache when you get payments sent electronically to you to an account that doesn't exist anymore.
Eliot: All right. "Can you convert a personal vehicle into a business vehicle if you use it only for business? What if you own only one vehicle? Can you deduct mileage and gas or anything else?" Personal vehicle into business.
Jeff: You can do that, but you have to actually contribute the vehicle to the business.
Eliot: It's got to be titled in the name of the business. What if you only have one vehicle? Does that cause us any concerns?
Jeff: That causes a ton of concerns.
Eliot: Do tell, Jeff.
Jeff: Because what we don't want is a lot, if any, personal use of this vehicle.
Eliot: Why not?
Jeff: For one thing, it lowers the amount of your deductions. You can't take any accelerated depreciation. You can't take bonus depreciation. The solution to this is to track your mileage and deduct mileage.
Eliot: If you did title this all the way over into your business, and you only have the one vehicle, and you do use it for personal use, that's taxable wages to you. You got to watch out for that. It does depend on the type of business you have.
All these questions depend on what kind of business entity we're using. If it is an S-corp, a C-corp, or as we're learning, an LLC taxed as an S or C, you'd have an accountable plan reimbursement. You can be reimbursed for mileage and things like that without titling it in the name of the business, because you keep it in your personal name. You just get reimbursement. That's cash coming to you tax-free, out of the S- or C-Corp, and they get a deduction for it.
That's probably as good as it gets. Your business gets a deduction, you get free cash in your pocket. That's all because you kept it in your personal name. If you are one who drives a lot, the more you drive, the more mileage, the better this comes out, because what is our rate? 67¢ a mile or 67.5, or end of 2022, I believe for reimbursement.
Jeff: That's 4¢, I think. It's quite a bit.
Eliot: It's up there. The point being, if you had 10,000 miles, that's $6700 of cash in your pocket for reimbursement and a deduction at the same time to your business if you keep it in your personal name, if it's a corporation and use the accountable plan.
Jeff: Toby often talks about the expenses of a car in a business or hire in your name. You're going to need commercial insurance, because they're not going to insure in your name if you don't own a car. Commercial insurance is more expensive.
Also, I feel like if you're in a bad accident where you're at fault, if it was in your name, you might be liable. But now by having it in LLC or the business's name, you pull both of you into the same.
Eliot: Yeah, and all your assets in your business. That may seem counterintuitive, because we like to use the business for asset protection. If you had a lot of assets in that business, they'd be exposed. Whereas typically, your personal insurance handles it if you're just driving personally.
I often tell my colleagues here at Anderson and clients who ask this type of question, just getting back to the expenses, that commercial insurance, I've had one client come back to me after we talked about this, and the commercial costs were four times as much. It's something that you have to take into account. Now with all the other types of vehicles coming online, who knows what the insurance commercial rates are going to be for that.
I don't typically recommend it and put it into business, but could you? Yes. If you only have one vehicle, that's a really tough situation because we know you're using it for personal use. The IRS knows you're using it for personal use. It becomes an audit risk if you put 100%.
Even if you didn't use it personally, you're going to have to convince the IRS that you're not. I think that becomes something that would get their attention on a return seen 100% business use when you're marking that you don't have another car.
Jeff: I do want to say that I said math is hard. I want to attribute that to Ian who says that frequently.
Eliot: Ian, can you put two and two together? He does a fantastic job. He has joined the group and Dutch to answer questions as well here, it looks like. We got Christos. I guess we don't see the number of questions answered here on ours. Anyway, they're busy typing away. I'm doing that often myself on the other side. What did I do? I heard my name. Ian's calling you out.
Jeff: I mentioned how math was hard and just wanted to give you credit for that one.
Eliot: Fifty-six answers so far. They're running through it. There we go. Ian's math abilities.
All right. "Can I reduce my W-2 taxes from my job by owning a rental property?" That's a loaded question. What say you, Jeff?
Jeff: It depends.
Eliot: That's a real ‘it depends.’ First of all, I think we want to ask, what do we mean by rental? Are we really talking rental or are we talking short-term rental that might be part of the discussion, you think?
Jeff: Let's talk about short-term rental first. It's a shorter answer. If you are materially participating in your short-term rental—it's not really a rental to trade or business—yes, the losses from that could reduce your W-2 income. Again, if you're materially participating, meaning you're doing everything or most everything.
Long-term rentals, we have a couple of rules in play. It's called Section 469, passive activity loss rules. Long-term rentals are a passive activity. Normally, you cannot deduct passive losses against active income. There is an exception. Tell us about the exception.
Eliot: There's one exception, it depends on your adjusted gross income. People often ask me what AGI is. It's a combination of all your income with a few adjustments. Like we talked about earlier, the HSA contributions. Maybe you put into a retirement plan like a traditional IRA that would give you a deduction. Those are all called adjustments.
We impact our AGI with those adjustments, and we get this AGI. If our AGI is $100,000 or less, then the IRS would let us take $25,000 of passive losses against it. That works really well. That's a quarter of your income at that point.
They're having a long-term rental. I don't really care if it's passive or not because $25,000 would be a really great deal, perhaps. But as your AGI goes from $100,000 up to $150,000, we slowly evaporate or phase-out that $25,000. Each $2 of increase of income, you lose $1 of the $25,000. By the time you get to $150,000 AGI, it's all gone, and we get no deduction for that passive.
Jeff: My gross income then has been adjusted. If that's $100,002, I'm going to be able to deduct $24,999.
Eliot: That's correct. Exactly. We wouldn't get the full $25,000, but you get very close to it, just $2 off. That is where rental property could help your W-2s if we are all in the passive world. But because there's passive, there must be something else. We call that non-passive or active. What about those rules?
Jeff: Non-passive or active?
Eliot: Yeah, for long-term rental under 469.
Jeff: That's a non passive rental for the REP status. Real estate professional is a two-prong rule. They always call it two-prong, but I feel like it's three-prong.
Eliot: It's two-plus.
Jeff: It's a two-prong rule. The first rule says you have to materially participate in real estate businesses that you own 5% or more and have 750 hours in those businesses. That can include your rental property. The second test is you have to materially participate in your rental business.
Eliot: In each rental activity, which is key for each rental property.
Jeff: We're basically talking about a 500-hour test at this point, right?
Eliot: Correct, most often.
Jeff: If I got five properties and I have a W-2 job, I can guarantee you that I do not have 2500 hours in those five properties, cumulative. There is what's called an aggregation election that lets you combine all those properties into one activity for this test, in particular, to meet the hours.
Now I only have to have 500 hours and all my properties, now that I've aggregated them. A couple of things happen is you can't free up passive losses when you sell one. You still have to recognize a gain or loss on that property. What else? Anything else important?
Eliot: Those hours for the 750 have to be, if it's a married couple, one spouse has to obtain that status, a real estate professional.
Jeff: Yeah, that's a good point.
Eliot: Really, a real estate professional says it has two prongs. It does. It's the over 750 hours in the real estate trade or business as designated under 469. The IRS actually goes out under 469(c)(7)(C) and lists those 11 types of businesses that you specifically can work in. You have to put over 50% of all your time into those real estate trade or business as opposed to any other type of business.
I think more often, you have to materially participate. That's really where people get caught. The material participation rule, basically, you have to run it. You can have a third-party property manager. There, you can use both spouses. Again, if it's married filing joint, both spouses can add that material participation to that 500 hours. There are seven different tests, but we go with a 500-hour test most often.
There are other tests. That's just the easiest to talk about. As Jeff points out, you can aggregate them all into one pile, but there's give and take to that. I don't recommend doing that until you absolutely have to in order to meet your real estate professional status, but you do have to materially participate in each of those rental properties themselves too.
Jeff: To give an example, because you did mention more than half of your time, and they call it service time? More than half your service time?
Eliot: Yeah.
Jeff: In this case, if you're working full time, let's say 2000 hours—I know that full time is 2080—that means you have to have 2001 hours in real estate activities. The only time this isn't really a problem is if you have that W-2 job in a business that you own and you're earning that many hours. This is moot.
Eliot: Exactly, and it's in a real estate trade or business, so one of those 11 that they list out there. Other than that, if you have a regular W-2 job, it's very difficult to meet that status. The tax courts are going to be skeptical. You're going to have an uphill battle.
As I tell people on the code, you can check all the boxes. It doesn't mean you're going to get it. You have to really be able to prove it. Prove and put in more time. Anybody else improve what their hours were. I've read cases.
There's a very prominent case out there in regards to this, where the individual had, I think it was a condo in a big building. He couldn't prove that he put more time into that because he didn't know how much time the custodians within that building had spent on it, and because he couldn't say how much time they put on the courts. It's reasonable that they put more time in, therefore the status was disallowed. You really have to track not only your time, but everybody else who touches the property.
Jeff: There are several areas. This is one. Trader status is one. There are a couple others, where the courts are landing all over the place. Sometimes it just matters who you get as a judge if you have to go to tax court.
Eliot: It always matters who you get as a judge, and what day they're having, and your attorney, and what day they're having.
Jeff: And if you decide to defend yourself.
Eliot: Yeah, don't ever do that. That's what we call mincemeat right there. All right, so back to the original question. "Can I reduce my W-2 taxes by owning a rental property?" It's plausible, but you're going to have to be within these parameters, short-term rental, or long-term rental and meet the criteria for it.
All right, next. Number one, "I have a C-corp staffing business. Since Covid, I've been using my home office. My home is in mine and my son's name. How can I count for the space using an office for tax deduction or reduction?" Any thoughts on that?
Jeff: I have an issue where this house property is jointly owned.
Eliot: Okay.
Jeff: What do you think? Does he only own half of this property?
Eliot: It depends.
Jeff: On where it's at or?
Eliot: I guess, because it's not a married couple. I thought about community property rules when applying, I would think.
Jeff: If he owned this house in its entirety or with his spouse, easy argument of reimbursing you for the administrative office assuming it's being used exclusively for the corporation. I'm not so sure about with the son owning.
Eliot: Joint ownership creates a potential hiccup here because he owns half of that room or the offices as well. Like I said in the earlier question, you can check the boxes if using that room solely for your C-corp and exclusively, and on a regular basis. But again, it's not all your home.
Jeff: I love my kids buying and putting their name on my house.
Eliot: I don't know. I haven't seen where the IRS has actually made it. I'm sure in the number of cases that have come up where they've actually made a decision about that, but I honestly don't know off the top of my head. I suspect that you would not be able to because it's probably 50/50. I would think that you'd probably need over 50%.
Jeff: I think at best, you're going to get to deduct half of what you'd normally get to deduct. We could be wrong about this. I think at worst, you get no deduction.
Eliot: Yeah, I would go along those lines. Between the two parameters, at best, 50%. Unless you had some agreement in there that that office area is in my, so to speak, part of the house, and there's another office that my son uses. Maybe you have that argument. I think that'd be a little weak.
Jeff: Are types of ownership that changes this argument, like joint tenancy with right of survivorship or?
Eliot: I don't see it being applicable until that right of survivorship takes over, because you're still 50/50 in a sense. I haven't seen that. Again, if you have some way of reasonably breaking out, you probably can get by. But under audit, they may discredit the deduction a little bit. I don't know. I guess we could probably research it a little bit more.
Jeff: This one would be a bad question for platinum.
Eliot: But I wanted to bring it up just in case because it is a really good question that hits to these details. We can take a deeper look at it.
Jeff: What about question two?
Eliot: "What is your advice for a small business owner on employing people who only have an ITIN number pending getting their social security number?"
Jeff: Eliot knew the answer to this. I did not. I disagreed with him and looked it up. My golly, he was right.
Eliot: The Google was right, again. What I was able to find on this is that, basically, you're not allowed to have people with an ITIN as employees. They have to have a social security number and be registered in the US to be here. It doesn’t mean if they have a work visa, then that's a different set of rules. I'm not going to get into whether they have an ITIN or whatnot. Work visa allows them to work
Jeff: Flat out from what I was reading is you can hire people with ITINs. They are not eligible to work in the United States. Once they are eligible to work in the United States, they have to apply for a Social Security number. I would think that may also apply to the work visas.
Eliot: That might be part of the application for that work visa that they meet this criteria, perhaps. I'm not really familiar. We don't do a lot of immigration, so I don't know the ins and outs of that. But I do know, like Jeff said, from what we've seen, you're not allowed to have an employee without a Social Security number.
Jeff: People with ITINs can still invest within the United States. They can come from Morez or Vancouver and buy property in the United States. That's okay. But also, typically, if they don't have a right to either green card or some type of work permit, they're also required to leave the United States every so often. That makes it a little hard to employ these people also.
Eliot: In the end, I would recommend talking to your immigration attorney that's working with these individuals or your own representative. Immigration attorneys will probably have a far better idea of exactly the boundaries. But as a general rule, no, you're not allowed to employ them.
All right. "Can you discuss the step by step process of completing a 1031 exchange?" There's not too many there, right?
Jeff: No.
Eliot: We talked about this a little bit beforehand. It's one that often Jeff and I bring up, especially in our tax hour that we do. Get a Qualified Intermediary (QI). You got to have that. That's number one. I wouldn't even consider this without that. That's your number one step. Then it gets into, well, you have some options on things. I think you decide if you want to do a regular, I'll call forward 1031 or reverse. Any idea of the difference between those?
Jeff: Reverse 1031 is just what it sounds like. Let's talk about forward 1031. Forward 1031 is you sell a house, and then you replace it.
Eliot: Yup, relinquished property.
Jeff: The reverse 1031 is you buy the new house first, and then you sell the old property. I like the reverse 1031, but it's very expensive to do, because at some point in time, you're going to have two mortgages. Now, when the market was really hot and when it was a buyer's market, the reverse mortgage or the reverse 1031 actually made more sense.
Eliot: It's about all you could do.
Jeff: Yeah, because what the problem people were having was, I sell my house, I go out and look for a house, and you can identify up to five houses for your 1031 exchange, and bam, bam, bam, all five of them sold out from under me.
Eliot: It was a real challenge. We'd hear this over and over 2 years ago, 12 months ago, even.
Jeff: Since the buyer's market has cooled off quite a bit, still an expensive market, but we're not dealing with some of the craziness we were before. The forward 1031 makes more sense, because keep in mind, you cannot touch the cash. That's why you need the Qualified Intermediary and make sure it's somebody who knows what they're talking about. Ask them lots of questions because they're going to be the person that keeps you out of trouble.
I sell my house to Eliot, Eliot pays the intermediary. All the money goes to them. When he goes to buy my next house, the replacement property, the intermediary pays for it with the money that I had. You also need to cover any loans, correct? If I had an old loan on my old property, I need to have a new loan or loan on my new property, or at least have put enough additional cash in to make up for that difference.
Eliot: Correct. Exactly right. Again, (1) You need that Qualified Intermediary. (2) Determine if you want to do, I guess we'll call it a forward 1031, a regular 1031, or do you want to do a reverse? Make sure you don't touch the money. You have 45 days. It's the first step of determining what you want for that relinquished property or what property you're going to sell in the case of a reverse, and then we have to have it all done in a total timeframe of 180 days that starts from the beginning of where we started the process.
Day one, we start the process we sold or we bought a house, 45 days to get the replacement or which one we're going to sell, and then 180 total from that first day to get this all wrapped up. You want to make sure it's moving along. That's another thing that your Qualified Intermediary can assist with, keeping the process moving along, and help with any challenges that are coming up, but don't touch that cash.
Then we get to our 180, we close out, and then you'll get the property, but the same title rule becomes a real important issue here. However you sold it, if you sold it in your ABC LLC, you have to pick up that property in the same title, ABC LLC, and you can't change tax statuses. If it was disregarded, keep it disregarded. If it was a partnership, keep it a partnership, and so on and so forth.
Jeff: The general rule of thumb, we talked about section 121. What section 121 used to be like in the 90s and earlier was the old rule that if I sell my primary residence, I don't have to pay taxes as long as I buy something more expensive. Kind of the same rule for the 1031. You need to put into your new property as much as you sold the old property for.
Eliot: As much more. You really want to buy a more expensive property. Let's say the sales price for what you relinquished was $500,000, pick up one for $550,000. If you had debt of $200,000 that's going to be released from the sale, well, then you want to pick up debt of more on that new property of say, $250,000. If you meet those criteria, you're going to get your 100% deferral on it.
Jeff: You can buy multiple properties. I wouldn't go crazy about how many I get, but I've seen clients do five, six, seven properties to replace one.
Eliot: Yup. There are some limits as far as pricing and all that, and ratios. But yes, you can do that.
Jeff: Let's talk about boot. I sold my house, bought a new house. My total gain that I'm deferring is about $100,000.
Eliot: It's not now.
Jeff: But what happens with that 10%?
Eliot: That boot that he's talking about, that cash, that is the amount you're going to get taxed on. You can't defer that amount. That's why it's critical that you're buying a more expensive house, you're picking up more debt than you unloaded. That's what keeps you from getting boot. Of course, cash is put in by the other party, et cetera. Boot equals the amount, typically, that's the amount of your gain that's going to be taxable, and then it's subject to depreciation recapture.
We got that. Why? Because if we started this whole process, this building that you're getting rid of or going to pick up, they all have to be used in a trade or business, so we're not talking about your personal residence. Anything else we got to that process?
Jeff: Nope.
Eliot: All right. "I have a question regarding investing with my HSA. Does an HSA function like a Roth IRA in terms of paying UBIT? In other words, if I invest my HSA in a crowdfunding or syndication, for example, realtymogul.com, will I have to pay UBIT?"
Jeff: I was going to say the Roth IRA is actually a decent comparison. You can invest in things. You're not going to be taxed on the income or the gain with one exception. The reason for that is, unlike the Roth IRA, they're figuring any money that comes out of this HSA is going to be used for medical expenses, so they're not going to tax any gain.
Talking about an HSA in general, if you pull money out and don't use it for medical expenses, that money is taxable as ordinary income. Now, what's the area that he mentioned here where you could get hit with tax?
Eliot: The UBIT (unrelated business income tax). That means that you've basically gone into something that has an operational business behind it. These are really trust by the background or where they came from, the IRAs, the HSAs.
The code is written so that you don't have an unfair playing field. To keep it even, the code doesn't want you investing in operational businesses, because they may not have to pay tax. If that's the case, then our other private businesses out there will suffer, because they're at a disadvantage. They have to pay tax. McDonald's has to pay tax on the hamburgers, happy meals, or whatever.
To equal the playing field or level it, the IRS hits its UBIT. UBIT is a skyrocket up the tax bracket. I believe it does run along the regular tax brackets as an individual. We call it trust. It's a trust tax bracket, but it goes up really fast.
Maybe it takes me $500,000 of income to reach the 37% tax bracket, but it takes all about $10 with UBIT to get up there. It takes very little income, maybe $15,000. I'm already in a very high tax bracket, so it rises really quick. The idea is to punish people to keep them from investing in these kinds of businesses within a protected field like an HSA or a Roth.
Jeff: They mentioned crowdfunding and syndications. Again, it’s an ‘it depends’ answer. If you're investing in real estate rental like your syndication or even your crowdfunding is an apartment complex, that's not going to be subject to UBIT, because that's not trade or business income. What are some of the syndications I've seen lately?
Fetch is one that they were syndicating, if some of you probably know what fetch is, or building low income properties. That's going to be a trade or business, and that's going to be subject to UBIT. It's possible you may have operational income within a real estate syndication that you may be subjected to UBIT at least in part.
Eliot: Yeah. Also, we have a subset of UBIT. They use debt. If they use debt in the purchase, that also creates a UBIT situation. I can't remember our acronym with it, UDFI. Unrelated debt financed income, there it is. It just says that if debt was used to purchase part of this, well, then guess what? You're going to get hit with the UBIT tax rates. If debt is on that syndication, that could be a problem.
Jeff: If I invested it in a syndication that's just real estate rental—my apartment complex—I'm not going to get hit with UBIT. But if they got a mortgage to build that or buy it, then I could be subject to UDFI.
Eliot: Exactly. You need to be very careful with the investments that you're going into. To your question, yes, it's subject to your HSA, it's subject to UBIT.
Jeff: A couple of cautions with investing in syndications and stuff like that. Keep in mind that this HSA is designed to be for your medical expenses. If you invest in a real estate syndication, those typically run four to five years. That money's going to be locked up in a hard asset that you can't get to, so just a little caution as to what you're investing in.
Eliot: Very good point. Yeah. Got it. If you need it for your medical, you want to make sure it's available for your medical.
Jeff: Don't get sick.
Eliot: Yeah, there you go. Better yet. All right. "Can I write off my bitcoin loss with $10,000? I bought it at $26,000 and bought it right back at $16,000" I think we're getting to the wash sale rules that are so popular lately. What about that in your crypto?
Jeff: For the moment, there are no wash sale rules with cryptocurrency, virtual currency, whatever you want to call it. If I sell today and recognize that $10,000 loss, I can buy it back within minutes.
Eliot: Yeah. No problem with that.
Jeff: And the loss is not disallowed. What the wash rules say is that for securities, I bought Boeing, I had a big loss on it, so I sold it to get the loss, and then I bought it back. That's not allowed. It's not allowed for you to recognize a loss on that.
Eliot: You got to wait 30 days.
Jeff: You got to wait 30 days before you buy back that security. Now, I've heard a rumor that this is going to change as far as crypto.
Eliot: It could be. There are a lot of rumors out there.
Jeff: Especially with crypto.
Eliot: Exactly. It was in the fifteens just the other day when I was looking.
Jeff: It left us all still hovering around 16, but it did take a pretty big hit because it was over 22 weeks ago.
Eliot: Yes, it's struggling. With this new fiasco, they're wondering about some of the other related… It's a domino effect. Are we waiting to see the next disaster in the crypto area?
Jeff: Good news, the former chairman or CEO of Enron is going to fix FTX. No, actually, he was the CEO during Enron's bankruptcy.
Eliot: Been trying to get out of it.
Jeff: Yeah.
Eliot: It looked like a good number of the assets were used for properties in the Bahamas. There you go. You got hard assets there, real estate. That's good. But yes, you can go ahead and take this loss, buy right back. At least currently, you don't have to worry about the wash sale rules.
All right, "My understanding from a tax perspective is an LLC taxed as a C-corp and a traditional C-corp receive the same benefits such as medical reimbursement, administrative office, retirement plans, et cetera. (1) Can you explain the positions in LLC taxed as a C-corp? Do I still need a president, vice-president, treasurer, secretary, or just member managed?" Let's just start there.
Jeff: Those positions are usually required by state law. It has nothing to do with how they're taxed. It has to do with how they're formed. An LLC is typically going to say, you have to have members and managers or member managers.
I know in my corporation, somebody of the stage requires, like you said, a president, vice president, treasurer, secretary. You see the same person listed on every single line. Yeah, that's going to be determined at the state level. You can have a president and all these positions with an LLC corp, but you're not required to do that in any place that I'm aware of.
Eliot: Exactly. That gets back to our previous question talking about complexity or whatnot. Usually, LLCs are considered a little bit more flexible. You could set up a regular traditional board and have these traditional officer positions, but you're not required to. You could just say, hey, it's a manager. That's your officer, and act accordingly.
All right, "Why would anyone form an LLC taxed as a regular C-corp if there's no plan to take it public or why choose one over the other costs, maintaining paperwork, et cetera?"
Jeff: Go ahead.
Eliot: As we mentioned earlier, we alluded to, if you have what I'll call the true C-corp, if the regular C-corp, it does have stock. It can take advantage of a 1244 stock loss, which basically says if you're single or married filing joint, it's $50,000 or $100,000, that you could take as a loss against ordinary income on your return, should your investment and your C-corp fail, and you have the stock loss.
LLC, even though we can mirror it towards an LLC taxed as a C-corp and runs very much like a C-corp, it doesn't have stock. It has units as an LLC. The 1244 does not extend to your LLC taxed as a C-corp. That's the major difference between the two.
Jeff: And they're asking, why would anybody choose an LLC taxed as a corp. Are LLCs typically cheaper and/or easier to form?
Eliot: Yeah, easier form, less criteria behind it, like a C-corp is required to have certain meetings, et cetera. You don't necessarily have that with the LLC. But as I alluded to earlier, that's not necessarily a good thing. You want to have those meetings.
You want to show that you're operating this business, taking control of things, and being responsible with having meetings. While the complexity lacks for the LLC, usually, the things that you don't have to do, you want to do just to show corporate formality.
Jeff: I think I asked this earlier, but I'll ask it again. Is the liability different from one to the other?
Eliot: Not really, because as a shareholder in a C-corp, you just lose your investment. As an LLC member, which is the owner of an LLC, you just lose your investment, typically. Now, as an officer, of course, if you do something abusive, like go out and buy $121 million of Bahama property, egregious acts probably break through the protections for officers under any of these. If you do something really bad, you're still going to be held liable.
As far as paperwork, again, just typically, it's often thought. The thing you're going to find online is that they just say LLCs again are easier to run, less requirements, et cetera, less red tape, and so on, so forth. But some of that red tape having meetings again, probably a good idea. I don't really look at that as a plus or minus.
Jeff: And if you're a C-corp or LLC taxed as a C-corp, you can change to any other entity you want.
Eliot: I would say that. Yeah, we touched on that earlier. I'd never really thought about that really until the day when we were answering that earlier question. As far as that, you can take from a C. It will be a dissolution, but you can turn it into a regular LLC, disregarded, or partnership, et cetera.
Jeff: You could also make it an S-corporation.
Eliot: Yes.
Jeff: By filling out one piece of paper.
Eliot: Yeah. It's very, very simple there. That would be one thing. Now, it doesn't mean there wouldn't be tax consequences, because you are going from a corporate to a non-corporate. But the point is that you could, so that is something. Of course, now you have to look into the states and what their rules are for that.
Next, "Is it best to start a new Airbnb—we'll call it short-term rental business—now or wait until the beginning of the year for tax purposes? I'm estimating two more weeks of getting it ready. December 1st is my goal. We got some background here. Nothing major like a roof or air conditioner. It was needed in 2022 to get it ready.
Next year, I will do some major upgrades, but the house is actually looking pretty good, super clean, new paint, and beautiful terrazzo floors. I didn't buy any major tools or capital equipment. I didn't buy a 6000-plus pound vehicle, either. No income this year except social security retirement, going to refinance in 2023. What do you think is the best option?"
Jeff: Okay, let's start off with the basic question of, do I want to wait till next year? If you want to start running this out as a short-term rental, that's fine, and then you go ahead and establish that it's a short-term rental. But I feel like what he's getting at is the cold cost segregation question.
Eliot: Because we always get that question. Yeah. That's the hint I got. "Hey, Anderson, should I be doing this major deduction getting that loss this year or should I just push it off to next year?" And what's that going to depend on?
Jeff: That's going to depend on your other income. You basically said all you have is social security income right now. I'm assuming you got lots of other assets, because you bought this beautiful property with what floors?
Eliot: Terrazzo.
Jeff: You don't need to do cost segregation. It's not going to help you, unless you're running this property out for a lot of money, like it's a beachfront property and a primary or something like that, and you're getting $10,000 a week for it. But otherwise, I don't do segregation on it this year and maybe not next year, depending on what my income looks like for next year. That decision for 2023 doesn't have to be made until 2024.
Eliot: Yup. We got some time on that. I think the major factor here is, what is your level of income in totality? You mentioned it's just social security. I don't know that doing a cost seg and taking bonus appreciation, we're looking at a really big deduction for maybe not all that much income compared to $300,000–$400,000, or something like that.
That would be my biggest decision maker in how much income we have coming in. If it's not that much, I wouldn't go through the added cost of a cost seg or lost depreciation.
Maybe, depending on the numbers, again, Jeff brings up a good point. If this Airbnb makes a ton of money and it makes more than even your retirement that you're getting which is plausible, then maybe yeah. Maybe we do, but it gets down to what Toby's golden rule, calculate, calculate, calculate.
If we have an idea, I would find it hard to believe though. In two weeks of December or whatever it is, three weeks of renting in December, you're going to get all that much income.
Jeff: I agree. Going back to, if this property is making a lot of money, the other problem that presents is it's going to make your social security taxable.
Eliot: More of it taxable, higher percentage.
Jeff: Up to possibly 85% of your social security. At that point, I think it becomes a different beast. The other thing I might consider doing if this is me is just holding back on that cost segregation if there's any possibility of me getting a windfall in something else.
Eliot: Yeah. In a future year, hold off on that. Don't blow it now when we only have two weeks. I would wait till 2023 more than likely. That's probably your conventional wisdom there. Wait till 2023. But again, you guys have a good deal of information here, but we don't know exactly how much income you have coming in, what to expect from the Airbnb. But I would say, probably, I would conserve it or save that cost seg for potentially 2023.
Jeff: I think both, Eliot. My guts say you don't use it in 2022.
Eliot: Very good. All right, that's it for our questions. Again, please submit more questions. That's what we choose, the pool of questions for. You can do that through taxtuesday@andersonadvisors.com or visit us at andersonadvisors.com. We're happy to do that.
I don't think right now, we have any other announcements. I just want to thank our group. Other ways to reach out to us, the YouTube. Subscribe on our YouTube at aba.link/youtube. Our podcast, andersonadvisors.com/podcasts, and our replay is on the platinum portal. I just want to thank our supporting staff behind the scenes doing all the questions.
We got Christos, Dana, Dutch, Ian, Kira, Piao, Troy. Of course, the regular staff running the show, Ander, Jennifer, Matthew. I think that's it for our team here today. Thank you all for joining us. We appreciate it. Have a wonderful Thanksgiving.
Jeff: We went over and now Toby's going to be so disappointed in us.
Eliot: Yeah, we were a little bit short last time, so I added another question this time. That was my fault.
Jeff: Have a wonderful and safe Thanksgiving. Just make sure you have something to be thankful about.
Eliot: Be safe. Again, thank you. Join us again in two weeks. I think we have Toby back, yes?
Jeff: Toby should be back.
Eliot: Thank goodness. Everyone, have a good day.
Jeff: Thanks, Eliot.
Eliot: Thank you.
In this episode of Anderson Business Advisors, host Toby Mathis speaks with Senior Attorney Joshua Robertson from Anderson Advisors. Josh details the five most egregious mistakes people make when attempting to protect their assets. From having no real structure to their planning, to failing to comply with their state’s regulations and paperwork, to not paying taxes correctly, people can really screw up their asset protection. Get yourself educated, find a professional to help you navigate your business or personal asset protection process, and you’ll avoid these common pitfalls.
Highlights/Topics: * Five ways that people mess up their asset protection: + Objectives - People have no objectives to structure their plan, and don’t do it at the right time + Anonymity - security through obscurity– keep your assets private + Compliance - adhere to your state’s regulations and paperwork + Education - know how to correctly protect yourself + Taxes - know what and when to pay * Objectives and timing example: The Montana family land lawsuits example - you have to protect your assets BEFORE there is an issue * Anonymity story: Patrice Cullors/BLM example - she should have used a land trust with an LLC * Compliance example: Leland Sycamore and Grandma Sycamore’s Bread and Bimbo Bakeries - Non-compete for baking bread * An education story: OJ Simpson was able to live comfortably despite legal entanglements because people knew how to protect his assets * Tax example – ticket scalper in Michigan - son incorporates business as C-Corp, while dad mistakenly continues to file as a sole proprietor
Resources: Josh Robertson, Esq on LinkedIn
https://www.linkedin.com/in/joshuatrobertson/
Email Josh Robertson
http://jrobertson@andersonadvisors.com/
Call Anderson Advisors 800-706-4741
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode of Anderson Business Advisors, Toby Mathis speaks with attorney Brent Nelson, partner at Rimon Law in San Francisco. Brent helps his clients understand, improve, and protect family structures that include trusts, business entities, private investments, charitable giving, and family governance. He is an established and respected thought leader in his field, and hosts the popular Wealth and Law Podcast.
You’ll hear Toby and Brent discuss a wide variety of scenarios and situations surrounding trusts – who should have them, how they can benefit you, and all the things they can’t do. People out there will try to tell you that you can avoid paying taxes by utilizing a trust, but as Brent and Toby explain, the IRS and the courts will usually always win, and they will eventually get what you owe. In fact you may even be paying more taxes than necessary with some trusts. In the end, you won’t get out of paying the taxes you owe, and you may just complicate your life by stashing your money in certain kinds of trusts, especially those promoted by less-than-scrupulous individuals. Highlights/Topics: * Trusts are not a way to avoid paying taxes - grantor trust rules * Only certain trusts can own S-corp stock * A “three-trust mechanism” – is it valid? * When you should use a trust and its benefits? * Promissory notes for stocks in trust * Making sure trusts allow the client to live the lifestyle they are used to * Non-US citizens/non-residents cap has been $60,000 since the 1930s * If you have a green card, you can be taxed and fall under the $12M cap * Canada’s exit tax * Setting up a simple living or revocable trust is advisable no matter how little money you have * Fund-promoted trusts in foreign jurisdictions – be very suspicious - you don’t save taxes, it’s just more complicated
Resources: Brent Nelson LinkedIn Wealth and Law Podcast Wealth and Law Twitter Wealth and Law Facebook Rimon Law Website Anderson Advisors Toby Mathis on YouTube Full Episode Transcript: Toby: Hey, guys, this is Toby Mathis with the Anderson Business Advisors Podcast. I am really lucky today to have Brent Nelson who's another attorney who works with a wealthy international clientele. I love picking the brains of folks like that.
First off, welcome, Brent.
Brent: Thank you for having me. Always a pleasure to see you, Toby. Let alone talk to you.
Toby: Hey, we could do both.
Brent: It's even better that way. I see you've got some bar set up in the background. I don't know why we missed out on happy hour, but I guess we'll talk about tax instead.
Toby: The sad part is none of them are open. I just collect the bottles.
Brent: I have a few not too far from me. I have a few bottles of wine. Every now and then towards the end of the week, I look to my left, I see them, and I think, maybe this working thing is going to be okay.
Toby: It's 5:00 PM somewhere. I can appreciate that 100%. I just keep my hard booze over there. Every now and then, somebody points out one of the bottles and says, hey, is that such and such? I’m like, yeah. Why is it still full? I don't know why, but I'm not good with hard alcohol.
Anyway, let's talk about trust. Maybe we should call this trust in moderation.
Brent: Yeah, use with caution.
Toby: I want to talk about all the bad stuff because I don't know about you, but I've been seeing these promoters all over the place showing you you don't have to pay tax if you put your business in a trust, have your investments in a trust, and all this stuff. I remember going through this 10 or 15 years ago where we had Pure Trust and Constitutional Trust.
Can we put some of that stuff to rest and just dive in? First off, have you been seeing it? Second off, what do you feel about it?
Brent: I've been seeing it and I feel that it doesn't work, but the more detailed answer is that first of all, as you say, this is an idea that is not new. It gets recirculated periodically that somehow, if money gets funded into a trust, then nobody pays any tax on the money.
You got to take two steps back chronologically. First of all, you're talking about money that you earned that you're then trying to stick into the trust. We don't allow you to do that and escape paying taxes.
We have this very nice doctrine that was created by the courts called the assignment of income doctrine that basically says, if you earn income, you must pay tax on it. You can't just shift it on to somebody else. This is not true, but just assuming hypothetically that the trust did not have to pay any taxes, the assignment of income doctrine would say, nope, that doesn't work.
Then, just because that's not enough, we have these rules that are called the grantor trust rules that would prevent someone from creating a trust for themselves and in many cases for their family because they like to keep control over these trusts and then not pay tax on it.
What happens is you put the money in the trust—say you're a beneficiary of the trust—and you think, oh, great, now I don't have to pay tax on the money. Even if you got over this assignment of income issue, the answer is not so fast because the grantor trust rule pretends that you still own what is inside the trust and therefore you still own the income and pay tax on it.
I know conceptually that that idea is weird because it's not reality. Maybe you really did put the money in the trust and you really don't have the money, but we just pretend for tax purposes that the trust is not there.
Toby: We like it because you could ignore the trust and pay the tax on it just like you own it. In an asset protection trust, it's actually a handy dandy to have a grantor trust, but that's not what these scam artists are doing. These guys are going right to the, hey, this is a complex trust and I can avoid all the tax by reallocating it to corpus and all this other stuff.
In my opinion, they're just butchering the code, but I'm curious as to your opinion since you're an expert in this area and you probably have to deal with it on a day-to-day basis.
Brent: I think the chances are that they are not escaping the grantor trust rules even when they say that they are. That's the first thing. People don't realize how sticky those grantor trust rules are. They exist to prevent you from not paying tax on income that's in the trust, so it's very difficult to avoid if you have any interest in the trust or you really maintain any controls over the trust.
Let's just assume that you could get over that. Again, you're earning income and shifting it into the trust. You've got this assignment of income doctrine that says, nope, that doesn't work. You have to pay tax on the income.
Even if let's say what you really did was you gifted business interest into the trust and it was truly a complex trust—meaning it's a non-grantor trust—we have rules for that too. Those rules say that someone between the trust and the trust beneficiaries must pay tax on the income for federal purposes, so even if you park this thing in a state that doesn't have state income taxes, that only solves the state income tax issue which I think is the half-truth that you get told in some of these promotions.
Toby: Yeah. They do the pings, dings, and all those. They're saying, hey, we can avoid California tax or something like that.
Brent: Maybe you can but that's state tax, not federal tax. Then, it also turns out that these complex trusts if they retain the income—so they're going to pay income on the earnings—they pay tax at the highest rates at the lowest possible levels. Not only are you not saving tax. You're paying higher taxes.
Toby: And just put it in perspective. It is like, hey, I made $15,000. I'm going to be in the highest tax bracket.
Brent: Yes. Basically.
Toby: That's really it. I'm just like, let's just be straight up. I forget what it is exactly.
Brent: I think it's $14,000 something. I can't remember the exact weird inflation-adjusted number right now.
Toby: And you're at 37%.
Brent: Yes, so that's not a great result.
Toby: Some promoter says this is a great idea. I've had two clients that were seven-figure clients get pitched this with their S-Corps for their business so that they would never have to pay tax on that money again. I'm like, not only would you pay tax, you're going to get killed in taxes.
Brent: That one's a really curious one. Again, let's just assume they put the shares of the S-Corp stock into the trust. There are only certain types of trusts that can own S-Corp stock, so you're no longer an S-Corp and now you're paying corporate-level tax. You're paying two levels of tax, C-Corp level tax plus tax on the dividends. That could be one option.
The other option is that you are a trust that can hold S-Corp stock, but it turns out that those are grantor trusts so you're paying tax no matter what. You get it coming and going, and there's just no relief. Again, this assignment of income doctrine kicks in.
At any time also—I guess we should probably note—that you're trying to avoid paying the tax that you owe and you're layering in a trust as a mechanism to make it look like you don't owe the tax, even setting aside all these fun things that we talked about, courts can freely ignore that the trust exists if it's a fraud.
There's also that. The tools in the tool kit for the courts and the IRS who are arguing to the courts are vast.
Toby: There are people that correctly can point out that there is a provision in the code about reallocating certain things like extraordinary dividends and things like that into the corpus. These were shares, for example, instead of a dividend but it's still taxed normally, and they're saying, hey, just allocate it back into the body of the trust. Is there a situation like that where you could escape immediate taxation and it just gets added to the corpus of the trust?
Brent: No. The answer is you're really talking about two completely different concepts. They're somewhat related in the trust and state income tax rules, but when you're talking about the corpus, you're really talking about what's called the trust accounting income issue and how you account for money that comes into the trust for state law trust purposes.
The general rule is that a dividend is "income." It may be that income is payable out to beneficiaries or not. It might not be, but under most state laws and trust agreements themselves, you can allocate those things to the corpus, which means it may not be payable out of the trust immediately.
That does not change the tax status of the trust at all. That's all just internal accounting for nontax purposes, so it doesn't save you on taxes.
Toby: Sometimes people get confused because they hear the DNI or distributable net income. They'll hear like, hey, the trust is sending it to the beneficiary. That doesn't mean that nobody's paying tax on it. It just means the trust doesn't have to get killed at the highest level and it's taxed to the recipient.
That's not what these guys are doing though. I had another one. I'll just throw this one. I know I'm throwing weird scenarios at you, but there were really nice people. They were in California and they do very, very well. They do lots of investments.
They were pitched a three-trust mechanism, one of them being a charitable trust, a business trust, and then just a grantor trust that held the business trust with the beneficiary being this foundation. They were loaning the money back out and doing all this craziness. I just said it's a sham, look at it, and go, first off, that's not how the rules are.
First blush, have you seen anything like that out there that you've had to deal with? What's your first blush on something like that?
Brent: I can't say that I've seen anything quite like that although I'd be very curious about how they were using the charitable trust. The transactions that I've seen, the way that it is almost always structured—and this is really where it starts to fall apart—is that let's say you have these three mechanisms and all of these loans. Basically, everything happens on day one and the other promoter wants you to sign everything on day one, so you sign everything on day one.
Right off the bat, somebody like URI and certainly a smart lawyer at the IRS is going to look at that and say, we can ignore the fact that you have all these different parts. For tax purposes, we'll just treat it the way that it really should be. The so-called substance over form, we'll just treat it the way that it should be for tax purposes.
Do you know what? You want to set up all these buckets and do all this complicated stuff, mazel tov, but that doesn't change the tax treatment, so you're stuck with the tax treatment and you've paid a lot of money for this complicated structure. You're stuck with both, unfortunately.
Toby: I actually emailed the promoter and wrote him a letter. I was just saying, my opinion is that this is a complete farce.
Also, it was a charitable foundation, but it was taxed as a private foundation [...] to it. But it was all in writing. That's what these guys do. I'm like, just send it to the IRS and let them know. Maybe there'll be a recovery for you.
Brent: It's interesting. I think you probably see the same thing. First of all, most of the promoters are not what I would consider serious tax professionals. That's the first thing.
The second thing is that they oftentimes like to hang their hat on the fact that everything is aboveboard. They're like, well, we have all these documents. We've got it all papered over, therefore, this is valid.
People need to understand the hard truth which is you can do all the dumb things you want, but that doesn't mean you get the tax result you want. There's a huge gulf between doing something that you want to do and then using it for a tax advantage and expecting the IRS to give you the tax advantage. They won't tell you you have to unwind the dumb transaction. They'll just say you can't take the tax advantage.
Toby: And they're going to say, hey, we don't care what you're calling it, we're going to treat it this way.
It was interesting because I had another one out here. I get hit with these all the time, so I'm just thinking of the ones that I've had in the last year.
There was another gentleman. I get on the phone with them. It's always somebody that they say is a lawyer, but it's not a lawyer. The lawyer had a Supreme Court decision that they rely on when they said to do it, and I'm like, what's the Supreme Court decision? Then, I look at it and I'm like, it has nothing to do with what you just said, or it's something that is from the 1800s, something goofy a long time ago, or 100 years ago where you're looking at it going, this is not relevant or this is not what you cited it for. This has nothing to do with anything. It's all pretty words.
Brent: That's a red flag for people too. I guess for anybody listening, if you're getting promotions and what they're hanging their hat on is that it's black and white and the code lets you do this, just understand that first of all, the last time there was a major change in the code was 1986. The IRS and Congress might have changed their minds about certain transactions. They might not have anticipated this transaction happening.
Let's just assume probabilities here. The chances of it being black and white in the code are not good. There's a lot of gray area in the code, so whenever somebody comes out to me with black and white, of course, I'm a crotchety lawyer too. I'm just like, okay, come on. Really?
Toby: If it's too good to be true, you're just looking at it going, come on, everybody's going to pay tax on this. When I see this, it's always to somebody affluent and somebody who has lots of tax pain.
There are lots of ways to mitigate your tax. Paying no tax is usually not one of them. Maybe if you're a real estate professional, operating in an exempt environment, taking a reasonable salary, or something, but for the most part, no, you're not going to avoid it all.
But there are scenarios where trusts are your friends. Maybe we could touch on some of the areas because you're working with wealthy folks. Your clientele sounds a lot international. When do you use a trust and for what purpose?
Brent: You mentioned one which was that asset protection trusts can be excellent vehicles for asset protection. In some states, you can get asset protection for yourself. You can create a so-called self-settled asset protection trust.
Whether those apply in every single jurisdiction, maybe a little bit of a cloud on that, but even if you don't want to do it for yourself and you want to do it for your kids, so you've put two nickels together, you've earned some money in your day, and you want to spare some of that money from ever going to future ex-in-laws and things like that, you can put them in trust and get great asset protection for your family so you can protect that family wealth in the wrapper of the trust. All you have to do is create the trust and you get the benefit. If you don't create the trust, you don't get the benefit.
There are tremendous estate tax and generation-skipping transfer tax benefits in certain types of trusts. We mentioned grantor trusts, particularly grantor trusts that are irrevocable trusts which basically means you're going to get asset protection. You, the grantor who created the trust for your kids, are going to pay tax on behalf of the trust, but everything in the trust is going to be free from estate tax.
Just imagine what that looks like because to me, if you're trying to boil it down to what do normal humans understand, it looks like a Roth IRA. It's like you paid the tax on the Roth IRA, and then it gets to grow tax-free, somewhat like that.
In these irrevocable grantor trusts you can set up for your kids, you're paying the tax on behalf of the trust, and then the money in the trust gets to grow tax-free which is where you want all the growth because nobody pays estate tax on that money.
Toby: You say it's growing tax-free for the estate tax, but you're the grantor. As a grantor, you're still paying tax if there are capital gains or whatnot. It's still down to you, but you're not burdening your kids.
We have this massive estate tax. I think you've been doing this as long as I have. I remember a $600,000 estate tax exemption when I started. I still remember those really small exemptions, and now we're at a $12 million-plus exemption. If somebody is over that, you're looking at this going, wow.
Is there a threshold that you use? It could be lower because we could be back at a million for all we know. I forget where it's going to go when The Tax Cuts and Jobs Act sunsets, but it's definitely not going to be $12 million. It's going to fall way down there.
Brent: It won't. It'll be half of that. The base number right now is $10 million, and then it gets adjusted for inflation. The base number on January 1, 2026 will be $5 million adjusted for inflation. Just round numbers, let's say it's $12 million today, it'll be $6 million then.
We're in a really weird environment where you could have somebody who's over $12 million. That's easy. They need to do something. They have to plan for it because this tax is horrendous like you're pointing out. It's $0.40 on the dollar tax. You got a $13 million estate, you die, $1 million of it is over the $12 million, and somebody writes a $400,000 check to the IRS. That's painful.
There is this weird middle ground right now between the $12 million and the $6 million where they don't have a problem today, but if they do the dumb thing and survive until 2026, then they do have a problem. For those people, they have to pretend that they have an issue and start doing planning.
The way that I like to plan for people in that space is to try to do things that will in essence cap the value of their estates so we're not going to get over $12 million. There are a lot of techniques that we can use to take some of the assets that they own that might have variable value, actually transfer those or even sell those into trusts, and convert them into something that has a very specific value.
Let me give you an example so people understand what I'm talking about. Let's say I set up one of these beautiful irrevocable grantor trusts. I'm the grantor, so I paid all the tax for the trust, and you're the beneficiary because you're my best friend in the world.
I have a bunch of Apple stock. I don't know what the value of Apple stock is going to be tomorrow, let alone in 2026, so I would prefer to take a promissory note that has a value equal to the Apple stock today and just hold that because I know that's not going to change in value.
What I do is I sell my Apple stock to my new irrevocable grantor trust, the trust gives me a promissory note for the fair market value today, and now, if the Apple stock appreciates in value above the face value of the note plus whatever the interest rate is, all that appreciation is in the trust for your benefit. It's out of my hands. No matter when I die, I'm not paying estate tax on it and you're not going to pay estate tax on it.
These sorts of little valuation capping transactions become really important, especially for people in between these threshold numbers. If you get above the thresholds, then it becomes really important to not only do those things but really give away as much as you possibly can.
Toby: You just mentioned an installment sale basically. Are they paying it, is it deferred, or is it something where you can say, hey, don't mess around with the interest because we don't really want to sell the Apple stock?
Brent: We're selling it, but because I own the stock and the IRS pretends that I own everything in the grantor trust, it's not a true taxable sale, so there are no capital gains. I'm not going to pay any capital gains.
It's a true sale and there is substance to it. It needs to be a real sale. There needs to be a real note with real interest that's really paid to me. Ultimately, the goal is to actually pay off the note at some point, but we can pay it off over time. We don't have to pay it off in the first year.
Toby: Do you put a marker on it like, hey, if you ever sell the stock, you have to pay back the note? And then in the meantime, the interest accumulates. Is this something where you have to pay the tax? What's the mechanism? Do you have to start making payments in that first year?
Brent: We usually require at least interest payments in the first year. Very frequently, the notice set up is an interest-only note that has a balloon payment at the end. Say it's 10–15 years. We might go something slightly less than 10 years on the term of the note because it gives us a little bit better interest rate, but the idea is that once we put the stock into the trust, the trust has free use of the stock.
If the trust sells the stock so they've actually generated a capital gain because they sold the stock, we also usually have a provision in that trust that should I want it, I can ask and get permission if an independent person agrees to it to be reimbursed for the cost of the capital gains tax. I'm not going to be burdened with the capital gains tax that I didn't want to pay.
Toby: Because it's still a grantor trust, I am responsible for the income. If there are dividends paid at Apple, for example, they pay a small dividend, but would that also be taxable to me? Let's say it's a parent for a child instead of just being really nice to me and giving me lots of stock, although I wouldn't stop you.
Brent: You wouldn't stop me, okay, good enough.
Toby: But you're still paying the tax on that. If I need to pay interest, is it something where I could continue to make additional contributions to the trust in case there needs to be cash that's paid out as interest? How does that work? Do I have to sell stock to pay that interest?
Brent: Hopefully not. The idea is actually, what you would do is first, when I create the trust, I would seed the trust with other investments. Maybe it's cash, but maybe it's other investments. I like to seed it with something that has a return on it so that collectively, the return that we can get on those assets plus the thing that I'm going to sell into the trust is far more than the interest that's going to be paid on the note.
I don't want to overly burden the trust, I don't want the trust to be uneconomical, and of course, what I'm trying to do is put more money into the trust. I don't want the money coming back to me. I want as much in the trust as possible.
A really good example would be if I have some real estate that's rented out and it has a pretty good stream of income on it, I might gift that into the trust first because the income off the real estate is going to support the promissory note in the future.
Toby: Either gift it or sell it. I understand what you just said. You're gifting the entire real estate in there so that the income stream covers the interest on the note.
Brent: Yeah, or it can be a mix. Maybe I gift a part of it, and then I sell the balance in just so that the assets collectively—between what I sell into the trust and what I gifted into the trust—are able to generate plenty of income to support the note payments because again, I don't want the trust to be uneconomical and I want the note to actually be paid off at some point.
Real estate's just great because it often has a relatively consistent stream of income and it can be used to do future financing. If the financial terms are appropriate, you might be able to suck some equity out of the real estate, pay off the note, and now you're just paying back the bank, but you're going to pay off the bank over probably a longer period of time than my promissory note. Those sorts of transactions are possible in the future with something like real estate.
Toby: That's really smart. It sounds like if somebody is over the $5 million mark, they might need to consider this. Would it be business interests, stock, or real estate? Maybe they're getting a portion of it that might be highly appreciating or keeps going up in value that they just want to freeze so that they don't have estate tax issues. Is that primarily what we're doing here?
Brent: That's what we're doing, and it would be all of the above. Obviously, it depends on what somebody owns.
The first question I almost always ask a client is something along the lines of how much can you afford to give away? What do you need to live on?
We also are not asking clients to do something that then impoverishes them in a way that substantially affects their quality of life. I'm not saying super lavish lifestyles, but I want them to be able to live comfortably the way that they enjoy living. We're trying to come up with strategies that can generate streams of income coming back to them from these trusts that will, in reality, support the lifestyle that they want.
I want them to also maintain enough funds outside of the trust so that if everything goes south in the trust transaction, they have enough money to take care of themselves, of course. I don't want to do something that is unreasonable because it just doesn't really work for their lifestyle. We're always trying to match up payment terms and assets with the reality of the client's lifestyle.
Toby: Shifting gears slightly, you mentioned international clients. You have wealthy international clients. Are we talking just US citizens or do you have folks that are noncitizens too?
Brent: Both.
Toby: If you're a US citizen, you get the benefit of the US estate tax, these huge amounts, the $12 million right now and in 2026 going back down to the $5 million indexed for inflation which will be around $6 million. What about the international folks? They don't get the benefit of that, do they?
Brent: They do not. If you are not a citizen and you're not a resident—and resident means you don't live here with the intent to stay here, you're not a so-called domiciliary of the US—then your estate tax exemption is $60,000.
That number has existed since the '30s and they're not changing it. It's not indexed for inflation. No one is coming to their rescue. These people don't vote, so nobody's helping them.
Toby: Let's say that I'm in Spain and I own $1 million US real estate. Am I going to be paying 40% on that $1 million minus the $60,000 exemption?
Brent: Unfortunately, yes.
Toby: What if I'm married to a US citizen? Do I get any reprieve or am I still going to get hit?
Brent: In that case, if you leave the property to your US citizen spouse, you get the benefit of what's called the marital deduction against the estate tax. That's a dollar-for-dollar deduction for all the value that goes to your US-citizen spouse, so you would pay no estate tax at your death in that case.
In essence, the policy is great, now, the property is in the hands of an American. We can tax Americans, so we'll expect that we'll tax the spouse later on. Of course, the exemptions are so high for Americans that it's not as useful, but that is still the policy.
Toby: Do you see this scenario play itself out? Is this something that you have folks come in and they're like, I have $5 million or $6 million real estate in the US. I'm not a US citizen. I don't intend to reside here. I'm not married to a US citizen. I just own a bunch of real estate here. Is that something you see?
Brent: I do. When they have done the thing and bought all the property before talking to me, that's a real challenge because it's hard to back out of that transaction without paying tax on some level. Usually, what it requires is swallowing a somewhat bitter pill and paying capital gains tax in order to avoid later paying estate tax.
The reason for that is the typical way to plan around is there are really two ways. The first way is for a non-citizen, non-resident of the US—and it's important that that is what they are because this doesn't apply to US citizens—if you set up a foreign company that's viewed as a corporation here, you own stock in a foreign company, and it owns the US real estate, when you die, we pretend you only own the stock in the foreign company and not the US real estate, so no estate tax. But in order to back into that structure, when you already own the US real estate, you have to pay capital gains tax.
Toby: You're going to have to sell it to the corporation, right?
Brent: In essence, yeah. It doesn't mean there's an exchange of cash. It's just we pretend that it's a sale when we contribute it to the foreign corporation.
Toby: How would this change if you do have a US-citizen spouse?
Brent: It's a little easier when you have a US-citizen spouse because of the marital deduction, but there's a little bit of a logical conundrum because you're guessing who's going to die first. If it's the foreigner, you're fine. If it's the US person, then you got a problem.
The other way that we usually handle this problem if we don't want to pay capital gains tax is we simply have the foreign spouse buy life insurance if they're insurable because proceeds on life insurance on the life of a non-citizen, non-resident of the US—very important that that's what you are because this doesn't apply to US people—are not subject to estate tax. We buy the life insurance to cover the estate tax on the off chance that that foreign person dies second, not first.
Toby: Very, very interesting. Does it change if they are a resident? Maybe they have a 10-year green card or something along those lines. Does it change everything under those circumstances?
Brent: It totally flips everything on its head, of course. It's like, yeah, you got a green card, great, you can't vote, but we're going to tax you like a US citizen. But that means you get the benefit of this $12 million exception as well.
Toby: You get it, so if you have that green card, that's your reprieve. If you become a non-resident so your green card is for three years and it expires, now you're back in, oh, heck.
Brent: You could be. In the meantime, the fun thing is we pretend you're a citizen, so we tax you on all your worldwide income. We get it from some angle, and then there are some very specific rules about long-term green card holders. If you hold a green card for more than 8 of the last 15 years and then you give it up, under some circumstances, we charge an exit tax. We pretend you sold all of your assets, and then you have to pay capital gains tax on the US on your way out.
Toby: I think that's some Canadian friends that I know here. They were dealing with that. I'm going to go back, and then they were like, I'm not going to go back because the tax is so heinous.
Brent: It goes both ways. Canada has its own exit tax. They actually call it the exit tax. We call ours the expatriation tax, but they functionally are the same.
When you're a Canadian resident, you come down here, and you become a US resident, you have an exit tax to pay in Canada. It can be kind of painful, so Canadians who accidentally trip up on the Canadian exit tax are not happy.
Toby: Yeah, because the CRA is not a pleasant organization. The other fun one is when they put things in trust. They treat it for Canadians. They treat it as though they sold the asset too.
Brent: They do. If you're a Canadian resident and you create a US trust because that's what your very smart and well-meaning US advisor told you to do, it's a deemed sale of the asset to the trust in Canada, so you pay taxes in Canada. The US doesn't care, but Canada really cares.
Toby: Blame Canada.
Brent: Exactly.
Toby: I guess the moral of the story—I could talk to you all day about this stuff because I find it fascinating—is it's complicated.
Brent: It is very complicated, yes. Unfortunately, it is.
Toby: Yup, and if you have a green card, if you own substantial assets, and you're a non-US resident, non-US citizen, you need to talk to somebody who knows what they're doing. If you reside here and you have assets over $5 million, you need to talk to somebody who knows what they're doing on this precise issue because it sounds like it could be a nasty ramification.
I want to ask you one last question. This is a softball because I know you and I think the same way.
There are also these revocable trusts that are floating around out there, most notably the living trust that we oftentimes hear about. I just want to get your take on people that do wills versus living trust versus doing nothing at all.
Brent: I'm not in favor of doing nothing at all to be perfectly clear. My number one preference is to do a living trust or revocable trust at a minimum. That's for almost every single one of my clients regardless of how much money they have in the bank or in the company.
Toby: I wish more lawyers say that.
Brent: The thing that really keeps me up at night is the nightmarish guardianship and conservatorship files that I have that exist because somebody didn't do a very small amount of planning into what could've been an extremely simple revocable trust that would have resolved an issue of what happens when they become incapacitated, who's going to manage things, or what happens if you die and you leave money to a minor? Who will manage things for the minor?
If it runs through a revocable trust, it just solves all those problems and there's so much headache that can be resolved just by doing this very simple thing that I see almost no circumstances where it doesn't make sense. The biggest caveat with it honestly is usually with foreigners where their home jurisdiction has a rule like Canada that says doing a trust is a deemed sale. Setting that aside, it's almost always the right answer.
Toby: Does Canada always tax? If you do a living trust in the United States, you're a US citizen, and all your assets are here in the US, would Canada still hit it?
Brent: If you're a US citizen and not a resident of Canada, then you're okay. But if you're a resident of Canada and you're doing a trust here, in most instances, they'll treat it as a sale of the assets to the trust.
There are some very small carve-outs for elderly people who are doing basically revocable trust. They call them bare trusts in Canada. Those trusts escape these rules, but the general rule is you have to.
Toby: I believe it's over a certain age.
Brent: It's 65 and older if I remember right.
Toby: I remember seeing that. It's in the recesses of this brain.
I want to hit on the living trust just one more time because a lot of times, people will go to somebody and they'll say just do a will. I'm always like, that's comparing a happy meal to buying just the burger. I can't just buy the burger. The happy meal comes with other stuff, and the other stuff sometimes is what's really important.
You just talked about doing guardianship files and conservatorships. That's always included in a living trust. I've never seen a living trust that did not have power of attorneys for financial and health, and I've never seen those attached to just a will. Sometimes, somebody will do both, but usually, if you're going through the trouble, you're either doing the estate plan or you're not. That's the part that just bugs the heck out of me because I see that over and over again.
Again, it's like should I have a meal or should I have a soda pop? Soda pop is perfectly filling, but they're two very different things. When somebody says, should I do a will or a living trust, I always look at it going, they're different animals.
You mentioned some of your files. How arduous is the process of getting to become somebody's conservator or taking over their finances when there isn't a written document? Is it pretty heinous?
Brent: In my fine state which is similar to most states, somebody who cares enough about you has to file a petition with the court. The court appoints somebody to be an investigator, talks to all the interested parties, and submits a report to the court. The court appoints a lawyer to you who is now incapacitated, so at least two lawyers are almost always involved. The court appoints a medical professional to do a medical examination.
All of this gets submitted to the court, you have a public hearing on your inability to manage your finances which may not be very pleasant, and then somebody gets appointed. Every year, they have to account to the court down to the penny everything that has come in and out of their hands on your behalf. They do that for your lifetime or until you're cured which is not usually the case.
Toby: If you have somebody with dementia or somebody that was in a car accident and for whatever reason can't make decisions on their behalf—maybe they're braindead—you're going to have to go through this process even under those circumstances?
Brent: Dementia definitely. Car accidents, definitely. The dementia one is easier to plan for and plan around. If somebody gets in an accident and they end up with a personal injury settlement, that can be hard to plan for and pan around and you may be forced into one of these conservatorships. But they are just very burdensome and very time-consuming, and when people hear time-consuming, they should think expensive. That time is being charged by the hour.
Toby: But a will is easy and probate is [...] in my state. I wish I had a nickel. Probate is not bad in my state. Oh, you don't need that, and you're just losing your mind. I think we think alike on that one.
Brent: Yeah, we definitely do. The other thing is they say, well, I have a power of attorney that takes care of it which is fine. It's just that the banks don't always agree. If the bank doesn't agree, your power of attorney is worthless.
That happens so frequently. Sometimes, people don't believe me, but that is the case. It happened plenty of times over the last 10 years that I could say with full confidence that banks hate powers of attorney.
Toby: Yup. Do the trust. I have dealt with the same thing you've dealt with, but they're covering their backside. They have obviously been disastrous in some circumstances. Ultimately, I don't think anybody's acting with ill intent. They're just trying to do what's in their best interest and it's not easy, so make sure you got your bases covered to make it easy.
Anything else you want to hit on? I've really enjoyed our conversation, so I'm just curious if there's anything else you want to add.
Brent: I guess the only thing we didn't mention is along the lines of the conversation we had at the beginning about all these fund-promoted trusts. If it's a trust that's in a foreign jurisdiction, just know that you're in [...] to go 50,000 storeys high because it probably doesn't work.
Toby: Oh my gosh, we didn't even get into it. I don't know about you, but I've had multiple clients go to me and say, I'm going to do this trust. This trustee has been in business in the 1800s or something weird, and then they come back a couple of years later going, my trustee won't respond. How do we get my money back?
I've had more than three occasions. I can think of just a few of them right off the top of my head. Have you dealt with that too? You said your tenant goes up. Is that one of the reasons or are there other reasons too?
Brent: One reason is just because the way that they're promoted is not the way they actually work. It's supposedly some sort of tax move. It's not. Surprise, you don't have to weave through the details. The surprise ending is it's not a tax move. You don't save taxes. You usually complicate your taxes is what happens.
Nightmare scenarios do happen. One of the most egregious cases that I had was a client who had a trust that was set up actually by her husband. There were two individuals who were the trustees and they basically just completely mismanaged the funds and stole money.
It took years to run them down and get rid of them, and we literally still have in the investment accounts one or two Irish mutual funds that were frozen during the Great Recession. Not great investments to begin with, but they were frozen during the Great Recession. We cannot recover the money. That was in 2009 or 2010, and we still haven't resolved it.
Toby: Again, there are enough nightmare stories of the trustee quit responding. Where is this trust? Isle of Man, Cook, or some island somewhere. I'm like, we're going to have to go there. It's going to be expensive litigation if they're still there.
Chances are they just disappeared with your money. I'm not a big fan of going offshore unless you have a really good reason, but that's interesting. You and I think more alike that I realized on a lot of these just from what I see because boy, we see a ton where somebody comes in and some promoter is like, go to this island, go to that island, go over here, and go over there.
I'm like, do you have business over there? Do you have people over there? Do you have infrastructure over there? Because it'd be really, really bad if you have to enforce over there. It's going to be tough. You have no infrastructure.
Are there any situations where you do go offshore?
Brent: It tends to be non-Americans. Foreign clients who are, say, investing in the US. We might set up a trust for them that's a non-US trust although we set up plenty of US trusts for those people.
But sometimes, it's better to set up a trust in a foreign jurisdiction because their home jurisdiction and that jurisdiction are more friendly to each other than that jurisdiction in the US, so we'll use the foreign country to set up the trust. That's really it.
Frankly, the US tax laws and the US trust laws are so good and so robust, and it's such a good environment for investments that very frequently, the trusts are here even for foreign clients.
Toby: My experience too. Us is hard to beat. We tax worldwide income, so you're not going to move it outside the US and somehow still have access to it and get it, but why would you? Buy the asset, let it appreciate, borrow against the asset, and it's going to step up when you die. There are just so many other benefits that are floating around here in the US tax code. Why go mess around overseas unless you're Amazon?
Brent: I get that from people sometimes. What about Amazon, Apple, and all these companies? I say, you're not a company. You play by a completely different set of rules. What are you thinking?
Toby: And they've been hit with billion-dollar fines too. Apple is getting crushed.
Brent: Just don't. You're an individual. Don't. It's not worth it.
Toby: Yeah. You don't need your team of lawyers to go overseas and try to argue why you should pay the tax that they're trying to assess on you that you set up to avoid. Sometimes, it's easier just to keep it simple.
Brent, how does somebody get a hold of you if they want to reach out?
Brent: If they google Brent Nelson lawyer, they'll probably find me. I'm a partner at a firm called Rimon. I live in Tucson. The firm is an international firm of about 180 lawyers or so.
I'm on social media, @wealthandlaw, and I have a podcast, the Wealth and Law podcast. That's on all the normal aggregators, Apple, Spotify, et cetera.
Toby: I'll put you in the show notes too. I'll make sure that we put a link so it's easy to find you.
The world needs good people like yourself. Again, we have some crossover, but I have no problem in saying reach out. If you're somebody who's over that $5 million mark and you want somebody who knows what they're doing, this is what guys like Brent do all day. You want somebody that knows their stuff 100%.
I really appreciate you coming on. I was going to call this trust scams and things to avoid. We all see them and every time somebody comes running in and says, I don't have to pay tax, this guy said, I'm always like, oh no, not again.
Brent: Not again, exactly. Let me give the compliment the other way too so if anything I said makes somebody think they need Toby's services, great. That's fine. The world is abundant. That doesn't bother me at all.
Toby: Never a worry here, but I just appreciate you sharing.
Brent: Likewise.
In this episode of Anderson Business Advisors, Toby Mathis speaks with attorney Brent Nelson, partner at Rimon Law in San Franciso. Brent helps his clients understand, improve, and protect family structures that include trusts, business entities, private investments, charitable giving, and family governance. He is an established and respected thought leader in his field, and hosts the popular Wealth and Law Podcast.
You’ll hear Toby and Brent discuss a wide variety of scenarios and situations surrounding trusts – who should have them, how they can benefit you, and all the things they can’t do. People out there will try to tell you that you can avoid paying taxes by utilizing a trust, but as Brent and Toby explain, the IRS and the courts will usually always win, and they will eventually get what you owe. In fact you may even be paying more taxes than necessary with some trusts. In the end, you won’t get out of paying the taxes you owe, and you may just complicate your life by stashing your money in certain kinds of trusts, especially those promoted by less-than-scrupulous individuals.
Highlights/Topics: * Trusts are not a way to avoid paying taxes - grantor trust rules * Only certain trusts can own S-corp stock * A “three-trust mechanism” – is it valid? * When you should use a trust and its benefits? * Promissory notes for stocks in trust * Making sure trusts allow the client to live the lifestyle they are used to * Non-US citizens/non-residents cap has been $60,000 since the 1930s * If you have a green card, you can be taxed and fall under the $12M cap * Canada’s exit tax * Setting up a simple living or revocable trust is advisable no matter how little money you have * Fund-promoted trusts in foreign jurisdictions – be very suspicious - you don’t save taxes, it’s just more complicated
Resources: Brent Nelson LinkedIn
https://www.linkedin.com/in/brent-nelson-0a485ba/
Wealth and Law Podcast
https://wealthandlaw.com/category/podcast/
Wealth and Law Twitter
https://twitter.com/wealthandlaw?lang=en
Wealth and Law Facebook
https://www.facebook.com/wealthandlaw/
Rimon Law Website
https://www.rimonlaw.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Today’s Tax Tuesday episode answers several listener questions on S-Corps vs. LLCs. Eliot Thomas hosts with special guest Jeff Webb, CFO of Anderson Business Advisors. Online we have some of the staff from Anderson – Dana, Dutch, Ian, Piao, and Troy here answering live chat questions.
In this episode, you’ll hear our advice on several scenarios regarding potentially switching from an LLC to an S-Corp and the likely tax benefits, along with several questions about purchasing property for your children to live in while they are attending school or just getting on their feet. Submit your tax question to taxtuesday@andersonadvisors. Highlights/Topics: * “I have an LLC now for a small business, and I'm wondering what the benefits are of switching to an S-Corp and what the tax deduction benefits might be?”--- If it’s an LLC, it's got liability protection. If it's not making a lot of money, (under $50K) – probably don't go the S-Corp route. * “Can cost segregation depreciation be done on a property purchased one or two years earlier? If so, is it state-specific? Would it be a great option if that was a possibility with REP status?” You can go back in time and do the cost segregation. Let's say you bought the property in 2020. It's now 2022. You could do cost segregation. That depreciation from the cost segregation would appear on your 2022 return. If you do not have REP status or can't get REP status, normally cost segregation is not a great idea. * “Is there a way to convert from a 401(k) to an IUL (Indexed Universal Life) or Roth without having to pay the high tax burden, or at least minimize the tax hit?” The problem is you are going to get a tax hit if you take 401(k) money and put it in an IUL. Anything you take out the 401(k), money's going to be taxed at ordinary rates. And if you're not 59½, you could be hit with a 10% penalty on top of it. * “I'm a member of WREIN. I purchased a house and a condo in the past few months that two of my children currently live in. There is a mortgage and my soon-to-be daughter-in-law is on that with me. I pay the mortgage on the living costs, including tuition. Should I claim this home as a rental?” You can't just write a check or gift it and say, now I'm going to have them pay me rent back. The IRS has seen through that. That's a gift. It doesn't sound like they're paying anything so I see no rental here. * “My son is 26 and in his second year of post-secondary education. The condo doesn't have a mortgage. I purchased it with funds from a private money lender in April that I have paid off with a HELOC from my primary residence. What would be the most advantageous way for me to claim this home, rent, and the best strategy? We've created a problem with our second home because we now have more than two private residences. Once again, I would probably deduct the HELOC as investment interest. Whichever one has the higher mortgage should be your second home. The next one would just be investment interest on an investment you own (the condo). And again, you can deduct the taxes on as many properties as you own. But again, you still have that $10,000 cap for state and local taxes. * “Due to having two W-2s, I cannot qualify for real estate professional status nor can my partner. What is the best solution to minimize the tax bill coming at the end of the year? By the way, with both W-2s, I will be moving to a higher tax bracket that neither W-2 knows about. I will owe more taxes than they take out at the end of the year, unless I find some way to get my passive losses from depreciation available to lower my W-2 bill.” If you make $50,000 in each job, you’re going to have a whole lot more taxes and probably going to be under-withheld because it's based on $50,000 on each job. REP status doesn't work. You could do a short-term rental. Be sure to adjust your W4s for two jobs/withholding. * “I just moved to Arkansas and sold and purchased properties here in Arkansas through a 1031. How do we get taxed on the remaining amount that was not used as a 1031 replacement property? I reserved some of the money from the sale as I don't know what my tax bracket here is for taxation, and how much. I would be paying income tax. Can you give me an answer using the percentage of the sale?” Every dollar that you held back from the 1031 exchange is going to be taxed. And the first tax is going to be depreciation recapture, at a max of 25%. And the rest is capital gain at around 15%. * “I'm interested in using an accountable plan. Can you differentiate between a home office deduction,” which is on Schedule A, I believe, “and requires an exclusive home office use, versus the administrative home office which appears not to need the exclusive use?” ‘Unreimbursed employee expenses’ was eliminated at the end of 2017, so that doesn't work anymore. Your only choice (especially in an S-Corporation) is a reimbursement. * “I'm not qualified as a REP (real estate professional) but with passive losses. Is there any way I can reduce my income with these losses and what can I do before this year is completed?” The only thing you can do with passive losses is offset them with a passive income, which effectively means you're not using your passive losses to reduce your income. Short-term rentals are not rental activity. * “We have mainly W-2 income and also some investment properties passive. Our W-2 is too high to get tax deductions from its loss besides doing a short-term rental Airbnb. What are other ways we can deduct our W-2 income tax?” Max out those retirement contributions. Oil and gas is another still popular investment. There you have to have a working interest—that's very important—but it is a write-off that's substantially all of your investment for the most part. * “We are about to apply for a HELOC. We do not own our home yet. My husband is the only moneymaker right now. We want to buy my daughter a mobile home. It's approximately $47,000. Our credit score is over 800.” I don't think this is a business, and I think wrapping an LLC around this property is a bad idea. But the daughter would have to be paying market rent. You would have to run it as a real business. * Check out our events coming up later this month.
Resources: Email us at Tax Tuesday Tax and Asset Protection Events Anderson Advisors Toby Mathis on YouTube Full Episode Transcript: Eliot: Hello everybody. My name is Eliot Thomas. This is our tax Tuesday for today. I’m sitting in for my boss, Toby Mathis, and I'm joined today by our CFO back from vacation, Jeff Webb.
Jeff: Glad to be here.
Eliot: Yup. Glad to have him back. Just before we get started, of course, this is where we answer your questions, bringing that tax knowledge to the masses.
I just want to thank the staff who's helping out here behind the scenes. We have Matthew, Patricia, and Ander. As far as answering questions we have Dana, Dutch, Ian, Piao, and Troy right now in the background. There'll be answering your questions that come through over into the Q&A section. We're going to go through 10 questions here. We'll show them here at the beginning, real quick.
First of all, here are our rules. We do answer live Q&A. That again is the group that will be answering the back in the Zoom. You can email your questions to taxtuesday@andersonadvisors.com. That's where I actually drew these questions that we have today from. We do answer them, we do select from them, and try to get to as many as we can.
If you need a detailed response, you will be needed to become a platinum client or a tax client, and we can have those questions answered on the platinum portal. We try to make this fast, fun, and educational. We want to give back to help educate our clients and those who aren't clients just to help learn a bit more about tax.
Jeff: Patti just added to the chat to make sure. If you're asking a tax question that you need answers to, ask it in the Q&A section, not the chat section. The chat section is for making general comments and so forth, making fun of Toby or stuff like that.
Eliot: Or the battle between Clint and Toby, we can do it there. I apologize for that. I'm used to the Zoom meetings where we have the chat, but here it's a Q&A section where we ask the questions, so sorry for that confusion.
I'm going to go through all the questions first that we'll be answering today. First one, “I have an LLC now for a small business, and I'm wondering what the benefits are of switching to an S-Corp and what the tax deduction benefits might be?”
Number two, “Hello. Can cost segregation depreciation be done on a property purchased one or two years earlier? This was a common. I happen to notice it in one of the blogs. If so, is it state-specific? Would it be a great option if that was a possibility with REP status?” That's real estate professional status. We'll look into that one.
Number three, “Is there a way to convert from a 401(k) to an IUL (Indexed Universal Life) or Roth without having to pay the high tax burden, or at least minimize the tax hit?” Excellent question there.
More questions here. “I'm a member of WREIN. I purchased a house and a condo in the past few months that two of my children currently live in. Both are in Pennsylvania where I live. The house is occupied by my son and his fiancee as they both attend college nearby.
There is a mortgage and my soon-to-be daughter-in-law is on that with me. I pay the mortgage on the living costs, including tuition. Should I claim this home as a rental?” Then I think we're talking about the next thing, the condo here.
“My son is 26 and in his second year of post-secondary education. The condo doesn't have a mortgage. I purchased it with funds from a private money lender in April that I have paid off with a HELOC from my primary residence.
I just finished rehab and she moved in last month. I'm the only one on the deed. I believe she'll only live there for a year or two maybe. She's a recent college grad and currently a teacher. What would be the most advantageous way for me to claim this home, rent, and the birth strategy? I'm planning to purchase another home as soon as I find a good one, also in Pennsylvania.”
Next, “During the pandemic, I resorted to working two W-2 jobs, both full-time, and took their share of taxes away before I saw it in my bank. Due to having two W-2s, I cannot qualify for real estate professional status nor can my partner. What is the best solution to minimize the tax bill coming at the end of the year?
By the way, with both W-2s, I will be moving to a higher tax bracket that neither W-2 knows about. I will owe more taxes than they take out at the end of the year, unless I find some way to get my passive losses from depreciation available to lower my W-2 bill.” So we'll examine that.
“I just moved to Arkansas and sold and purchased properties here in Arkansas through a 1031. How do we get tax on the remaining amount that was not used as a 1031 replacement property? I reserved some of the money from the sale as I don't know what my tax bracket here is for taxation, and how much. I would be paying income tax. Can you give me an answer using the percentage of the sale?”
We'll do what we can to help you with that one. We might need more detail to really narrow that one down. But we'll be able to walk that through, I think.
Next, “I'm interested in using an accountable plan. Can you differentiate between a home office deduction,” which is on Schedule A, I believe, “and requires an exclusive home office use, versus the administrative home office which appears not to need the exclusive use?” We'll definitely tear that apart there and look into it.
Next, “I'm not qualified as a REP (real estate professional) but with passive losses. Is there any way I can reduce my income with these losses and what can I do before this year is completed?” Now, I picked that one because it goes very well with the very next one.
“We have mainly W-2 income and also some investment properties passive. Our W-2 is too high to get tax deductions from its loss besides doing a short-term rental Airbnb. What are other ways we can deduct our W-2 income tax?” Those two go together and we'll look at that whole issue in a mass spectrum there.
Last question here. “We are about to apply for a HELOC. We do not own our home yet. My husband is the only moneymaker right now. We want to buy my daughter a mobile home that happens to be in a town in Indiana but not Alpine property. It's approximately $47,000. Our credit score is over eight.
What will be our tax obligations and what to prepare for, and should we make it an LLC? Maybe you have a link from a tutorial you can direct me to as well. She and her husband will be making the loan payments until they can qualify to buy it in about three years.”
We'll get to those questions here in just a second. Just a reminder, that you can join us on YouTube. Subscribe on YouTube for the latest updates. We have a lot of videos. The partners are always putting out videos as well as fellow staff, and colleagues here at Anderson. You can listen to podcasts at andersonadvisors.com/podcast and watch the replays in your platinum portal.
Jeff: That's why I'm sitting here quietly. Can't make mistakes if you don't say anything.
Eliot: Okay, first question. “I have an LLC for now with a small business, and I'm wondering what the benefits are of switching to an S-Corp and what are the tax deduction benefits.” Jefferson?
Jeff: Here's my thing with the small business. It's in an LLC, so it's got liability protection. If it's not making a lot of money, I probably don't go the S-Corp route. And by a lot of money, I'd say under $50,000. What's your feeling on that?
Eliot: If we go back and forth behind the scenes talking about this and I'd say we’re $40,000–$50,000, you might change my mind if you really know what you're doing with operating your business. By that, I might accept a little bit lower.
We'd like to see a client have a fair amount of income before you make that S election because it is going to add a new tax return to you and bring a little bit more complication into your world. We want to see you get those tax benefits. To be sure, there are tax benefits and we will definitely go over those.
Being an LLC, I was assuming when I first saw that you're talking about a sole proprietorship, but that doesn't necessarily need to be. It could be a partnership, it could be a C-Corp, in which case there are different issues if you went to an S. I probably wouldn't recommend it necessarily from a C to an S perhaps.
Jeff: So assuming that it is a sole proprietorship. Another, we just talked about if you’re not making a lot of money. But if you have (say) a high W-2 over $150,000–$160,000, you're already maxing out the social security part of that.
The reason we bring that up is because you're not paying the social security part on the self-employment on the sole proprietorship. That gives you even a little more leeway or let's say less of a reason to go to an S-Corporation.
Eliot: There are three things, three prongs we typically look at for an S-Corporation of really nice tax benefits leading into that part of it. One of them is savings on self-employment tax.
But as Jeff points out, if you're already making a lot of other income on your return that's covering your bill (so to speak) for the initial part of that 15.3% which is about $150,000, there's not a whole lot of savings to be had from self-employment savings in an S-Corporation.
If you're under that, well then that's a different story. If you had no other income, and it's just your sole proprietorship, then maybe we will have possibly some significant self-employment savings, plus other tax benefits, which again, we'll get into. I think that's what Jeff’s referring to. It does matter on the amount of income we have coming in.
But once we're there, if we did decide to do an S, two of the things that we typically talk about is the accountable plan, which just means that's fancy for IRS reimbursement, and that's usually where you have your administrative office which we're going to talk more about later on one of these questions, but that's reimbursement for that. Cell phone, internet, mileage, they’re all reimbursements you can do through that and you can do your corporate meetings through ADA, and those will be your tax benefits.
Jeff: I'm not sure how much of a benefit this is. You can do a 401(k) plan through the S-Corporation, but you can do a SEP contribution through sole proprietorship. The big difference I see there is that a retirement plan contribution through a sole proprietorship is not deductible from the Schedule C income whereas a contribution to your retirement and the S-Corporation does reduce that income.
Eliot: Yeah. We see that reduction from the overall corporation, the income that would otherwise be taxable through the flow through onto your return. There are benefits like that, too.
Unfortunately, what this boils down to is that it would really need a consult to really look at the numbers to see if this was beneficial to you or not. But just to give you an idea, if we're looking at around $50,000 of income coming in, then I think we would typically go stronger towards maybe an S-Corporation and might be in your best interest with these reimbursements and corporate meetings and things like that, and possible savings on self-employment tax.
Also, something I guess we didn't bring up here yet that Toby really hits on is that Schedule C traditionally has been a lightning rod for audit risks. If you have nothing to hide, you shouldn't worry about an audit, but they do get audited a lot. That's one thing that Toby often will tell us, hey, maybe we won't get into an S-Corp because they have statistically much less chance of getting audited.
Jeff: Agreed.
Eliot: All right, number two. “Hello. Can cost segregation depreciation be done on a property purchase a couple of years prior? This was common I happen to notice on one of the blogs. If so, is it state-specific? It would be a great option if it was a possibility with REP status.”
Jeff: Let's talk about the first part of the question. You can go back in time and do the cost segregation. Let's say you bought the property in 2020. It's now 2022. You could do cost segregation. That depreciation from the cost segregation would appear on your 2022 return. You don't go back and amend prior year returns. You do what's called a change of accounting method. What that allows you to do is catch that depreciation up and collect all of that from the cost segregation.
Now, I liked that he pointed out the state-by-state issue. It's not a state-by-state issue because it's one or two years old. It's a state-by-state issue because some states—I’m going to use our friend, California—don't allow bonus depreciation. I do a cost segregation and I end up with $100,000 of bonus depreciation, and I got this huge deduction on my federal return. Then I look at my California or whatever state that maybe return…
Eliot: And I still owe.
Jeff: And I still owe, exactly.
Eliot: That's the big thing. The issue of state-specific is always there when you're dealing with California. This is one of those times where you have to know the state you're in, and whether or not they allow that bonus appreciation. California is not alone in this. There are other states that don't recognize that as well. I think they're in the minority, but they are out there.
If you did have the REP status, though, and this was on long-term rentals that you'd aggregated or this was a property that you materially participated in and made you 750 hours, et cetera, all those tests, then yeah, this would be a great play for writing off against ordinary income on your return. That's correct.
Jeff: I'm sure this is coming up later, but if you do not have REP status or can't get REP status, normally cost segregation is not a great idea.
Eliot: The only time that it would be beneficial is if you had an abundance of positive passive income, and you still are trying to write off against it. That'd be about the only time I would still recommend REP.
Jeff: Like maybe they've invested in Toby's pizza shop that's just making them money.
Eliot: Exactly. Every time we talked to Toby, that thing is doing great.
Next, number three. “Is there a way to convert from a 401(k) into an IUL (Indexed Universal Life Plan) or Roth without having to pay the high tax burden or at least minimize the tax hit?”
Jeff: I've seen the strategy out there converting from a 401(k) to an IUL. Each has its own advantages. The problem is you are going to get a tax hit if you take 401(k) money and put it in an IUL. Anything you take out the 401(k), money's going to be taxed at ordinary rates. And if you're not 59½, you could be hit with a 10% penalty on top of it.
Now, there's a way to get out of the 10% penalty. I'm not sure how well it works. There's an exception to the 10% penalty if you have substantially equal payments being paid to you. First, you'd have to roll over your 401(k) into an IRA, and then start taking those substantial payments.
The problem I have with that is if you're willing to put it in an IUL, you're not going to be receiving large amounts of funds that you can contribute to that IUL which is what you typically want to do.
Eliot: I'm not a big fan of what I've read out there about trying to do this. Instead of doing a convert, you could maybe take a loan. Pay that into the IUL for the premiums or whatever, but you'd have to still have to pay back for the loan. That's not a perfect solution, either, but I think you're going to get hit with the taxes.
Jeff: The IUL has downside protection, whereas with the 401(k) you could lose a lot of money if you invest wrong. There are advantages to this and disadvantages to that. Maybe you think we're going to be going into a bear market for the next 20 years and IUL would obviously make more money, but is it going to make enough to offset that tax burden?
Eliot: Yeah, that liability you're going to get hit with. I think 72(t) was the removal you're talking about to try and get money out of the 401(k). There's rule 72(t) they call it if you take equal payments but you're paying tax. You just don't get it. You don't have the penalty on them. So there's (I guess) that half-plus if you will.
Other than that, I always bring up this. You bring up that last sentence or at least minimize the tax hit. If you are doing the right type of investments, we can always look for other things on your return. It's just not going to come from this set of facts with a 401(k) going into IUL.
If you invest in other things that give you a write-off, maybe oil and gas or something like that, or a short-term rental that you are materially operating or something of that nature, we could look for other things on the return to help offset this tax hit. But from this specific scenario, moving 401(k) to an IUL, I don't see a lot of options.
Jeff: This is one of those strategies that could possibly work, depending. If I'm a high W-2 earner, it's going to trash me. If I'm taking a year off from work or just retired, my income is low this year, and I'm married and as you said, get some other good write-offs, maybe you're in the 12% bracket, maybe you're in the 0% bracket, and can make this work for you. I'm much more willing to do this in a 12% bracket than I am in a 34% or a 37% bracket.
Eliot: Again, not wanting to speak for Toby, but I've heard him often say that in these situations, it's tough to make that money back up if you had to pay out that tax bill if you're in a higher bracket. So he often questions the wisdom of moving into a Roth later on from a plan like this.
I know we're all worried about taxes going up but you got to remember that loss that you're taking of investment power by paying it into the US government. That's something to take into account as well.
Jeff: But you know? That's a good point. You mentioned Roth. I would think a lot of the same rule of thumbs of converting to a Roth applies to converting to an IUL.
Eliot: Because we're still having that tax hit.
Jeff: Yup
Eliot: All right. Hopefully, that helped.
“I'm a member of WREIN. I purchased a house and a condo in the past few months that two of my children currently live in. Both are in Pennsylvania where I live. The house is occupied by my son and his fiancee as they both attend college nearby. There is a mortgage and my soon-to-be daughter-in-law is on that with me. I pay the mortgage and all the costs of living, including tuition. Should I claim this home as a rental?”
I'm going to stop right there and break these up. The next part is the son in secondary education might be part of the same scenario. It doesn't really matter one way or another. But let's separate the house from the condo and just deal with the house going on here.
Jeff: And if you're wondering what WREIN is, that's a Women's Real Estate Investors Network.
Eliot: Yes. It's a group that we've had a lot of fun working with lately and good success and hopefully been very helpful to them.
So we got the house. I think the key here is do we want to maybe turn it into a rental? Well, that begs the question. I don't know. Are they paying rent? It sounds like you are providing all this stuff to them. You can't just write a check or gift it and say, now I'm going to have them pay me rent back.
The IRS has seen through that. We've seen the cases. They're not going to accept that. That's a gift. We don't have a rental situation here. They would need to have earned income and be paying you not just rent, mind you, but market rate rent before we would have a rental situation. Right now, what you have is a second house, and you have a family living there.
Jeff: Basically what Eliot said, this is not a rental property at all. The mortgage interest you're paying, you could deduct that on Schedule A. Likewise, any taxes that you're paying on the real estate up to the $10,000 cap. There is that. But otherwise, just because the potential daughter-in-law is on the mortgage really carries no weight at all.
Eliot: It doesn't really change the fact pattern too much because they're not paying anything right now on this as it is right here.
Jeff: And with you paying tuition, I'm sure they're not paying rent.
Eliot: And all the costs of living including tuition, so it doesn't sound like they're paying anything so I see no rental here.
Now moving on to the next one, the condo. “It doesn't have a mortgage. I purchased it with PML (private money lending) in April, and I've paid that off with a HELOC for my primary residence. I just finished the rehab, she moved in last month, I'm the only one on the deed.
I believe she'll be there for a year or two. She is a recent college grad and is currently a teacher. What would be the most advantageous way for me to claim this home rental birth strategy? I'm planning to purchase another home as soon as I find a good one, also in Pennsylvania.”
Jeff: Now we've created a problem with our second home because we now have more than two private residences. Once again, I would probably deduct the HELOC as investment interest.
Eliot: I think that's where you'd want to go because we can't probably get on Schedule A with the two house limits.
Jeff: Whichever one has the higher mortgage to be your second home. The next one would just be investment interest on an investment you own (the condo). But again, if she is not paying fair rental market rate, arm's length transaction, and so on and so forth, it's not a rental property and it makes the argument even harder that she's a relative.
Eliot: I have seen cases where they look into that. Some of them I've seen were more geared towards where you have a family member renting a house that you picked up as a replacement in 1031. The same applies that even if it wasn't part of 1031, the IRS wants to see that they're paying market rate.
In one particular case I read, the taxpayer documented that the market rate would say $1500–$1700 in that neighborhood a month. But the IRS found someone paying $1800 and they said that that’s the market rate, even though that wasn't the outreach. The IRS can play hardball on this one, so I'd be careful with that.
Jeff: We had one where the parents were renting to the daughter. The rent was $35,000 a year. It’s an expensive place in LA. But when you looked at the daughter's W-2s and her income, her income was less than half of that, so that's almost an automatic fail to that test.
Eliot: Makes you wonder. That's the kind of thing the IRS is going to see right through. We would hope they'd see that. Anyway, the most advantageous way probably the best you can get off here is maybe interest investments. Is that our interest expense?
Jeff: And again, you can deduct the taxes on as many properties as you own. But again, you still have that $10,000 cap for state and local taxes.
Eliot: Yup. All right.
Jeff: Hang on. She asked about combining the PRR which is fine, but if we're talking about the condo, you want to make that a true rental property first. I even see that as being a problem when going to the lender to do the refinance and they're not really seeing a cash flow coming in.
Eliot: I see it as a potential problem for a lender. You want to show some profitability, maybe absent the depreciation expense.
Jeff: And once I get to three true rental properties, I'm probably considering putting them in definitely an LLC partnership.
Eliot: Better lending terms typically with a partnership. Hopefully, that will give you some path going forward on that. Great questions.
“During the pandemic, I resorted to working two W-2 jobs, both full-time jobs, both take their share taxes away. Due to having two W-2s, I cannot qualify for real estate professional status, nor can my partner. What is the best solution to minimize the tax bill coming up at the end of the year?
By the way, with both W-2s, I'll be moving into a higher tax bracket that neither knows about, so I will owe more taxes than they take at the end of the year unless I find some way to get my passive loss from depreciation available to lower my W-2 bill.”
Jeff: When you fill out a W-4, if you fill it out correctly (and hardly anybody does), there is a place to calculate income from two W-2s for this very reason. I mean, you're exactly right.
If I make $50,000 in a job, I'm not going to have a whole lot of taxes. If I make $50,000 in two jobs, I'm going to have a whole lot more taxes and I'm probably going to be under-withheld because it's based on $50,000 on each job. The first thing you might want to do is adjust your W-4s.
Eliot: You can now request more to be taken out.
Jeff: You can request it from both. We don't know how much we're talking about in this situation. REP status doesn't work. You could do short-term rental. I don't know. What else do you have?
Eliot: Little things that we look at maybe contributing to a retirement plan, HSA. I don't mean to say that those are small ideas, but they typically wouldn't have that big bang like a short-term rental. HSA, retirement plans, things of that nature, anything to lower your overall tax burden while getting some benefit. Even though you lose the cash, it goes into an investment, but you're getting the tax benefit at the same time.
I would recommend probably adjusting those W-4s like Jeff’s saying to have a little bit more taken out. That way, you don't have to worry about cutting a check at the end of the year. You got that burden taken care of and now you can just focus on investments such as what we were just talking about that can help your taxes.
Jeff: I'm going to approach this from a different angle. This is me. I'm working two full-time jobs, and getting two W-2s. Do I want to take a massive amount of money and put it into an investment to save myself some taxes? I'm thinking about working 80 hours a week and I suppose there was a reason for it. Maybe it's to make the extra money. Maybe it's to just get by to fulfill my needs. But when it comes to dumping into an investment, I think I'm very careful about what I'm investing in.
Eliot: Yeah. Why are we doing this extra work and putting ourselves through this? One investment that might work, we get into Toby's pizza shop that we always talk about.
If you do have a passive loss from depreciation which you're noting here, what if you found another passive investment like a pizza shop that you don't have anything to do with, you’re just a limited partner that is generating income? That passive income would be offset by depreciation. Now, that is not going to change anything on your return as is, but it's going to help you use that depreciation loss instead of just building up on your return.
That might be something to look at because as Jeff pointed out, there's a reason you’re doing twoW-2 jobs. If it is to try and make an investment, you could carefully architect it in a manner that's getting written off by what we call a PIG—a passive income generator. Hopefully, that helps you out.
“I just moved to AR—Arkansas—and sold and purchased properties here in Arkansas through a 1031 exchange. How do we get tax on the remaining amount that was not used as a 1031 replacement property? I reserved some of the money from the sale as I don't know what my bracket year is for taxation. How much are we paying come tax time? Can you give an answer using the percentage of the sale?”
Jeff: No.
Eliot: But we can help you here.
Jeff: We can give you an answer. Every dollar that you held back from the 1031 exchange is going to be taxed. And the first tax is going to be depreciation recapture, which is at what percent? Twenty-five?
Eliot: A maximum of 25%.
Jeff: You're going to get taxed on the depreciation recapture first, and then the rest will be capital gain. Let's say you have a $75,000 capital gain total of $10,000 recapture and you held back $30,000. Did that make it too complicated?
Eliot: No, I got it. $75,000, $10,000, $30,000.
Jeff: So you first got to recapture that $10,000 at 25% a year. The next $20,000 is going to be taxed at whatever capital gain rate you are—0%, 15%, or 20%.
Two points here. Depreciation recapture is never going to go above your capital gain. If you had kept $200,000 of cash, you wouldn't be taxed on all that. Just the amount that is capital gain. In this case, I think I said $75,000. I would pretty much count on every dollar being taxed somewhere between 15% and 25%.
Eliot: There is a huge bracket for your capital gains at 15%. I did bring the little cheat sheet here, but it takes me time to find it here.
Jeff: Is it around $500,000?
Eliot: It’s $83,000 up to $517,000. That's your 15% capital gains rate. That's a big chunk. A lot of territory in there so you can almost bet your bottom dollar against in this case that it's going to be 15%. Unless you're over half a million, and then it will go up to 20%, just the amount that's above $517,000 mind you.
That will give you a rough ballpark of what you're looking at. But back to your original part of the question, “Hey, I withheld some of the money from the sale,” that will be taxed. We know it's going to be depreciation recapture first at a max of 25% and then the rest of cap gains is probably a lot of it at 15%. It just depends on the dollar amounts we're talking about here.
Jeff: There's nothing wrong with holding money back. Sometimes you may need a new car or house repairs or any number of things, whatever you want to do with the cash. It's fine as long as you keep in mind that 15%, 20% (maybe) is going to go to the government.
Eliot: And 3.8% net investment income tax.
Jeff: Once you get over $250,000.
Eliot: We can't give you the exact percentages, but hopefully that helps narrow it down for you.
Jeff: And the depreciation recapture is going to be at your ordinary rate.
Eliot: Yup. All right. “I'm interested in using an accountable plan. Can you differentiate between a home office deduction,” which is on Schedule A, I believe, “and requires an exclusive use of the home office versus the administrative home office which appears not to need an exclusive use?”
Jeff: You are correct about Schedule A if this was still 2017. That was considered unreimbursed employee expenses. That was eliminated at the end of 2017, so that doesn't work anymore. Your only choice especially in an S-Corporation is a reimbursement. While you don't get to deduct it on your return, in a way you still do because it's being deducted on your S-Corp return and it's going to lower that S-Corp income that's flowing back to you.
Eliot: And if we're in an S-Corp situation, we're using the accountable plan which means that this (as you point out) administrative office is a reimbursement, so you're going to get cash back in your pocket.
If you had $1500 worth of expenses for this office, the S-Corp will cut you a check for $1500. You put that in your pocket tax-free, and then the S-Corp takes the deduction. You’re saving on your tax return via the S-Corp as well as getting your money back.
It's a no-brainer to use the administrative office if we can if we are in a corporation for that. We can't do that unless we are an employee. We cannot be an employee of our sole proprietorship or our partnership, so we must be an S-Corp or a C-Corporation.
Another aim here, though, you get into this exclusive use. You still have to use this for the exclusive use of the business. Even if it's an area where you have your dining table where you would have formal events and you've turned that into your office.
You take everything away for one day for Thanksgiving to have everybody in there, you've lost the ability—at least in the tax code’s eyes—to use it as a deduction because it has to be used exclusively for the business, on both of them. Exclusive and on a regular basis use. Alright, so hopefully that helps you out there.
“I'm not qualified as a real estate professional, but I have some passive losses. Is there any way to reduce my income with these losses and what can I do before this year is completed?”
Now this question ties in very much with the next question. That's why I brought both of these in together so we'll try and look at this whole as an issue. We already started answering this in one of the earlier questions. Jeff, what do you think?
Jeff: No. And you brought this up earlier, the only thing you can do with passive losses is offset them with a passive income, which effectively means you're not using your passive losses to reduce your income.
Eliot: You found some other investment, creating more income, but instead of paying tax on it, it's going to be written off by your passive losses. That's one thing you can do. Again, we're not lowering taxes. We're taking advantage of the fact that we have passive losses we haven't been able to use.
But then there is Airbnb, the short-term rental. If we truly qualify for what's in the tax code a short-term rental, which is not the same definition as a general public out there, and we are the one operating it, we're getting services done, and it's less than seven days average day, you can do some great things with depreciation to write off against any income on returns. That's always a first. That's probably our first go-to or having the passive income generator business or something like that.
Again, we have the HSA. Maybe you can contribute to retirement plans, things of that nature, oil and gas investments if you have a working interest. Those are all things that would still help us write off income here.
Jeff: I don't think we can say this often enough that when we talk about Airbnb, short-term rentals and all, it can't be combined with your other long-term passive investments. They're not the same thing.
Eliot: Your long-term rentals which are giving you the REP status or not giving you REP status, that is a rental activity. In the tax code, unfortunately, it's very confusing, but a short-term rental is not a rental activity. Short-term rental is not a rental activity. Only the US government can come up with this, okay?
It is like a hotel when we talk about short-term rental. Here in Vegas, we have a lot of hotels. They're not renting to people. The average day is less than seven days of providing some services. You look like a hotel. That's what you want to do for a short-term rental because if you're the one managing that, putting more time in than everybody else, it's less than seven days.
Now, you're no longer in your REP status. It's not a rental. You could do depreciation cost segs and things like that, and get some heavy write-offs that are ordinary losses that would go against your W-2 income.
Jeff: Here's the thing with short-term rentals. I probably should have brought this up before. Clock's ticking. Please don't go out and buy something on Christmas eve and try to say it's a short-term rental. It's probably going to fail. That's probably a little harsh. It's going to be a challenge.
Eliot: I think it's true. It's going to fail. But yes, that is harsh. It's going to be a challenge.
Jeff: If you're talking short-term rentals, you want to go out and buy a property and Airbnb it, buy the property now. Find and buy the property now. I know mortgage rates are high. I think they've actually dropped back down a little bit. Buy the property now. Get a couple of guests to stay in your Airbnb for less than seven days. Don't screw it up with somebody staying there for like three weeks.
Eliot: Don't have a big family or someone related.
Jeff: Very important. We've had that. If I buy an Airbnb on December 15 and I have my brother-in-law stay there, no.
Eliot: Have someone that's not related. I don't care if it's your best friend or something like that. That's probably okay but just don't make it family.
Jeff: We're talking about cost segregation. Don't worry about the cost segregation right now. Get that established as a short-term rental by having renters in it and a property that you own. You have until the due date of your return, including extensions, to get that cost segregation done. On the other hand, please do not do the cost segregation in October of next year. Please get it done early.
Eliot: While we're not in a mad rush to get it done, we also don't want to delay too much into next year to get it done, either. Those are things that you might be able to do here if you don't have that REP status going on which leads us to our next question, almost similar.
“We have mainly W-2 income. We also have some passive investment properties. Our W-2 is too high to get deductions from its losses. We're probably not going to be able to do Airbnb, Eliot. Are there other ways that we can deduct our W-2 income?”
Yeah. If our income is too high, we probably won't get to be put into an IRA for deduction, but we might have some other retirement plan like a solo 401(k), maybe even a defined benefit plan if we're lucky at work or something like that, things that might assist us that way.
Jeff: Max out those retirement contributions.
Eliot: Absolutely. Oil and gas is another still popular investment. There you have to have a working interest—that's very important—but it is a write-off that's substantially all of your investment for the most part. Things along those lines.
Jeff: I would say some of the syndications. But if they're real estate syndications, you're probably going to be limited on taking losses. Even other syndications that may have losses that aren't real estate are still going to have passive limitations.
I always like retirement. If we're not taking advantage of retirement contributions when we're able to, it’s almost like leaving money on the table.
Eliot: It really is. We talk a lot about Airbnb, obviously. But remember that concept of Airbnb is like you're a motel. That holds true to any other business. If this is a time in our situation here for these taxpayers asking this question, maybe they had thought about a side gig and have something that might have an extensive outlay of cash for some asset that's depreciable. Well, you could still do 100% depreciation on that, too, more than likely.
One of our colleagues used to have a dog-washing van or something like that. If you want a side gig you wanted to get into and you bought that van, you could probably take a heavy write-off for that right away this year. It's all business that will have its loss. And if you materially participate in that business, it's going to have the same effect as having an Airbnb.
We just always talk about Airbnb because that's real estate, but any business you go into where you're buying a heavy asset that's going to give you bonus depreciation and cause that loss in the first year will have the same effect.
Jeff: One thing we don't really talk about often enough is businesses, especially in pass-through entities that are profitable and we get the year-end. And one of our biggest tax planning tools is to go out and buy something.
Your catering service, have you replaced your refrigeration units lately or things of that nature? It's an immediate write-off against the income that prevents that income from landing back on your 1040.
Eliot: Absolutely. Bonus depreciation. It was our friend at 100% until the end of this year. It doesn't leave us totally next year. It goes down to 80% though.
Jeff: The bonus drops to 80%. The good news is for retirement plans, contribution rates are increasing dramatically. I believe 10%–15%, so we shall be able to put more into our 401(k) and IRAs.
Eliot: Perfect. All right. And I think this is our last one. “My question is we're about ready to apply for a HELOC. We do not own our own home yet and my husband is the only moneymaker right now.” Now we're assuming that while you may not own it, you are paying on it because that's why you can do the HELOC.
“We want to buy my daughter a mobile home. It happens to be in Bluffton, Indiana but not an Alpine property approximately $47,000. Our credit score is over 800. What can you tell me about our tax obligations and what to prepare for, and should we make an LLC? Maybe you have a link to some of your tutorials or something that can direct me. She and her husband will be making the loan payments until they can qualify to buy it in about three years.”
Assuming that we have a HELOC we can get. Remember, that's our primary residency. When you take that and you go out and you buy an investment property, there may be a hesitation to be able to deduct that interest because that HELOC wasn't used on the house, that it's backed by your primary residence. You wouldn't take those funds somewhere else. But it wasn't an investment, so you could maybe argue as an investment and interest deduction there, perhaps. I don't know what your thoughts are.
Jeff: I agree with that, but what are your thoughts on using an LLC?
Eliot: If we're going to get an LLC, we probably are talking business. That means it would be a rental. It doesn't look like if the daughter is going in there is going to pay rent. And again, we have to make this a business. It has to be arm's length rent, fair market rent rate. Then yes, put it in LLC. Get it protected, I would say.
Jeff: I would love to sell you an LLC just because I can. But in good conscience, I don't think this is a business, and I think wrapping an LLC around this property is a bad idea.
Eliot: As it is right now, she's not paying fair market rent. It's not a business, no LLC.
Jeff: That goes back to that earlier question. I think you already addressed the HELOC. I'm not really sure what kind of taxes mobile homes pay. Usually, you're running the pad wherever it's parked.
Eliot: Maybe some personal tangible property taxes perhaps?
Jeff: What else can you do with a mobile home once they start renting it out?
Eliot: Once they start renting, then you can run it as a business if they are paying rent on it, and then they decide to buy in three years. You could make that play and then put it in an LLC. But they got to be paying market rent. You have to run it as a real business.
I realize it's family. That's why we say don't get in business with family because it's got to be a real business. We can't be cutting corners on it and sliding off on the rent a little bit on them. Other than that, I think that's about all we could do.
Jeff: If you're talking about her buying it in three years, I don't think I want to treat it as a rental. But one thing. If this is not an anchored mobile home—if you're curious as to what that means, you can look it up—if it's not anchored to the ground, it's a five-year property.
Eliot: There you go.
Jeff: And I don't want to depreciate that mobile home. Because if I do, I'm going to have a huge capital gain when I sell it to my daughter.
Eliot: Have no basis left or very little after three years and depreciation recapture.
Jeff: Yup.
Eliot: You got to make the decision. Is this going to be a rental or not, or are we just going to eat the cost right now, maybe be able to deduct some of the state and local taxes on property taxes or something like that? Other than that, it's either you’re going to turn it into a real rental business or not. If it is a real rental business, put it in LLC. If not, I wouldn't spend the extra money on it.
Jeff: A couple of these questions. I've noticed people buying properties for their children, especially when they're in school or trying to get on their feet and all. That's great. I am all for that. You just have to keep in mind that it's probably not going to have a tax benefit, at least currently.
Eliot: It might have an investment positive effect, and then goes up in value but right now you're not going to get that tax write-off typically. That was a real theme on some of the questions, and that’s why I picked them because we are hearing a lot of those come through the platinum portal, et cetera, and wanted to address some of them here.
All right. I think that was our last one. As a reminder, if you have questions, please send them to taxtuesday@andersonadvisors.com, or go on to our website, andersonadvisors.com.
As a reminder, I believe we do have this coming Saturday, the Tax and Asset Protection workshop, so please feel free to be a part of that. I think it starts at 9:00 Pacific, as I recall. That's right, Patti. Maybe you can send that through the chat.
Jeff: If you've been to that in the past, maybe you went a couple of years ago. I know I first went five years ago. It changes with the law. Not only tax law but legal law. Always go in and get that refresher every so often.
Eliot: You'll never walk away not learning something new. I always sit there and listen to it even if I'm at the office here working. I'm not even part of the thing. I'll sometimes try and get in there and listen, and I'm always learning more.
Clint always got something new. It’s the world of tax. There's always something new there. I would highly recommend it. Get a refresher. If you're not familiar with it, please join.
I think Patti put the link up there, but definitely on our website. We can get in there at andersonadvisors.com and look at events. Again, that's this Saturday.
Jeff: No, we're not promoting Ms.Patti, but I believe we also have a Tax Wise coming up on November 17th?
Eliot: Eighteenth, I thought? It’s a Friday.
Jeff: Which Toby always goes through a number of…
Eliot: Oh heavens. Yes. That's his big thing. That'll be coming up and a lot of good ideas, tax advice on that. As he says, he's going to overload you. You want to walk away with three or four good ideas. Two or three actually, I think is what he says, and always something new there as well to learn.
Jeff: There are several. The Tax Wise is always excellent. If you have not been to Tax and Asset Protection, please do that. Or if you haven't been in a while.
Eliot: Yup. A lot of good stuff coming up here.
Jeff: Structure Implementation workshop. I know we do that every so often.
Eliot: That is probably I think the most critical. Once you're in the door, that is the most critical of all the things that we have. Now we call it the Structural Implementation Series. It’s SIS now. Nonetheless, same thing, the same great content. That's where you learn okay, now I got all these tools. How do I use them? How do they all work together?
Jeff: It answers that one really common question we get. Why do I have this structure?
Eliot: Exactly. If you've ever asked yourself why Anderson gave me this, you need to go to that event. That is just huge. They do a fantastic job. Michael Bowman's on it (one of our partners) and I know that Carl has been on there. He's on a lot of them. I don't know if he's on everyone, but they have set the tone for that program, and there are a lot of great resources and great people that can help you out with that.
Jeff: Toby, Clint, and Michael like educating the clients.
Eliot: That's the biggest deal. It’s not just talk. Believe me, we hear it behind the scenes. Educate, educate, educate, and that's how we all learn. Huge on that. We want you to be a part of it. Get that learning in and you'll be all the better for it.
Well, that's all we have. Thank you so much for joining today. I think I will be actually back next Tuesday as well or the next one but then Toby's after that. Yes?
Jeff: Yes. If you enjoyed Eliot and I, we’ll be back in two weeks.
Eliot: Otherwise, if not, there'll be someone else here. All right. Thank you so much and have a great afternoon.
Today’s Tax Tuesday episode covers a variety of questions about short-term and long-term rentals, the IRS rules around those entities, and lots of tips and stories about how to report and document your time so as not to trigger an IRS audit. Toby Mathis hosts, with special guest Eliot Thomas from Anderson Advisors, and some of the staff from Anderson including Dana, Patty, Ander, Matthew, Dutch, Cindy, Trisha, Cristos, Piao - are all online today to help answer your questions. If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors. Highlights/Topics: * "For a 1031, does acquiring the beneficial interest of a land trust holding title to real estate qualify as replacement property? Same question, but an installment sale for the beneficial interest of a land trust." First question: When you look at the 26 USC 1031 and I want to say a to e, I believe, are the list of all of the exceptions, you'll see that the acquisition of a beneficial interest in a trust is one of the exceptions to being able to qualify for a 1031 exchange. Second question: What you can't do is go ‘no debt’ to ‘debt’. * "How can the IRS prove we as owners used our short-term rental for more than 14 days or 10% of rental rented days?" How can they prove it, dang it?" The reality is they probably can't unless they somehow got the ability to go out there, research, find out, bring it into court, and documents were produced, et cetera. The reality is they probably can't. But I would suggest that you'd be very honest. * "My wife is the property manager of our small real estate portfolio. What is the best way to document the hours she spends on our business as we are claiming she is a full-time real estate professional to unlock the potential extra tax benefits."We hire professionals for plumbing, AC repair, and she handles items like semi-annual home inspections, painting AC filter, deliveries, all advertising, bookkeeping, et cetera. Thank you." Put the date, what the activity was, the amount of time you spent. I'm assuming this is a local property, kind of in your town area, put down the time you drove there, the time it took to drive back, the time on the phone calling, et cetera. Any of that, just document it in an Excel spreadsheet. Use MileIQ if you're tracking mileage, for example. It'll GPS you. It'll also tell you the times and everything along those lines if you want to track everything. * "I have a Fidelity brokerage taxable mutual fund account. It is not a retirement account. The taxable account has two mutual funds inside. One is a diversified growth and the other is a more balanced 60-40," probably bonds. "I started investing in these accounts in 1992 and directed all dividends and capital gains to be reinvested in the same funds." So a drip. "On a positive note, the account has grown dramatically, but the bad news is that both funds have high costs associated with them, i.e., actively traded, high turnover, which drives up costs. I would like to somehow move the money to a more tax-efficient index stocks such as XLY, the Dividend Kings, Dow Diamonds, QQQ, S&P 500, VOO, et cetera. Will I be able to do so with no tax or minimal tax implications?" I think you'd have to sell and that is a taxable event. Now you're going to have to move it over. We might be able to do things to mitigate that around it—some lost positions or something like that—to offset that gain. But I don't know personally how you would be able to get that transferred over. So is there a way to avoid the tax on the capital gain? It's really hard. You could sell other assets that have capital losses and harvest some losses like maybe you have crypto. * "After using accelerated depreciation on a new Airbnb this year, can I avoid future recapture in the case of a sale through a 1031 exchange? Can I exclude some nights when I stayed overnight on the Airbnb property for the purpose of improvement, say installation of the gutter guards by a company the next day? I had to be there to receive the furniture delivered, which I also had to unpack, move, and put in the right places." Yes-If it's used in trade or business, yes. * "Can I take a primary home loan on a property that has been bought with 1031 exchange funds and live in the property myself?" Yes. But of course, there are rules behind it. I don't know that there's a fast and steady rule for how long you have. You have to use it after the 1031 in a trade or business. * "How does the new corporate transparency law affect our LLC structures? Are you confident that Anderson can figure out a workaround to maintain anonymity? What are the good and bad takeaways from this new law?" Well, every LLC for our clients typically is going to be underneath this because it hits all small businesses. * "Our family has Christian healthcare medical bill sharing. I'm always told this is not insurance. How does the IRS view this? Can it be deducted for Schedule A? Can it be used as an insurance deduction?" It is not insurance in the eyes of the IRS. It is just a group of people coming together and helping pay one another's medical claims and so that's why it is not insurance. Insurance is defined as something that can be deducted. This cannot be deducted. It cannot be used on Schedule A. It cannot be used as medical reimbursement. there is a proposal out there for regulation where the IRS is trying to change that. They're trying to get to this where this would be deductible. * "My husband and I acquired a short-term rental this year and are hoping to close on a multi-family property for long-term rental by the end of the year. I am on track with REP status," that is real estate professional status for 2022. "We have come across several potential listings. However, requiring a gut down in major rehab. The likelihood of having this rental done and rented is slim by the end of the year. My question is if having the listing up and ready for rental is considered in service?" If it's someone just putting the listing up there, no. It has to be available for service. It is the status you're trying to get. That means that if you did put it up there, then I could move in there right now. You run the whole risk of needing asset protection if you do something like that.I'll have it available by the last week of the year. Does that allow me to take the deduction this year? The answer is yes.so you can talk to somebody like Eliot because you are dealing with two or three issues that are very fact specific that we don't want you to screw yourself up. * Be sure to subscribe to our podcast. And if you are already a subscriber, please provide us a review of what you thought!
Resources: Email us at Tax Tuesday Tax and Asset Protection Events Anderson Advisors Toby Mathis on YouTube Full Episode Transcript: This is the Anderson Business Advisors Podcast, the show for real estate investors, stock traders, and business owners. We help you keep more of what you learned and protect what you build. Let's get started.
Toby: All right, guys. Welcome to Tax Tuesday. We're bringing tax knowledge to the masses. My name is Toby Mathis and I'm joined by?
Eliot: Eliot Thomas.
Toby: Eliot's going to sit in for Jeff today because Jeff's hanging out doing other things. Hopefully, the wonderful tax season just creamed our text staff. We still got a bunch on. I can already see a bunch of names popping in that are there to help.
I saw Ian pop up earlier. Let me see if I can actually make my cursor work. I know we got [...]. We got Dana. We do have Patty, Ander, and Matthew to help support you guys. We got Cindy, Dutch, and Piao. We got a really good team to help you guys. Trisha and Christos. You guys got a venerable pack out here of tax knowledge to help you guys out.
By all means, ask tax questions in the Q&A. If you have comments, by all means, go into chat. You use Q&A for your questions. You use chat for your comments. I already see somebody saying hello from New Hampshire. Hey, Ken. If you can, go into that chat and let me know where you're sitting.
There we go. We got Anacortes. What city and state if you can. Manteca, Roseville, Anchorage, Alaska on the couch. Odessa, Florida, now they're flying bad too fast. There's DC. There's Honolulu, Hawaii; Claremont; Atlanta, Georgia; St. Augustine, Chicago; Seattle; Ashland, Oregon; Wiley, Texas; Bailey, Colorado. There's some more Seattle, Washington, Fresno, Baltimore, Las Vegas, Nevada. All right. We got at least one hometown. Albuquerque, Los Angeles, SoCal. Tullahoma, Tennessee. Very cool. We're sitting in Las Vegas, Nevada. Eliot, how are you doing?
Eliot: I'm doing well. I had it a lot easier than Jeff and company with a tax prep, but busy nonetheless. I'm glad they're getting a break.
Toby: It's crazy and I know that sometimes it's frustrating during tax season because everybody's trying to walk through the same door at the same time and you always want to prepare for it. No good plan overcomes contact with reality. I'll put it that way. The IRS is just really, really difficult to communicate with right now. If there are any questions that go on, instead of being a five- or ten-minute phone call, it ends up being a two-hour ordeal. It's really frustrating and really tough.
There's somebody in Portland, Oregon, the home of the zombie apocalypse. We got people. There's Brooklyn, Naples, and Incline Village. We've got people from all over the country, so that's fantastic. Thanks for joining us. We do try to make this kind of enjoyable, fast and fun, and answer your tax questions.
Speaking of tax questions, if you have them during the two weeks in between these episodes, by all means, go ahead and send them via taxtuesday@andersonadvisors. We do take a look at them and I do pull questions out of that heap because it is a heap. It's several hundred questions a week that come in. I can already see tons of questions going to the Q&A, but we have people that have questions throughout the week and you can just go ahead and email those in. We may grab your question, that's all.
We love the questions. It keeps us going, and it's so much fun. There we go. Patty's already communicating with folks from Pullman, Washington because her daughter went to WSU.
All right, here we go. These are the questions we're going to go over today and we will answer all these in turn, so do not worry. We already got coops going on in the background. You guys are doing pretty good this year, right? If I'm not mistaken. I haven't paid a lot of attention to college football this year. But let's see how they're doing. I'll keep my eye rolled.
"For a 1031, does acquiring the beneficial interest of a land trust holding title to real estate qualify as replacement property? Same question, but an installment sale for the beneficial interest of a land trust." Interesting questions. We'll answer that.
"How can the IRS prove we as owners used our short term rental for more than 14 days or 10% of rental rented days?" How can they prove it, dang it?" We'll answer that.
"My wife is the property manager of our small real estate portfolio. What is the best way to document the hours she spends on our business as we are claiming she is a full-time real estate professional to unlock the potential extra tax benefits." We'll go over that too.
"We hire professionals for plumbing, AC repair, and she handles items like semi-annual home inspections, painting AC filter, deliveries, all advertising, bookkeeping, et cetera. Thank you." We'll get into that and we'll break down kind of the rules. When I say we, it means Eliot.
"I have a Fidelity brokerage taxable mutual fund account. It is not a retirement account. The taxable account has two mutual funds inside. One is a diversified growth and the other is a more balanced 60-40," probably bonds. "I started investing in these accounts in 1992 and directed all dividends and capital gains to be reinvested in the same funds." So a drip.
"On a positive note, the account has grown dramatically, but the bad news is that both funds have high costs associated with them, i.e., actively traded, high turnover, which drives up costs. I would like to somehow move the money to a more tax-efficient index stocks such as XLY, the Dividend Kings, Dow Diamonds, QQQ, S&P 500, VOO, et cetera. Will I be able to do so with no tax or minimal tax implications?" I picked that one because it was really long. No, it's a good question so we're going to get it.
"After using accelerated depreciation on a new Airbnb this year, can I avoid future recapture in the case of a sale through a 1031 exchange? Can I exclude some nights when I stayed overnight on the Airbnb property for the purpose of improvement, say installation of the gutter guards by a company the next day? I had to be there to receive the furniture delivered, which I also had to unpack, move, and put in the right places." Good questions and we'll get into that.
"Can I take a primary home loan on a property that has been bought with 1031 exchange funds and live in the property myself?" Oh, very good question.
"How does the new corporate transparency law affect our LLC structures? Are you confident that Anderson can figure out a workaround to maintain anonymity? What are the good and bad takeaways from this new law?" We'll give you guys kind of the good, the bad, and the ugly on. They said the good and the bad, so I just threw in ugly.
"Our family has Christian healthcare medical bill sharing. I'm always told this is not insurance. How does the IRS view this? Can it be deducted for Schedule A? Can it be used as an insurance deduction?" We'll get into that.
"My husband and I acquired a short-term rental this year and are hoping to close on a multi-family property for long-term rental by the end of the year. I am on track with REP status," that is real estate professional status for 2022. "We have come across several potential listings. However, requiring a gut down in major rehab. The likelihood of having this rental done and rented is slim by the end of the year. My question is if having the listing up and ready for rental is considered in service?" I'll break that one down. That's a little bit confusing to me, but we'll dive into it.
All right. If you guys like getting your questions answered and don't know the right question to ask, you can go to our YouTube channel. One of the cool things there is we're always throwing out new content every week, about two a week. Put out videos, podcasts, et cetera on a variety of different topics.
Everything from tax, to financial, to asset protection, to legacy planning, to 501(c)(3). We just go with the gamut. Feel free to join up and sign up and it is free, just like Tax Tuesday is always free, but it does help us to have you subscribe and to interact and to comment things like that because Google likes us better. I don't know why it matters whether Google likes us. I suppose it helps to have them like us. I don't know.
Eliot: It wouldn't hurt.
Toby: It doesn't hurt, I guess. All right, let's dive into these. "For a 1031 exchange, does acquiring the beneficial interest of a land trust holding title to real estate qualify as replacement property? Same question, but an installment sale for the beneficial of the land trust?" What do you say?
Eliot: At first when I saw this question, I wasn't exactly certain how we were getting that beneficial interest. I suspect maybe there isn't a sale involved, and that's the real key behind the 1031 is it has to be a sale of land in picking up a replacement that you purchased. If this beneficial interest was in some way inheritance beneficial interest, from land trust, or you put it in there, that would not qualify.
If you're saying hey, I've done the 1031, gotten a replacement, I put it in a land trust, and now I'm getting the beneficial interest, I believe that would count because it's all disregarded. If that was what we're trying to get through with this question.
Toby: All right. Let's break this down. I think they're saying I'm selling a property under a 1031, and if I buy a beneficial interest in a land trust, does that count as the purchase of a property under a 1031 exchange?
Eliot: No.
Toby: Right. It's actually specifically listed as excluded from the same way stock is excluded and it's the same as a beneficial interest in a trust is excluded. If you are the grantor of a trust, then you might be able to get away with it. If I am going from trust to trust, you could probably do it.
I would say my personal preference and I think that of most the qualified intermediaries would be that you go name to name. It has to be the same name or you're going to get scrutinized. If you are going from Eliot Thomas to buy a beneficial interest in a trust, that would not work. If it went Eliot Thomas to Eliot Thomas as trustee, that would probably be looked at. Then what they would really care about is whether you're the grantor. The IRS considers the grantor, the owner of the property, so the person that creates the trust.
Eliot: On a revocable trust.
Toby: Yeah. And an irrevocable trust, then it's not going to work then. You can do the Delaware statutory trust. They look at that kind of thing in a different vein. Those ones they've actually had, I think it was either a revenue ruling or a private letter ruling where they said that it's the underlying property that you're acquiring when you buy the DST. You could go from your name to your name buying the DST, and they'll consider you buying the underlying property, but that's a completely different issue.
When you look at the 26 USC 1031 and I want to say a to e, I believe, are the list of all of the exceptions, you'll see that the acquisition of a beneficial interest in a trust is one of the exceptions to being able to qualify for a 1031 exchange. They'll make it really easy.
Then the question about an installment sale, you always have to put the equity. You can get financing on something else. I don't want to step on you. Were you going to answer that one?
Eliot: No.
Toby: If I sell a property, then buy another property, if it has debt on it when I sell it, I can get the same amount of debt on the other, otherwise I can go in all cash. What I can't do is go no debt to debt. What you would do there is, and it's actually going to be an answer coming up in a little while, you would close and then not incidentally. It can't be something that was necessary with this property, then you would refi it. We'll dive into that one a little deeper a little bit later. Anything else you want to throw in there on those 1031 exchanges?
Eliot: No, just always be aware of the same title or less rule. That's probably where people are having the most difficulty.
Toby: Here's the final one. How about the executor of an estate and they're buying out the heirs? Can you do a 1031 exchange? You have a step up in basis when you're the executor of an estate. The chances are there is going to be no game, but let's just say that there was. No, because you're selling a property and you're buying a replacement property.
1031 is a fancy way of saying, I'm taking real estate and I'm buying equal or greater value of real estate. It doesn't matter what type of real estate, how many pieces. I sell one property and I could buy 10. What happens is the basis of the first property gets spread out amongst the 10 that you're buying. It's basically a deferral technique so you don't have to pay tax on your gain or your recapture right away.
We kick it down the path away and all you have to do to never pay tax is die, and then your basis steps up and your heirs can sell it. Somebody says, I am selling a commercial building into the estate's property. I'm an heir and also an executor.
If you're selling and you're buying replacement property, then yes. What would happen is the new property that you purchased from the estate, it's kind of weird if you're the beneficiary, you'd already have a step up in basis. I'm not sure whether you'd be disqualified here. I know that there are rules when you're selling.
Kevin is sending this via chat. You guys can't see it. What I imagine is Kevin is saying, I'm going to sell a piece of property. I want to buy the property for my other heirs. I don't think that's prohibited, so you're buying out the remainder of their interest. The only question is whether you're buying as a tenant in common, which I assume you probably would be to make this valid. I think you just have a longer holding period. I think it's like two years before you sell and you'd be okay.
Again, I'm buying in a family LP, then it has to be LP. I think that if you're buying in the family LP, you're going to have an issue. It needs to be name to name, and it has to be the real estate itself. You can't buy out the LP. You'd actually have to buy the underlying asset. It would be a specific interest, probably a tenant in common in that property.
Go ahead and throw that also in the Q&A. Our guys might grab a hold of that one. It's kind of fun. There are a few other comments in the Q&A, but I'll just sneak on. Otherwise, we'll be answering that question all day long.
All right. "How can the IRS prove we, as owners, used our short term rental for more than 14 days or 10% of rental days?"
Eliot: What do you say?
Toby: Oh, come on.
Eliot: The reality is they probably can't unless they somehow got the ability to go out there, research, find out, bring it into court, and documents were produced, et cetera. The reality is they probably can't. We have an honor system in our Cox Code.
Toby: It's facts and circumstances. The same way how can the IRS prove that I got paid for all of the widgets I sold or I'm selling burritos at a stadium. How do they know how much cash? They don't, but if you don't report it, it's called tax evasion and you go to jail. Somebody says, looking good.
Eliot: She's on my team. I pay him to do that.
Toby: It's good. Somebody says Eliot's looking good. I think you look good. Anyway, the IRS doesn't have to prove it. You have to report it. If you can't support your position that you rented it for enough days, they're going to ask you about the days that it wasn't rented. They might do fact-finding. They may want you to say, hey, you never stayed at it. In which case, if they catch you, then the ramifications are pretty severe.
They don't have to prove. You have kind of a burden when you create your tax return for a position and then they might say, hey, can you provide support for your position? That's about it. They don't really have to prove much of anything. But I would suggest that you'd be very honest. If you're using the short term rental, they might look at your bank statements. They might get testimony from somebody. It might be bad if you got caught in a lie.
Eliot: Upset neighbor was on the whistleblower. Whatever it is.
Toby: It's always an ex-spouse, ex-lover, ex-business partner. Somebody always comes up and says, did you know that Eliot's been staying there for 30 days every year and he lies on his tax return? That's why they have the whistleblower program in the IRS.
Eliot: That actually happened to one of my professors in law school for tax. One of his students was at a bar and a guy was spouting off about how he got away from some things on his tax return. The student had left and graduated and gone to work for the IRS. So there was an IRS attorney right there and some guys blabbing off in a bar about. He gave him an audit and went after him.
Toby: He says, hey, that's what you get.
Eliot: That was that.
Toby: If somebody says if the IRS suspects use over 14 days, they can track your receipts and cell phone records during your stays. They can go in there and they can get discovery. They'll get it. They'll absolutely do if they put their ears back and come after you. The best thing is to avoid the IRS.
Let's just be honest and do everything we can to not cause their ire. I tell you, you never win. Even when you win, you lose. You just try to avoid it. Try to stay off their radar. Do things that don't cause scrutiny. By the way, when we do our returns, say we do over 10,000 a year and it's less than a dozen audits every year, it's not that many. We try to make sure that we're keeping our clients from the things that cause consternation and inquiry.
That's why we don't like sole proprietorships and home office deductions. We try to keep that form from being filed or that Form SE if you may. It's kind of like putting a little beacon on yourself or filling in as a trader. If there are things that will cause the inquiry, those are a few of them.
All right, let's talk about this one. This is a good one. "My wife is the property manager for our small real estate portfolio. What is the best way to document the hours she spends on our business? As we are claiming, she is a full-time real estate professional to unlock the potential extra tax benefits?" Real estate professional is a fancy way of saying your passive rental losses could be considered ordinary active loss and offset your W-2.
"We hire professionals for plumbing, AC repair, et cetera. She handles items like semi-annual home inspections, painting, AC filter deliveries, all advertising, bookkeeping, et cetera." What's the best way to document what she's doing?
Eliot: All of those things that you list out, talking to a plumber, AC repair person, et cetera, put it on an Excel spreadsheet. Put the date, what the activity was, the amount of time you spent. I'm assuming this is a local property, kind of in your town area, put down the time you drove there, the time it took to drive back, the time on the phone calling, et cetera. Any of that, just document it in an Excel spreadsheet.
You may even want to check the time that those individuals are spending on the house as well. That gives you a full documentation that the IRS can see what actually went on. You will have to make sure you're hitting the overall tests for real estate professional status. I don't know if we want to go into depth on those.
Toby: I think it is necessary. I use phone and I can easily put something on my calendar, spend this much time, and then take it and put it in a spreadsheet. There are some programs that you can use that are time-tracking apps. If you want to do that, you can do that too. I would suggest that you use MileIQ if you're tracking mileage, for example. It'll GPS you. It'll also tell you the times and everything along those lines if you want to track everything. That's another way.
Sometimes it's easy. You pull up to a building, you're there, you're doing your supervision, you're working on the building, and you leave. Those little timestamps are actually good. If you say hey, I spent five hours there, and the IRS wants you to substantiate it even like, hey, can you give me any details? You already have it. Hey, see, this is the time I pulled up. This is the time I left. It was five hours exactly. That type of thing. It certainly helps and it keeps you out of harm's way.
Eliot: Maybe take photos too if there are repairs being done.
Toby: Yeah, but the real deal is when you say real estate professional, there are two tests for real estate professional status and then there's one test to apply it to your small real estate portfolio.
The first two-part test, it's under 469(c)(7). It's this provision that was enacted in 1986 that basically high income people were buying real estate to offset their high income and Congress shut the door on that by creating the passive activity loss rules, which is section 469.
Basically, people were complaining saying hey, I know you shut it down to stop the doctors and the lawyers and stuff from using it as a tax shelter, but I work in real estate. This is what I do. I deserve this. They get to write off their equipment. Why can I write off my property? I think it was probably 92 or 93, they carved off this provision called Real Estate Professional.
If you spend more than half of your time, and either spouse you can qualify for either spouse. Either spouse can qualify by doing 750 hours in real estate trades or businesses. It doesn't have to be yours. It could be any real estate trade or business, development, construction, the sale, management, brokerage, et cetera. Even if it's other people, 750 hours and more than 50% of your personal time.
More than any other job you do is basically the easiest way to remember. One spouse. I could be a spouse working full time as a lawyer. My spouse could be working 750 hours in real estate and qualify as a real estate professional.
The second step is where I think this comes in. The second step is I materially participate in my real estate activities and you have to aggregate them. What I mean by that is you treat all of your rental activities as one activity. Otherwise, you have to materially participate in each separate activity. The courts actually wrongfully interpreted that to mean 750 on each property so you have to aggregate your properties together. And then you have this thing called material participation.
This is why it's relevant. There are seven rules under material participation. There are really only three that we pay attention to that are applicable. Number one, I provided substantially all of the work and labor done on those properties. We already hear there's AC filter, painting, plumbing, AC repair, so there are other people doing stuff so we nix that one.
Number two, I do 100 hours and more than anybody else, this one could apply. Your wife would have to make sure she's spending at least a hundred hours on your real estate portfolio as a whole and nobody else is spending more time than her. That's where you have to actually get how much time these people spend. I doubt you're going to need that type of stuff for a plumbing or AC repair.
But if you have a property manager, my guess is that whoever is managing those properties, you might have to get their time. How much time are you spending on my properties? They might say four hours a month, in which case you'll be way ahead of them. You just have to do a hundred hours or more than anybody else. You would track your time for that.
There are two types of time you're tracking. Real estate professionals, which could be property management on your properties. Otherwise, it could be doing construction. Otherwise it could be doing development for other people in your side job, whatever it might be. Maybe you're a real estate agent and you're helping other people buy properties. Then you have to track your time on the material participation on your properties.
Do you guys track those separately on a spreadsheet or do you just have them pick which ones it hits?
Eliot: I would track it by property. Break it out by property and what the event was the time. The more detail you can provide—we don't want you killing yourself trying to put this document together. But the better you do, the less argument you're going to get from the IRS because they don't want to take on good documentation.
Toby: What I would do is I would just document your time aggregating and adding it all up. If you know that you're above 750 hours, I wouldn't do it. I would just be like hey, I'm not going to go through all those extra steps. I can if asked, which is what's quite common. People go back and look. And then I'll add it all up.
Just make sure you're doing so with an accountant. There's actually a really good case. There was a girl that gave all her time, but she didn't do the travel time. And she added up to about 650 hours without her travel time. Then on appeal, she added more time. She said, I screwed up. I didn't add all my time.
They allowed her to do so and they found it credible, but she got herself a problem because she didn't have an account that knew what they were doing to say, I'm not going to turn in your time if it doesn't meet 750 hours.
Eliot: As I recall, even the court harassed her to go back and get that time in there. They were trying to help her out. It shows that if you're a credible taxpayer, they want to work for you. They don't like to see the big IRS coming down on the little guy.
Toby: Which is weird. I could tell you right now, the IRS, that is not their position. Some of the quotes that have come out of the very few audits, but I talked to other accountants, remember old Ronnie? He shares with me in real time some of the crud that's coming out of these new agents. They think they're going to get all these new agents.
I'm sorry. It's not happening and the people they're getting are just jerks, to put it mildly. No offense. I love most of the folks. I know a lot of the attorneys and things like that work for the IRS, they're great. But holy kashmali, some of these people that are being hired as agents, they don't know the basics of depreciation and they're being put out there to audit people. It's silly.
Anyway, I get frustrated with it because it wastes accountants' time. You're spending three hours explaining basic depreciation. Somebody says that's why Scott [...] said goodbye to them a long time ago. Scott [...] was a great tax attorney with the IRS. He and I have handled many cases together. He's a really good guy.
Here, guys, it's going to get worse. They're going to bring in more agents. They're going to put pressure on them to do more audits. Think of that, it's going to generate greater returns, but they say really ridiculous things like we don't care what the law says. My job's to represent the interest of the government. That is not legal. That is absolutely against the law, but they do it because what are you going to do? You're going to basically take it to internal appeals. They're going to fix it later, but you have to deal with the nonsense of these folks in the beginning.
The IRS, since 1997, passed the kinder and gentler IRS laws. They can't actually take positions that are legal just to harass you and take extra money out of you. They're supposed to do it. They did it in the case we were talking about where the gal didn't substantiate but they knew she actually met the test and they said, hey, take another whack at it. You missed it here. But it's not because you lack the time. We need an accurate account of your time. They actually did find her very, very credible. And they went out of their way to make sure that she did get the relief she was seeking realizing that the accountant messed it up.
All right, more fund stuff. Talking about insanity, let's talk about mutual funds. If you've ever listened to us, you know we're not juge fans and here's why. "I have a Fidelity brokerage taxable mutual fund account. It is not a retirement account. The taxable account has two mutual funds inside. One is a diversified growth and the other is a more balanced 60-40. I started investing in these accounts in 1992," way to go by the way. You got way ahead of it, "And directed all dividends and capital gains to be reinvested in the same funds. On a positive note, the account has grown dramatically, but the bad news is that both funds have high costs associated with them."
Mutual funds are bad. On an average, it's between 4.8% and 5.8%. "I actively traded a high turnover, which drives up costs." They call it cash drag, tax drag, you got to maintain liquidity, and all sorts of bad stuff. "I would like to somehow move the money to more tax-efficient index stocks such as XLY, the Dividend Kings, Dow Diamonds, QQQ, S&P 500, VOO, et cetera. Will I be able to do so with no tax or minimal tax implications?" What do you think?
Eliot: I wouldn't know how. I wouldn't think so. I think you'd have to sell and that is a taxable event. Now you're going to have to move it over. We might be able to do things to mitigate that around it—some lost positions or something like that—to offset that gain. But I don't know personally how you would be able to get that transferred over.
Toby: Yeah. Mutual funds are taxed in a multitude of ways. Number one, as a holder of a mutual fund, you are paying tax on all those sales. So when you see, hey, I have high costs because there's high turnover, they're actively trading the account, you pay that as the mutual fund holder. You can actually buy into a tax liability in a mutual fund. It's weird.
Somebody says the keyword is taxable account. Correct. It is not an IRA. It is not a Roth. It is not a 401(k). It is not an exempt account, but it's in their personal account. It's going to be taxable to them. So they've been paying tax all along on those funds that are being reinvested.
The same way is that if Eliot here got a dividend from Altria and they paid him $300 a dividend, he said, go ahead and reinvest it. He pays tax on the dividends at long term capital gains rates. He reinvested the amount. So in a mutual fund, you're paying that as you go as they actively trade it. That's why it can be kind of surprising that you get these tax forms every year. You’re like, I didn't sell anything. They're like, we did, inside your account. You're paying tax on that.
You're paying tax on interest, if there are bonds and things like that. So you're paying that as you go. You reinvest it. You have a basis in those shares. If you sell that mutual fund, you owe tax on the capital gain. So is there a way to avoid the tax on the capital gain? It's really hard. You could sell other assets that have capital losses and harvest some losses like maybe you have crypto.
Maybe you have something that's gone down in value, and you say this is a good time to sell it. Even on crypto, you could sell it and buy it back and harvest that loss to offset your gain. You could still do a qualified opportunity zone, which means that you sell it and then you buy something that's in a qualified opportunity zone. You put together the qualified opportunity zone fund, buy something, and you can defer it until 2026. I don't know if I would recommend that.
The other thing you could do is you could actually donate it and take the entire deduction for the entire donation. If you control the charity in which you donate it, maybe it's in a private foundation or charity, you get a nice deduction on your side, you still control those funds on the other, and then you could reinvest it in there.
So there are few options that you could use, but there's nothing that allows you just to sell it and buy something as a replacement and avoid the tax. There's no 1031 exchange for stocks, unfortunately. Is there anything I'm missing?
Eliot: No. I think that's just hitting those opportunities. I think that's of questionable use, and it would only defer and I think it causes more problems down the line. But if you could harvest any losses, I think that's your best bet.
Toby: There is one other thing that you just keep it and you say, man, it sucks. And then borrow against it. If it's Fidelity, usually, it's a stock account that they'll loan on. I know that for sure, you can do a security-backed line of credit. But if you own this for long enough, they may say, hey, we'll let you borrow against it and then reinvest those funds.
I don't think I'd be doing that in the S&P. It might be something that's maybe real estate or something that's a little more backed. But if I could borrow the money, and I have a dividend that's being paid out on something that—again, I keep using Altria, just because they're like 8% dividend right now. But maybe I'm borrowing the money, I don't have to pay any tax. I borrowed at 4%. I'm getting a decent-sized dividend that's covering more than that cost.
Maybe I do that, then I don't have a taxable event. But it really depends on your risk tolerance and your assets. If you have a lot of money, then maybe you do that to avoid the tax. How much is the maximum I can donate to a nonprofit? It's 60% of your adjusted gross income if it is cash. It's 30% if it’s appreciated assets. If it's a private foundation where it's not doing anything but you just use it as a holding vehicle to donate to other charities, then it's 20%, I believe.
Anyway, you could actually do a combination of that. I could actually say, hey, I'm going to sell some, but I'm going to donate some and then sell some. The reason I do that is I'm going to take the donation and that charitable in my income tax deduction to offset the gain on the rest of it. It's long term capital gains so it's going to be taxed at 0, 15 or 20%. I should have answered right at the beginning that if you make less than $80,000 a year and you're married, you're probably paying zero anyway.
So let's take a look at that. Maybe you recognize gain over a couple of tax years. You’re okay paying 15%. You just don't want to pay higher. If you're making less than half a million dollars, married filing jointly, you're in the 15% category for long term capital gains. So you might be like, hey, I'm okay with that. I'll pay it now and get out of that high price fund.
Speaking of high prices, there's nothing worse than the high price of not knowing how to protect yourself, create a legacy, and use taxes to offset a lot of your income. Feel free to join us at our tax and asset protection workshop. It's absolutely free. We have November 12 and October 29. We have one coming right up. What is today? Oh, it's Saturday? Well, Clint and I are teaching it this Saturday, you can come join us. Sometimes I forget.
All right. "After using accelerated depreciation on a new Airbnb this year, can I avoid future recapture through a 1031 exchange? Can I exclude some nights?" Let's answer that one then we'll answer the rest of it. Can I 1031 exchange an Airbnb property?
Eliot: Yes. Wow. If it's used in a trade or business, yes.
Toby: But I took accelerated depreciation. I wrote off 30% of that property, can I really do a 1031 exchange?
Eliot: You can. I don't like the word avoid. You can defer future recapture. Unless that you eventually leave that to your beneficiaries if you pass.
Toby: Or donate it.
Eliot: Or donate, thank you. That would get around it. That would avoid it. Yeah.
Toby: Yes, you can even if you write off a huge chunk of it. Can I exclude some nights when I stayed overnight in the Airbnb property for the purpose of improvements, say an installation of the gutter guards by a company? And then hey, I had to be there for a few furniture being delivered. I had to unpack, move, and put it in the right places.
Eliot: Yes, if as long as you're there that day or substantially spend the whole day doing the repairs and maintenance and things like that, that will not count as a personal day.
Toby: Yeah. First off, if it's 14 days or less, we don't care because they don't count any of those days. If you're over 14 days of personal use, then we really have to start tracking it or if this would put you over. If you are rehabbing, repairing, and you're there not for personal use, like this isn't because you're staying there to get the benefit of the property, but you're there because you're working on the property then they'll exclude it from personal use.
The IRS actually tells us that you can do that. Two pieces of good news for you. Whoever the Airbnb king is or queen, you get a star. You're going to be very, very happy. Hopefully, they're listening, right?
"Can I take the primary home loan on a property that has been bought with 1031 exchange funds and live in the property myself?" In other words, can I convert a property that I purchased in a 1031 exchange? Can I move into it and borrow against it?
Eliot: Yes. But of course, there are rules behind it. I don't know that there's a fast and steady rule for how long you have. You have to use it after the 1031 in a trade or business. You're going to have to run it as a business. You can't just get it and then move right into it. The rule of thumb out there is maybe two years or run it as a trade or business is often what you'll see. Then you can move into it. Once you've picked it up and you're living it, then yes, you could do whatever loan you want to.
Toby: Yeah, so I would say this. Number one, primary home. If you buy a replacement property, there's a period of time. I don't know if it's a year, two years where it has to be an investment property. In other words, you can't just move into it. Then the code actually contemplates this happening. You have a 121 exclusion, which is a capital gain exclusion. Normally, you have to live in it tow of five years. You can't do it every two years.
When it's a 1031 exchange property, I think you have a five-year waiting period. But you could and then borrowing against a 1031 exchange, I don't know I'm sorry, if you already said this. I was reading all the chats. Did you get into borrowing against the 1031?
Eliot: I did. Well, after they've moved into their primary residence. I was just saying that you could, but we have the other issue that if you donate that.
Toby: You have a general rule that you can actually borrow even after your 1031 exchange, so long as it's not part of the exchange. In other words, hey, if I 1031 into a property and it's not relevant to the closing, in other words, I have enough monies to close then you could borrow, you can use it to lever in take money out of a 1031 exchange. There are actually a couple cases.
Eliot: But like I said, in the two years, they get to live with it. That's just kind of what a lot of people see out there. I think the most important thing is that you show that it was used in a trade or business. That may take two years. It's just all up in the air on that. I think they use it as a safe harbor. But it doesn't mean you necessarily have to wait two years.
Toby: We have somebody out there that looks like their mortgage broker something and says for 1031 to a primary home, you really need to get in. If you're doing a loan against it, you need to make sure you have your documentation in place. My guess is that somebody is moving into the property and then taking a loan out I think is what you were advocating. But if somebody is hey, I want to move into the 1031 exchange but I can't unless I need money out of it, then probably do.
Well, you already own it, maybe to extinguish a loan on another piece of property or something, Then, yeah, you'd have to make sure you're crossing your T's and dotting your I's with the mortgage company, for sure. But anyway, so the good news is yes, you can. The code actually contemplated. Yeah, you can do both. You can take a primary home loan on a property and move into it.
It's just making sure if it's closing as a 1031, then it's going in the investment category loan. Exactly, Rick. So you're never going to be able to just move directly into the house. If I 1031 exchange, so I sell a commercial property and I buy a property, I am not moving into that property after the close. I am waiting a period of time, probably a year, maybe at least six months, but you got to show that it was an investment property when you bought it, and then you can convert it to a primary home.
All right. "How does the new corporate transparency law affect our LLC structures? Are you confident that Anderson can figure out a workaround to maintain anonymity? What are the good and bad takeaways from the new law?"
Eliot: Well, every LLC for our clients typically is going to be underneath this because it hits all small businesses. The exemptions are there are like 23 that really deal with your publicly trading companies. The companies that everybody knows all about, anyway, so it's more geared towards smaller businesses.
Is there a way to maintain anonymity? Well, we never had anonymity to begin with the government. The purpose behind this is that there is going to be the FinCEN Agency and law enforcement that are supposed to be the only ones who have information to this.
Toby: The Corporate Transparency Act was passed. They're doing regs on them and they just came out with final regs a few weeks ago. I think my partner, Clint, put something on his YouTube channel going over in a really fancy way. Was it FinREN? What is it?
Eliot: FinCEN.
Toby: FinCEN. Financial reporting.
Eliot: Financial criminal.
Toby: So it's a government agency that cannot share your information. You're reporting the beneficial owners on all entities where there's a beneficial interest, and it can be corporations, LLCs, trusts, et cetera. They want to know who's behind them. They're trying to prevent money laundering or bad people, and also create a criminal act to go after those folks that they don't disclose.
If they find out that an oligarch from some country where I'm really mad at is investing in the United States, they have additional crimes that they can tack on and go after those assets and go after that business. But it's not a public disclosure. In other words, the government's not sharing that information. Look who's behind this LLC. No. It’s no different than what the Bank Secrecy Act requires now.
After 9/11, these laws were put into place where the bank has to know who the owners are. The United States is pretty lax compared to Europe. I mean, it's nasty in Europe, but they just want to know, hey, who the customer is, who's the beneficiary, and they're going to want to know who that individual is.
To your politicians, look to your left and right, they're the criminals. John, yes, but they have to disclose under this too. But I do know what you're saying. This will have zero impact on the anonymity that Anderson advocates, which is from the public record. In other words, I don't want to create liability by having somebody be able to go to a public record and look up my ownership or my involvement with an entity.
That's no different than if I get into a car accident. I run up and say, by the way, I'm really, really wealthy, and start telling the other person how much money you have, expect to get sued. They're just going to be, oh, that's great to know. Then they go to a lawyer, and they said, well, what do we know about that individual? I don't know. They said, they're really rich.
I have a really good friend that owns an agency. They said, they always tell doctors, please do not tell the other party that you're a doctor. The claim just went up considerably once the other party knows that. We want to not create liability for ourselves. Hey, look, I have 30 properties in the city. You want people to not know that information. This does not impact that.
The Corporate Transparency Act will not affect your ability to maintain anonymity. But there's no workaround on the Corporate Transparency Act. It's a law. We're going to follow the law, just like everybody else is going to have to follow the law. And anybody that's a Registered Agent, or a formation company is going to have to disclose who's doing it. We have to disclose who we are and the beneficiaries.
So, are there people that are going to mean criminals tend to ignore the law anyway? Are there going to be criminals that have other people open up bank accounts on their behalf and give them the money? Yes. The real crooks are always going to do that, or they're using cash or crypto now. They're not using regular transactions, for the most part. There might be some that still do, but they're not generally not going to be the United States if they are.
It just gives the government more tools to prevent certain types of behaviors from occurring, and it gives them a remedy in the event somebody does that. I don't know what else to say about that. It doesn't really impact our clients for the most part. Our clients are pretty…
Eliot: As far as we know, they're there clean.
Toby: They're on the up and up. "Our family has Christian health care medical bills sharing. I'm always told this is not insurance. How does the IRS view this? Can it be deducted for Schedule A? Can it be used as an insurance deduction?
Eliot: We get this question quite a bit, especially during tax deadlines. It isn't. You're correct. It is not insurance in the eyes of the IRS. It is just a group of people coming together and helping pay one another's medical claims and so that's why it is not insurance. Insurance is defined as something that can be deducted. This cannot be deducted. It cannot be used on Schedule A. It cannot be used as medical reimbursement.
However, in researching this just to see what was the latest on it, there is a proposal out there for regulation where the IRS is trying to change that. They're trying to get to this where this would be deductible. They recognize the similarities. It's just that the proposal hasn't really just passed, if you will, to be something that we can rely on yet.
Toby: When we had Obamacare and you had the requirement to carry insurance portion. The courts had come through and said we recognize the medical sharing arrangements are meeting that standard.
Eliot: Correct. It has had that level of acceptance within the tax and legal realm, but it's not quite where we can deduct it yet. But again, there's a proposal out there. We just have to wait to see what happens.
Toby: Yeah, HSAs still don't work. You can't treat it as insurance.
Eliot: That's part of the problem is that's actually the HSA law, from what I read on it. I read a really in-depth research paper on this. The laws are a little bit different for HSA. There's the problem of trying to make it fit or what's called Section 1213. I think it was like 1223 or something like that for the HSA. The IRS is trying to balance the two. They’re basically really just to say, look, we understand there's a difference in the language, how we use it. But we're saying go ahead and allow it as a deduction. That’s what they're proposing. It just takes time to get there.
Toby: We will see but yeah, so to answer your question. The IRS does not view it as insurance. It views it as though like you helped your brother pay some of his bills. It's a gift, right, if it’s not deductible? No, it's not deductible on Schedule A and no, it cannot be used as an insurance deduction. Correct. As of right now. So maybe they change it. Lobby your Congress people and say, hey, this is unfair that if I buy from United Healthcare, I'm good. But if I buy from Medishare, I'm not.
"My husband and I acquired a short term rental this year, hoping to close on a multifamily property for a long term residential by the end of the year. I'm on track with rep status for 2022. We have come across several potential listings however, requiring a cut-down and major rehab. The likelihood of having a rental done and rent is slim by the end of this year. My question is, if having the listing up ready for rental is considered in service?"
Eliot: If it's someone just putting the listing up there, no. It has to be available for service. It is the status you're trying to get. That means that if you did put it up there, then I could move in there right now. You run the whole risk of needing asset protection if you do something like that. Because if you've ever been around constructing a house, you have a renter in there, a tenant, there's a lot of things that could injure that individual. So you're definitely going to want to have your LLC set up in place and insurance, et cetera. But if they can't move in right now, then no, it's not available for rent. So no, we would not get that deduction by 1231.
Toby: Unless it is available. If your question is, hey, I'll have it available by the last week of the year. Does that allow me to take the deduction this year? The answer is yes. If it's not available for rent, you're not done with the rental by the end of the year, it'll be in 2023.
Here's the problem I see. It says I acquired a short term rental and a long term rental and I'm on track for rep status. Short term rentals do not count for the material participation of your rental activities together. So that time would only count towards qualifying them to 750 hours, not under material participation. Because a short term rental, if it is seven days or less average rental—listen to me carefully—it is not a rental activity. It's a regular trade or business activity.
Whenever I hear short term rental, I say pizza shop. So I acquired a pizza shop this year and I'm hoping to close on a multifamily property for long term rentals by the end of the year and I'm on track for rep status. Did you include the pizza shop in your reps calculation because unless you're managing the short term rental, that's not going to fly. It's a completely different material participation test. It sounds weird, like why is Toby talking about pizza? It’s because it's a completely separate activity.
The way you bring that underneath the same umbrella as your long term rentals is you set up a corporation to be the host of that short term rental and you rent the property to the corporation on an annual basis. Now for you, that is an investment property for purposes of qualifying for a real estate. If you want to be a real estate professional for 750 hours, you can add that time together because you owe more than 10% of the corporation. So you can take that time.
But magically, it can be considered a long term rental for purposes of aggregating and meeting the material participation test. I know you asked a few questions on this. This is one of these situations where I would strongly urge you to reach out to us. If you're platinum, make sure you're meeting with somebody. If you're not, make sure that maybe you should become so you can talk to somebody like Eliot because you are dealing with two or three issues that are very fact specific that we don't want you to screw yourself up.
Because when I see rep status and I see short term and long term, I immediately think, oh, crud, seven days or less short term rental pizza shop, it's not a short term rental anymore. How do we make sure that we don't miss the material participation on all of your properties because you're not going to get to have any material participation on the long term rental, unless you do in the build out yourself, or you're there supervising. It's going to be really tough for you to materially participate in that.
You're going to meet your material participation test more than likely on working in the short term rental, and you can't count that when it's a short term rental. So it's going to be really difficult for you to meet rep status. You may not need it if you're going to depreciate the short term. You may not need it if you're okay taking the long term rental into next year, and you're going to meet the material participation tests on the multifamily next year. But it is absolutely critical that you understand the different type of timekeeping. I just want to make sure that I mentioned that.
Eliot: Easy to mix that up.
Toby: Yeah, and unfortunately, the rules, not everybody understands it. You want to make sure hey, I do this. I want to make sure that I am tracking those things accurately and I set myself up for success on that.
Speaking of setting yourself up for success, make sure that you join our YouTube channel. Again, it's free. You can set yourself up to get notified by turning on notifications when new videos come out. So if you like this type of information, we do put our Tax Tuesday recordings up there too. If you saw a few people were saying, hey, can I get a recording of this? Yes, you can absolutely go there and do that.
Now speaking to the folks that have been getting their questions answered, there have been 165 written answers thus far. Another 16 that are waiting. Thank you for patiently waiting, but Patty, Dana, Matthew, Lanzi. I think Piao was on. Dutch was on. Ian was on. Christos was on. I think I already said Lanzi. Who else? Trisha was on. I think we hit everybody else. But there are a lot of folks answering your questions. They will get to your questions.
Kevin wrote in a much longer reply, Patty, maybe grab that one and shoot it over to me. So I can make sure that we get somebody answered, so that we can give you some guidance because it looks like there's more facts coming our way on that one.
Hey, if you have questions during the time in between Tax Tuesdays, go to Tax Tuesday, or you can email in at taxtuesday@andersonadvisors.com. Somebody says, "I have issues with the last question both." Okay, we'll make sure that we get with you, Roseanne. I think that Patty is communicating with you. But if you have questions on taxes, general questions, just go ahead, shoot them in at taxtuesday@andersonadvisors.com.
Visit our website, if you want to sign up for our Tax and Asset Protection or look at our other training. We do provide a lot of free training. The reason we do that is because smarter clients are better clients, more successful people become our clients. It doesn't do us any good if you don't make money because it's hard to do tax planning for people that don't make money. Legacy planning goes hand in hand with good investing and good business planning.
We actually have an interest in making sure that you are successful. It makes us more successful. Plus, we just like doing good out there. So we will absolutely provide you with tons of free training if you allow it. Again, our YouTube channels. My partner Clint has a very good channel as well. You could pop in there if you want to. You could also come into our website just at Anderson Advisors and then of course you could reach out to us at any time at taxtuesday@andersonadvisors. Eliot, do you have anything to add?
Eliot: No.
Toby: Thanks for stepping in.
Eliot: Thanks for allowing me.
Toby: You did a great job. Sometimes I step on you, I apologize.
Eliot: No. Not at all.
Toby: It's my nature, right? So anyway, thanks for coming in and stepping in for Jeff and I hope Jeff is feeling better. We will see you guys in two weeks. If you have a question waiting to be answered, hang tight. We will answer it and we will make sure that we get you some responses.
Thank you for listening to today's podcast. Show notes for links to everything mentioned in this episode could be found on our website at andersonadvisors.com/podcast. Be sure to subscribe to our podcast. And if you are already a subscriber, please provide us a review of what you thought of this episode.
Today’s Tax Tuesday episode is focused on bookkeeping. Toby Mathis hosts with special guest Troy Butler, Executive Manager of our bookkeeping department at Anderson Advisors, and some of the bookkeeping staff from Anderson including Patty, Ander, Matthew, Eliot, Dana, Trisha, Blanca, Landsey, Kiera, and Cindy, are all online today to help answer your questions. You’ll hear our advice on things like what bookkeeping software to use, expense reimbursement and mileage, grouping your businesses using “classes,” and even some detailed information on how you can become an Anderson Advisors client and the services you’ll have access to. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * If I request an EIN so I can open up a bank account for my disregarded single member LLC, do I have to file a tax return or can I somehow inform the IRS the EIN is for a disregarded entity? – Any EIN should be on “a” tax return, but doesn’t have to have it’s own return. * If I paid for something on behalf of my C-corp and it didn’t have enough funds to reimburse me, how do I account for it? – First of all, if you paid for something on behalf of your corporation, I would make sure that I'm submitting a reimbursement sheet. I would do that monthly where I'm putting together everything I paid for personally, putting it on a sheet, and submitting that to my company for reimbursement. Step 1 - Do it monthly or quarterly. Step 2 - You can have a revolving line of credit.If it's an IOU, it's a loan. It's a liability of the company. It would be an asset to you as the shareholder. * What is the best way to record, handle reimbursement for business expenses that were charged on the owner's personal credit card to avoid giving the IRS concerns about the legitimacy of the business?" – Again, you would want to submit those charges that were business related on a reimbursement sheet. What you don't want to do is you don't want to put that credit card that's in my personal name on your company's books. That can be looked at as co-mingling. It's a business expense that you’re getting reimbursed for. * Can I deduct other courses I take that are general business-type classes, not specific to real estate investing, and if they are for the purpose of helping me build my business? – General business if it's you're improving your current lines of business. I don't see an issue with that. * What is the smartest tax advantage way to pay the kids for helping the S-corp? Can I reimburse myself for the payments I have made to them from my personal account? – There are a couple of options here. I am a believer in payroll. The reason for that is if they're on payroll, if they make less than the standard deduction as employees, they're not required to file a tax return. You can also pay them by putting money in their Roth - they’ll never pay tax, or do a 1099. * How do I not pay taxes at the end of the year?- This is what everyone wants to know!! My reply is, either don’t make any money, live on borrowed money, have someone else make the money, or buy real estate as a real estate professional which unlocks passive losses. * I have a three-member LLC taxed as a partnership. The members want to take a distribution each of $100,000. How is that taxed and how is it recorded in the books? – That's not a taxable event. It's a distribution. That's an equity transaction. The $100,000 is not a taxable event. The taxable event is the numbers that come on that K-1 and say, you made profit of “X” or you made loss of “X”. * How does the Anderson bookkeeping service integrate with the accounting service, et cetera? – We work very closely between teams! …we have full service monthly, or quarterly “virtual” service that uses QuickBooks. Virtual bookkeeping is $995 for a year for the first set of books and then $495 for each additional set of books. * Can you please discuss some big-picture strategies to help with bookkeeping automation, AI, we should be considering? Botkeeper is one AI we’ve learned about. They can’t do complex things. It's much cheaper to use a human being right now. Maybe that changes at some point. * What is the best way to keep track of miles? MileIQ is an app, it works well and creates good reports. There is also a function within QuickBooks works reasonably well. And Timr is easy to use, but it is $100 a year * Best software for doing bookkeeping? There are thousands, and thousands, and thousands of accounting softwares out there. Most of them do a pretty good job. We use QuickBooks online for all Anderson clients. * I'm trying to figure out how to property log and transfer friends from the property LLC to the holding LLC and vice versa. (1) how to capture my personal mortgage loan into the property LLC and then to the holding LLC? – It's an investment expense that I'm going to show on my Schedule E, which is going to allow me to take that deduction against my rental income if it's real estate. (2) how to record all transactions from the property LLCs throughout the year and distribute to the holding LLC for tax filing. –Like Toby's saying, for each tax return that you file, you need a set of books. But if you have entities that are disregarded to a holding company, they can be within one set of books. If you have 10 properties, you're going to have 10 classes on one set of books, and it's all going to flow up. * Platinum members: Log on to our bookkeeping office hours, Thursdays, 3:00 Pacific Standard Time. We’re live and answering all your bookkeeping questions!
Resources: Email us at Tax Tuesday
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
If you’re an investor and you’re worried about interest rates, and don’t have a ton of cash, what products are out there for financing your purchase?
On today’s episode, Clint Coons of Anderson Business Advisors talks to Rick Floyd, Executive Vice President of Homebridge Financial Services. Rick explains some of the basics that you’ll find in the agency space, such as the typical Fannie/Freddie guidelines, but there are also options out there for investors such as the non-qualified mortgage that has very different requirements and doesn’t carry some of the limits and restrictions you may find in the Fannie/Freddie underwriting.
Highlights/Topics: * Background on Homebridge Financial * The traditional Fannie and Freddie guidelines * Avoid common mistakes investors make - talk with your advisor, make sure they are looking at your ‘big picture’ * How important is ‘seasoning’ of cash - it should be able to be sourced * Portfolio loans use Fannie and Freddie guidelines * Non-qualified mortgages - qualifying, terms, cap limits, rates and other details * HELOCs- only on primary residences, not on investment properties * What does the next year look like for investors? Lack of inventory is the biggest problem * One last question -nonQM property transfers- it’s not an issue
Resources: Rick Floyd LinkedIn
https://www.linkedin.com/in/rickfloydremn/
Homebridge Financial
https://www.homebridge.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Several of today’s tax questions address bonus depreciation and when you can take it on single and multiple property groupings, including on short-term rentals. Toby Mathis and Elliot Thomas, tax attorney of Anderson Advisors, discuss the detailed specifics relating to several different tax scenarios involving bonus depreciation. They also discuss cost segregation and frontloading depreciation deductions for real estate assets into the early years of ownership. Submit your tax question to taxtuesday@andersonadvisors. Highlights/Topics: * Taking the 5,7, or 15-year depreciation - You can only choose one, but you can spread them out over different years and different properties. * Bonus depreciation - equipment leasing company rents to a) a construction company and b) another company with no employees. Should they add a third? - No, adding would have the opposite effect. If you wanted to group a and b together, you probably could. This is active income and if you want to avoid self-employment tax, pay yourself a small salary. * A listener rents a single-family property on a flat lot that gets a lot of rain/water damage, can they deduct rain barrels/hardware? Yes, you can do it all in the first year, bonus depreciation, as it is not an “improvement” and it’s under $2500 per line item. * Can I group short-term rental activities if one property has an out-of-state property manager? This falls under passive activity loss rules - an STR can be passive if you’re not participating. Each rental is a business, like a pizza parlor. This is a trader business. Make a statement for aggregation on your return. * Can I amend my 2021 taxes to do cost segregation? Yes, you can, the deadline is Oct. 17th- send us how much you saved! * A U.S. citizen gets a gift of property in another country. Do I need to report to IRS? Typically no, and you pay no tax, but fill out a form if the property value is over $100K and foreign. You have to list it on Form 3520. * Bonus depreciation on rental, if taken in the first year of service, can I use any of the depreciation for next year? It’s only the first year that you break out of that property. * If a CPA does your taxes, and you get revised/audited, it’s ultimately only your responsibility at the end of the day. * Shout out to the staff for helping to answer questions in the middle of tax season
Resources: Email us at Tax Tuesday Tax and Asset Protection Events Anderson Advisors Anderson Advisors on YouTube Full Episode Transcript: Toby: All right, welcome to Tax Tuesday. If you're looking for tax Tuesday, you're in the right place. If you're looking for tax Wednesday, Thursday, or Friday, you can probably watch recordings. You can still be in the right place. Hey, this is Toby Mathis.
Eliot: Eliot Thomas.
Toby: We're going to bring some tax knowledge to the masses today, so it's very exciting. Eliot here is a tax attorney, though he doesn't put that after his name. I have to put the big ESQ to make sure that's—I don't even know what that means. Esquire?
Eliot: That means gentlemanly or something.
Toby: It means something.
Eliot: That's why I can't use it.
Toby: You put JD. What else could you put after the end, attorney or counselor? Anyway, we're done with that. Tax Tuesday rules since we're two lawyers who don't have a CPA today. We have some on of course. If you could ask your questions in the Q&A, we have staffed even during tax season.
We have Dana, Matthew, Patty, and Troy. I think we have Christos probably. Piao's on? All right. We're still grabbing people from the tax department, even though this is tax season and they are getting killed. Are they going to be nice? We're always nice.
All right. If you have questions, you can always email them even when we're not doing this. In fact, it's where we grab our questions every week or every other week. It's taxtuesday@andersonadvisors. You can ask general questions there. We still answer them because we try not to put a big paywall behind you and getting answers to questions. We get about 500 a week, so sometimes be a little patient.
If you need a real detailed response, facts specific to you, and it's giving you advice, then we're going to say you got to become a Platinum client. Platinum client is $35 a month, but they still get to ask tax questions in writing, and you get as many as you want. Those ones we ask that you do the tax in writing just because it's usually very fact specific and we don't want there to be confusion. You can also talk to the attorneys ad nauseam pretty much. Lawyers like to talk, so you can always get one on.
Hey, anybody there? Yes. They're excited to talk to you. They don't bill you for their time. They just answer your questions. We're in the field specifically of asset protection, business planning, legacy planning. If it's a divorce question, we're probably going to say, we can't help you much unless it's a tax question.
All right. It's fast, fun, and educational. We're going to have a lot of fun. Where are you from? I know that we always do this. Let's see where everybody's at. Hey, there's Anacortes. Don, I think that you always come on, and my mom's right there on Seventh St. in Anacortes. She walks into the Rockfish sometimes or she used to coat walk in there. She works at the Red Door, which is one of the thrift marks there, all that good stuff.
Let's see where. Kahului, Maui. I'd go to that one. New Jersey, Las Vegas, Granite Bay, New York, SoCal, San Juan, Puerto Rico. Daniel's got electricity. Hopefully, you guys are doing okay there. We love that area. Hope you guys are doing great.
Austin, Chandler is in Houston, Texas. Beverly Hills in the house. We have a lot of California going on. A lot of folks from Texas. There's Seattle. We're just talking about it. Somebody asked, is this live? Yes. I'm in Tunisia in South Africa. Love South Africa. I've been there. I've done some hunting there. People get mad at you if you go hunting there, but no. It's actually for food. Everybody eats everything on those animals. Honolulu, Crystal Bay.
We got people from all over the place. This is awesome. We love it. There's Reno even and Smyrna in Georgia. Is that how you say it?
Eliot: I think so.
Toby: I just butcher stuff. All right, let's go over. There's Tampa. Mark, praying for you sir that you guys do okay in this storm, so please be safe. We got a lot of our folks down there. A lot of our employees from Anderson actually worked in the Tampa area. We got a bunch of them. Let's send out good vibes and may that storm be weakened. I'm in Tampa and you are distracting me. Ignore the storm, it's not coming.
They're saying category two, maybe one. It's always the storm surge. Hopefully, you guys get a glancing blow, and then it's not as big of a deal. You never know this day and age with TV. Those guys like to hype it sometimes, but sometimes it's not the hype. Just be safe.
All right, opening questions. There are about 10 of them. Let's go over this. "Can one pick and choose properties in a cost segregation study and take bonus depreciation for multiple years? For example, can one take bonus depreciation on the 5-year properties for 2021 and the 15-year properties for 2022?" We'll answer that. That's a good question, by the way. It's very specific.
"I have an equipment leasing company that rents equipment to my construction company to another company that is a manufacturing plant. My CPA said the revenue is considered active. There are no employees when opening the equipment leasing to others remedy that." We'll go over that too. Good questions so far.
"We rent out single-family property that is on a flat lot. Our winter rain storms damage the foundation and make the house cold. If we buy six 200-gallon rain barrels and hardware for about $4000, can we deduct it for 2022?" Good question. We'll get into that.
"Would it be reasonable to group short-term rental activity?" STR just stands for things like Vrbo, and Airbnb. "Would it be reasonable to group Airbnb activities or short-term rental activities (including out-of-state) together with a," this is a regulation, "1.469-4 grouping and materially participate in the group? What if the out-of-state ones have a property manager?" Good question.
Eliot: That's a fantastic one.
Toby: Yeah, this is like stump the tax people. I can't answer a single question. I'm glad you're here. "If a US citizen receives a property that's located in another country as a gift, does he or she need to report it to the IRS? If so, what paperwork is needed for it? Does a real estate gift from a parent get taxed?"
Then we have a long one. "My question is about bonus depreciation, which I realized must be taken in the first year that the depreciable item is placed into service. The property was purchased this year and was informally placed." We'll dive into this one, don't worry. Some of you guys are already seeing the issue here. "The property was purchased this year and was informally placed into service for a very short period of time to family and friends, but needed renovations to open it to a larger Vrbo market which we did this year.
It is now placed in service. Not sure if I can qualify this year for the real estate professional or the professional real estate status designation. Any chance I can use any of the bonus depreciation for next year since without the designation, I can't take a loss unless I want to carry forward. Also, I seem to remember that you have to place the property in service before the expenses are incurred to take bonus depreciable." So depreciation. Great question. We could just do an hour on that one. That one's popping open a whole bunch of goodness.
All right. "How does accelerated depreciation work in general and more specifically for multifamily syndication as both a passive and non-passive investor?" Good question. That's a good one too.
"What are my options if the IRS refigures your taxes and you have a CPA reviewing and signing off on the return?" We'll have to dig into that one a little bit.
"After cost segregation, how long do we need to hold the property? Is there hold time restrictions to sell after cost segregation, or can I sell the property after cost segregation and do a 1031 exchange for tax-deferred?" I don't write these guys, so if you see weird typo things, sometimes we'll massage a little bit for the most part. I'm always like, hey.
All right, we're going to answer all of those. If you're already having so much fun and you say, this is so much fun, I don't want it to last just an hour, an hour and a half, or whatever it is, I want to get more, go to my YouTube channel. There's my smiling face. We record all of these and put them up. We usually put the questions.
You could tell if it's Tax Tuesday because it'll be an hour-long video, generally speaking, and it'll have a whole bunch of different questions. But it's just mind food. It may not even be like, hey, I'm not doing a lot of rental properties, but you never know when something's going to sneak up and give you a return that you didn't anticipate.
I will tell you what, in this day and age, the way everything's going right now, I would want every little nickel I can get my hands on and I put it into service. I don't think I would sit on cash, but I would definitely be agitating the markets right now. I think this was the fourth worst start of the S&P in history. It's not even the worst.
I could tell you, it made new highs after all of them. All right. This is going to be fun. "Can one pick and choose properties in a cost segregation study and take bonus depreciation multiple years? For example, can one take bonus depreciation on the 5-year properties for the 2021 tax year and 15-year properties for the 2022 tax years?" What say you, Eliot?
Eliot: You can do the five-year property on a particular property if you did a cost seg. Take all that five-year in that one property in one year, and then the rest of it in that particular property, the 10, 15, 20 would be depreciated over time. But you don't have to do that for all your properties.
What you can't do is you take the 5-year this year, then next year, just immediately bonus depreciate all the 15-year. I don't think you're allowed to do that unless maybe you're reverting back to the previous years' cost seg study. Because I know we can go back with cost seg studies, but I'm not sure about when you break the pieces, 5, 10, and 15 like that.
Toby: Yeah. What Eliot is basically saying, and not to paraphrase you, but when you take a building, specifically when they see properties in a cost seg study, you're talking about a building. Let's just say we're here in an office building, this is a 39-year property. I use this example all the time, so I apologize if you're like, oh, here he goes off again about carpeting.
We have carpeting under our feet that your accountant would say is a 39-year property, but we all know that this carpeting isn't going to make it 39 years. The IRS will say it's five-year property, but we have to break it out.
We have to say, here's the value of the carpeting, here's the value of cabinets, here's the value of the trees. You literally depreciate the trees. You depreciate the car lot, the parking lot. You get to take that over 15 years and you break these out into their pieces. That's step number one. That's a cost seg.
Step number two is, do I bonus it and take it all in one year? This is the last year of 100% bonus depreciation. If you put a property into service in 2022, I could take any item that's 5-year, 7-year, or 15-year, boom, write it off in one year, but I have to pick.
This is the only year I can do this. I can choose 5, 7, or 15. One or all or none. I could just depreciate them over five years, or I could depreciate in one year and take bonus depreciation. In fact, I had to opt-out of bonus depreciation.
What I think we're getting at is, hey, if I pick a property, can I bonus 100% of the five-year property in year one and 100% of bonus depreciation on the seven-year in year two? The answer is no. It's the year that you decide, this is my 5-year property, 7-year, 15. It's that year that you have to take bonus depreciation or lose it, and you get to opt-out.
What Eliot just pointed out so smartly was that, but you could choose different properties for different years that you're going to do a cost seg on. I could cost seg a property this year. I could say, hey, based off of my facts and circumstance, you could still be doing cost seg by the way for 2021 up until your return is due with extension, so it's October 15th this year.
You could make a cost seg. You could say, hey, do I want to do this or not? Let me see. Okay, I'll cost seg this one this year. In 2022, I'll cost seg another. You're allowed to do that.
In that one, I could bonus depreciate the five-year property for property number one in the first year. In the second year, I could accelerate the depreciation on the 15-year property on property two or the 5, 7, and 15. I hope you're getting that. There's a lot of flexibility here. It's just on this one property, you can't do that over multiple years. I hope that makes sense. Anything you want to add on that?
Eliot: No.
Toby: It's exciting stuff, guys. How often are you seeing bonus depreciation and more specifically, cost segs come up?
Eliot: Every day right now, especially this time of year, because as Toby pointed out, we still have time really to do those up until the 15th on our personal returns. This is one of those things that we still can take advantage of. It's not just that we can still do it right now, it's a heavy hitter of the deductions in the tax code right now. It's very popular right now and will continue next year as well.
Toby: Yup. The bonus depreciation doesn't go away next year, it just drops to 80%. If my carpeting is worth $100,000, in 2021, you could write off 100% of it if you did a cost seg for 2021. If you did a cost seg for 2022, you could write off 100%, $100,000. In 2023, you cost seg that same property and put it into service, then you're writing off $80,000, and you're writing off the $20,000 extra over five years.
Again, it's not bad. It's just starting to phase down a little bit. We see a little bit of that. All right. Here gets fun stuff, equipment leasing company is what everybody is excited to hear about.
"I have an equipment leasing company that rents equipment to my construction company and to another company that is a manufacturing plant." Company A rents equipment to Company B and C. B and C have different owners. B has the same owners as Company A that's doing the equipment leasing. "My CPA said that the revenue is considered active," which company? We'll get into that. "There are no employees. Would opening the equipment leasing to others remedy that?" It seems like they're focusing on the equipment leasing company.
Eliot: Yeah. I think the problem here is that if we are already active, assuming that's active to both companies that you're renting to, adding a third is only going to further, I think, bolden the fact that this is an active business because now you brought in yet another business. You're doing unrelated leasing to this unrelated business. I think that just bolster is showing that this is active income. It's not just internal, so no. I think that would have the opposite effect more than likely.
Toby: Yeah. Equipment leasing is always active. I think that's the big thing. Where you see rents become passive is when it's rental activities. If you're in a company that's being run by somebody else, you could possibly be passive because you're not materially participating, but I think equipment leasing is always subject to self-employment tax.
The bigger issue here is this idea of a third-party having anything to do with it, and it really doesn't. But whether it could come into play is if you decide you're going to start grouping activities together. If you wanted to group the construction company and the leasing company together, you probably could. I wouldn't see if it's the same ownership. I guess they always do the facts and circumstances.
We're not even in passive, so I don't even know if we'd have to do it. Actually, I don't even think you'd have to worry about it. I don't even have to worry about grouping. The only time I'd have to worry about grouping is if it's rental property being leased to the construction company. Under those rules, it gets really wonky when you have self-rental because the self-rental could be considered non-passive.
Most people group it. If you have an accountant that knows what they're doing, they're going to group an active business with a rental business to make the rental non-passive loss, offset the income from the active business. Otherwise, you could have a bad tax effect of not getting to use the passive losses so you could make them non-passive. All of a sudden, you could have issues if you have other passive income. It wouldn't offset, so it's like, ah.
The answer to this one really straightforward is it's active. There's not much you can do about it, but what you do is look at the type of entity. If you want to avoid getting hit with self-employment tax on all that income, you might want to consider S-corps and making the leasing companies into something that is not subject entirely.
Especially, if it doesn't have employees on that leasing company and you're not really doing that much, it might be that you take a really small salary. All that income, it's not passive, but it's not subject to social security taxes, which gets you to the same place, kind of. Anything else on that one, sir?
Eliot: No, we're good.
Toby: Pontificating too much. "We rent out a single family property that is on a flat lot," I think what they're saying is, hey, we have a house on a really flat lot. When it rains a bunch, it messes up the house. It damages the foundation and makes the house cold, which is kind of odd.
"If we buy six 200-gallon rain barrels and hardware, can we deduct it?" It sounds like they found a solution to the issue, which maybe is to keep the moisture off the ground or something. I don't know what it is. I've never run into this, but you have a lot of rain, so you're buying barrels in a hardware. Can you write it off? What say you?
Eliot: Yes, the answer. Can we do it all in the first year? Yes. One popular thing that would pop out here, I think, to a lot of people would maybe be the $2500 de minimis election. We're over that amount because we have $4000. But going along that same path, there is a provision that if it's lesser of $10,000 or 2% of the unadjusted basis of this property, you could add to it and probably still deduct immediately as a kind of a prepare.
Toby: Are you assuming that this is an improvement?
Eliot: I would think it's probably not an improvement. But just in case the IRS even argued it, I think you have a perfectly good explanation for why you could deduct it, so I don't see any problem at all.
Toby: What you just hit on was the safe harbor of $2500, and that's per invoice or per line item on an invoice. The line items here would be six 200-gallon rain barrels. If they're below $2500, you're as good as gold. The hardware, you would break that out, and you'd look at each line item. You'd have to be $2500 or under $2500 for each. Otherwise, what are we writing this off? What would be the useful life of a rain barrel?
Eliot: Yeah. I don't see it as an improvement. But even in a worst-case scenario, I think you have a way around that.
Toby: Your bonus depreciating it anyway, right?
Eliot: Yeah.
Toby: You're just trying to make sure that it's not an improvement, so it depends on what you're doing with it. If you're installing it somehow to the home, benefiting the home, and making it more valuable, then we'd probably have to do a cost seg and break it out. Again, if you're below that $2500, they can't even question it. It's boom, safe harbor, it's a repair, done. You don't have to think about it.
It's not $2500 per invoice. It's $2500 per line item on an invoice. Assuming that the six 200-gallon rain barrels are underneath that $2500 in the hardware is also underneath that $2500, but they add up together on $4000, you shouldn't have a problem. Even if it was more, I think you wouldn't have a problem.
All right. "Would it be reasonable to group short-term rental activities," we're talking Vrbo and Airbnb, "including out-of-state properties together with a Reg 1.469-4 grouping and materially participate in the group?" The secondary question is, "What if the out-of-state ones have a property manager?"
Eliot: Yeah, this is an interesting one. First of all, as Toby's pointing out, he keeps mentioning that we're talking about Airbnb, Vrbo. We got to remember that short-term rental has a very unique, specific definition in the code. Just because you're Airbnb-ing something, doesn't mean you're going to fit short-term rental in the IRS' eyes. That aside, and if we're just assuming that we fit that and we're calling it short-term rental, you can group if you want.
What that will allow you to do is, and it's kind of bringing in the second question, you're going to have properties locally that you're managing yourself meeting all the criteria for. But then you have this one outlier that maybe is across the country and you have another property manager. On its own, you may not qualify with that one property. But by grouping, you could probably pull it into the fold there and then do exactly what you're trying to do here, I think, with depreciation probably.
Toby: Yeah, so what's a reg?
Eliot: It's just the IRS' interpretation of what the tax code is.
Toby: Yeah. The code provision here is 469, which is passive activity loss rules. We're talking about passive activities. A short-term rental couldn't be a passive activity if you don't materially participate. The only question here is, are you materially participating in your short-term rental activities as a group? What we know for sure is that when you have rental property, and rentals are anything eight days or above, I'm not going to get into the substantial services, extraordinary services, and all that.
Just figure in real life, eight days and above average tenant if you're renting it out. Then we have to group those all together if we're going to be a real estate professional because our material participation is per property unless we group them. Here, we're just saying, hey, this is short-term rentals. This is not a rental activity underneath the code as far as it is not a passive activity by itself. It is a trade or business.
Can we group a number of these? I always say pizza parlors. Every time somebody says short-term rental, I say pizza harbor. You like to make fun of that, right?
Eliot: I was actually going to make a t-shirt.
Toby: Toby's Pizza?
Eliot: I may still do it.
Toby: Each short-term rental is really a pizza parlor, and it's an operating business. The only question is, am I materially participating it? This is no different than if I have a bunch of pizza parlors. Generally speaking, in a pizza parlor, you're going to wrap them all up into one entity. You're probably going to have a parent company.
In the short-term rental, we probably want those losses to hit us. We might group them up through a partnership. We might group them up through a disregarded entity, but at the end of the day, it's you. You need to make that election to group all of those short-term rentals, and it's only for purposes of material participation. This has nothing to do with real estate professional status.
Because it's a short-term rental activity, we do not care. It is not a rental activity that is considered passive. It is a trade or business. It's a pizzeria. The only issue is, did I materially participate? The reason that I want material participation is to make it non-passive so that that loss can be used against all my other types of income. That's it.
If I have a bunch of Airbnbs, and I know, oh, yeah, I could offset my W-2 income. I could do this great tax maneuver. I'm just using the tax laws in my favor, and I'm like, yes—somebody says, "If you eat too much pizza, you'll look like a hog." I guess not. John, stop that. John's misbehaving again.
Anyway, all we're doing is saying, hey, we want to use these in our favor in this particular year. Again, the way the cost segs and everything else work is the short-term rentals, we could pick sometime in the future. Hey, I have a lot of W-2 income, maybe it's not this year, maybe it's next year. And then boom, I can unlock a whole bunch of depreciation. It's grouped by activity together, my short-term rentals together, which is, I think, there are four provisions. It's common ownership, the nature of the activity, and all that fun stuff.
If you choose geographical proximity and all that stuff, you can lump them together and say, all right, here's this one business that I'm running and materially participating in. Now I have a non-passive ordinary loss that I can use to offset my W-2 income. That's why people love short-term rentals from a tax standpoint. I'm just seeing if there's anything in the chat. I keep seeing just Patty. I'm going to expand this. Bear with me, guys. There we go.
Eliot: Patty taking over?
Toby: "If you have a group of rentals for material participation, how is that election?" It's actually something you do on your return. You're literally just saying we're making a grouping election, the mechanics of it. "Do I still report them separately?" Yes. You still report them separately, but you treat them all. Rosa, you treat them all as one activity. Literally, you're putting a little statement on your return?
Eliot: Yeah, there actually will be a statement for aggregation on that that you'd make on your return. You just glue them all together, but you do report them all independently.
Toby: Yeah, so you treat the group of the activity, so those rental losses. I wouldn't make a grouping election on rental property that you have a whole bunch of loss carry forward on because it locks it. But you're looking at it going, all right, let's see, I'm a real estate professional. If I make this designation, and I could choose not to or I could choose to, boy, oh, boy, I could do myself some good.
Eliot: Just remember, Rosa, that pulls in all of your rental activity, even syndications. It's all-or-nothing.
Toby: Somebody says, "Does the short-term rental need to be within your own town or can it be a condo?" It could be anywhere if you're grouping them. But you want to materially participate. There are seven tests that you could meet any of them. The most common one, if it's in your hometown and you're the one managing it, you don't have to worry about anybody else. If you have a property manager that's doing it, then the question is, do you and a spouse do more than 100 hours a year in more than anybody else?
The way that court trips people is property managers don't track time. The real one there is probably closer to the 500-hour test. You and your spouse meeting 250 hours each, so 500 hours total would meet the material participation test on a yearly basis. Boom, you don't have to worry. You could have a property manager and all that fun stuff.
"Can you materially participate in short-term rental using property managers if you meet the more than 100-hour rule?" I think we just said that, Philippe. Technically, yes, but you'd want to make sure that that property manager is documenting who's doing what on your property. Just because if you're asked, the IRS is going to say, who else did substantial services? Let's see.
It's not the company. It's the actual employee for that company. Johnny and Sal over here were the cleaners. How often do they clean your property? How many hours? Okay, we add that up. They did 30 hours. You're like, okay, I did 100 hours and it's way more than everybody else. I'm good.
If it's, hey, but we also had these other guys doing a lot of work on your properties. These ones over here, they did 110 hours. Okay, now I have trouble. I need to show how many hours I did, how many hours they did, and then I did more. Cool. "Is that the person, not the company?" It's the person. Yup, so you're already out.
"If you buy a rental property together, wife is a real estate agent and husband is not, can you still be considered active?" Yeah, absolutely. It's per couple. You add your times together to meet the material participation. The issue is it sounds like your wife would probably be a real estate agent, would be a real estate professional, and she would meet the first test which is 750 hours more than 50% of her time.
It's under 469(c)(7). If I'm not mistaken on this reg, it's 1.469-4(c)(2). That is the provision you're probably actually triggering here to do the grouping election, which is what you put on your return. I'm making a grouping election pursuant to such and such.
Eliot: Just for technicality here, grouping is very different than aggregation. They're similar concepts, but aggregation is going to be with your long-term rentals, and we're pulling all your long-term rental activity into one big group. Grouping is where you have different businesses that you're trying to find similarity with and putting together for material participation purposes.
Toby: Good enough. All right. Tax and Asset Protection Workshop is coming up on October 1st. Is that this weekend?
Eliot: Yes.
Toby: So we're already into October?
Eliot: Right there, almost. Yeah.
Toby: This year has just been like [...]. Yeah, it's getting towards the end of September. We're in tax season. Everybody's like, oh, they've been getting crushed. Somebody says, "Earlier, you mentioned it's not too late to do a cost seg for 2021. If the 2021 tax is already filed without cost seg, can you amend them and do it?" Yes, Kevin. This is why you're here.
"Can you do the bonus depreciation? What would the deadline to amend? Is it October 15th?" It's actually October 17th this year. Do it. And if you need a good cost seg person, Ian's in this What's Ian doing?
Eliot: He's married right now.
Toby: It's like irresistible. He's like, oh, there are questions. Somebody needs to answer them.
Eliot: I think it takes his mind off things.
Toby: I would be curious, Kevin, if you would be willing to share once we are done, how much it saved you in 2021. Just send us an email to our Tax Tuesday and just say, hey, by the way, it saved me like $15,000 or whatever it is that you're going to save because of that. It just tells you why you stick around and listen to this stuff because you never know when it's going to save you some money. It's like a nice vacation that 's going to save you.
All right, Tax and Asset Protection Workshop. My partner Clint Coons does the morning, I do the afternoons. He does a great job on asset protection, security through obscurity, creating a great plan, keeping your stuff out of reach of all the nasties out there, lawyers, snoops, Uncle Sam. I do tax in the afternoon. We work just on real estate. We're going to show you how to build a great blueprint, a great plan to help you create a legacy. This is fun.
"Does the short-term rental period consider who was renting to if someone stayed three different times?" You're fine. It's unique rentals. They're always looking at it. If you rented it, again, the way the IRS says is you take all the days that you rented it out as a short-term rental and divide it by the unique rentals. I think that if you had somebody stay three days in a row and you had three different rentals, they would say no. But if you had somebody stay three days this week, three days next month, three days the other, they're going to break that up.
All right, I'm just answering questions. Sorry, guys. Sometimes I just read the chat. It's right in front of my face and I can't help myself.
All right, here's a good one. "If a US citizen receives a property that's located in another country as a gift," let's say it's Spain. You get a villa in Marbella. You're like, okay, I'm doing good. "Does he or she need to report it to the IRS?" Let's just answer that one first.
Eliot: Probably at that dollar value, yes, but typically, no. First of all, it's not going to be taxed, but you may have to report it if it's over $100,000. You just fill out a form, but you're not going to be taxed on it. Though, if you do get over that $100,000 mark, every gift that's over $5000, you have to individually list out, but there's no tax.
Toby: If you receive a gift, you have to list it on your return or is it just from foreign sources?
Eliot: If it's from foreign sources and it's over $100,000, then we need to report, but we're not paying any tax.
Toby: Not paying any tax is the only part you need to know. What paperwork is needed for it again?
Eliot: I actually wrote that down. I think it's Form 3052 or something like that.
Toby: Yeah, so you can make sure that you're getting it. "Does the real estate gift from a parent get taxed?" Not by you. What's weird is if I can give Eliot here half a million dollars, he pays no tax on it. I do.
Eliot: I'm a grantor.
Toby: Unless I choose to use my lifetime exclusion, which right now is sitting at around $12 million. I can give away a lot of money. Let's turn that one around. Eliot can give me a half million dollars.
Eliot: Yeah. I'd have $11 million to the $12 million. I'm a little bit light on that right now, but yeah. For the foreign report, it is Form 3520. In the US, if it's a US individual giving a gift to another, again, you might fill out, and I always get this mixed up Form 709, but they're just forms. All you do is you're going to have to report it, but there isn't any tax unless we're over 11.
Toby: You can always receive stuff, that's the thing. There are a few states that have inheritance taxes still, but that's only when there's death. When we're gifting, maybe there's one that triggers on the state side. On the federal side, it's never taxable. There are very few instances where I think a state gets involved. We like that.
All right, long question. "My question is about bonus depreciation, which I realized must be taken in the first year that the depreciable item is placed into service," kind of, right?
Eliot: Yeah, a little bit right.
Toby: I could have a property for five years and I could choose to change it to accounting method under the 3115 and say we're going to cost seg it. That's the year that I have to do the bonus depreciation. Technically, not quite. It's the first year that I break out that property, then I have to take bonus. I'm supposed to take it or opt-out.
Eliot: Now I would have to go back to the bonus depreciation rule for that year that I put it in service though. That might be where you're getting caught on this first year part.
Toby: "The property was purchased this year and was informally placed into service for a very short period of time to family and friends. But it needed renovations to open it up to a larger Vrbo market, which we did this year. It's now placed in service." When I see family and friends, I always think personal. If I rent to somebody under market value and if I rent to somebody that's a family member, that's personal use. I don't get to depreciate it.
Eliot: What happens is you're going to add up all these personal use days, you're going to have all the true fair market rental days. If you're at the thing over 14 days or 10% of the fair market rental days that you've used it personally, then you're going to be limited to your deductions up to the amount of income that you actually received. You could really do yourself a disservice.
Toby: You're not going to get the loss. Let's just say you were using it for personal services. This is the reason I'm going to say that. It's like, all right, now it's placed into service. Now, this is the year that we care about 100% bonus depreciation.
"We're not sure if we qualify this year for professional real estate status." We don't have to worry about that if this is Vrbo and you're seven days or less average use. Because if you average less than seven days or less, it's a pizza shop. It's a trade or business. It's no different than any other business. You don't have to worry about professional real estate status, it's real estate professional status.
"Any chance I can use any of the bonus depreciation for next year since without the designation, I can't take the loss unless I want to carry forward?" The answer is yes. What you would do is, hey, we would just treat it as a 39-year property since it's a Vrbo. I would treat it as typical process. If it was single family, maybe 27.5. Residential would be 27.5 years, but this is 39 years because it's considered a hotel.
I could just wait until next year. I could do a cost seg on it and take all the bonus depreciation next year. Absolutely, you could. But remember, you don't have to qualify as a real estate professional. All we care about is, did you materially participate? Did you do all the activities?
Were you the host? If the answer is yes, we don't have to worry about anything else. If the answer is no, then we go to step two, which is, did you do 100 hours? Did anybody do more? If the answer is yes to that, I did 100 hours, but somebody did more, then we go to the 500 hours. And if you've met that, then we don't care about anybody else. Vrbo is vacation rentals by owner. It's like an Airbnb, Mary.
"Also, I want to. I seem to remember that you have to place the property in service before expenses are incurred to take bonus depreciation." Yeah, that's absolutely right, before it's depreciable because we put it into service because we don't depreciate our personal property. The easiest way to think about this is if I bought a house and I was living in it, I don't depreciate it. But if I moved out of that house and made it into a rental, then I could. Yay.
Eliot: Perfect.
Toby: "How does accelerated depreciation work, Eliot?" This sounds like a lot exempt. How does accelerated depreciation work? Discuss. You have three pages. "In general and more specifically for multifamily syndication as both a passive and non-passive investor?"
Eliot: To really prep for this question, I actually went back and tried to come up with the actual definition of accelerated depreciation, which just simply means you're deducting more upfront than you are at the end. That's the baseline.
Toby: It's bonus depreciation.
Eliot: Yeah. Bonus depreciation is certainly a part of that, but there are other types out there.
Toby: Here's a good question, [...]. "There is bonus depreciation in California for federal tax purposes. They will not allow you to take bonus for state tax purposes, so you end up with two returns."
Eliot: Very good question there.
Toby: Yeah. California sucks. No offense, but your tax department, the Franchise Tax Board is a bunch of vampires. If you're listening, go back into your coffins because you know that you are. We have a whole bunch of folks that worked for the service. We had tax attorneys that worked for them. They even say it was pretty brutal. Most people are like, we're pretty vicious. There's a bunch of you guys.
I can say it. I love you guys. I probably never be allowed to go back into California again, but holy schmoly, you guys are vicious.
Eliot: I'll be checking for Toby at the border.
Toby: I want that team coming after my enemies. You go after them and you're just [...]. Anyway, accelerated depreciation is a fancy way of saying, anything that's 5-, 7-, 15-year, and even 20 years or below useful life, you can write off in one year. It's under 168(k). I can, boom, kick this huge deduction.
"How does it work for a multifamily syndication?" It doesn't unless you do a cost seg. If I do a cost seg, I'm breaking out the personal property, which is 1245 property—that's just for the accountants out there—versus the 1250 structural property.
Eliot: Your personal property and your real property—1245, personal property, 1250 being your real property.
Toby: Right. We never get to write off land, so it's whatever is built on that land. You walk up to this beautiful apartment complex. You're walking this little alleyway or the walkway and it has a nice little fan. It's got some palm trees. You walk out there, there's a pool, and you see all these cute little gates and all this stuff. All that stuff is a 15-year property for the most part. All that, you could write off in one year. That creates a big loss.
Now, the only question is, are you a material participant in that syndication? If the answer is no, then the next question is, are you a real estate professional? If the answer is no, then it's passive. If the answer to either those first two questions—are you active in the management, are you materially participating—then it's non-passive. Are you a real estate professional? Then it's non-passive. Otherwise, yes, it's a passive activity.
Eliot: If you aggregate, which we talked about earlier.
Toby: Yeah, I guess you're right. Even on that one property. If I was a general partner in a syndication, then it doesn't matter whether I aggregate it or not, that would be non-passive loss shooting down. If I'm a real estate professional, then I would have to aggregate my properties together to meet the material participation test. If I was a real estate pro, then it unlocks the loss there as non-passive.
Somebody says, "California is like watching the Titanic go down over two decades." It's still a beautiful state. It's beautiful there, but man, we're going to be nice. We're not going to say anything. I love going fishing out of San Diego. Napa Valley is amazing. The beaches are gorgeous. It's just you have a little bit of a...
Eliot: Tax problem.
Toby: Yeah. It's kind of like that. Your family's great, except we got that one uncle. He drinks too much and uses colorful language, and you're like, everything's great. This is a great holiday, but...
Eliot: But uncle Eliot showing up.
Toby: Uncle Eliot getting hammered talking some crap. That's the problem. California is beautiful, you just got a little...
Eliot: That's why I missed my invitation to Thanksgiving last year.
Toby: Yeah, skip it. I can't see you ever being mad ever. You're like the nicest guy on the planet. Eliot's truly the nicest guy that's out there. I can't see you ever misbehaving.
All right, "What are my options if the IRS re-figures your taxes and you have a CPA reviewing and signing off on the return?"
Eliot: The tax liability is always the responsibility of the taxpayer. It really doesn't matter if a CPA messed something up or didn't, gave you bad information or didn't. Whatever it is, the liability is yours as an individual.
Toby: And then if you don't agree with it, that's where you get to go to the office of internal appeals and you say, I don't agree with this. Let's take a look at it. You're going to get a real professional looking at your information then. It's not uncommon to have an examiner. You remember, Ronnie?
Eliot: Yeah.
Toby: This is fun. Let me see if I can actually look this up in real-time. Ronnie had a client and he was going through an audit. Ronnie Withaeger is a great CPA, a great friend of ours, and used to work here. Let me see what he says. Oh, this is great, there.
He said he was in this audit and some inexperienced guy asked questions like, what airline do you travel on and what hotel do you stay in? After 90 minutes of answering questions, some new guy pops up and starts yelling that the shareholder loan is a dividend. We're like, who are you? He was so combative. It was an awkward 10 minutes.
These were two of his statements. "Don't cite code sections at me. I represent the interests of the government. I don't care the way you see it." Sometimes you get that auditor, we've seen that. It's rare. But holy cow, when you get one, it's like, you know what, just figure out what you're going to say sir, ma'am, whatever. Just tell me what it is that you think I owe, and then I'm going to ignore you and go straight to your boss.
Eliot: No reason to engage on that.
Toby: Yes. Sometimes it's just better to be like, you know what, you're right. Bad me. The CPAs will just be like, [...]. They're going to tear into each other. But for the most part, sometimes you get an idiot.
Eliot: The smart play is like what Ronnie did. You laugh about it, but get out of that as fast as you can and file your appeal.
Toby: Ronnie's like, go ahead and make your decision. That's what he's going to say. Go ahead and do it, don't worry. If it's us, we always back our return. We'll fight on your behalf. We don't charge you, so you're like, you know what, just go ahead. Throw it out there, we'll go to the office of internal appeals, and we'll talk to somebody who knows what they're doing that actually respects the law.
I've seen some bad ones. We had a poor guy come in with a $79,000 tax liability and CPA rolled over on him. He was a completely docile kitty just lying on his belly. We took it. It was like, you're just absolutely dead wrong. Here are all the things. We just appeal, boom, done. It took two months, it was annoying. I think the liability was $1500, $2000 when it was done. Just know that sometimes that happens.
Yes. IRS reconfigures your taxes, you want to find out why because they're doing it for a reason. Usually, it's because somebody sent a 1099 or something was reported underneath your social security number, and it could be incorrectly reported. It could be a transcribed number. It could be somebody that was just wrong. Maybe they gave you a gross number instead of a net number.
There are a number of reasons. But sometimes the IRS gets bad information, and you just want to see what their information is. Then you meet with the agent to determine whether or not they're taking a position that's contrary to yours and whether you can rectify it, then you get to go to the office of internal appeals. If you still don't like what they're saying, then you go to the tax court.
I'll tell you this, if you go to tax court, they do not want you in tax court. They absolutely want to settle these things if humanly possible, unless it's something where they really do need court guidance. Like I don't know if it's A or B. Nobody knows whether it's A or B. Hey, court, will you tell us whether it's A or B?
Eliot: The courts go to the law clerks to do the research.
Toby: Yup. You clerks for judges. I clerk for judges. You should not be listening to what the law clerks say for the most part. You shouldn't be listening with the judges.
All right. "After cost segregation, how long do we need to hold the property? Is there a hold time restriction to sell after cost segregation, or can I sell the property after cost segregation and do a 1031 exchange for tax-deferred?"
Eliot: I really like this question because you're going to hear a lot of stuff out there. It should be this long, common sense is this long, or whatever. The reality is the code doesn't say anything. There's no time given for how long you have it. You just have to have it in a trade or business or as an investment.
Toby: Yeah, and I will say this. If you cost seg a property and you sell it, and let's say you did it after one year, you're going to have four years of recapture on the five-year property if you bonused all of it. You're going to have 14 years of recapture on the 15-year property. You're going to have six years of recapture on the seventh. That recapture is taxed as ordinary income.
That's number one. There could be a tax implication. But if you 1031, don't worry about it. If you have an investment property, there's nothing that says I can't cost seg it and roll it into another property. Just know that if you do, you need to keep the same tax methodology. In other words, you have to cost seg the new property and write off its 1245 property separately from its 1250 property.
Somebody says, "By the way, my IRS tax auditor spelled his title wrong. He wrote, opersations manager." You still had to pay an arm and a leg after his audit. Opersations, that's mean.
Eliot: That's everybody this time of year in taxes.
Toby: I misspell my name half the time at this point. Sometimes I'm just lucky to be OC. I'm like, Toby, you misspelled your name again. Spell check. It just says, Hefe. Keeps going to El Hefe, I don't know why.
All right. "This is my first year in business, so I have not filed the [...]." Oh, somebody's already answering that. By the way. I just want to say a big shout-out to Troy who manages our bookkeeping department, Dana, Matthew, Patty, Ian, Piao, and Christos who have been answering questions. There are 125 written questions that have been answered, which is pretty amazing.
I have to say, give props where props are due. Those guys are in the middle of tax season and they're doing this. They get a big star. You don't realize how bad tax season can be. You're tax professionals. It has been so tough dealing with the IRS.
I know that the Inflation Reduction Act gets made fun of because it doesn't really stop inflation. We're going to have 87,000 new agents or whatever. We need investment into the IRS. I got to tell you as a tax professional. I don't know if you feel the same way.
We need more people working for the IRS that could actually help because you can't get a question answered half the time. It took us about a year to get a paper return response. They would take your check and then they would say you still owed the money. It's absolutely catastrophic what's going on in that place.
I don't begrudge the money. I do begrudge that if they're going to give it to a bunch of examiners to audit poor people, I think that sucks. That's who they audit, by the way. The vast majority of audits are people that are working-class or lower. It sucks. They shouldn't be doing it, but they get a good return on their investment when they send out those letters and audit the earned income tax credits.
The people that are making $25,000 and below, they can't afford an account to fight it. They're usually scared to death of the IRS, so they just pay it, versus the folks that can have guys like us who defend them. It's a completely different animal.
All right. If you guys like tax knowledge, if you like this type of information, please go in there and subscribe to the YouTube channel. Patty always shares out the link. We also stream Tax Tuesdays. If you want to watch it in a different format, you can go to YouTube and watch it. You could also watch the videos there. There's a ton of stuff.
We put about three videos a week, usually two at least, three sometimes. I'm always trying to pick topics. You can always help me out. One of the things you can do is go to taxtuesday@andersonadvisors.com and let me know what topic that you want me to do, a deep dive into, and ask your questions. This is where we pick our questions.
We get them. We get about 500. I just randomly go in, it's usually like the top. I literally look at the top bunch of questions and I'll be like, oh, those ones all look good. Just grab them and throw them in, just make sure that they make a little bit of sense.
You could always go in there and ask your questions. I personally think that one of the most beneficial use of your time is to learn these rules. It's not necessarily you that you might be helping. It maybe somebody that you care about, maybe somebody that you meet, maybe a friend, maybe a family member, or somebody else where you just say, hey, you know what, you might want to look at this. I heard you might be able to do something that can help yourself. Big, big difference.
Especially in the years like now, if you don't realize that the wash sale rule doesn't apply to crypto, so you can sell your crypto and immediately buy it back, have this huge capital loss, offset a bunch of your capital gains, especially if you had to sell some property or sell stock during this last year. Maybe you took a bunch of winners and your financial professional said, we're out of the market and dumped it and you have all this gain. There's a freebie to help offset it.
It's just knowing little things like that so you can better yourself and you don't get smacked with the tax stick. Anything from you, sir?
Eliot: I think we're determined next time, it's going to be with some bookkeeping element to it.
Toby: Yeah. What we're going to do next Tax Tuesday is a bookkeeping special. If you have bookkeeping questions specifically, send them on and say, I have a bookkeeping question that'll help me identify that as a bookkeeping question. I have no doubt that we have a ton already in there.
If you do the Tax Tuesday next time in two weeks, we're going to have Troy Butler on. We're just going to focus like a laser beam on books and records because your P&L and balance sheets actually matter. In fact, the more time that you spend on those things, the better off your business is going to be because it's going to tell you the actual financial health of your business as opposed to guessing and waiting until the end of the year. Or like me, six months after the end of the year, like, okay, let's make sure my books are actually done.
You want to actually kind of be doing this stuff as you go so you can get a good idea of the health of your business because there's nothing worse than that surprise of like, hey, I ran out of money, I wonder why. That kind of sucks. It has a chilling effect on your weekend activities.
All right. There are still a few questions that are open. We'll continue to answer those. But in the meantime, I just want to thank everybody for joining us for Tax Tuesday. We will see you in two weeks. Anything else?
Eliot: No. Thanks for letting me attend. We'll see you again.
Toby: Eliot kicks some hiney. He does a great job. I just want to say thanks to Eliot. Thanks to the whole team for doing another Tax Tuesday. You guys do a fantastic job. Thanks, guys.
Eliot: Thanks to the clients.
Toby: Yeah, absolutely. Without you guys, we'd be talking to ourselves.
Eliot: Which we used to do anyway.
Toby: All right.
In this episode of Anderson Business Advisors, Toby Mathis speaks with Jeff Mason and Chris Hammond about cash balance pension plans for business owners. This is not a 401(k), it’s not an IRA, it’s a way to defer and even reduce a portion of the taxes you might need to pay and set yourself up with an annual income when you retire - if you are a business owner.
This is for all business entities. True pass-throughs, S Corps, sole proprietorships, and partnerships work best in this savings scenario. Many people that have even heard of defined benefit plans, or cash balance plans, might think you can’t start contributing until later in life, and that used to be true, but now people like Chris and Jeff are designing plans for people in their 30s.
Jeff and Chris will go over what the benefits, timelines, and rules are regarding these plans, give you some sample scenarios with actual clients they have helped, and also answer some specific questions that Toby has about their validity, value and future potential for participants.
Highlights/Topics: * The basics - How business owners can set up an income for themselves at retirement, the requirements to contribute, how much you can put in, how much you can take out and the tax implications * Some examples of Jeff’s clients and the actual numbers they are working with * Deadlines and potential increases in contribution limits from the IRS * Are Jeff and Chris going to try to “sell you” stuff if you go to them for help? No- the retirement community is very small, everyone would know if you were operating in an unethical way. We want more referrals, not less, so everything is highly ethical and we don’t take advantage of people * Get in touch with Jeff and Chris - there’s no cost for your initial consultation and even developing a sample plan - they just want to see if their services can help you!
Resources: Email Jeff Mason
jmason@redwoodrs.com
Call Jeff Mason 815-516-0560
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
In this episode, Clint Coons of Anderson Business Advisors welcomes Kim Lalande, Founder and CEO of Key.
Key is a ‘one-stop shop’ that partners with quality vacation rental homes (usually 3+ bedrooms and a certain aesthetic) to take all of the “concierge” burden off of the host or homeowner’s plate and provides one place to book all the in-home services to enhance each guest’s stay. Before launching KEY.co in 2015, Kim was the Director of Business Development for DLA Piper, a law firm representing many leading technology companies.
I talk with Kim about some of the reasons that investors who own or are looking for short-term rental properties should use this type of service. From my own experience with a rental in Hawaii that I sold because I hated doing all the work with guests, it is obvious what a relief this service would be to any short-term property owner. Kim says that naturally most of the “vacation destinations” with beaches like Hawaii, Florida, Nantucket, and The Hamptons are perfect spots to invest, but there are also some up-and-coming areas such as Austin, Nashville and Charlotte that are hotspots for short-term rentals. You’ll get better reviews and more bookings when you offer a concierge service such as Key, and there are a number of tax benefits as well.
Highlights/Topics: * Kim came up with the idea for Key during one of her own short-term rental stays * The types of “quality” homes Key represents - they personally vet every home * The most attractive markets: Data shows lake, beach, Florida, Hawaii, Austin, Nantucket, Hamptons, mostly vacation destinations * How should a person stage their rental? Think high end hotel * Using Key services - what’s the return on cost of your services? * At Anderson, we say if you spend 100 hours managing it, you can accelerate the depreciation. Key shares all their marketing and promotion with each homeowner to increase bookings * Today’s short term rental market is even getting large hotel chains participating. If you DON’T have a service like this, it’s harder and harder to compete * Each type of renter needs different services - families vs. couples vs. bachelorette party. Flexible service is best, trips types are so different * Cleaning, pre-arrival groceries should be automatically included, along with a “mid-stay” cleaning * Smaller properties (condos, townhomes) will have high volume, large homes may only need to rent out six times a year with their higher cost * Make sure your rental is in the “center” of local activities (beach, skiing), people don’t want to drive on vacation * Outlier homes, drive to go anywhere, ppl don’t want to go driving, not nec city center, lake? Boat rentals/beach, center of activities. * The pandemic took many rentals off the market - people moved out of city centers to their second homes * It’s important with today’s hybrid/remote workers to include highspeed internet and a desk/office area – consider adding a cool background wall for video calls!
Resources: Kim Lalande LinkedIn
https://www.linkedin.com/in/kimshrum/
Key Website
https://partners.key.co/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Several of today’s tax questions are related to STRs (Short-term rentals) like Airbnb and VRBO. Toby Mathis and Jeff Webb of Anderson Advisors discuss the differences between passive or active income on these popular investment properties, and answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors. Highlights/Topics: * Investing in multiple family syndications - I think when you make an aggregation election, you're electing to treat all your rental activities as one activity * Setting up ongoing support for 501(c)(3) organizations that support the advancement of religion - Make it a private foundation. Spell out your values and then say, here are the organizations that I believe meet that at this time- but understand how wildly society and religion might change over time * Short-term rentals/hotel syndications - active or passive income? Unless you’re an employee like the general manager of the investment property, you’re passive. This is not a rental activity, period. Hotel syndication or short-term rental, just remove the ‘rental’ and it’s a regular business * A real estate investor pays almost no taxes, but her husband is a 1099 contractor with a huge tax burden. Should they put some properties in his name? If you’re filing jointly, it won’t matter. You could also donate a property for a community service/non profit to get the deduction of the full market value * There are still actions you can take if you’re getting killed on 2021 taxes, the clock has not stopped on 2021yet!
Resources: Email us at Tax Tuesday Get Clint Coons’ Book Tax and Asset Protection Events Anderson Advisors Anderson Advisors on YouTube Full Episode Transcript: Toby: Welcome to Tax Tuesday. My name is Toby Mathis.
Jeff: And I'm Jeff Webb.
Toby: We're going to bring some tax knowledge to the masses on the September 13th edition, which is two days before a tax deadline which is why Jeff looks extremely excited. You have another tax deadline. It's just [...]. This is the season.
Everybody thinks it's April 15th, but no. If you got to get an accountant, this is the time of the year that they're all busy getting hammered away going through all this fun stuff. Let me just do one thing. I can see my chat. I'm going to grab my little Q&A.
Here are the rules. You can make comments via chat. You can ask questions via the Q&A feature. Be light today. We have a lot of accountants doing return prep. We still have a bunch of folks on, including Dana, Eliot, Jeff, Trisha, Troy, Patty, and Ander.
You got Jeff and I. We're going to answer your questions as best we can. But if you're thinking today's the day, I brought 10 questions, just ask one of them. Try not to kill us. They're all getting slaughtered as it is.
All right, let's jump in. We have our simple rules. You could ask questions. We already said that. Ask questions via the Q&A. You can ask questions during the week via email at taxtuesday@andersonadvisors.com.
These are general questions and answers. Some folks out there are just asking away for other people. You'll see, one of those is one of our questions today asking for a neighbor. We want to make sure that you know that if you're going into detail that we're going to ask you to become a client before we answer.
We're willing to give general Q&A and answer general questions. But if it gets a little crazy, we will put the skids on it and say, all right, hold on for a second. This is getting into the advising. We're not just answering a simple question.
The whole intent of this, by the way, is to be fun. We want you guys to enjoy taxes and start looking around for all the things that could benefit you. We're going to try to bring to the surface that there are a lot of tax benefits out there that you may not be aware of. Hopefully, you go away having a little bit of fun, getting a little bit of knowledge, and putting some more dollars in your pocket with that knowledge, which is what we like.
We're going to go through all the questions that we're going to answer today. Don't think we're going to answer all these right now. We're going to go through and we'll knock that down. Patty, you can just interrupt next time. I was looking at the chat going, hey.
Here we go. "I have numerous multifamily syndications with bonus depreciation losses on a K-1. They were obtained between 2018 and 2020 as a passive investor and owned by a multi-member LLC—me and my wife. Starting in 2021 and currently, I have real estate professional status." It's going to be an interesting question here, because I can already see what's happening.
"In 2022, I have two dispositions of properties that were purchased as a passive investor. Can I use the original bonus depreciation losses to go against the gains on the sales? FYI, I have elected to group all my real estate activities and properties together." This is going to be a good learning experience. It'll be interesting to go through that. We'll get to that one here in a second.
"I am an active options trader that files a Schedule C for expenses and a Schedule D for gains and losses. I've heard of mark-to-market tax filing. What are the benefits of one over the other?" Good question. We'll get into it. If you guys know what traders are and what mark-to-market is, you already know the answer. If you don't, this will be a good learning experience.
"I have a list of 10 501(c)(3) organizations that I want to support in perpetuity as long as they continue faithfully in their current missions for the advancement of religion. I am weighing the option of a C-corp private grant writing foundation versus a charitable trust.
I worry that the make-up of the board of a private foundation may drift over time after I die and grant writing will eventually shift from 501(3) organizations that align with my values to 501(c)(3) organizations that do not." Okay, we'll address that in specificity. There are some things there that we want to correct, and we'll give you some ideas.
"Short-term rentals when depreciated with cost segregation allow for the depreciation to offset income without having real estate professional status if you materially participate." That's a mouthful. "Most real estate syndications are long-term rentals with depreciation only offsetting rental income, which is passive.
If you are involved in a hotel syndication or a short-term rental syndication, can the depreciation offset active income or would it just go to passive income? With the rental income and a hotel syndication, are short-term rentals considered active income or passive income?"
I like these types of questions because they're good teaching. This is a little bit convoluted. But when we dive into it, actually, these are great questions for teaching a principle.
"My neighbor asked me this question." Hey, neighbor. "He purchased his first house/home when he was in his early 20s, which resulted in his dad needing to co-sign the loan. He paid off the loan and found out his dad's name is on the title and not his name." Uh-oh. Dad owns the house.
"He purchased a second home and has since been renting out the first, the one titled in dad's name. He would like to sell the row house but does not know how to proceed since it's titled in his dad's name." Wow, have you seen that before?
Jeff: No.
Toby: That's weird that you bought it and somehow, dad's name got on the title. I wonder if maybe there are two people. Anyway, we'll get into it.
"I've heard Anderson talking about Spartan Investment Group, which buys, develops, owns self storage units across the country." Yes, we do like Spartan. We've been working with them for years, and they do a great job for our clients. "I'm considering using my self-directed Roth 401(k) to invest in that company." Probably in a syndication, but whatever. "Would I be subject to UBIT or UDFI tax by using my Roth 401(k) for that investment?" Really good question, and we'll dive into that for you.
"Is short-term rental income still considered active if I have a property management company running the short-term rental business for me?" STR stands for short-term rentals. It's Airbnb, Vrbo. "I do not rent the property to them, they simply manage the business for me. I'm a real estate investor and pay nothing or almost nothing in taxes every year." That's awesome.
"My husband, on the other hand, is a 1099 contractor with a huge tax burden. Would it benefit us to put some of the properties under his name?" I immediately ask, are they filing jointly? We'll dive into that a little bit.
"You have mentioned multiple times in your videos that borrowed money is not taxed, but you never explain it in detail." All right, let me explain it in detail. Borrowed money is not taxed. I’m just kidding. There are some cases where it can be.
"I have multiple investment properties, each in its own single member LLCs. My CPA says if I refi, I have to take the money out as an owner draw because they are in an LLC, and it's going to be taxed. Please help clear this up. Can I refi investment properties inside an LLC and take the money out tax free?" We always save the best for last. We'll get to that one before we're done.
If you guys have lots and lots of questions, you're getting into real estate investing, you're getting into business ownership, whatever, you're just interested in taxes, asset protection, or just how that world operates, come to my YouTube channel. We have a lot of them. Lots and lots of videos. We've been doing this for years.
I was talking to somebody, but we have videos from 2014 and stuff like that not still up, but we've been doing that for a long time. Actually, we started doing podcasts. I actually remember I was in Seattle and that would have been in about 2003. We're like, meh it's a fad.
We did a whole bunch and we're like, meh it's a fad. Nobody's watching, and then you look at this. Wow. It gets a little crazy. You absolutely come and join the community.
If you just click on subscribe, you don't get inundated with anything, you're not signing up for any marketing list. It just lets you know when videos come out. I think you have to subscribe and then click the little bell. I know where the little bell is. Turn on notifications, there we go, the little bell.
Click that bell if you want to know when new videos come out. We usually put two or three out a week. pretty consistently at least two long ones and then some short ones. I love creating content for the YouTube channel. It's so much fun to share information with people.
Speaking of sharing information with people, Jeff, you're going to have to help me on this because my brain exploded reading this. "I have numerous multifamily syndications with the bonus depreciation on K-1." First off, a syndication just means I'm an investor in a group. Usually, it's an LLC, sometimes it's a limited partnership. I invested, and they invest in multifamily.
You can really accelerate depreciation on a multifamily. You don't have to do the 47½ years. That's kind of boring. What they do is they break it into its components. It's called segregation, not bad. Segregation, but good segregation. We're segregating the assets.
I always use the example of carpeting in the last five years. Why are you writing it off over 27½ years, right? They're writing these things off really fast. If you're a passive investor, you can't use those passive losses on anything, right?
Jeff: Right.
Toby: What do you do? You lose them?
Jeff: Now they're suspended. Meaning, you can use them sometime in the future, but not for now.
Toby: That's the important concept first. When you have these losses and they're passive, they offset other passive income. There are only two forces of passive income, businesses in which you do not materially participate and rental. If you don't have any other rental income, those losses just get suspended if you carry them forward.
Let's keep going. "They were obtained between 2018 and 2020 as a passive investor and owned by a multi-member LLC—me and my wife." That just flowed onto their return. The chances are they're a partnership together, and those losses are being carried forward. This is where it gets interesting. "Starting in 2021 and currently, I have real estate professional status." Why is this important?
Jeff: Once you have real estate professional status, you can deduct any current losses from your real estate. But all those suspended passive losses, they're stuck until you sell substantially everything.
Toby: This is where it's really important. This is where people sometimes stub their toe. They go to their accountant and they say, I heard this great thing called real estate professional, I qualify. They say, okay, we'll make you a real estate professional. The downside of real estate professional status is if you already have losses, you have to dump all your stuff before you get to take them, or you have to have passive income that will offset, which is possible.
But again, if you're doing these syndications and getting these big bonus depreciation, that's not making money. That's creating paper loss. Yes, if I'm a real estate professional, I could use my current losses, but my old losses are stuck. I can't do anything with them.
Here's what they ask. "In 2022, I have two dispositions of properties that were purchased as a passive investor." This could either be multifamily, it could just be individual properties. I don't know which one, “but passive purchases are being sold. Can I use the original bonus depreciation losses to go against the gain on the sale?
FYI, this is the most important line here. “I have elected to group all of my real estate activities, properties together." I love grouping unless we have loss carryforward sitting on your return, in which case, now, I would say get rid of those losses before you group, because otherwise, they're going to be trapped in the group. In order to take that loss, what do you have to do?
Jeff: Take the loss on that property once we aggregate it. You got to sell substantially all of the properties which are aggregated, which could be 75%–80% of the properties, maybe more.
Toby: Maybe more. Yeah, they would say, substantially, all of the properties would have to be sold to release that. Normally, you have a loss carryforward on a property and you sell the property. It releases that passive loss and it becomes non-passive loss.
Jeff: Correct.
Toby: If I had $100,000 in a syndication and I sold the syndication, the $100,000 of loss carryforward gets released and would offset the gain that I had.
Jeff: Correct.
Toby: Does that not happen now for these people?
Jeff: It does not happen now.
Toby: Now, those still have some capital gains. They have this loss carryforward and it just keeps carrying forward. You don't lose it, but it doesn't get released. You still have this passive loss until you get rid of all your properties or, substantially all your properties. It stinks.
Or if you have passive income. You have the passive loss sitting there, waiting for you to have passive income. Passive income is not just from rental real estate. It could also be businesses in which you do not materially participate.
If Jeff opens up a pizza shop. He runs the place, I'm a 50% owner, but I don't do anything, I don't participate in the business, and it makes me $100,000 a year. Great. My real estate loss can offset that income that I made from the pizza business, because I did not materially participate. It's actually a really important line there. What do they do here? They're just toast?
Jeff: Pretty much they are. There is another regulation 1.469 blah-blah-blah that says the character of an asset is the same as the character of the income or loss that it's generating. Normally, if you sell a passive asset, a rental property, that gain is now passive and you can offset passive losses. However, when you aggregate these properties and become a real estate professional, you've turned your rentals into a trade or business.
Toby: Let's do a timeout here.
Jeff: Okay.
Toby: If you are a trade or business. As the taxpayer, you're no longer a passive participant in real estate. What if you didn't aggregate? What if you never elected to aggregate the properties and you said, you know what? Treat each of my properties separately? Then are you okay?
Jeff: It's possible that some of those properties can remain passive. If you have a number of properties, the syndications are almost definitely passive.
Toby: Yes. Here's the big important thing. If you do not aggregate, I need to qualify as a real estate professional on each property. Only the ones that I'd materially participate in, each having to meet a separate test for material participation. Which is why we aggregate, so we don't have to do it on each property.
Let's say that you have two properties that you materially participate on, two that you don't, then you could still have passive and you could still have your real estate professional status with the losses on these ones that you're materially participating on.
Somebody says, "In this case, is it better to not group?" Chances are, it would have been better to not group, but chances are, they wouldn't have been a real estate professional either. Chances are, they have to do both.
Jeff: I don't know that it's worth being a real estate professional if I can only do it for 1 or 2 properties, and I own 10. The other wonky thing that happens when you aggregate and have passive losses that are going to be suspended… Where was I going with this?
Toby: It's okay, Jeff, it's tax season.
Jeff: I know.
Toby: You're thinking of six other returns. You've been aggregating, and all of a sudden, you make an aggregation election, you have the passive loss.
Jeff: Okay. I know where it's going. Back to the pizza shop. It's impossible to buy more rental property to generate passive losses, because as soon as you buy another rental property, you're a real estate professional and it gets aggregated with these properties.
Toby: It almost seems like rental properties are no longer passive for you. You're aggregating all your activities together, so you're either a real estate professional or you're not, and either all your properties or you’re per property. If you aggregate them together, it's all one property. It's not this property, that property, it's all one big property. But you still have businesses in which you do not materially participate, which by the way, could be an Airbnb.
Jeff: Yes, it could.
Toby: It could be a pizza shop.
Jeff: I think that's a great idea.
Toby: You could sit there and go, you know what I shouldn't do? I should not materially participate on my Airbnb, so I have a bunch of income that I can offset. Now I have these passive loss carryforwards, I'll never pay tax on it. I'll just be wiping it out. That's what you do.
Can you aggregate the properties separately? I think when you make an aggregation election, you're electing to treat all your rental activities as one activity. Unfortunately, Jeff, great idea. You're thinking right, but I don't think it's possible.
All right. That was a good one. I'm going to go back to it and just look at it for a second. The FYI was the secret sauce. That's why when I see FYI, sometimes I'm like, huh, all right.
Jeff: That's all the information to have.
Toby: I like to know that you aggregate it, because that's the whole calling of the question. Otherwise, we'd be sitting here saying, did you aggregate? Almost all real estate professionals aggregate.
In fact, the way that the IRS wins all those cases against the real estate professionals, isn't that they're not a real estate professional. They meet the first prong, but they did not materially participate on their rental activities individually. They have to combine them. You're almost always electing to treat them all.
What qualifies as a real estate professional? It's under 469(c)(7), and it's a two-prong test. I have to spend 750 hours in a real estate trade or business, and that's an annual test, 750 hours, and it has to be more than 50% of my personal services. If you're filing a joint return, one spouse has to meet that test.
Number two, you have to materially participate on your rental activities. You do that, a material participation is a seven-prong. There are seven tests that you could qualify. (1) All you have to do, the easiest is I do everything myself. (2) If I do 100 hours and nobody else spends 100 hours. (3) If I do 500 hours.
By the way, if you file a joint return, they add your time together on the second test, not the first test. But don't worry. I have it broken down on my videos on YouTube. If you go in there and you want to know, I always say it's the number one real estate strategy. It's cost seg with a real estate professional designation.
All right, here we go. I know we're supposed to be only an hour, so I'm going to do really hard to get you out of here. "I am an active options trader that files a Schedule C for expenses and Schedule D for gains and losses." Which means they're a trader, by the way. There's a term for that, it's called trader status. "I've heard of mark-to-market tax filing. What are the benefits of one over the other?"
Jeff: We love mark-to-market. That was sarcasm.
Toby: We could just tell you all sorts of nasty stories. Mark-to-market is...
Jeff: Mark-to-market changes capital gains and losses into ordinary gains and losses. Why is this important? Capital losses are limited on the individual return to $3000 of losses a year.
Toby: After you offset all your capital gain. Net capital losses are limited to $3000 a year on a return.
Jeff: If you do mark-to-market—and I don't want to go too deep into what mark-to-market is—it allows you to claim it as an ordinary loss, so unlimited.
Toby: All these stock traders go out there and say, you need to make a mark-to-market election so you can write off your losses. That statement right there should cause you pause. I hate to say this—actually, I don't hate to say this. It doesn't bring me joy to say this. About 5% of active stock traders make money. That's being really generous, because they did a 15-year study in Taiwan of active stock traders, 1% had profit over that 15-year stretch.
I know a bunch of you guys are already pissed off at me. I'm sorry, but the odds are not in your favor. You're better off being an investor. But hey, neither here nor there. If you're going to spend the time being a trader, number one, you should get to write off your expenses. And that's what they're doing here.
Realistically, you need to be doing about 750 trades a year. You can't be taking more than two and three weeks off. I say about 70% of the trading days, you need to be actively trading. If you do that, you're a trader.
You can write off your expenses on Schedule C, you still report your income on Schedule D, which is this weird thing where you have zero income on a Schedule C, which means you're just going to be a big loss on a sole proprietor.
And you write ‘trader’ on your return, you may as well audit yourself. You may as well just say, hey, you know what, I want to be in the highest audit rate known to man, because that's what you're doing. You're basically saying, hey, IRS, I'm losing money, hahaha, but you're reporting your income on your D, you're taking your expenses on your C, you're going to have to meet the test.
I've seen so many court cases. They always find a way to deny you what you're looking for. Even when they say, okay, you're a trader, then it's the second one. You can't write off the loss.
If I am a trader, that's capital loss. I'm limited to capital gains or I get $3000 a year. If I have $100,000 of capital losses as a trader, guess what? I can't use it, unless you make a mark-to-market election.
The thing about mark-to-market that I hate is a mark-to-market is saying I'm treating your investment account as though it's liquidated on December 31st of every year. It really sucks because they always have the Christmas rally, and then all of a sudden, it treats it as though you sold it, even though you still have the security.
If it tanks the following two or three months, which happened in 2002, it's happening here, we just saw it happen in the pandemic, in March, we had a 20% drop, we just had a massive loss today, you see all these things. What if you're having to sell your stock to pay the darn tax bill, even though you never sold your stock?
I saw this happen. I saw Qualcomm run up, but then it ran right back down right after the first of the year. All these people that were traders had these huge option contracts. They made all this money, but they never sold.
They had $100,000 short-term capital gain, they owe the tax on it at their rate. At that time, it was like 39.6 on some of these, and the stock wasn't worth what the tax bill was anymore. I always looked at that and said, why would anybody willingly put themselves in that situation? That's mark-to-market. I'm not a big fan.
Jeff: You may hear some people say, well, wash sales don't apply to mark-to-market. That's such a meaningless argument. It's a fractional portion of the entire argument. I'd like to tell people who want to do mark-to-market so they can claim their losses so I can save them even more money by telling them not to invest.
Toby: I got into a big one. It was in the 90s and I'm beating the head with a CPA. I was like, if you're planning around your clients losing money at their endeavor, tell them not to do that endeavor anymore. Your planning should really be that you're breaking even or making profit, and then making sure that you're getting the most tax advantages.
I said, in either case, you're not filing as a trader. There's not a world which I live where you'd file as a trader barring maybe the fraction of 1%, where somebody's really doing this, they're good at it, and they accept the risk.
There are a very few people that I've met over my life that would fall in that category. Maybe Mark A, and then there are a few others that are out there, where consistently, year after year, they make money. Then you don't need the mark-to-market election. It doesn't do anything for you. Anything else on that?
Jeff: Nope.
Toby: Do not do the mark-to-market, please. "Does the mark-to-market election primarily convert the capital loss to potential net operating loss?"
Jeff: Yeah, it could.
Toby: That's it. Your capital loss is no longer capital, it's considered ordinary loss.
Jeff: But if you're good at investing, it's going to turn your capital gains that are at a lower rate into ordinary gains at a much higher rate.
Toby: What's the difference? If you're doing short-term trading, you're still in the ordinary income bracket, right?
Jeff: Yeah, but if I'm doing mark-to-market and I'm at the highest tax bracket, I'm paying 37% on these gains instead of what normally would have been 20% on long-term capital gains. Most of these guys are going to be short-term.
Toby: Yeah. "You would not qualify as a trader if you had long-term capital gains?" Yeah, they blow you up on that one, too. "Is it possible to set up a non-TTS business for traders who don't need the TTS qualifications, nor do I want to meet those swinging trade options?" Yeah, you are a tailor. What you do is an LLC taxed as a partnership and then have it managed by a corporation.
It's usually about 20% that you'd give the corporation. It's not being paid a management fee. It's just literally getting paid to manage the LLC. The LLC is engaged in investment activities. That's it. It's so simple. It saves you a lot of trouble.
Realistically, you need to have a good sized amount of money in there to make it worthwhile, I would say at least $25,000–$50,000.
"If you don't file as a trader, then what category would you file?” You're an investor, Gary. Trader does not exist in the tax code. You couldn't go look it up. It's something that somebody made up (I think) in the 80s. They said, hey, it's not fair that you don't get to write off expenses. I want to write off expenses, because otherwise, you're limited to investment expenses, which is margin interest, really. You can't even write off money managers anymore under miscellaneous itemized deductions. You can't write off hardly anything.
He says, "Is it an investor under an LLC?" You could, but what I do is I put the corporation as a partner. The corporation, if you make $10,000 and the corporation has two of it or 20%, $2000 would flow into the corporation, expense it away. Let the corporation do everything. The corporation is not trading. It's not a trader. It's managing the assets in an LLC or its managing the LLC.
All right. 501(c)(3)s, let's jump into that. "I have a list of 10 501(c)(3) organizations that I want to support in perpetuity as long as they continue faithfully in their current missions for the advancement of religion." It was Voltaire, I believe, who said, if you have two religions in a town, they'll cut their throats. If you have 30, they'll all live in harmony. I can hear somebody laughing horribly. Anyway, that was Voltaire. I believe that's Voltaire.
"I am weighing the option of a C-corp private grant writing foundation versus a charitable trust. I worry that the make-up of the board of a private foundation may drift over time after I die, and grant writing will eventually shift from 501(c)(3) organizations that align my values to ones that do not." Let's leave it at that. What do you say to that person?
Jeff: The thing that ran through my head the whole time I was reading this is you can't control things forever.
Toby: No, you can't.
Jeff: Actually, what I like in the circumstance, I don't know how you feel about it, but I think this is perfect for a charitable remainder trust.
Toby: They want to do it in perpetuity, though.
Jeff: They want to do it in perpetuity, but when I die, the money goes to the charities, and you have to trust that they're going to do what they said they're going to do.
Toby: I always look at real life examples. The one that I enjoy looking at the most is the Hershey School. I think it was 1905 that Milton Hershey set up a school, which was for training orphaned boys on agriculture, so that they could grow and that they would not be a burden on society.
Now it's the Milton Hershey School, and it's boys and girls. It teaches high school and elementary, and takes these kids, and their parents that don't just have to be passed away. It's not just orphans, but it's also children whose parents are incarcerated or their parents are unavailable. I've met a bunch of kids out of that school. It's grown crazy.
I use it as an example because the Milton Hershey Trust, which is a charitable trust, is worth over $12.6 billion now. It started off with a few million in the early 1900s. Here we are 120 years later, and it's lights out. It's just kicking tail. It has a museum and a bunch of other stuff, too.
I look at it saying, hey, you should have a little bit of flexibility just in case because you never know what the future is. You say, here's the advancement of religion. What type of religion? What type of parameters do you want to put?
What if somebody's belief comes to fruition? Somebody shows up and says, by the way, I am so and so, and does a bunch of miracles. Everybody's like, oh, my gosh, I was so wrong about my religion, this one looks way better. You want to have some flexibility no matter what you're doing, and you're not doing a C-corp, period.
You're not doing private grant writing. What you're doing is a private foundation, and then you explain in detail your values that the board should be adhering to.
For example, Milton Hershey wanted to train these children something so that they would not be a burden on society. At the time, it was men who were non-productive that were the burden on society, because women (at the time) either were not necessarily working or their norm might be that they're married off. God knows what.
It was a different time, different day and age, and I'm not making any commentary on that. I'm just saying that the big worry was boys. Here's how he was solving that issue. Then it morphed and now it's no longer just a boys issue. You would have something that was set up that was just for the support of these organizations, and you had very, very clearly listed your values. Even if things shift over time, even if facts shift over time, it's your values.
You just have to be specific and give your board direction, because in 100 years, whoever is sitting on that board needs to be able to discern what values you want to establish. It's not just, hey, I want to support religion. You're going to say, these are the things that are most important to me, these are the organizations that most closely align, and I want their successor or an organization that closely resembles their values to be the successor. And if you do that, you're going to be fine.
Things might shift, but realistically, it aligns with the values that you list out. I think that's the most thing, because I see the organizations that align with my values, spell out your values and then say, here are the organizations that I believe meet that at this time. But you're right, 50 years from now, they might not. You want them to be swapped for something that does meet with your values.
Jeff: It's really important when you're doing this to determine what your flexibility is. I'll give you an example. For the past several 100 years, the Episcopal Church has been all male-led, and then they decided to ordain women. That virtually tore the church apart. That's the kind of thing you have to consider may change in the future. Is this a deal breaker or not?
Toby: Which is why you spell out your values.
Jeff: Right.
Toby: And be specific. There are certain things that I've been asked to draft that I refused. I said, here you go. Off with you.
Jeff: Are these sometimes challenged, though, in court or no?
Toby: No, not unless you're trying to do something illegal. If you're doing something reprehensible, then, again, like we had something that was pretty evil and we're not going to touch it, but it doesn't mean somebody's not going to. You have the Church of Satan and a bunch of these other things, and they're nonprofit. The Church of Weed and all this weird stuff. It's like, cool for you. I'm not really going to touch it, but somebody might.
Your values might be something that, yeah 501(c)(3) could probably support that. It's bizarre what actually qualifies as a religion these days. Marc Gershow used to have some really good examples of stuff that he saw. I'm sure that Kareem could tell you some ones, too, because he worked at the IRS.
At the end of the day, your values, list them, and make sure that somebody understands, the organizations at the time of your passing that had those values, and then give them the ability to replace them if somebody does not continue to walk those values.
Jeff: Yeah, that is important.
Toby: It would not be a charitable trust, it would not be a C-corporation, private grant writing foundation. It would be a private foundation, period. They're perpetual. All you have to do is have a convention for putting the board, and it has to give away 5% of its assets every year to those organizations.
You can list more. But if you want it to continue on in perpetuity, you probably want to give them the flexibility to go probably 5%–10% if you want it to continue on forever. Otherwise, it would eventually deplete itself.
All right. By the way, I think the national average for gifts from private foundations was about 11%, just so you guys know. Everybody thinks private foundations just sit there and get big, but they do help a lot of people. The stock market sometimes goes crazy and does great things, sometimes they get more gifts, and they actually do a lot of good.
They're not just rich people vehicles where they park their stuff. Although, yes, rich people park their stuff in private foundations. It does not die. You don't have to worry about your kids' spouses and making weird decisions. It's actually a pretty good estate planning vehicle.
"Short-term rentals, when depreciated with cost segregation, allow the depreciation to offset active income without having real estate professional status if you materially participate." In English, it's a business and it's an ordinary loss. As long as you are materially participating in it, no different than a pizza shop.
"If I materially participate in the pizza shop, I get to write off ordinary losses against anything I make. If I do not materially participate, then I'm a passive participant, and its passive activity loss rules. I can use the loss against other passive income. Why is that important?"
As we keep reading on, "Most real estate syndications or long-term rentals with depreciation only offsetting rental income, which is passive. If you're involved in a wholesale syndication or a short-term rental syndication, can the depreciation offset income, or would it just go to passive income?"
The hotel syndication. Short-term rentals, it's a regular business. That's your pizza shop. Are you materially participating? If yes and you're involved in the day to day operations or you're meeting the hourly requirements of running the hotel, then that would be an active loss. If you're not, then it would be passive. Would the rental income in a hotel syndication that is short-term rentals be considered active income or passive income?
Jeff: Most investors, unless you're the GP or you're running the hotel, like you said, you're going to be a passive investor. You're not working in the business.
Toby: You're designed to be passive. The whole syndication, if you're not in the management team, you're a passive investor.
Jeff: You're likely a limited partner in this syndication.
Toby: This is where it gets weird. If I am in a rental real estate syndication that's kicking me passive loss and I'm a real estate professional, that can become ordinary.
If I am in a syndication, so long as I'm ungrouping all my activities—we go back to the very first question we had—if I am in a syndication that is not rental—this is hotel, it's ordinary business, seven days or less so it's not rental activity anymore, this is a regular business—then the only question is, am I a material participant or not?
If I am, it's ordinary active loss or non-passive loss. If I am not, then it's passive loss. It'd be passive income or passive loss. If it's income that I could use my other rental losses against it, if it's loss, then it's just passive loss that I would use against my other passive income.
Jeff: And you probably heard us talk about active participation in real estate for long-term rentals. This would not fall into that because it's considered trade or business. It is not considered a real estate activity.
Toby: This is not a rental activity, period. Hotel syndication or short-term rental, just remove the rental and just call it pizza. Anytime you see short-term rental, just pizza business, because that's the way you should be looking at it. It's not a rental activity anymore.
"My neighbor asked me this question. He purchased his first home when he was in his early 20s. His dad co-signed on the loan. He paid off the loan, but then he found out that his dad's name is on the title, not his.
Then he purchased a second house and has been renting out the first house. He still has that first house that's all paid off, and it's in his dad's name. He wants to sell it now, but he doesn't know what the heck to do." Dad's on my title. This is horrible.
Jeff: Actually, I might be wrong about this, but I think this has an incredibly easy fix to it. Couldn't the dad just quitclaim it to the son?
Toby: Let's say dad quitclaims his interest over. He says, here's my interest, you get it now. What's his basis?
Jeff: I would transfer his old basis over just the way that dad had.
Toby: I think gifts carry the gift towards basis. It'd still be the same deal if the kid sold it. Would it be a gift?
Jeff: Now that's the part I question. I'm not sure it would be if the son has paid for everything.
Toby: Except the dad could sell it. It's the dad's asset. If his name's on it.
Jeff: Yes, the dad could.
Toby: The kid may be misremembering. They may have said, hey, your dad has to be on title. You're going to have to sign these documents. Once you pay off the loan, you could transfer it to your name. You don't remember any of that, because all you remember was, I'm buying the house, and then who wrote off the interest on the loan? Did dad write it off? Did he write it off?
I'm with you. I'm like, hey, you know what? Gift it and it's a rental, then 1031 exchange it. I don't know what your holding period would be. I think that you would get the dad's holding period when you gift, when you get their basis in their holding period.
Jeff: If both their names are on the title—
Toby: I think you said it's only his dad's.
Jeff: I thought he did, too.
Toby: And not his name. He says not his name.
Jeff: What happens is Section 121 exclusion.
Toby: I thought the exact same thing, because you have to own it, and you have to have lived in it as your primary residence two of the last five years under 121. But they're not asking for it, so what I would say is, you would not meet the requirement to have your name on it.
Jeff: I don't think so, either.
Toby: The IRS would say, you did not own it and reside in it. You need to. The only exception to that is if it's a married couple.
Jeff: One of the things we're talking about with having your name on title, we see this a lot with timeshares. You don't actually own the property, so you can't deduct the mortgage interest on it.
Toby: I would be curious to see who is writing off the loan. If it's an error and you said, hey, we mistakenly had my dad, you just did a let's just change it now, then we say it was an honest mistake, and we never intended it, I still think the IRS looks at it.
You're not going to go under the exam, so let's just say you just said, all right, let's just transfer it and treat it as though I've owned it all those years. But if you get under audit, I think the IRS is going to have some pointed questions, because a lot of people say this stuff, then transfer things. They play little shenanigans, and the IRS blows it up.
Jeff: Yeah, it would have worked out better if you had fixed this while you were still living in the house.
Toby: Yeah, and better off while you're still paying for the loan. I understand dad needed to co-sign, but you would not have needed the loan at all. If you're not on title, you don't need to be on the loan. They didn't need you. They needed your dad, which just tells me something may have shifted.
Again, I have a feeling there was probably a misinterpreted conversation that took place with the lender, where they said, hey, you can't be on it. We don't want to risk you, but you could be on the loan to gain experience. As you pay that, eventually, then you can refinance the house and put it in your name. My guess is that the bank knew exactly what it was doing when it put that on the title. Dad probably knew, too.
Jeff: The only other reason I can see not putting him on title was if was a minor and couldn't contract.
Toby: He was in his early 20s, so he has the capacity to execute contracts. It was one of those things, where usually, just get a co-signer on a loan. You're on the house and the dad's not. But in this case, they had it on dad. It could have just been a mistake.
Jeff: What I don't understand is if I'm the bank, I want the son on as a primary and the dad on there as backup, because then I got two people to go after if this deal goes south.
Toby: You have a co-sign. You still got it. It's dad's house, but you got both on the hook. It's weird.
Jeff: It is weird.
Toby: But it's secured by the property, so the bank probably didn't care. They're like, I don't care whose name's on it. We can go after you guys, but really we're just going to sell the house if you guys don't pay.
Jeff: Just don't burn it down.
Toby: Yeah, don't burn it down. You could transfer it and it's a gift. You have $12,550,000 or some ridiculous number right now. It's $12 million something. I forget the amount for the federal gift tax exclusion. It's a huge amount. $12 million you can give without having to worry about it.
File your gift tax return on this one, though, and say, hey, this is the gift, this is the value of it, the value of the house. The IRS overlooks. I'm sure there's no tax owed, so they'll be fine.
All right. "I've heard Anderson talking about Spartan Investment Group which buys, develops, and owns self-storage units cross country." They do syndications and self-storage. They have one that has an ongoing syndication where they buy lots of deals and sell them inside the fund, and then they have individual projects where they're going in and buying.
Here, we're going to buy these four units, and then they exit them after they fix them up. Get them operating more efficiently and then sell. "I'm considering using my self-directed Roth 401(k) to invest in that company." You're not investing in the company, you're investing in a syndication that's owning the property. "Would I be subject to UBIT or UDFI by using my Roth 401(k) for that investment? Jeff, what do you say?
Jeff: The UDFI, possibly. Not in the 401(k) because 401(k) is not subject to UDFI, IRAs are.
Toby: What Jeff's saying is UDFI is unrelated debt finance income. If I have a property, a house, or we'll use anything, self-storage unit, that's in a syndication, and they lever 80% of it, so they come in with 20% cash, they levered up, and then borrow 80%, 80% of your income is considered financed income.
It's unrelated debt financing. It's unrelated to the investment because we use debt. We use money that we borrowed. If it's in an IRA, that's taxable. If it's in a 401(k), it's not. If you're doing a Spartan investment, they use debt. They're going in with cash and debt to acquire these properties, and then they fix the management.
They use their software, they use the free storage, they have a bunch of sophisticated software that they use on all their facilities, and it makes it much less expensive from an operating standpoint. That increases the net income, which increases the value and then they exit. You're not going to have any UBIT, which is unrelated business income tax or UDFI if you're using a Roth 401(k). But if you used a Roth IRA or a traditional IRA, you would.
Jeff: The rental self-storage units are considered rental commercial real estate. Where you might see a tiny bit of UBIT is a lot of these places sell boxes, locks, and stuff like that. That could generate a little bit of UBIT, but they would specify on there that this much is...
Toby: It's crazy. Ryan in that group has been awesome over the years. We don't get anything for recommending them either. There's not a relationship there like that where we say, give us $1 for every person we send. No. We just like the fact that they make our clients money, so they do a good job.
Jeff: Yeah. If you'd like the investment, I wouldn't worry about the UBIT portion of it. It's going to be insubstantial.
Toby: Speaking of good investments, here's a good investment. This is my partner Clint Coons’ new book, Next Level Real Estate Asset Protection. I did make fun of the cover two weeks ago because I'm a juvenile. For whatever reason, I think it's funny that it has a goofy picture, and I made fun of it.
It's actually a really good book. You should go to Amazon and buy it if you haven't already because it's a really good value. I think it's only $22 for a hard cover. It's well-put together. Also, you can do the Kindle version. In the Kindle, it's like $10.
If you want to learn about how to protect the things that you're investing in and make sure that you don't leave them for somebody to take away from you, that's a great place to start.
The other place you can go, and Patty, I'm going to surprise you with this one, is you can always come to our Tax and Asset Protection events. I think we have one on Saturday coming up. You can certainly come in and spend the day on Saturday learning about trusts, corporations, LLCs, how they all work together. Absolutely free on Saturday.
We do them every other week for the most part, and they're very well-attended. There's a big group, we have a lot of fun. You'll learn just a lot about how to make sure that people can't take your stuff.
I always say lawyers, snoops, and Uncle Sam. They're the ones that like to take your stuff away. You work so hard. Please don't leave it just lying there for somebody to pick up and take.
All right. Jeff, "Is STR income," which is short-term rental income—Vrbo, Airbnb—"still considered active if I have a property management company running the business for me? I do not rent the property to them, they simply manage the business for me."
Jeff: Short answer for the short-term rental is this is probably a passive investment if you're not managing the rental at all. One of the tests we talk about substantially all the time is I do myself. Second test is that I do at least 100 hours more than anybody else.
Toby: You'd have a tough time with the property management company. The court cases never really believe that one.
Jeff: So then you have to fall back to the 500-hour test, which becomes really difficult if you have a property manager.
Toby: Between you and a spouse, you could hit that 500 hours. If you had enough real estate, short-term is not rental income, so you can't aggregate it with your other real estate. It has to be, are you materially participating on this property? Not any other rentals on the properties that are the short-term rentals.
You could probably group the short-term rental. You can say this is a business. I'm engaged in these businesses together. Otherwise, it's not going to happen for you. It's going to be considered a regular business.
Again, remember what I said about short-term rental? Pizza shop. Is pizza shop income still considered active if I have a pizza management company running the pizza shop for me? Imagine you have a pizza shop and you hire Pizza Management LLC to come in and manage it for you. Is that active business for you anymore? No. You are a passive investor, somebody else is doing all the work.
Jeff: I have invested in Toby's pizza business.
Toby: I want a pizza.
All right. "I am a real estate investor and pay nothing or almost nothing in taxes every year. My husband is a 1099 contractor with a huge tax burden. Would it benefit us to put some properties in his name?"
Jeff: I had this very same question you did. Aren't you filing jointly? If you're not filing jointly, you're making the situation way worse.
Toby: I'm killing it, and I got no tax. This knucklehead is just killing us with taxes. Should I give them some of my properties? If you're jointly, it doesn't matter, does it?
Jeff: If you're jointly, yeah, it's all going on the same return. If you're filing separately and you put some rental properties in his name, and I'm thinking long-term, it's not going to change anything, because he's not going to be able to deduct any of those losses.
Toby: No. If you're a real estate investor and you're paying almost nothing in taxes every year, it sounds like you're probably a real estate professional. If your husband has contractor income and you're getting killed with taxes, then no. You don't have to put any properties in his name. You just need to make an election to say, hey, you know what? I'm a real estate professional. All of my losses that are wiping out my income, we're going to allow those extra losses to come over and wipe out his income too.
It might be that you're just not doing that. I would be curious to see if there's any passive loss carryforward towards somebody. A lot of times, they just have no idea that real estate professional status exists. They meet it, it's obvious, but the accountant just has no idea it's even out there.
Jeff: There are a couple reasons you may file separately. One is if your husband's name is John Gotti or Whitey Bulger.
Toby: You can watch me sitting on the hill. Bulger keeps popping up in that one. Oh, my gosh.
Jeff: Or if your spouse has substantial back taxes that he hasn't paid, there are times where you want to make sure that you keep them separate. Or if you think your spouse—this goes back to the Whitey Bulger thing—is maybe doing things not on the up and up.
Toby: I don't see any of that here. I think you're just sitting there going, hey, my income gets offset, my husband's doesn't, what can we do? You could do the properties. The other thing you do is set up a charity and donate some of your property.
If you're doing low- to moderate-income housing, if you're in recovery housing, if you're doing housing for disadvantaged group, it could be veterans, it could be elderly, residential-assisted living, it could be any of those categories, anything that's helping society, here's the rub, I can donate a house and write off its full fair market value, not what I paid for.
I'm just doing this right now. I have a gal. I'm not going to get you into all the specifics, but she was going to be dehoused. Let's just put it that way. We are in a position to say, we'll get you that house, you never have to worry about it, ma'am, you'll always have a place to live.
We bought the house. We bought it for about $120,000. I'm looking at it going, I think I'm going to give it to one of the charities. We just had it appraised. It was $300,000 something. It's gone way up. I get the deduction for $300,000 something.
Will it save me more than my original investment? Absolutely. That's why it's there. Yay, everybody wins. It lowers my tax bracket a little bit, it gives me some tax relief, and I didn't have to come out of pocket other than the original investment. Yeah, it's for a good cause. I like stuff like that.
You could look at doing that too, because you might be surprised. As you're doing this depreciation, as you're writing things off, you haven't been having to pay tax, you may look at it and go, whoa, I would love to get some extra benefit on some of these homes that I've had for 10–20 years, whatever.
I may have even depreciated them completely and you're like, I don't even know what to do with it now. I get no tax benefit. It's just churning out rentals. Okay, great. Give that to charity. Take the full fair market value. It's fun.
All right. "You have mentioned multiple times in your videos that borrowed money is not taxed, but you never explained it in detail." I'm sorry. We'll get into this. There is a way that it could be taxed.
"I have multiple investment properties, each in its own single member LLC." Except in your situation, there's no way it's taxable. "My CPA says if I refi, I have to take the money out as an owner draw because they are an LLC, and it's going to be taxed. Please help clear this up." Your CPA is wrong. Jeff?
Jeff: I was going to go harsher, but you told me I couldn't.
Toby: You could go as harsh as you want. All the CPAs out there, you guys all just going like, what?
Jeff: Feel free to put in chat what I want to say.
Toby: Yeah. Feel free to chew up the other CPAs. Usually, we have a few on here.
Jeff: It's actually fairly common for a bank to have you take a property out of an LLC to refinance it. If it's disregarded to you or if it's in a partnership, you do that, you refinance it, and you put it right back in. There are no tax consequences.
Toby: Somebody says get a new CPA. Yes. No, they may be well-intentioned. Here's when it can be taxed. I put $100,000 in a syndication. The syndication levers that money. Let's say that it raises a million dollars, borrows $9 million, and gets an asset that's now $10 million. It goes up to $20 million, and they refi it again. But this time, they refi it for $15 million, they pay off the previous loan, and they distribute to the shareholders a whole bunch of money.
The first $100,000 that you get back, tax free. You don't have to worry about it. But what if they give you more than what you put in? You're not at risk on that loan. You're not a guarantor, there is no risk to you. That could be taxed as long-term capital gains or as a distribution in excess of your basis.
That cannot happen in this situation because you're a single member LLC. It's you. You're on the hook for these. You're not a passive investor in this thing. You're not on the loan. Even if they had a non-recourse loan, you don't have to worry about this. But yes, the proceeds of borrowing is not income, unless somebody forgives it.
Jeff: Yes. Good point.
Toby: I can loan Jeff a million dollars tomorrow, he pays no tax on it because it's not income. They always say, but you never explained it in detail, because it's not income. There isn't a detail.
When I borrow money, that is not income to me. It's not my money. I still owe it back. The day that somebody says, you don't have to pay it back, is the day I have a tax event.
Jeff: Normally, you can take a property in a partnership or a disregarded entity to you. You take it out at cost, you put it in at cost, you can take it out at cost. You can do this all day long.
If you have an S-corporation or a C-corporation, you have a whole different problem, because property has to come out at fair market value. In those cases, you could possibly have taxable consequences of removing property out of an S-corporation or C-corporation.
Toby: Easy peasy. If you want the best strategy that we see works year after year no matter what, it's buy assets, allow them to appreciate. By the way, there are two factors for appreciation. We're experiencing one of them right now, which is high inflation. Inflation and growth will drive your asset up and then you can borrow against it.
We use Elon Musk as an example. If Elon could just lever his stock portfolio if he wants to—he probably does—we use what are called security backed lines of credit, which means you can borrow at any time. They're really cheap, by the way. We just did one with Morgan Stanley. It was 2.5%. Wow. You can go as high as 70% of the value of your stock portfolio, which after today, we're not going to talk—
Jeff: You may be looking at an equity call.
Toby: Yeah. We would never go above 50%. I always say 50% is your magic line on borrowing. Don't go about 50% of anything, because you could have something that dips down. You rarely do see it go worse, but it does happen, so you just have to be smart about it.
If you're borrowing against a blue chip portfolio that could have bonds in it, for all we care, there are bonds right now paying over 9%, guys. You just have to get a bond that's tied to inflation, and it's like 9.6% last year. Some stupid numbers, right? And then you could borrow against it at 2.5%, you're making money and you actually have the cash to go out and invest it again. That's how the wealthy do it.
That's how you see it over and over again. They always lever their assets. When there's an opportunity, they lever it. They don't go crazy. They usually are in a position to be liquid, where they needed to pay it off, they could. If I'm borrowing money against stock, I have the stock. That's not too bad.
Look at that. We just hit all answered questions. Our guys, for Jeff, Eliot, Dana, Troy, Patty, and Andrew, you guys kicked butt today. You just saved our tax team from having to come on. They did a great job. Six minutes over? Shoot. I was supposed to stop at 4:00. Bad Jeff.
Jeff: I know.
Tobu: All right, guys. Thank you, Sherry. Anyway, pop onto the YouTube channel. We do put these up in recorded format after. If you came late or if you're one of those people that you missed one or two and you want to see what was on them, you can listen to them a little bit faster in the podcast channels. You can go on to YouTube, listen to them there, and watch.
If you have questions, this is where we grab the questions that we answer. Just shoot them to taxtuesday@andersonadvisors.com. We're still going to answer your questions. We do it as a courtesy, because there's so much crud out there and there's so much bad information. If it's in our wheelhouse, chances are, we answer it 20 times a day anyway. We're just going to answer yours too.
There are some good questions that just popped up. As soon as I said they're all answered, it was like everybody asked a question. These guys did a great job. Happy tax season. Hopefully, you guys realize that there are still some things you can do even on your 2021 taxes. It's not too late to do cost segregation, for example.
It's not too late if you're getting killed with taxes on your 2021 to do some strategies, maybe look around. Even when we were talking about that first question in the aggregation election, part of me is always like, did you aggregate for 2021? Is there a time to amend that, to maybe not aggregate? I don't know. There are things that we can look at to maybe get yourself out of that pickle. The clock is not stopped for 2021.
Jeff: You got 32 days to fix things.
Toby: You got it. Reach out if you have any questions. If not, gosh, I hope you guys have a great next two weeks. It'll be exciting to see where everybody's at in two weeks. In the middle of the tax season, we're going to go easy on Jeff here.
We'll have Jeff on for at least one more. Maybe you need to take a break at tax season. Maybe we'll have Eliot or somebody step in so that you don't have to get squoosh mooshed. I think that's the term for it. Have a great two weeks. We'll see you guys in two weeks.
If you are into Airbnb or VRBO, what are the top tax benefits and loopholes for short-term rentals? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors. Highlights/Topics: * We have to clean the short-term rental the first year to get the hours necessary for active/material participation. It is a 90-to-120 (minute or mile) drive one way. Since we will be working, can we stay in the unit that night without counting it as personal use? You can include the travel time. However, staying the night will not count toward working on it. It definitely counts as personal use. * I have a beach house that I'm starting to rent out, so I got a DBA business name. I've been renovating and fixing it up to make it more attractive. I have a regular job and was told that if I made more than $150,000, I would not be able to write off my expenses and costs associated with my rental. Is this true? It depends on if it’s a rental or residential investment. Also, in some states and counties, the DBA is a fictitious name, and it offers no kind of protection or benefit at all. * Can you explain the short-term rental tax benefit and how to get 100 hours of material participation? If short-term rentals are seven days or less, it's a business. Determine if it’s 1245 or 1250 property and passive or active/material participation income. * I have a four-unit that I want to live in and rent out the other three units. What are all the tax deductions and write-offs I can use to zero out earnings? Bifurcate it into two properties. One unit would be your personal residence and the other 75% would be rental properties. Any expenses related to your rental unit would go against your real estate taxes and mortgage interest.
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Go to iTunes to leave a review of the Tax Tuesday podcast. Resources: Next Level Real Estate Asset Protection by Clint Coons Cost Segregation Authority Real Estate Professional Status Capital Gains, Losses, and Sale of Home 26 U.S. Code 121 Exclusion Schedule E Anderson Business Advisors Anderson Business Advisors on YouTube Anderson Business Advisors on Facebook Anderson Business Advisors Podcast Full Episode Transcript: Toby: All right, welcome to Tax Tuesday. Hopefully you guys can hear us and all is good out there in tax land. My name is Toby Mathis.
Jeff: And I'm Jeff Webb.
Toby: We are bringing tax knowledge to the masses today. Today's an interesting one. I looked at the questions just a little bit ago. It seems like people have short-term rentals on the brain. I think I counted four or five questions that pertain to short-term rentals. If you're somebody who's into Airbnb, Vrbo, what are the other ones? Are there any others?
Jeff: Those are the only two I'm aware of.
Toby: Then this is going to be a fun day for you. If you're not, there are other questions. I just noticed there was definitely a little bit of a bend towards that.
All right, this says VP of professional services. You are now the CFO.
Jeff: That is correct.
Toby: Yeah, to update our slides appropriately. A big CFO, which is great.
Jeff: Maybe I'll put a CFO picture up.
Toby: I don't even know what a CFO is. UFO, I've heard of. CFO, it just is rare.
All right. Where are you guys all coming from? If you're sitting some place, just say what city and state. It's always fun to see how many people are all over the place.
Twin Falls, Idaho. Look at that. Allison is fast. Boulder, Colorado. Now they're just flying through. Oh, my God. This is horrible. I cannot read these fast enough. Portland, Los Angeles, West Orange. Nashville, Tennessee, New Jersey, Simi Valley, Mesa, Santa Cruz, Philadelphia, PA, my hometown.
There's Seattle, Houston, McKinney, Texas. See now, totally I'm cheating. Tampa, Aliso Viejo, Portland Oregon. We got people from New York. Hey from New York. Los Angeles, Boone, Iowa. I don't think I've ever seen Boone, Iowa. Robin, welcome.
Louisiana. Where in Louisiana, Ross? It's a big state. We got some Kansas City, some West Orange, some Chicago in the house, Austin, Texas, Murfreesboro. That's cool. Mark, welcome. We got people from all over the place. There's Kansas City, Missouri.
We got BC, Canada in the house. I got a good friend, a lawyer up there in British Columbia and Vancouver. I had some friends. I actually had a consul, somebody that was sitting in Vancouver today. He said it was absolutely beautiful.
Green Valley, Arizona, some Las Vegas, that's where we're sitting. Seattle, Washington, St. George, Huntington Beach, California, surf capital of the world, and all over the place. There's Honolulu. We have folks, really. There's Lancaster, California. That was PA for a second. I was all getting excited and giddy.
We got people from across the country and even across some of the globe. Welcome. These are fun little tidbits. We should be here for about an hour. We already have a ton of people on. We have people on Facebook Live. Welcome and hey. I'll give you the [...].
Welcome to another fun-filled Tuesday, where we just try to answer questions. We're going to go through the questions that we're going to answer here in a second. Wait a second, Hawaii is the surfing capital of the world. Now we're going to have a fight. I thought Huntington Beach was. I've seen Dukes there. I don't know. Although I'd probably side with Hawaii, but that's just me. The water is warmer.
All right. Email your questions during the week, taxtuesday@andersonadvisors.com. We pick questions. Now we have a fight going on. I don't think you guys can see each other, but Huntington Beach, apparently, it's going to be all caps here in a second. We got Dukes.
If you guys have questions during the week, send them in. We pick them, then I read them, and Jeff and I answer them. That's how it works. Hawaii has a patent on surfing. Oh, I don’t know. Opened up a can of worms on that one. We'll say they're both joined, because remember, you got Dukes in both places. Come on.
US opens hers. Yup, there we go. Huntington Beach is probably rocking right now. All right, we have a lot to go over that does not involve surfing unless we're talking about the kind that you do on the Internet.
All right, opening questions. I picked some long ones and I apologize. They're not always the most fun to read, but I get it. I just get a whole bunch and I just grabbed 10, 15, 20, whatever I feel like on that particular day, today. We're in the teens. We'll go through these, but they're good and educational, that's why I like them.
"We are converting our vacation home into a short-term rental in 2023. Too many personal days used in 2022." I'll explain what that means. Jeff and I will explain. "We want to make some updates, so we are wondering on the time. Should we convert to a short-term rental in early 2023, make it available for X days, then block out the calendar, then remodel an update? Or should we just do the remodel now in 2022 before converting, and then the basis when converted to the LLC will already be increased?"
Somebody has been doing their homework. You're very very intelligent. You get a big star for even knowing these questions to ask. "I want to have a cost seg done and would like those updates included in the cost seg if I could." Really good questions. This is why I love this one.
When I looked at it, it was just really long, and it had a bunch of XXX in it, and I was like, oh, my God, what are they asking? And then I realized it's just the number of days. But I grabbed that one and I said, that's going to be a good one.
All right, "We have to clean the short-term rental this first year to get the hours necessary for active participation. It is a 90–120 minute drive one way. Since we will be working, can we stay in the unit that night without counting it as personal use?" That'll be an interesting one.
"If you're retired and receive social security and annuity income, can you get your closing cost deducted from your income tax when you file?" We'll answer that one.
"I'm setting up a corporation to wholesale and flip and later on hold real estate." Please don't hold it in the corporation, please. "I have high startup costs—$20,000—and this is my first business entity that I've ever started. I am a full-time ICU nurse and pay lots of taxes." Thank you for your service. I know that's a tough one. "Is there any way I can rollover losses from the corporation to my W-2 taxes from my nursing job?" Really good question. Jeff will probably be answering that one.
"I have a beach house that I'm starting to rent out. I got a DBA business name. I've been renovating and fixing it up to make it more attractive. I have a regular job and was told that if I made more than $150,000, I would not be able to write off my expenses and costs associated with my rental. Is this true?"
You see what I'm saying? These are good questions. It'd be very educational for everybody. It's good for Jeff and I to discuss, too, because believe it or not, there are gray areas here.
"I have a C-Corp in Nevada through which I send some quarterly consulting and management revenue from my other manufacturing business. I don't take a salary or dividends, but I use the earnings for equipment financing. On my taxes, I categorize most of the accumulated earnings as appropriated earnings to avoid the accumulated earnings tax, but the retained earnings numbers grow every year with the income taxes paid. How do I categorize earnings used for taxes to lower the chance of accumulated earnings tax?" Really good question.
I bet you guys have never heard of this thing before. We will have some fun with this one. This is where Jeff gets excited. I can't really tell, but he's definitely excited right now. Accumulated earnings tax. See? Some people used to say football. It's football season, and there, like, yes, I get excited, if I say accumulated earnings tax. Jeff's like, yes, it's been so long.
"As an investor/owner, is it possible to claim part of my internet, phone, and home office as expenses?" We'll talk about that.
"Can you explain the short-term rental tax benefit and how to get 100 hours of material participation?" We'll go through that too.
"If I offset all of the passive income with depreciation or accelerated depreciation, would that eliminate the AMT adjustment? Note, W-2 income is less than $57,000 a year and very little interest from bank accounts of dividends less than $1000 per year for both." Good question. AMT, another one. The mister here, the CPA guy next to me, is probably stoked today. That's our new word for the day, stoked because of Huntington Beach.
"I have a four-unit. I want to live in and rent out the other three units." House hacking. "What are all the tax deductions and write-offs I can use to zero out earnings?" We'll be here till midnight going through all the different tax deductions. No, we'll go through these, too.
All right, last couple of questions. "Any details on the short-term rental loophole in terms of how long to keep the rental in service for if you can do it for one year, and then benefit from classification, and then decide to use the property only for your personal use after that one year? If so, how much time does it need to stay in service or how many rental days do you need to have a year?" We'll go through that. We'll break that one down. That's a little bit of a word salad. We will break that down into bite sized pieces.
"I bought a $400,000 home in 2021 and is now ready to use for short-term rental, to use the short-term rental loophole to offset some of my W-2 active income. I want to use cost segregation study and claim bonus depreciation. Any thoughts on using a DIY (do it yourself) for the cost seg on a property of this value?" Yes, and we will share them with you. You ready, Jeff?
Jeff: I've seen the short-term rental loophole a couple of times now.
Toby: I wonder whether they've been watching our channel. If you have W-2 income, this is one of the few ways where you can get some relief because it's not a rental property. It's a...
Jeff: Trade or business.
Toby: It's a trade or business. People don't realize that, necessarily. Hey, if you like this type of information, if you want to learn as much as you can, if you want to fill your brain full of tax strategies because, by the way, the Internal Revenue Code tells us what we should be investing in. They'll usually say, hey, we're going to beat you up if you do this, and we're going to reward you if you do this over here. That way, you can go, let's go over here.
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All right, "We are converting our vacation home into a short-term rental in 2023. Too many personal days used in 2021 or 2022" By the way, what's a short-term rental?
Jeff: A short-term rental is generally a home that you rent out to for an average of seven or less days and provide substantial services to your short-term tenants.
Toby: You don't have to provide substantial services. It's seven days or less, right? Basically, if you have 10 rentals and those 10 rentals use your house 300 days, your average term is 30 days per rental. If you flip that around, and you have 100 tenants during the year and rented for 300 days, your average stay is 3 days, which is 7 days or less, which means it's not rental activity. It's a trade or business.
Jeff: You're running a hotel.
Toby: You're running a hotel, and it's non-residential, too. They say it's transient nature, so it is not even residential property. We're not writing off our home under 27½ years. We are writing off our home 39 years. Here's the deal. They want to take a vacation home, which is called a second home. They used it too many personal days in 2022. Why is that important, Jeff?
Jeff: There's a rule that says if you use it more than 10% of the days you rented it out, if you used it personally for more than 10% of the days or the second rule is more than 15 days, 15 days or more that it doesn't count as a rental counts as a vacation home.
Toby: You go above, it's the greater of 14 days or 10% of the total days rented. It's treated as a residence, which means you can't take losses on it. That's the bad part. You would bifurcate out the portion that was used for business and the portion that was used for investing.
By the way, I had neglected to say something earlier. We have Matthew, Patty, Christos Dana, Dutch, Eliot, Ian, Piao, and Troy, all answering questions in the Q&A. If you have questions, do not put them into chat, put them into Q&A and you'll have a tax attorney, CPA, or accountant answering your question, absolutely free. All right, sorry.
Jeff: What happens with a vacation home is your deductible expenses are limited to your income from that activity. If I have rental income of $10,000, but expenses of $100,000, my deductible, no loss.
Toby: No loss against your W-2. We don't get to play the game of, hey, I have other passive income from other rental activities, I can't use it. I'm toast. It sounds to me that they used it for too many days more than they rented it. It's a residence, it's not an investment property. They're going to change that.
Now this is what's really, really important. "We want to make some updates, so we're wondering about the timing." When I hear updates, they want to fix the place up. "Should we convert to a short-term rental in early 2023, make it available for XXX days, then block out the calendar, and then remodel or update? Or should we just do the remodel now?" What do you think, Jeff?
Jeff: I think I'm going to go ahead and start it out as that short-term rental, get a couple of rentals under my belt, then take it out of service for however long it takes to do those updates and remodels, and then get that done.
Toby: Jeff's absolutely 100% right and I agree. I had put it into service, I would make my improvements, then I would take it out of service to do the improvements, and then put it back in. The reason that this is important is because when you look at a property—let's say that this is specifically for short-term, this might not be the case on a long-term rental—I have structural components that are called 1250 property and I have personal property—things that can be removed—that are 1245.
Things that are 1245 have a much shorter, useful life, like your carpet can be removed. It has a useful life of five years, so we write it off much faster. Under our current setup, bonus depreciation is available on anything that's below 20 years.
You could write off your carpeting in one year, whether it's Airbnb or otherwise. But your structural, like your roof is still written off over, in this case, 39 years because it's considered non-residential property, believe it or not, even though it's treated like a hotel. The reason this is important is because when you have non-residential property and you make improvements to it, you can write off that improvement under a shorter lifespan. What is it, a 15-year property?
Jeff: Yes.
Toby: Any of it, I can write off in year one, right?
Jeff: But that expires at the end of this year.
Toby: You could do that in 2022.
Jeff: But not in 2023.
Toby: It won't work in 2023.
Jeff: Unless they extend it again.
Toby: What are the chances? Right? Did they extend it because it was for 2018, 2019, 2020?
Jeff: And then extended to 2021 and 2022.
Toby: We'd have to also look at the Inflation Reduction Act to see if there's anything in there, because they have been extending a lot of these. Let's just go back to this. If it's qualified improvement property, it is deductible immediately. If you have a non-residential property and you make improvements, you get to write it off even if it is something that would be considered 1250 property.
Otherwise, the only property you can accelerate depreciation on is 1245 property, which are cabinets, your fans, driveway, your carpeting, your linoleum, your cat, things that you put into the property.
If you put it into service, short-term rental, seven days or less, then do the updates, that should be considered, because like Jeff’s pointing out, it might not be the case next year, qualified improvement property, although they keep extending it.
If you just did the improvement now and then put it in the service, you're not completely out of luck. It just means that the only property that gives you the massive deduction is that 1245 property, which is the five-year property, the seven-year property, and the 15-year property. That's our little wackadoodle thing.
Jeff: The qualified improvement property that you're talking about has to be in service at the time that you make those improvements.
Toby: What Jeff is saying is we have to have the property in service as a non-residential, trade or business, before the improvements are put in there in order for those to be deducted.
Jeff: Sometimes you make me sound really smart.
Toby: You're smart. All right. That just says, hey, I have two choices here, which is going to yield me the greatest amount of deduction, put it into service, do the improvements. It's almost always going to be better. It's almost always going to be easier, too, from a cost seg standpoint as opposed to coming in after the fact and doing it.
The reason being is because you have all the receipts. You just did the big improvement and you could show the cost seg engineer, here's what I spent it on. Instead of looking at it and I'm basing it on a percentage base, you can literally take, this is what they spent on it because here's a receipt. It makes it a lot easier.
That's your answer. You can absolutely do a cost seg. You can absolutely do the improvements in and under either one of those if you do the qualified improvement and we have the extension into 2023. If you did it this year, I could tell you definitively, the answer is you would just right off the qualified improvement.
If it's next year, you should be able to see if they extend it. I just don't know sitting here. But no matter what, you'll be able to write off the 1245 property if you go through the process of getting a cost seg. A cost seg is nothing more than saying here's the value of the carpet, here's the value of the driveway, here's the value of the shrubs, the fence, the cabinets that you put in, and here's the value of some specialty plumbing and electric stuff.
All that, they compartmentalize. It's usually about 30% of the improvement value of a property. If you do that, you can write that off 100% next year. You could absolutely do that, because of the bonus depreciation. When does it stop being 100? In two years?
Jeff: This year. In 2023, it drops 80%.
Toby: That makes me want to think about this a little bit.
Jeff: The other thing I was wondering was, would this be a candidate for a master lease?
Toby: It depends on whether they're a real estate professional. I know what you're saying.
Jeff: I'm thinking that it might be a way to turn it into a short-term rental in 2022.
Toby: But if they have too many personal days in 2022, then...
Jeff: I see what you're saying.
Toby: It's still a residence. It just means that we won't be able to use the loss in 2022. What if we put it into service, did our improvement and then did a cost seg make it effective in 2023? You would still have your cost seg. All that means is that if I had $100,000 of improvements that were 1245 property, I get $80,000 deduction next year, as opposed to this year would be 100?
Jeff: No, that's a good point. If you place it in service in 2022 and do the cost seg before the end of the year, actually, you can do it after the end of the year for 2022.
Toby: Yeah, you could actually do it next year.
Jeff: You're going to get a little more bang for your buck.
Toby: Which by the way, you could actually be making this election to use a cost seg for 2021, even right now. Even though you're sitting here in the second half of 2022, you could be making that election ticked in accelerated depreciation if you wanted to for your properties that you held last year in lowering your 2021 taxes.
There's always a way to take advantage of the incentives that are put out there in the code. Sometimes you don't realize, you can go back. You can even be making contributions to employer retirement plans, so long as you haven't filed the return yet.
If you have an S-Corp and you have a Solo 401(k), you could still be making employer contributions for last year that are deductible in 2021. Somebody says, “Do you have to pay for all your upgrades or just sign a contract?” I believe you have to put them into service.
Jeff: It's not even a matter of paying for it. It's whether or not they're being used in the business.
Toby: It actually has to be put into service. Otherwise, it wouldn't work. I know what you guys are saying. In some cases, what is the one where they're saying that a firm contract to purchase is in solar?
You're seeing some people saying, hey, if you want the 30% credit, as long as you have a contract to purchase the solar and install it, it's a hard contract that could be enforced against you, that you could take the tax credit this year. That's the only time I see something where you could contract for it and actually get it from the government.
"We have to clean the short-term rental this first year to get the hours necessary for active participation." There are no actual hours for active participation, but I think you mean material participation. Whatever, I get your point. "It is a 90–120 drive one way." I don't know if that's a minute or mile. “Since we will be working, can we stay in the unit that night without counting it as personal use?"
Jeff: Some mixed questions. I think you can include the travel time. However, staying the night will not count towards working on it.
Toby: I think they're saying, does it count as personal use?
Jeff: It definitely counts as personal use.
Toby: If you are staying in a house, I think they're looking at the 14-day or the 10% of renting days, then they're worried that they're going to push themselves above the threshold and make it into a property that has to bifurcate the investment use versus the personal use.
Jeff: And this is going to be the IRS possessions. There's a Motel 6 right down the street from your house. I know where that is.
Toby: So you would tell them not to stay in the property?
Jeff: I would say if it's only one night, it's probably not really going to affect anything unless you've already used it a bunch.
Toby: Here's another way to look at it. How many days are you actually renting it this year? If it's like 30 days or worse, let's say it's 20 days, make sure that you're not doing more than 10% of those, because it could bite you. I understand that you want to stay with the unit the night.
I believe that the rules are that you can do it when you're doing rehabs and remodels, and construction that you can stay in it. It doesn't count. But when you're not doing that, I think it counts as a personal day. Otherwise, people would just say, hey, I stayed there, but I was cleaning the unit for three days. I understand why they're doing this because they want the material participation.
You don't have to worry about hours. Again, if nobody else is cleaning your unit, nobody else is providing substantial services. You don't have to worry about the 100-hour test. It's only if somebody else is providing. If somebody else was cleaning it, then we'd be worried about you hitting your 100 hours. You would have to do more hours than anybody else.
If you have somebody cleaning your unit, that's not the death knell. Make sure that you're rotating that person, so nobody is doing more than 100 hours. Nobody's doing more time than you. And then make sure that you're documenting the time that you actually do things for the short-term rental, including handling your bookings, drive it there, doing any fix up, putting things around, whatever you're working on on the property.
Just know that you got to keep good records, because the IRS looks at it. The tax courts have looked at these with a raised eyebrow when somebody drives along ways and they go, you didn't do eight hours. You were there and you probably did too. If you ask for some ridiculous amount, they might look at you and say, no.
Jeff: Probably the biggest killer for material participation is a third party property manager for short-term rentals, especially if it's out of state, if your property is out of state.
Toby: Make sure you're doing the rentals. That's the big one. Let me just go back and answer this. Active participation, by the way, is if you're doing rental, not short-terms. The short-term rentals, seven days or less, is a trade or business.
If you're doing rental activity, active participation, it just means you're managing the manager. You get up to a $25,000 deduction. That is not the issue here. The issue here is material participation, just to put a little correction there.
All right, "If you are retired and receive social security and annuity income, can you get your closing cost deductible from your income tax when you file?"
Jeff: Reading this, I'm guessing they're talking about closing costs on the purchase or sale of a house. If it's on the sale of a house, it actually reduces your capital gains now. If you buy a house and have closing costs, it's going to go into the basis of your property. If I buy a house for $100,000 and I have $10,000 for closing costs, I'm going to have a basis of $110,000.
Toby: I would say that there's one exception to that rule, which is if you're paying down points, if you're paying down the cost of your loan, then you would write it off as what?
Jeff: It actually writes off as mortgage interest.
Toby: Yeah, that's a mortgage. Prepaid mortgage is basically, some people call that a closing cost.
Jeff: Origination fees or...
Toby: Your traditional closing cost, you're adding into your basis, or you're writing it off as basis. It's increasing your basis in both cases. One of them, you're not using to deduct against anything. When you're selling, you're using it to deduct against the sales price, so you're getting a deduction that way.
But it doesn't matter whether you're retired or receiving social security. They do not care. That rule is just hard and fast. You don't get to write off closing costs with the one exception of closing costs that are actually interest deductions.
All right, "I'm setting up a corporation to wholesale and flip and later on hold real estate." They're going to wholesale and flip property and then they're going to hold real estate. Don't hold real estate in a corporation, period. The only exception is if you're selling a property that was your personal residence to a wholly-owned S-Corporation for purposes of stepping up basis and accelerated depreciation and taking advantage of the 121 exclusion, which is the $250,000 or $500,000 exclusion.
If you're moving out of a house, and you want to make it into a rental, and you've owned it for a while, and you want to step up the basis, because its property value has gone through the roof, you don't have to pay tax on the gain. You could do that even on an installment sale. We would elect out of the installment sale treatment and just take the exclusion, which means no tax on the sale of your house. That's the only time I want to see a house in a corporation. Can you think of anything else?
Jeff: No, not really.
Toby: If you're going to hold real estate, do not do it in a corporation. If you're going to flip real estate, then I don't care. Do it in a corporation. "I have a high startup costs, $20,000 and this is my first business entity I've ever started. I'm a full-time ICU nurse and pay lots of taxes. Is there any way I can rollover losses from the corporation to my W-2 taxes from my nursing job?"
Jeff: There are no way to rollover losses from your corporation to your personal return, because it's the corporation's losses? The W-2, they're your separate entities.
Toby: What if it's an S-Corporation?
Jeff: S-Corporation, definitely.
Toby: Then you could write off the loss if you put the money in.
Jeff: Actually, any losses would roll over to you personally.
Toby: You could write off your ICU nurse, W-2, if the S-Corporation essentially paid you back. It has to incur the expense, right?
Jeff: Right.
Toby: If you paid for stuff and you put it in there, and you said, hey, it's going to reimburse you at some point, it's a cash basis taxpayer, meaning that it gets to take the loss when it pays you back. You're going to have to loan it some money to pay you back. It sounds goofy, but then the S-Corp would have a $20,000 loss and you could write it off on your personal taxes under those circumstances, if you materially participated in the business.
Jeff: Something I was thinking about, because you said, please don't put your long-term rentals in your corporation. If you're going to do long-term rentals, I would either rent them at my name or a partnership name and then have this very same corporation managing these rental properties.
Toby: Yeah. Somebody says, what should I hold real estate in if not a corporation? You're always going to do an LLC if you're in California. It might be in Wyoming statutory trust. If it's in Florida, it might be a land trust. They have statutes just like LLCs.
It's going to be in a pass-through entity that we can ignore for tax purposes or that can be held in a partnership, an LLC taxed as a partnership. The reason that we do that is to qualify for loans, because there's a difference on where it gets reported for purposes of Freddie and Fannie loans. It's 75% of value on page one of Schedule E. It's 100% of values on page two of Schedule E on your 1040.
A K-1 that comes from a partnership goes on page two. A K-1 that comes from an S-Corp goes on page two. A disregarded entity that has real estate goes on page one of your Schedule E, which is really, really problematic if you're trying to qualify for loans, because you want all the income to be to be carried.
Would you hold it in? What Jeff just said is absolutely 100% correct. If you're going to have to buy and hold real estate, it's going to be either an LLC or trust holding that real estate. More than likely, that LLC or trust is going to be directed and owned by a singular LLC, most likely in Wyoming, because nobody can take it away from you. That is taxed as a partnership.
If it's your only one, it might be an LLC in your home state unless that home state is California or Florida, in which case we might do it slightly different. What Jeff said is even easier, because you could have the corporation manage that entity, and pull additional revenue out of it that goes from being something that would ordinarily flow on your return as rental income. And now is going to the corporation and coming in that's using probably to reimburse your expenses that you're carrying on its behalf or to pay expenses directly.
If this is confusing to you, guys, I would really encourage you to go to the YouTube channel and start watching the real estate videos, both myself and Clint. We go over this over, and over, and over again. We also teach a class called the Tax and Asset Protection Workshop every other Saturday. I'm going to probably show you a link. Actually, I don't think I put it in there today, but maybe Patty will share a link out there in chat land.
You can go to the Tax and Asset Protection Event and we will teach you where you hold your real estate. It doesn't cost you anything. You just come on except for a little bit of time. You got to go spend a day with us. You're going to want to do that. Maybe Patty can share that link. You're having people ask you, so I'll just go, Patty, Patty. Patty. Just teasing. Somebody maybe we'll share that link. They'll get it out there. We'll figure out where it is and we'll send it out to you guys.
All right, "I have a beach house that I'm starting to rent out. I got a DBA business name. I've been renovating and fixing it up to make it more attractive. I have a regular job and was told that if I made more than $150,000, I would not be able to write off my expenses and costs associated with my rental. Is this true?"
Jeff: This is a first of a couple of questions that the answer is it depends. I want to address the DBA first. The DBA , in California, it's called a fictitious name. It offers you no protection at all.
Toby: How do you know it's in California?
Jeff: There's a beach involved.
Toby: What if it's Florida? What if it's North Carolina? What if it's South Carolina? What if it's Virginia?
Jeff: The DBA doesn't offer you with any liability protection nor does it give you any anonymity. At least in the case of California, they're usually ran by the local counties and all. At least, who was actually the owner of that DBA?
Toby: A DBA does not give you any benefit, whatsoever, other than you get to possibly have another name on your check. I would actually put it in a trust or an LLC. If it is California or Wyoming, statutory trust to avoid the $800. There are beaches in Michigan. There are beaches in Ohio. There are beaches all over the place. There are a lot of beaches.
Jeff: Life's a beach.
Toby: Like we were talking about earlier, there's Huntington Beach and there's Hawaii that has beaches. There are a lot of beaches. You're not at a loss of beaches, but you immediately went to California?
Jeff: Yeah, I know.
Toby: All right, so the $150,000 rule, though, they're obviously thinking of the active. Somebody said, you could only write off the expenses if it's under $150,000. They're talking about losses being deductible as an active participant in rental real estate.
You have this beach house. The first thing we got to figure out is, is it a residence that's being used as an investment or is it just an investment? If it is just an investment, is it short-term or is it long-term?
Once we know those things, then we can give you a really good clear idea, because if it's short-term rental, it's not rental. We don't worry about active participation. We don't worry about real estate professional or any of those things. The only question is, is it ordinary loss, is it non-passive? And you get to write off all your expenses and depreciate the house.
If it's a rental and it's longer than an average stay of 7 days, longer than 8–30 days with substantial services provided, and then greater than 30 days with extraordinary services provided, those are the rules as to when it's not a rental. If it's a rental and you really are just doing this month-to-month or an annual lease, which is probably the more likely event, then the question is, can I write off my expenses? Yes. But if it creates a loss with your expenses and depreciation, now there's an exception.
The exception to the general rule, the general rule being, I can't use my passive losses against my active income. I can write off up to $25,000 of passive losses if I actively participated in real estate. That just means I picked the manager. I don't have to manage the property, but it phases out between $100,000 and $150,000.
For every $2, it goes up above $100,000, your income, you lose $1 of deduction. At $150,000, you lose that $25,000 completely. If you're making $100,000 a year, you can write off up to $25,000 of passive losses from rental real estate and use them against your income.
All of a sudden, let's say you're making $100,000 and you have $25,000 of loss, you're now making $75,000. On top of that, your standard deduction, you're barely paying taxes at all. You're going to be really, really happy. That's going to have a pretty major impact on your overall tax bill.
You get up to $150,000, that goes away, but you still have real estate professional, you still have the short-term rental, you still have some other things in your back pocket, plus you can always write off the expenses and costs against that income. If you have rental income, you can always use it. The only question is, can I write off the loss?
If it creates a loss, you do not lose your loss. You can use it against other passive income. If you have other rentals, if you have another business interests that you don't materially participate in, you get to use it against it.
This is twisted, but you can actually use it against short-term rental that you do not materially participate in because you have somebody else do it and you're passive, then you can even use it to offset that.
If I was in a pizza shop with Jeff—that's my favorite example—Jeff and I opened a pizza shop. He works and I don't do anything. I'm a silent partner. I could use any losses from my beach house to offset any income that the pizza parlor gives me because they're both considered passive. Very exciting stuff, Jeff. I don't know if anybody understood anything I just said.
All right, "I have a C-Corporation in Nevada through which I send some quarterly consulting and management revenue from my other manufacturing businesses." It sounds like you have a management company that is contracted with other businesses, and it's getting paid. "On my taxes, I categorize most of the accumulated earnings as appropriated earnings to avoid the accumulated earnings tax, but the retained earnings number grows every year with the income taxes paid. How do I categorize earnings used for taxes to lower the chance of an accumulated earnings tax?"
Jeff: I almost never see appropriated earnings used on the balance sheet for tax returns.
Toby: What is an appropriated earning?
Jeff: Appropriated earnings are earnings that you have set aside for a specific purpose. Maybe you're going to open up another franchise, build a building, or something like that. Those would be appropriated earnings. Basically, you're saying the money's already spent.
Toby: What's the accumulated earnings? What's this tax? And why do we have to be aware of it?
Jeff: Accumulated earnings tax is a tax on corporations for basically not paying your money out to your investors, either in the form of dividends, salaries, or something.
Toby: In other words, you have a bunch of cash. The only reason you're leaving it in there is because you didn't want to pay tax on it. As long as you have another reason for that cash to be going in there—hey, I need it for other projects, I'm going to require more assets, I'm loaning it, I have revenue opportunities, but I need to have enough cash stockpile to do so—as long as you have some plausible reason, you don't pay tax on it. I don't think I've ever seen an accumulated earnings tax imposed on one of our clients.
Jeff: I have not seen it on any small clients I've ever worked with.
Toby: It's when big companies have no reason to stockpile cash. They're not expanding. They have no other reason then. They're just sitting on it. They're not giving it out to their shareholders, where the IRS would be able to charge a dividend tax, which is long-term capital gains or paid out in revenue, in which case the IRS would get revenue. They just want something to happen with the cash. If you're just accumulating it, just make sure you have a reason to accumulate it that's not tax-motivated.
Jeff: A couple of things about this tax is if you have less than $250,000 accumulated, it's not looked at. It's an automatic exemption. But if you do have more than that, sit down, write up a plan, put it in your file cabinet. I would also put it in the company minutes, what my plan is, why I'm holding this cash back.
Toby: As long as you're documenting and you say, here's what I'm doing, you're going to be fine. You got to have a lot of cash before they even look at you. Again, I've not seen a small company ever get hit with this. It's what, 20%, the accumulated earnings tax?
Jeff: Yup, 20%.
Toby: Yeah, so they just say, hey, you're not using your money, let's hit it. Just make sure you're doing something with it and you have a reason. Invest it in something. Loan it, put it out on the street, do hard money, loans, loan it to yourself, I don't care. Just do something. Jeff's probably going to have an aneurysm if I say loan it to yourself, but you just make sure you're documenting that you have a reason to be stockpiling cash.
Jeff: Loaning to yourself is actually a really good idea.
Toby: Or pay it out to yourself. It's long-term capital gains. It's going to be 0%, 15% or 20%. It's not that bad of a hit.
Jeff: I wanted to go back to something they said earlier that it keeps getting bigger and bigger. What would you say about actually managing the money that's coming in? Maybe they're putting too much into the corporation?
Toby: Obviously, you're going to have a better tax bracket. Maybe you're in the highest bracket and you're like, hey, it's 21%. Loan it back out and use it in your other entities that are doing investments. Take out your mortgage. Take out any loans you have on any real estate. Buy more real estate. Use the money as a loan. Pay the corporation a small interest. That way, you never have to worry about it.
Jeff: Also take a hard look at reimbursable expenses that you could be deducting in the corporation to help lower some of these earnings.
Toby: A question that somebody asked that was in the chat. I know Patty makes everybody go to question and answer, but they asked a question about UBIT for short-term rentals in a 401(k). Have you seen the UBIT issue if somebody is doing short-term rentals in a 401(k)?
Jeff: Yes. Short-term rentals are a trade or business and they will generate UBIT.
Toby: Unless it's passive?
Jeff: I think it's still going to generate. It's still trade or business.
Toby: It's still trade or business income. UBIT is when you have unrelated business income and you're doing an activity inside of a retirement plan, or any exempt entities. It's UBIT. They basically say, hey, you're in an active trade or business, it's not fair not to tax you, because you're competing with other businesses. I could see there being a couple of ways that you might be able to do that and get around, but it's definitely something you want to talk to somebody and dig into.
You can generally get away with small amounts of things instead of a 401(k). If you're flipping, we have like, hey, don't do more than five flips. Stagger them, do them very seldom, or better yet, just borrow the money out of the 401(k) and do it in a corporation. It's even better.
Let's just say that you are doing some of this activity, just make sure that it's the exception to the rule. Make sure that you cannot be managing that. That has to be a third party or you're going to be dealing with some prohibitive transaction. Make sure that you're not doing it.
Jeff: I think you really need to look at your strategy, because UBIT is taxed on unrelated business income, not losses. If you have a short-term rental that you're running at a loss or close to breakeven, you could be holding that property for growth.
Toby: Most real estate, I know that there are people out there that do the 401(k) now because that's where their money is and that's what they're investing in real estate, I get it. But short-term, you get such a huge tax benefit right now to have that in your personal realm. I would much prefer you guys have it in your personal realm.
Jeff: Can I add one more thing? Don't do a cost segregation inside of an IRA or 401(k).
Toby: Not unless you're borrowing a ton of money in an IRA. Probably, never. You shouldn't be doing that anyway.
Hey, my partner Clint came out with this really cool book. I looked at this cover and I immediately said, oh, great, you did a men's health book. Let's see if you guys figure that one out. It's Next Level Real Estate Asset Protection by Clint. He just put it out. I don't think it's even available. I think it gets shipped. Maybe now, I think. It's number one Amazon new release in buying and selling homes. Fantastic. Clint does a really great job of breaking down the entities. Based on some of the questions I saw, you might want to be looking at it. It is available in Kindle and hard cover.
I'm just trying to remember. I think it just went live, so I think you can actually order it. Let's see what it says, buy now. Wednesday, September 7th or pre-delivery by September 9th. I think it's just coming out. It might be something. I get mine. It is available right now. Okay, you can go get it right now.
It's really one of those things. We write. All of us are goobers, we write books. Someone says, I got a copy. Clint's really, really good on the asset protection side. We do events all the time. I tend to do the tax and Clint does the asset protection. He's really good at breaking down anonymity and with the difference between land trusts, corporations, statutory trusts, all that good stuff.
I don't see any reason why this would not be a great thing for anybody who's doing real estate to ask or to read, so it's always fun. I got my copy. Jeff, do you have a copy?
Jeff: I don't have my copy.
Toby: I might have an extra one for you in my room or in my office. I just like this because I can use it as a prop now so I can point at Jeff. That's what I'm going to do and be like, he said it.
Jeff: What do you think, Jeff?
Toby: Yes. Anyway, I just like that. It has a funny arrow. When I first saw it again, I was like, oh, you're writing a book on your experience with men's health. I'm glad you're coming clean, Clint. My understanding is that he took the blue pill and all he did is got taller.
All right, more questions. “Will you be giving Clint's book out for free at upcoming events?” No, I don't think so. I am clueless on it. That's up to Clint. Somebody says, “Do you do cost segregation services?” No, but we have a great resource that we could send you, Erik Oliver over at Cost Seg Authority. aba.link/csa, I know that's the link. Sorry, sometimes I'm offensive. Bad Toby, bad Toby.
All right, "As an investor/owner, is it possible to claim part of my internet, phone, and home office as expenses?"
Jeff: This is the second ‘it depends’ question. The Internet and phone, it's going to depend on what entity you are. If you're an S- or a C-Corp, you can deduct them 100% if your employer requires you to have internet and phone.
Toby: But if they're just an investor in real estate, they would still be able to write off a few things, would they not?
Jeff: Yes. You could write off the Internet and phone, but it's going to be limited to how much of it is used for the business.
Toby: What Jeff is talking about is if you have one of these beautiful little iPhones or whatever they are and your employer wants you to use it in your employment, I can reimburse 100%. If I work for Jeff, CPA, and I use this, hey, I have to answer tax questions, Jeff can reimburse me 100%. I don't have to say what portion is personal or business. That's the benefit of an accountable plan, when you're an employee of an organization.
To be an employee, by the way, that organization must be taxed, not has to be, but it must be taxed as S-Corp, C-Corp, or a charity—501(c)(3). Most likely, if it's for profit—it's S- or a C-Corp, it could be an LLC taxed as an S-Corp, LLC taxed as a C-Corp—I am going to reimburse 100% of that.
If you are an investor, now I'm having to say, hey, I made 100 phone calls for 300 minutes, how many of those are related to your investment properties? Oh, you made three of those 100 calls and it was a portion of the time, I'm not going to get to write off much. That stinks. I need to be able to write off the whole thing. You need to have the corporation in the mix.
By the way, this explains that. Not to pimp Clint's book too much, but when you come to our event, the Tax and Asset Protection event, we get into that. When you go and you spend time looking at the strategies that we've taught over the years and all the hundreds of hours of video on our YouTube, we explain that. We're breaking that down quite often.
Jeff: I like what you just said and I think it's even more applicable for the home office if you're running it through a corporation who's managing your [...].
Toby: It's much better. Literally 10 times the amount in several circumstances because instead of just doing the $5 an hour or $5 a square foot or the gross square footage, you can do net usable footage or you can do room methodology. Direct cost is 100%. Indirect costs, you can do portions. You could really get some benefit if you have an administrative office in the home that you're being reimbursed for, as opposed to a traditional home office.
Somebody says, "What if you have a separate phone number for owner/investor activities?" Then you can break it down easier. If you have a separate phone or phone number that's only used 100% for business, then you write that up. But then you have another phone for personal, and I'd rather not track it. That's just me. I'd rather not deal with it. I'd rather just write it all off, which you can do if you're an employee of your S-Corp or C-Corp.
Somebody says, "I bought the book, but I need to wait for the 6th of September. It's worth it. Is it the 30th today?
Jeff: 30th, and the 5th is Labor Day.
Toby: "1031s are so stressful." James, start doing reverse 1031s, where you acquire the property and then you sell. It might be a little bit less. Or find a good company that has properties that you can just talk to and maybe park it in investment properties until you find something that you really, really want. Just make sure you're doing it that way. You might be doing the DST (Delaware Statutory Trust). It's buying stuff.
"My CPA did my S-Corp the last two years as a short-term rental passive, but now I realize I'm actually qualified as a trade or business with that. Oh, my gosh, is it something that can be corrected?" Yeah, Mike, absolutely. You got three years. We could fix it. Sorry, I'm reading chats. I'm not going to read chats anymore. I'm going to go like this.
"Can you explain the short-term rental tax benefit and how to get 100 hours of material participation?"
Jeff: I don't even know where to start with this one.
Toby. We already talked about short-term rentals.
Jeff: We talked a lot.
Toby: If there are seven days or less, it's a business. Just think of a pizza parlor. Jeff and I entered into an agreement. We're going to have an LLC that has a pizza shop. We're going to buy a pizza oven. That's equipment.
In a short-term rental, we're in a business. We're in the pizza business, but our equipment is the portion of the property that's called 1245 property. We have to determine what that is versus the structure. We can't write off the structure any faster than 39 years, but I can write off all of that, the linoleum on the floor, if you have hardwoods, the carpet, the countertops, all the specialty equipment.
If, hey, I had to plumb it, I had to put in electricity for this thing, I'm writing off a big chunk of that, about 30% of the value of the improvement of the home itself. Not the land, the improvement itself, I get to write off. If it's a trade or business, whether I get to write that off against my W-2 income or my other income, depends on the type of income and it is, and did I materially participate?
Jeff and I have a pizza parlor. Jeff works in the pizza parlor, I do not. I'm just a silent owner. If there are losses, my loss is passive. I cannot use that passive loss against my W-2 income. Jeff is working in the business. He's what's called a material participant. He gets to use the loss against his other income.
When we look at a short-term rental, we now know it's trade or business. If we create a loss by doing the cost seg and depreciating the pizza oven, the short-term components, now the only question is, am I working in the business or am I a silent partner? Working in the business means material participation.
There are seven tests of material participation. The easiest is nobody else works in the business, it's just me. I don't even have to have an hour requirement. The test that you're looking at here is the second one, which is I did 100 hours and nobody else did more than me.
Jeff could qualify for this in our pizza oven. He could actually have done more than 100 hours in the pizza business. As long as nobody else did 100 hours, it's material participation. Really tough to do if it's a pizza shop or if it's a short-term rental. Somebody's going to probably be spending more time on it during the year.
You get to the next one, which is 500 hours. If I work 500 hours in my short-term rental, it doesn't matter what anybody else does. I'm actively participating. I'm a material participant in that activity. I get to write off the losses against my W-2 and other income. That's the-10,000 foot view of short-term rentals. Anything you want to add?
Jeff: I'm just think about, how do I get the hours? It could be anything from directly working on the property. It could be indirect collecting payments, calling repair people. It could be keeping the books and records for the property.
Toby: It has to be something involved with that property and managing that property. Again, if you do an Airbnb, you're running the rent website, you're talking to people, you're doing this and the other. If you don't want to worry about material participation, do everything yourself. You don't have to worry about it.
That's why you saw that earlier question about the cleaning. Cleaning could be considered a substantial activity. If somebody cleans the unit and you're saying, hey, nobody else substantially participated in it, I did everything, the IRS would say, no, somebody else cleaned the unit. How many hours should they do? Now you're down that path, like, oh, God, I have to figure this out.
It might be five hours, but now it just pushed you into a situation where you have to do 100 hours and nobody did more than you. By the way, it's not just you. You and a spouse, if you're married, have to add up to 100 hours. It's not that difficult, really, if you're consistently doing Airbnb activities. You still treat them as one big activity if you have multiple.
The question is always, can I get through that threshold for our clients? I'll tell you, we usually have W-2 clients, there are a lot of doctors, a lot of professionals. They don't want to have to meet that 100 hours. They're just buying. Usually, they buy at the end of the year. Usually, October, November, December, they self-manage, get the big write off, and then turn it into a long-term rental.
They're like, hey, I want the big deduction now. It saves me so much money against my income because I'm in the highest bracket. Every dollar I get to write off and put into this year is worth 50¢ to make it into a rental later, or I'll let somebody else run it and I don't care about the losses being passive or active anymore. That's basically it.
"If I offset all of the passive income with depreciation or accelerated depreciation, would that eliminate the AMT adjustment?" This person is making less than $57,000 a year. Aren't they underneath the threshold?
Jeff: Oh, yeah. The threshold for a single person is $73,000. For married, I think it's $114,000. What used to be the biggest AMT adjustment was state and local taxes. Since they've been limited to $10,000, even that's virtually gone. There are still a couple left.
Toby: You don't use passive deduction against because it doesn't offset active income.
Jeff: They can have different depreciation methods. We're talking about short-term rentals so much. The life we said was 39 year. For AMT, it's 40 years, so minute difference. ISOs tend to have a big effect on some stock options and tangible drilling costs. It's not the normal thing that most people have.
Toby: Here's the answer to this question. You don't have to worry about it. You're beneath the AMT threshold. You don't have to worry about it at all. For anybody above that, talk to your account, because it's really complicated. Your passive income would not really have an effect if it's truly passive income.
Rental real estate's not going to have any effect on your AMT equation. You're going to either hit it or you're not. What has an effect, like Jeff just said, are things that adjust your ordinary active income downward, which means oil and gas, losses from business in which you materially participate. Trades or businesses, that's where the short-term rental could come in. What other things could actually adjust the AGI? It wouldn't even be 401(k) or contributions to a retirement plan.
Jeff: Incentive stock options have a big effect.
Toby: There you go. All right. Sorry, Toby has been pontificating too much today. I'm going to be put in timeout.
"I have a four-unit I want to live in and rent out the other three units. What are the tax deductions and write offs I can use to zero out earnings?"
Jeff: Here's how I would handle this. I would bifurcate, because it's still bifurcated for cutting into four pieces. Anyway, this is into two properties. I'd have my personal residence on one of the units and the other 75% would be my rental properties. Any expenses related to my rental unit would go against my real estate taxes and mortgage interest. My share of that would go against my 1040 Schedule A. Any other expenses would be just like any other rental.
Toby: You're just looking at the total expenses on it. I cannot depreciate my personal property. If I live in one unit and assuming that they're all equal size, then you would get three quarters of the depreciation. You would get three quarters of the expenses that were incurred, like property taxes. You would get three quarters of things that were for the entire property, which you can't really think of any others that would really go other than the property taxes.
Maybe the loan. Three quarters of the interest would be considered investment interest and not personal mortgage. You would just treat it three quarters as an investment property, one quarter as a personal home. Then when you went to sell it, you would do the same thing. You'd say, all right, if I sold it and there was gain, I could literally 1031 exchange three of the four units, the profit on it. I could use a 121 exclusion, the $500,000 or $250,000 of capital gain exclusion on the sale of a home, whether you're married, filing, or single. I could use that against that one unit of the four.
Jeff: Exactly what I was thinking.
Toby: All right. I told you guys, people had short-term on the brain this last week. "Any details on the short-term rental loophole in terms of how long you keep the rental and service for if you can do it for one year, and then benefit from classification, and then decide to use the property only for your personal use after that one year? If so, how much time does it need to stay in service, or how many rental days do you need to have a year?"
Jeff: I would say first off that if you start renting it in (say) 2023, it needs to stay a short-term rental for the entire year, and do the cost segregation during that year to take advantage of the bonus depreciation, and then you can turn it into that personal property in 2024.
Toby: Technically, there's no rule. Let's say we looked at 2022. They'd say, is this short-term, is this long-term, is this a residence? Let's go in reverse. Did you use it 14 days or 10% of the rented days?
Let's say you rented it for 200 days. Did you use it for 20 days? If so, it's a residence. There's a portion of it that you're not going to be able to take any deduction or loss against. There's a portion of it, percentage wise, let's say that you did 200 days and you had 20 days of business here for personal use.
You'd have 90% of the period of time was investment. You'd be able to write off 90% of the improvement, the depreciation amount, so you have to break it into that piece. You got to figure that out. Is it a residence or is it not? Then you look and say, is it long-term rental or is it short-term?
If it's short-term with no residential use, like, hey, I didn't live in it, I didn't stay in it, then it's really clean. Can I now write that off? Even if I only put it in service in December, the IRS would look at that one period of time and say, how many days was it rented? How many unique rentals were there? In other words, it was rented for 20 days and there were 4 different leases, Airbnb guests or bookings. You'd take the 20 divided by the 4, that's 5 days, it's short-term rental. For that year, it qualifies as a short-term rental.
Now we look at the following year and you ask the same questions again. Was it a residence? Was it an investment? If it was investment, was it short-term, was it long-term? It's a whole other period.
To answer your question, you could put it into service in December. You could accelerate the depreciation, because it's a trade or business. We don't really care as long as you don't get rid of the property. It's not going to have a tax impact to accelerate depreciation into that first year as long as you're not disposing of the asset. If you turn it into a residence the following year, it doesn't do anything. It doesn't hurt you.
Jeff: Yeah. Our concern is not how long you're holding it, but things you may be doing during that same year that you're short-term rental that's going to ruin that short-term rental status.
Toby: Well, you rent it for a long period of time or you stay in it too much.
Jeff: Yeah, then you're not going to be able to take that cost segregation and you're not going to be able to get the big deduction.
Toby: That's always the issue. People always say, we get this one. I think we had this one last time. Hey, I have a house, it's worth a lot, I'm going to make it into a short-term rental at the end of the year.
This is why you can't do that, because they say, how much of the time of the year? Was it residential? Were you staying in it or a member of your family or below market rents? Those are the things that they look at.
If I had been living in it all year, 300 days I was living in it, all right, that's residence. There might be a small portion of the depreciation that you could take, but it's not going to be much. You can't use any of that loss against your other income for that period of time if it's a residence. That's where you get toast.
"Is there a video in the strategy where you buy properties into the year?" Yeah, look at my channel. You'll see it. I think I just did one. I think cost seg is the number one tax strategy, but they're definitely floating around there, or you look at Clint's YouTube. There's probably some on there too. I know he talks about it, but we both go into these concepts.
It's a small world that you end up in when you're in rental real estate. You see how we break it down. You're thinking in little lists. Okay, is it residential? Do you have personal use? Is it a vacation home? Is it your residence?
There's one that we never talked about, which is the 14 days or less, where if you don't take depreciation, they don't have to recognize any rents either. If you take your personal home and you rent it out for 14 days, you can take all that income, you don't have to pay tax on it. You don't have to report it, but you don't depreciate the property either. It's still a residence.
You look at it and say, okay, is it more than 14 days more than 10% of the use, whichever one is greater? Yes. Then we only get a proportion of the deduction? No. Then we get the full deduction. Then the only question is, is it residential real estate or is it non-residential real estate? Is it short-term? Is it considered rental activity or not?
If it's not, then it's a trade or business. If it is, then we lump it in with rental activities and other passive activities. Do you have any other passive activities that you're involved in that generate profit? If we have a loss from this one, they offset or vice versa.
If you have extra losses that are passive, then we go down the next checklist. Are you an active participant, or are you a real estate professional and we just start going through a little list in our head saying whether there's something that you could do to offset it? That's really about it.
I just gave you a broad view, but that's literally the whole world there on real estate. You're just going through and seeing which bucket you're going to fall in, which category, and then what are the rules for those? You get pretty deep and you get nuanced on little issues, but you're looking at it for that 10,000 foot view. That's about what it is.
Here's a great example. "I bought a $400,000 home in 2021 and it's now ready to use as a short-term rental, to use the short-term rental loophole," I know everybody's really interested in that one, "to offset some of my W-2 active income. I want to use a cost segregation study and claim bonus depreciation."
They just hit everything we just talked about. It's an active trade or business because it's a short-term rental. It's not a typical rental. They want to accelerate the depreciation on those items that can be removed from the home or removed from the property, which includes everything from your cabinets, to (again) your carpet, to your linoleum, to your driveway, to your sidewalks, to trees you put out there, to the flowers you plant, to the fence that you put out there.
All of that can be deducted. The last thing they said, bonus depreciation, I can write that whole thing off right now in one year. Then they go, "Should I use a do-it-yourself cost seg?" I don't know your thoughts on it. Actually, I'll ask you your thoughts.
Jeff: My thoughts are no, but I think you may have a different answer.
Toby: I would say, absolutely, 100% not, because the do-it-yourself sounds like a good deal. It might be a lower price, but it's not the value. The value of having somebody do it, it's what you're supposed to do. It's what the audit guide requires as an engineer. If you did it under a do-it-yourself, you're still going to pay, but you're gonna get so much less of a deduction, because they have to be so much more conservative.
In other words, if I had Erik Oliver and his team and his engineers go out to a property, a million dollar property, subtract the land off it. Let's say it's $200,000 of land, there's $800,000. A good company's going to give me between $200,000 and $240,000 of deduction.
A do-it-yourself might get me $150,000. What's the cost to you of losing out on that extra $50,000-$70,000 of deduction? Depends on your tax bill, but it's significantly higher than any savings you're getting on a do-it-yourself.
Jeff: Sometimes we fall into that, I'm just going to get the store brand because it's cheaper and it tastes the same. This ain't it. This can make a huge difference on your deduction. Yeah, it may sound expensive for what you're paying for it, but you're more than getting that back in your cost segregation.
Jeff: Yup. If you're going to do something, focus on value. The way I used to say it, because I used to make fun of H&R Block and some of the others—no offense if you work for them—-I just pointed out that when it came to business returns and investment returns, the government said they got 0% correct when they actually did the study on them. I thought that was really extraordinary.
How do you do it? None. You think a broken clock is we just write with twice a day, they would have gotten one right, but they didn't. You might be able to go there and save 20% on tax prep. Because I went to H&R Block. Yes, I saved money. No, you didn't because they did it wrong and you missed out on $10,000 worth of tax benefit, so you saved $200.
Let's say that it was $800 to get your returns done at H&R Block when you could have gone to a CPA firm or a good firm and paid $1000. Somebody says, I saved $200, but it costs me $10,000. That's value versus price. Wealthy people focus on value. They want to know that it's done right.
I'll just tell you, we could be doing the cost seg studies. If I was going to do a do-it-yourself, they have solutions for CPA firms and lawyers to use to do the studies, but it's not in your best interest. Yes, I could actually make money on it, but it's not in our clients’ best interest, so we don't do it.
"I am an engineer that can do cost seg for others. Do you still recommend a third party?" Jeffrey, I would talk to Cost Seg Authority, absolutely. Even you, you could probably do your own, but it's like the doctor working on themselves or the lawyer representing themselves. They say the lawyer that represents himself has a fool for a client. It's because you're gonna have blinders on.
Again, it's up to you, but I would actually talk to Cost Seg Authority. Maybe you could do analysis for them. Or maybe they could work with you because you're a professional and say, hey, here, it's going to take us a lot less time if you do all this work, but if you do this, we'll assist you. Just have that discussion. But as a matter of course, don't do things yourself.
Everybody that always knows that, there's a learning curve and there's always a price to be paid. I'd rather you not pay that price. I'd rather you get the benefit. The Cost Seg Authority will tell you whether the benefits are worth it, because they will do an analysis before they charge you to tell you what they think it will get.
"How about cost seg, can we use it for the long-term?" Yeah. I don't know what that means.
Jeff: Long-term rentals, but yes.
Toby: Yeah, you absolutely can. You're breaking it down. Again, you have that study. I look at the IRS audit guide, and it wants a professional study of somebody who went into the property. There's an exception if you have the same property, same build, like it's the same home or the same units in an apartment complex or something along those lines. But for single families, you do them for each one. You don't mess around.
It's not worth it. The money saved versus actually being physically in there, and getting the nuances, and getting every dollar as a deduction, the amount that you leave behind is much more than the extra cost that would have cost to do it right.
There's my YouTube channel. If you haven't heard about it enough, there it is. Again, I'm staring at you. You can go in there and subscribe. We like subscribers to it. There are lots and lots of playlists. Some of you guys said, where do I find out more information about the short-term strategy and things like that. Go in there and coast around my channel, you will find it.
Last thing, ask your questions. We answered, I'm looking at 275 questions we had. We had a really good group on, so we had 275 questions. You could ask taxtuesday@andersonadvisors.com during the next two weeks between our Tax Tuesdays, and we still answer your questions. Why do we do this, Jeff? Are we just nuts because we like answering tax questions for nothing?
Jeff: We like educating people. A smart client is a better client.
Toby: Smart clients are the best clients.
Somebody says, "Are new builds still need a cost seg engineer?" Not necessarily. You still want to have somebody that understands it. But if you ever broke down the components and what you cost, then you can do it, absolutely.
All right. I don't sell cost seg, guys. I'll just send you someplace else. Yeah, Jeffrey, if you reach out, we'll send you the team that does it. We work with a firm, a CPA firm. All they do is energy credits and cost segregation.
Energy credits are going to be huge next year, the 45L. If you're doing rehabs, if you're building properties, you want to be aware of this. It's up to a $5000 tax credit per unit. If you do apartments, you want to be aware of these things to see if you can get the tax credit. Not a deduction, it's a credit. They just extended not only the 2000, but they enhanced it and made it easier.
Somebody says, "Doing my cost seg walkthroughs this week." Yes. You can do cost segs even for 2021 still. You can do them even if you sold the property. You'd be shocked at how much you might actually get put back in your pocket when you do it.
Anyway, reach out to us at taxtuesday@andersonadvisors.com. Visit us on our website. Sign up for our courses. We teach them every other week. We love going out and educating you. Anything else, sir?
Jeff: No, sir.
Toby: Very active group today. You guys get a star. I know we were heavy on the short-term rentals. I get that.
Jeff: Do we have some questions on those?
Toby: Yeah, we had a couple of questions on short-term rentals. We have days where we have none and then we just got [...]. At least you guys are thinking, which is awesome. That was awesome. I appreciate you guys. We will see you in two weeks. Until then, this is Toby and...
Jeff: Jeff.
Toby: At Tax Tuesday. Thanks, guys.
As always, take advantage of our free educational content. And every other Tuesday we have Toby's Tax Tuesday, a great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets.
Additional Resources: * Claim your FREE Strategy Session, and learn how Anderson Advisors can protect your assets. * Join our next Tax & Asset Protection event to learn more advanced tax minimization & entity structuring strategies * For all things investing, check out the Infinity Investing YouTube channel * Subscribe to our YouTube channel to make sure you never miss the latest strategies & updates
Small multifamily real estate does exist. You don’t have to have hundreds of units, syndicate, bring in investors, and make it complicated. So, how do you get started investing in small multifamily real estate and produce cash flow?
Today, Clint Coons of Anderson Business Advisors talks to Jen and Stacy Conkey, Founders of Warriors of Wealth and the Remote Multifamily Investing Academy™. They are two experts who know how to get into smaller deals that generate massive cash flow.
Jen and Stacy Conkey have more than 20 years of experience as entrepreneurs and real estate investors. Through their diverse real estate experiences, Jen and Stacy know what it takes to identify deals and make offers on properties that build long-lasting wealth. Also, Jen and Stacy share their knowledge and experience by teaching people what it takes to succeed in multifamily real estate investing with actionable strategies that make cash flow real estate fun and easy.
Highlights/Topics: * Multifamily Impediments: Too big, too expensive, too much inventory, too competitive * Where did Jen and Stacy start finding smaller deals? Education and just doing it * Multifamily: More than big apartment buildings—anything more than a single unit/home * Multifamily Categories: Get a good deal, good cash flow to learn process, then build up * Four Units & Under: Build relationships with realtors in local markets to find deals * Path of Progress: As things build out, it drives the value of other homes via BRRRR * BRRRR Strategy: Buy, renovate, rent, refinance value-add project and maximize capital * Stabilized vs. Value-add Strategy: When evaluating quad, is it a good investment? * Why Jen and Stacy never visit their properties, but do everything online/on the phone * Where do Jen and Stacy find contractors? Get them to go to a locked property and bid * How do they find a property manager? Google and then find and call all of them
Resources Warriors of Wealth
https://www.warriorsofwealth.com/
Remote Multifamily Investing Academy
https://www.wowaua.com/home
Facebook Group: https://www.facebook.com/groups/PassiveIncomeRealEstateInvesting
Thumbtack
https://www.thumbtack.com/
HomeAdvisor
https://www.homeadvisor.com/
Angie's List
https://www.angi.com/
Marco Polo
https://www.marcopolo.me/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Are you a real estate professional? Then, how do you avoid an IRS audit? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Do you pay tax on discrimination judgment? If so, how much percentage? What qualifies as non-taxable income? Usually, pain and suffering is non-taxable and then compensatory judgments where they're paying you for lost wages is always taxable because your wages would have been taxable. * Are solar credits available for the installation of solar panels and equipment on an RV or travel trailer? What if the RV or travel trailer is used to live in for a substantial part of the year? You can put solar panels on your main home and second home. Your RV could qualify to be your second home as long as it has a bathroom, kitchen, and sleeping area. * We plan to claim qualified real estate professional status for my unemployed wife this year. We have been maintaining records, and she has been using a separate phone and email to track all her real estate efforts. We live in New Jersey, and if we get audited for this, what will the IRS likely ask for and how many years back? Forget about the phone and its deductibility and the email. Instead, keep good logs of her time spent to meet the various tests for real estate professional status. You may be asked about any contemporaneous records and numbers. If you are a real estate professional and you're accelerating depreciation, you'll need your cost seg report and records of your purchase and improvements. It is unlikely that you will be audited.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Homeowner’s Guide to the Federal Tax Credit for Solar
https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics
26 U.S. Code § 45L - New energy efficient home credit
https://www.law.cornell.edu/uscode/text/26/45L
Inflation Reduction Act of 2022
https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/15/by-the-numbers-the-inflation-reduction-act/
Real Estate Professional Status
https://www.aicpa.org/resources/article/tax-rules-for-real-estate-professionals
121 Exclusion
https://www.irs.gov/taxtopics/tc701
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Anderson Business Advisors
https://andersonadvisors.com/
Anderson Business Advisors on YouTube
http://aba.link/YouTube
Anderson Business Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Business Advisors Podcast
https://andersonadvisors.com/podcast/
What is the single-most effective way to affect your adjusted gross income (AGI) in the conservation easement realm? Preserve land while deducting taxes. There are people who are doing really good things with conservation easements. Is Donald Trump one of them?
In this episode, Toby Mathis of Anderson Advisors talks to Tyler Surat about tax incentives for conservation easements.
Tyler works in the renewable energy industry. His work involves solar involvement, solar installation, and solar sales in southern Colorado. Tyler talks to clients about renewable energy—the benefits and tax savings.
Highlights/Topics: * Why might people put solar on a property they own or even investment properties? Aside from the benefits of being green, contributing back to the grid, and knowing that a perpetual power bill can become cost controlled by your solar investment, there are financial reasons. * Explain the economics of it. Do most people finance solar systems? On a residential level, most people finance solar systems because most don’t have $35,000 available. Ultimately, a finance payment is in exchange for a power bill. * Why did the U.S. government create a program for conservation easements? As a way to incentivize a private conservation effort because it cannot single-handedly serve every piece of land that should be conserved. * What is a conservation easement? When you place boundaries on a property to where development cannot happen. * Why would you partner in a deal to buy land that will be devalued considerably? Your investment is essentially the developed cost and the government is giving the marketable developed value as a deduction. You get 25% of your money back that you invested as income. Now, your investment turns into a deduction of your AGI.
Resources: Tyler Surat on LinkedIn
https://www.linkedin.com/in/tyler-surat-1a17881b%20Steel%20City%20Solar%20https:/steelcitysolar.us/
Tyler Surat’s Email
tsurat@onetreeadvisors.com
Tyler Surat’s Phone Number: 719-580-3051
Steel City Solar
https://steelcitysolar.us/
Conservation Easements Benefits for Investors
https://andersonadvisors.com/podcast/conservation-easements-benefits-for-investors/
Internal Revenue Service (IRS) – Dirty Dozen List
https://www.irs.gov/newsroom/dirty-dozen
Bureau of Land Management
https://www.blm.gov/
Toby Mathis
http://tobymathis.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Anderson Advisors
https://andersonadvisors.com/
Answers to tax questions are never quite as straightforward as you want. Toby Mathis and Jeff Webb of Anderson Advisors talk about how dividends are taxed (how to reduce your tax bill) and answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * What are the tax implications of selling stock and using the proceeds to invest in real estate? It depends. If you sell some stock and then go out and buy some real estate, one actually has nothing to do with the other, except in one circumstance - if you buy real estate in a qualified opportunity zone. * What's the best way to avoid taxes when getting income from forex trading? The IRS is actually very hard on forex traders. There's one tool called, the 988 election. When you do forex trading, it's subject to the 1256 rules. No matter when you bought and sold it, 60% gets treated as long-term, 40% as short-term. * Can I get a hard money loan with no collateral? Maybe, but it depends solely upon the lender. A hard money loan is money from a private lender, not from a bank. * I bought a real estate course in April 2022 and then started my LLC in May 2022. Can I write-off the cost of the course as a business expense on my taxes? It depends primarily on how your LLC is being taxed. If it's being taxed as a corporation, a C Corp, you can use those costs and the C Corp should reimburse you. * I have a nonprofit mentoring business that I often fund with my personal finances. Is there any way that I can write this money off on my taxes? Instead, let the nonprofit pay its own expenses. Every time you give them cash, they should give you a receipt. Anytime you fund a nonprofit, it's going to be a charitable donation. As long as you document it, then the organization is paying that expense.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Wills and Trusts
https://andersonadvisors.com/living-trusts/
Opportunity Zones
https://www.irs.gov/credits-deductions/businesses/opportunity-zones
1031 Exchange
https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx
Wash Sale/Loss Rule
https://www.investopedia.com/terms/w/washsalerule.asp
Capital Gains and Losses (Schedule D)
https://www.irs.gov/forms-pubs/about-schedule-d-form-1040
Entity Formation
https://andersonadvisors.com/entity-formation/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
There is no greater path to wealth for you and your future generations than through real estate, but the biggest challenge is getting started on that journey.
Today, Clint Coons of Anderson Business Advisors talks to Brett Hadley about how to get started in real estate investing and the need to network to find deals.
Brett started at ground level with nothing and built up his investing into multifamily and syndications. He explains what that journey was like for him, how the market looks right now, and what he did. Brett offers insight on what you should focus on, putting teams together, and how to approach real estate investing.
Highlights/Topics: * Brett’s Backstory: Where he came from and what it took to buy his first house * Biggest Mistake: Getting in the game before getting educated first and foremost * Lesson Learned: Value of investing in yourself via education is extremely important * Anderson Advisory Group: Guides, leads, and establishes asset protection to grow * Accelerators and Masterminds: Network enables ability to execute vast amounts of deals * Start Small: You can have capital to execute a deal and go in and do what you promised * Real estate is real estate—understand the basics and the foundations to build a house * Changing Minds: Show people results from hard work, dedication, and ability to execute * Like-minded People: Portfolio grows faster with those who know more than you that help * Yin and Yang: Partnership is a marriage; be careful who you partner with and can trust * Team Effort: Get experienced people who have done it, been there, and closed deals * Preferential Treatment? Build relationships to benefit from network and close deals * Finish Line: Find a great deal, know it's going to cost you, and be able to execute/close * Current Market: Find area with tailwinds—it's going to be a competitive environment
Resources BAB Investments
http://www.babinvestment.org/
The War Room
https://military-millionaire-academy.teachable.com/p/the-war-room
Service Academy Business Mastermind (SABM)
https://sabmgroup.com/
Real Estate Accelerator
https://sabmgroup.com/realestate
Personal Mentoring: The Apartment King - Brad Sumrok
https://bradsumrok.com/personal-mentoring
The Secrets of Successful Syndication Seminar - Radio Real Estate Guys
https://realestateguysradio.com/events/how-to-raise-money-for-real-estate-investing
Clint Coons
https://andersonadvisors.com/clint-coons/
Clint Coons on YouTube
https://www.youtube.com/c/RealEstateAssetProtection
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
A lot of people make a lot of money by investing in self storage. How do you get started in it and collect mailbox money to put yourself into a different asset class and create retirement plans or a financial future that you’ve always wanted?
Today, Clint Coons of Anderson Business Advisors talks to Ryan Gibson, CIO of Spartan Investment Group, which has a half-billion under management and more than 300 million square feet of self storage.
Highlights/Topics: * What attracted Ryan to self storage? 3 Es: Easy to own, easy to evict, easy to maintain * Why did Ryan start Spartan? Less involvement and fewer restrictions from government * Is self storage insulated from the economy? Self storage tends to be recession resistant * How did Ryan find and acquire his first deal? Off-market by sending letters to owners * What due diligence did Ryan do? Learn about the industry from top operators * Why did Ryan go the syndication route? To bring the opportunity to his investors * What are the demographics for opportunities? Check demand, occupancy, underwriting * Are there operators that handle the management of units? Yes, small and regional ones * Is there a minimum size for evaluating units? Depends on price thresholds, expectations * What should investors avoid? Flood zones, smaller properties, and overpriced facilities * Is it worth it to build from the ground up? Yes, but the stakes are much higher * What are the rents for self-storage units? $15 a square foot or higher per year
Resources Spartan Investment Group
https://spartan-investors.com/
Bob Copper - Self Storage 101
https://selfstorage101.com/
Jay Graham - Self Storage Advisor
https://www.storageadvisors.com/brokerage
Inside Self Storage (ISS)
https://www.insideselfstorage.com/
Inside Self Storage Store
https://shop.insideselfstorage.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Clint Coons on YouTube
https://www.youtube.com/c/RealEstateAssetProtection
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Toby Mathis and Jeff Webb of Anderson Advisors talk about how to avoid taxes from borrowed money and other tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is the money I get from a line of credit or loan taxable? No, proceeds from or payments back on a loan are never taxable. What's the best way to avoid taxes on money borrowed toward investment? Utilize interest and repay your loan to avoid taxes. * I am a co-owner of a property. I don't get proceeds from rent but want to invest in the renovations. Are there any tax advantages for me? You can get tax advantages/deductions for repairs, but renovations may depend on your income, operating agreement, and other factors. * If I move my paid-off condo to a trust, will the trust pay taxes on it? Don’t put your condo into an irrevocable trust. If it's a living trust or land trust, neither are considered disregarded entities nor pay taxes. If I sell it one year after owning it then put it in trust before I sell it? Also, it is not recommended to change a title shortly before selling it. * Should I put my college kid on my payroll for $24-to-30,000 a year rather than just pay their rent out of my pocket? Makes perfect sense to do this, but your child actually has to be doing something for your business that is worth $24-to-30,000 a year.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: 1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Section 179
https://www.section179.org/
121 Exclusion
https://www.irs.gov/taxtopics/tc701
Small Business Administration (SBA)
https://www.sba.gov/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you write off your vehicle exclusively for your business? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I have an LLC but I want to know if I need one for each of my properties that are short-term rentals (STRs)? You don't need one for every short-term rental. If you can do that, it's a great idea to have one for every rental, but you don't have to. * Can you write off a new truck purchase for use exclusively for my business? It depends on the size and type of truck. If it qualifies as equipment, you can write off 100% of it. Don't put your car in your business because you have to use it more than 50% or there's adverse tax consequences. If your company owns your truck and you start using it personally, it's a taxable event to you. * I operate my business out of my home and want to rent the home to my entity so I can write off the mortgage rental expense as a business expense and use a primary residence loan to purchase a new home. Can I achieve this by writing a lease to my business? Never rent to your corporation or rent your house out to a business. Instead, have the business reimburse you.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: 1202 - Qualified Small Business Stock
https://www.taftlaw.com/news-events/law-bulletins/the-abcs-of-i-r-c-section-1202-qualified-small-business-stock
IRS - Cost Segregation Audit
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Section 179
https://www.irs.gov/newsroom/irs-issues-guidance-on-section-179-expenses-and-section-168g-depreciation-under-tax-cuts-and-jobs-act
Section 469
https://www.law.cornell.edu/uscode/text/26/469
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby
Mathis
https://www.amazon.com/Infinity-Investing-Rich-Richer-Same/dp/1950863271
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Eliot Thomas and Jeff Webb of Anderson Advisors talk about how to maximize tax deductions for your home office and answer more of your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I have an S corporation. Can I institute a health reimbursement account (HRA) plan? Yes, you can have an HRA and an S Corp. The problem is that you cannot benefit 5% shareholders. An HRA can only be for the employees of the company. * Can a real estate professional status be claimed year to year with yearly gaps on any years that you may not qualify? Yes, this is an annual test. So, you must re-attain real estate professional status every year or possibly experience passive losses. * If I personally fund my small business, can I deduct all the monies I put into the business from my business taxes? It depends on the type of business and how it is structured. Basically, you are contributing money to your business. So, even if it's a pass through, if it's a corporation, it's not a deduction, but an investment. * What expenses can/must be kept/recorded in order to get tax reductions or deductions for a home office? All of them, including your utilities, water, trash removal, HOA fees, gas/electric power, property taxes, cleaning expenses, and mortgage interest. Keep any records around those items. Also, calculate for the depreciation to that area.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: 1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
26 US Code Section 721 Exchange
https://www.law.cornell.edu/uscode/text/26/721
Aggregation Election
https://www.eisneramper.com/irc-section-199a-aggregation-election-0919/
26 US Code Section 1244
https://www.law.cornell.edu/uscode/text/26/1244
Wash-Sale Rule
https://www.investopedia.com/terms/w/washsalerule.asp
Turo
https://turo.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What are funding options for different types of real estate investing? How do you finance deals, and what does it take to put these things together?
Today, Clint Coons of Anderson Business Advisors talks to Kurt Nederveld, CEO and founder of Rainstar Capital Group (RCG). Kurt is an expert when it comes to funding and helps clients gain access to funds that they didn't think they would have access to ordinarily.
RCG has more than 250 lenders on its debt advisory platform that fund against invoices, accounts receivables, commercial real estate, corporate finance, small business,
equipment and rental real estate.
Highlights/Topics: * What is RCG’s lending platform? It functions on the four Cs: Cash, credit, collateral, and character via a blueprint of the entire process of accessing all product lines and placing a very high focus on education to grow and create generational wealth. * What does RCG teach clients? Understand their equity story. If RCG can bring in a higher leverage product, it saves clients/investors the equity. * What is RCG’s process for doing deals with clients/investors that have little to no cash? Based on cash, credit, and collateral, identify which product lines that they can qualify for from the highest leverage perspective, when you break down the capital stack. * Can RCG do a blanket loan, cross-collateralize assets to take some cash out to roll into a client’s next deal? The ability to grow is limited by your equity. RCG analyzes which properties have the most equity and whether to do individual cash out or refinance. * What if somebody wants to do traditional house hacking or they're going to be renting out rooms, how would that work with the lenders? Currently, the VRBO and Airbnb strategy is the greatest disruptor in the marketplace. Know your local market and drivers. * What about flipping? Does RCG have products/strategies for those who want to flip properties? There’s either build-to-sell or build-to-rehab-and-rent models. From a mission perspective, families need homes. * What is Kurt doing right now in the market? Where does he find most of the money? What type of deals is it chasing? Multifamily and single-family rentals are hot. People always need a place to live. The biggest battle is a lack of inventory.
Resources Kurt Nederveld on LinkedIn
https://www.linkedin.com/in/kurtanederveld
Rainstar Capital Group
https://www.rainstarcapitalgroup.com/
Roster List of Top MSAs
Grant Cardone
https://grantcardone.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Clint Coons on YouTube
https://www.youtube.com/c/RealEstateAssetProtection
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Do you dream about real estate investing replacing your active income? Make no longer having to report to an employer every day, being able to sit back, and collecting mailbox money on a monthly basis a reality.
Today, Clint Coons of Anderson Business Advisors talks to Dustin Heiner, founder of Master Passive Income and Successfully Unemployed.
Dustin is a real estate rental property investor who was able to make enough passive income from his business to quit his job when he was 37 years old. With his podcast, books, courses, and coaching, Dustin now helps other people quit their job by investing in real estate rental properties. He is passionate about his mission to help others become successfully unemployed and never need a job again.
Highlights/Topics: * How did Dustin get started in real estate investing? He needed to find a job to make sure he could provide for his family and never have to worry about needing a job again. * What value does Dustin put on himself? Value does not come from your job. Your value is so much more than anybody could ever pay you. * What did Dustin decide to do? Rather than losing money working just over broke (JOB), start a business: * As an investor, what did Dustin focus on? Single-family? Commercial? Residential, it's not single-family homes only. It's four units and below because that's what the IRS classifies. Dustin buys more rental properties that make a minimum amount. * What are ways that Dustin got financing? Conventional mortgage, private money, and portfolio/commercial loans. * Where does Dustin buy homes for $10,000? There are places that have good homes that other people would want to live in—you may not—that are lower in price. * Who are the experts and what does Dustin do to vett them? People that live there on the ground. Seek property managers that you trust, can communicate, and have experience. * What areas is Dustin looking into beyond residential? Syndications, other people that find, buy, and manage multifamily homes, apartment complexes, and hotels.
Resources Successfully Unemployed
https://www.successfullyunemployed.co/
Master Passive Income
https://masterpassiveincome.com/
Master Passive Income Podcast on Spotify
https://masterpassiveincome.com/spotify
Dustin Heiner on Instagram
https://masterpassiveincome.com/instagram
Dustin Heiner on Facebook
https://masterpassiveincome.com/facebook
Dustin Heiner on YouTube
https://masterpassiveincome.com/youtube
Free Real Estate Investing Course
https://masterpassiveincome.com/freecourse
Clint Coons
https://andersonadvisors.com/clint-coons/
Clint Coons on YouTube
https://www.youtube.com/c/RealEstateAssetProtection
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Should you create a new LLC for your vacation rental? Eliot Thomas and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I rent my personal residence and my home office is my primary place of business for my S Corp. Am I a good candidate to take advantage of Section 280A deduction or does that fact pattern disqualify me? No, you're not disqualified. Keep the areas separate and you are a good candidate to take advantage of 280A and still have the administrative office reimbursement. * Is it possible to minimize taxes by selling the C Corp, which holds property via a 1031 exchange and then form an LLC to buy the replacement property? Generally, no. If you're going to have appreciable real estate, a rental, you can't do 1031 on flipping property. It's considered inventory. * I just bought a lake cabin in Wisconsin where we will be renting it out as VRBO as much as possible, but also using it for some personal use for our family. Will I need to create a new LLC to hold the cabin in and how much of it can I write off given we're unsure about how much it will be rented out, especially the first year? If your personal use exceeds 14 days or 10% of the rental time, it is considered your vacation property and you can’t take losses beyond your income. * Is there any limit on how long a person should keep tax records? It depends. Most people recommend three to seven years, unless you know you did something wrong. You’ll want to keep all tax records to convince and defend yourself against the IRS.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Entity Formation
https://andersonadvisors.com/entity-formation/
Section 280A Deduction
https://andersonadvisors.com/section-280a-deduction-explained/
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Qualified Business Income (QBI) Deduction (199A)
https://www.irs.gov/newsroom/qualified-business-income-deduction
Tax Cuts and Jobs Act
https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-businesses
K-1 Form
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What are the pros and cons of a C Corp and S Corp versus an LLC? calculate, calculate, calculate because it's possible to pay dividends out that are not going to be taxable to you.
Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Do corporations get taxed double? What are the pros and cons of a C Corp, S corp, and an LLC? Double taxation means the C Corp's getting taxed on its income. When it pays out dividends, the shareholders are getting taxed on those dividends. Also, LLC is not a tax designation. An S Corp is similar to a partnership. It has stricter rules about who can be shareholders of your S Corp and it passes through its income expenses down to the shareholders. A C Corp is its own entity/being. * I own a childcare center that is set up as a corporation and taxed as an S Corp. It has a line of credit of $150,000. I'm a new real estate investor and would like to know if I can lend those funds to myself to purchase a house to buy, repair, rent, refinance, repeat (Brrr) or fix and flip? Yes, you could do that, but make sure there are promissory notes between the S corporation and borrower. However, you do have to repay that money to the S Corporation. Document it, and then honor the document. * I just received a notice from the IRS asking me to pay taxes on the money withdrawn from my retirement under the CARES Act in 2020. I thought I had three years to pay back the money withdrawn in 2020, which means I still have 2022 to pay back the money that was withdrawn. How do I proceed? You have until 2022 to repay this distribution. However, the IRS technically wants you to pay back taxes on a third of that distribution each year.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Entity Formation
https://andersonadvisors.com/entity-formation/
Coronavirus Aid, Relief, and Economic Security (CARES) Act
https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers
199A (Qualified Business Income Deduction)
https://www.irs.gov/newsroom/qualified-business-income-deduction
Section 280A Deduction
https://andersonadvisors.com/section-280a-deduction-explained/
Form 1099-R
https://www.irs.gov/forms-pubs/about-form-1099-r
Toby Mathis
https://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What are things that you absolutely want to make sure to avoid like the plague when it comes to estate planning? Absolutely avoid doing nothing. You should have a plan in place.
Today, Toby Mathis of Anderson Business Advisors talks about major mistakes to avoid and choices to make when estate planning and ensuring your legacy. The most important thing is to have the opportunity to put things in place and affect lives for decades, if not centuries, after you're gone.
Highlights/Topics: * Mistake #1: Doing nothing. * Mistake #2: Thinking that you're going to live forever. * Three Choices: Do a simple will, living trust, or go through the probate process. * Mistake #3: Documenting things, but not actually updating them.. * Mistake #4: Focusing only on your own mortality, not everything else you have to offer.
Resources: Toby Mathis
https://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you calculate taxes for flipping houses? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is there depreciation recapture on a business vehicle when it is sold or no longer used for the business? Depreciation recapture works differently for personal/tangible property than for real estate. So, anything that's not real estate and intangible, such as a car. * Inherited IRAs: Are distributions taxed no matter what or can you shelter them with cost seg and depreciation from short-term rentals? Can you shelter with long-term rentals? It doesn't matter if the IRA is inherited, the distributions are taxable because you could have cost segs or short-term rentals from somewhere else that are offsetting that income. IRAs, unless it's a Roth IRA, are always going to generate taxable income. * I am a physician in a single-specialty practice under an LLP. I have set up my personal PLLC in the state. Do I need to set up payroll and give myself a W-2? It depends. Most states require that you're an S-corp. You are going to have to take a reasonable salary that is about a third of all the net profit. * We made $200,000 on our first flip, we closed in April 2022. How much should we put aside for IRS taxes? Would you happen to know how much we should put aside for state taxes as well? if you were set up as a business before you made the $200,000, then you just made the 200,000 and that's it. Pay the tax.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Wills and Trusts
https://andersonadvisors.com/living-trusts/
Turo
https://turo.com/
Retirement Planning
https://andersonadvisors.com/retirement-plan/
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
Toby Mathis
https://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you get started in real estate? What is that process? What can you do to scale and grow your own portfolio or take it to the next level? Do you already have a few single-family properties, but want to get involved in multifamily investing?
Today, Clint Coons of Anderson Business Advisors talks to Abel Pacheco, President and Principal of 5 Talents Capital, who loves investing in and owning multifamily properties in Texas.
Abel is a real estate entrepreneur with a proven track record of repositioning properties and delivering quality renovated housing products to market and consistent returns to investment partners. He has experience in acquiring distressed properties, handling renovations, raising private capital, and managing single and multifamily investment properties.
Highlights/Topics: * 5 Talents Capital: Abel buys apartment buildings and allows people that don’t have much time available to invest in commercial multifamily real estate via syndications. * Cash Flow Positive: Don't overlook the amount of time that you have available for side hustles and to make more money. * Education and Knowledge: Learn about wholesaling, seller financing, hard money loans, and finding motivated sellers for free from conferences, YouTube, and Google. * Knowledge: After educating yourself on different ways to invest, it takes mental and tactical shifting to find properties. * Networking: Unlock your mindset. You don't have to do everything yourself. You don't have to know everything. You just have to partner with people that are experts. * Create Luck: It's where planning meets opportunity. Then, when that opportunity is there and you plan for it, you better be ready to take action and be willing to move forward. * In multifamily, net worth equates to the size of the loan amount, equity enough to buy the deal, general partners need their own money for a deal.You have to have experience. * Where to Find Deals: Off- and on-market. In commercial real estate, almost all the deals actually trade through brokers.
Resources: Abel Pacheco on LinkedIn
https://www.linkedin.com/in/abelpacheco/
Abel Pacheco on Facebook
https://www.facebook.com/bullpacheco/
Abel Pacheco on Instagram
https://www.instagram.com/abeljpacheco/?hl=en
5 Talents.Capital
http://www.5talents.capital/
5 Talents Podcast
https://podcasts.apple.com/us/podcast/5-talents-podcast-passive-investing-cashflow-wealth/id1531901889
Meetup.com
https://www.meetup.com/
Rich Dad, Poor Dad by Robert Kiyosaki
https://www.amazon.com/Rich-Dad-Poor-Teach-Middle/dp/1543626610
The ABCs of Real Estate Investing
https://www.amazon.com/ABCs-Real-Estate-Investing-Investors/dp/1937832031
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Many people talk about flipping and buying properties, but a niche area of real estate investing that most people are unaware of is called note buying.
Today, Clint Coons of Anderson Business Advisors talks to Bill Mencarow of Paper Source Online. The Paper Source, Inc., was founded in 1987 by Bill and his wife and business partner, Alison.
Bill and Alison have been note investors since the 1980s. Also, he is the editor and she is the publisher of The Paper Source Journal and they co-host the radio talk show, First Couple of Texas Radio.
Would you like to learn more about note investing and network with other note investors? Attend The Paper Source Note Convention on May 12-14, 2022. Register for the live event and use the discount code, NOTES2022, with your affiliate link for $50 off through May 1. Toby Mathis of Anderson Advisors will be speaking at this event.
Highlights/Topics: * What is a real estate note? A promise to pay—mortgage secured by real estate. * What’s your role if you own a real estate note? You’re the banker, not the landlord. * Why not be a landlord? You have to deal with tenants, toilets, and termites. * What are the reasons to buy/own real estate notes? Cash flow, higher yields, lower risk. * How the process of buying notes work? Sell note for lump sum to investor at a discount. * What are the different types of notes? First, second, or third position against note. * How do you know what you are buying? Perform due diligence—paper, property, payer. * How do you verify payments, borrower’s credit, and value of note to know what to offer? * What do you need to get started buying notes? Cash investment or broker note. * How to find real estate notes? Network to establish context with people with notes.
Resources The Paper Source Online
The Paper Source Facebook Group
How To Get Started Profiting From Notes (Free E-Course)
First Couple of Texas Radio
Fair Credit Reporting Act
Clint Coons
Anderson Advisors
Anderson Advisors on YouTube
Is income from your rental properties active or passive? What is the best way to report your income and expenses for rentals? How long do you have before having to pay taxes on the sale of your property rental? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions about income from rental properties. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is retirement income considered passive or active income? If it is a passive income, then can passive real estate depreciation be used against retirement income? Retirement income is not passive, active, earned, or portfolio income. It's ordinary income. Retirement income is not going to offset your passive losses, but it can cause social security to become taxable. * I've been told that filing Schedule E for rental properties, which I've been doing for the past several years, is not a good way to report your income and expenses for rentals. I want to file 1065, but I don't have a partner and don't intend to get one. I don't think Form 1120 or 1120S is a good way to file either. What do you recommend for next year? Stay away from corporations because of liability and other issues with appreciated property. If you take an appreciated asset out of a corporation, it's a taxable event. * I closed on a co-owned rental property in April 2021. I did not have an LLC with my co-owner, and we are still in the process of forming an LLC to protect the asset. Can we still take all the real estate deductions on our 2021 tax return, absent having an LLC in place last year? You don’t have to necessarily have a partnership agreement to form a partnership. Whether you had an LLC or not, you have effectively created a partnership, unless you've done this as tenants-in-common. * I just sold my condo that I owned for three years. One year I lived in it and two years I rented it out. How long do I have before I have to pay taxes on my sale? Technically, your taxes are due as they're accrued. You might have some quarterly taxes on it and your actual tax bill is going to be April 15 of the following year. If you sell it in 2022, you have to pay the tax on April 15, 2023.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
1031 Exchange
https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx
Entity Formation
https://andersonadvisors.com/entity-formation/
Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
National Alliance for Recovery Residences (NARR)
https://narronline.org/
Toby Mathis
https://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How can reinvesting help you avoid capital gains taxes? Jeff Webb and Eliot Thomas of Anderson Advisors answer that question and others about capital gains. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is it true that creating a revocable living trust will raise my capital gains taxes if I sell my primary residence vs. if I transfer the house into my name, I must live in it for two to five years to qualify for lower capital gains taxes? If you take advantage of Section 121,You have to live in it for two to five years no matter what. Putting it under the revocable living trust or in your own name, that can be done. * I have sold a real estate transaction in 2022. Can I avoid capital gains taxes if I purchase another real estate transaction in 2022? It depends. If you have already sold it and received the proceeds from the sale, Section 1031 (like-kind exchange) is no longer available or possible. * I am a retired person wanting to give a sum of money to my son. How can I advise him regarding deferring taxes on that inheritance money? You don't have to tell your son anything because he's not the one who has to pay taxes on it. The recipient doesn't have to pay tax. It's the grantor, donor, gift giver that may have to pay taxes on it.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Living Trusts
https://andersonadvisors.com/living-trusts/
Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
Entity Formation
https://andersonadvisors.com/entity-formation/
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Section 121 Exclusion
https://www.irs.gov/taxtopics/tc701
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
If you haven’t watched “Triple Digit Flip” on A&E yet, you need to because it’s tough to find real deals. What do you need to look at when analyzing properties and going through the numbers?
Today, Clint Coons of Anderson Business Advisors talks to Pace Morby, who shares his real estate investing secrets for 2022. If you haven’t listened to Pace’s first episode, go to Creative Financing Strategies with Pace Morby.
Pace is on a mission to bring others value and snuff out the fluff in the industry. He is known as the go to "subto guy" bringing creative strategies to the mainstream real estate investment industry.
Pace and his partner have amassed more than $32 million in buy-and-hold properties while operating wholesale, fix-and-flip, and other symbiotic businesses.
Also, Pace’s high energy and no BS approach attracts loyal followers across social media. He is able to tell stories and crush it when closing sellers.
Highlights/Topics: * Highest and Best Offer: How much are you willing to pay for a property? * Wholesale vs. Cash: Seller is willing to work with cash or terms in competitive market * Secure Creative Financing: Structure loan the right way to buy deals and not overpay * Why? Sellers accept terms rather than cash because of tax liability and capital gains * Morby Method: Use better negotiation tactics or find lender to get a non-recourse loan * Cash Flow: Do you listen and follow Robert Kiyosaki or Dave Ramsey’s advice? * Where to find off-market deals and comp listings? PropStream or BatchLeads * Triple Digit Flip: How to get selected and start in real estate for free with Pace
Resources: Pace Morby Mentorship: http://subto.com/
http://subto.com/
Pace Morby Ebook: Subto Seller Spells
https://go.subto.com/ebook-seller-spells
Pace Morby on Youtube: https://www.youtube.com/c/PaceMorby
https://www.youtube.com/c/PaceMorby
Pace Morby on Instagram: https://www.instagram.com/pacemorby/
https://www.instagram.com/pacemorby/
Facebook Group: Creative Financing with Pace Morby
https://www.facebook.com/groups/creativefinancewithpacemorby
Triple Digit Flip
https://www.aetv.com/shows/triple-digit-flip
My Investor Loan
https://www.myinvestorloan.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are there any strategies to mitigate capital gain tax on the sale of a vacation home? Can you no-tax your vacation home? Toby Mathis and Michael Bowman of Anderson Advisors answer your questions about how to mitigate capital gains taxes. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * For a partnership LLC, can capital gains (such as stock sale) from brokerage account owned by the business be combined/offset with real estate losses *such as depreciation) in the LLC? It depends on the type of real estate. If it's rental real estate, no, unless you’re a real estate professional or active participant in real estate, and you make less than $150,000. * When I sell a property for 1031 exchange, can I sell 100% ownership of the owning LLC instead of the actual real estate to avoid the transfer taxes, title fees - assuming the LLC is single owner and only owns the subject property, nothing else? You can’t do a 1031 exchange of an entity to try to avoid the transfer taxes and title fees, nor should you. Technically, the change of ownership of an entity, even 50%, is a deemed sale of the underlying asset. * If I buy an existing home inside an opportunity zone will I be able to save tax on the capital gain, if I keep the property for 10 years? You can buy a piece of property, but you have to double its depreciable basis. If you do that and hold it for at least 10 years, you could step up the basis on any given year to its fair market value and avoid tax on the growth of that asset. Yet, you have to recognize the deferred gain in the 2027 period. * Our vacation home is in another state and it's solely for personal use and never rented. We've owned it for 10 years. Are there strategies to mitigate capital gains tax on the sale of a vacation home? Do we have to make it our primary residence for two years before we can sell it and get the capital gains exemption? You have to live in your vacation home as your primary residence for two years prior to selling it. Or, make it into an investment property and do a 1031 exchange.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
Opportunity Zones
https://www.irs.gov/credits-deductions/businesses/opportunity-zones
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Michael Bowman
https://andersonadvisors.com/michael-bowman/#:~:text=Michael%20B.,Nevada%2C%20Arizona%2C%20and%20Washington.
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What are some mind-blowing ways to access capital that you may not be aware of—where the money is 100% tax-free and you don’t have to report it on your personal credit and FICO score?
In this episode, Toby Mathis of Anderson Advisors talks to Geal Talbert, Vice President of Wealth Management at UBS Financial, and Dan Ollman, Executive Manager - Anderson Funding Community, which helps people get money for new businesses as well as for flippers from non-traditional sources.
Geal and Dan are two experts in the realm of other people’s money (OPM) and how you get access to it.
Geal's specialization includes advanced planning strategies for tax minimization, estate transfer, and business exit planning to ensure clients maximize the net proceeds from the sale of their business.
DISCLAIMER: The rates mentioned on this podcast change regularly.
Highlights/Topics: * Rampant Inflation: At almost 8%, now is not the time to sell assets to pay bills. * Why sell when you don’t have to? Instead, you buy, borrow, and step up in basis. * Security-backed Lines of Credit: Different investments have different line maximums. * How long does it take and how much do you get? Depends on quality of equity of stock. * What could go wrong? You’ll have to come up with more cash or sell to cash. * No Cost: What does it cost to get a line of credit? Do you pay for points upfront? * What does somebody need to have in their account to qualify for a fixed rate? $25,000 * Private Money: If assets continue to grow, then dividends are used to pay back loans. * Non-revenue-producing Business: Brand new companies/startups can get lines of credit. * Line of Credit: Get credit when you don’t need it. You never know when you’ll need it.
Resources: Geal Talbert
https://advisors.ubs.com/geal.talbert/
The Succession Group
https://advisors.ubs.com/successiongroup/
Dan Ollman Phone: (800) 706-4741 x 270
Dan Ollman Email: funding@andersonadvisors.com
1-on-1 Consultation: https://calendly.com/anderson-funding-community/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Should you consider switching from a Limited Liability Company (LLC) to S corporation? Not if you and your business partner have an LLC for your real estate investments that is an LLC taxed as a partnership. There’s no reason to convert it to an S-Corp.
In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors provide answers to your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * If I buy an existing home inside an opportunity zone, will I be able to save tax on the capital gain if I keep the property for 10 years? Qualified opportunities had three benefits. The deferral, step-up, and payout. You still get the deferral. It's a shorter deferral now, but you still get it. The step-up in basis is now gone. You've got a 10% step-up in basis of your property that you put into the opportunity zone. The payout is if you hold the property you put in there for 10 years, that's tax free and still exists. The one thing that's missing is that 10% step up-in basis. * We sold a single family residence in December 2021 and in the process of a 1031 exchange. Can our expenses, such as repairs, painting interior, and replacing carpet, be deducted as expenses, or used to increase the cost basis of the property? Although the word, repairs, was used, carpet and paint is always deductible as a repair. You never capitalize that. Anything that's truly repairs, write it off as a rental expense. If it goes to basis, you're not getting any benefit out of it. * My business partner and I have an LLC for our real estate investments. Our LLC is taxed as a partnership. Would it be better to convert our LLC to a S corporation? If so, why? No, there’s no reason to convert it to an S-Corp. * I incorrectly allocated too much building versus land. I understand that my depreciation expense will decrease. How do I correct my tax returns for a basis error on my vacation rental property? This is a change in accounting estimate, which means if it's wrong on last year's return, you go in and correct the numbers on this year's return. If you mess up something on a return, but thought you were correct when you did it, you are not under any legal obligation to go back and restate it.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Opportunity Zones
https://www.irs.gov/credits-deductions/businesses/opportunity-zones
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
Form 3115
https://www.irs.gov/forms-pubs/about-form-3115
Section 121
https://www.irs.gov/pub/irs-drop/rr-14-02.pdf
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors provide answers to your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I bought a property in Georgia in 2021, doing renovations and repairs, planning to rent it out in March 2022. I didn't collect rents in 2021, so, I can't claim this property on my 2021 tax return, correct? Can I deduct the expenses ahead for renovations in 2021 in my next year's tax return, 2022? Correct, you cannot claim those deductions in 2021. They don't disappear, but what happens is the majority of those renovation and repair expenses go into the basis of your property. You will get to depreciate them if you do cost segregation. * Is YouTube income considered passive or active? It depends on whether you're passively or actively participating. What matters is a test for material participation. * I manage properties for a relative as an employee of a C-Corp. During a banking transaction, I personally received the rents through Zelle in 2021, the start of 2022. Those rents were then redeposited into the property owner's personal bank account. Will I have a problem with my 2021 tax return? Do I need to issue a 1099 to the property owner for 2022? Never accept payments in your personal name that belonged to somebody else. You're not going to have a problem, but if you did receive a 1099 for this money, then issue a 1099 back to whoever the money was paid to. * Can you elaborate on revocable versus irrevocable trust from a tax standpoint? A revocable trust is almost like a disregarded entity. It's good for protecting assets—your estate and so forth—from probate, but you can change it every day if you want. The revocable trust is taxed as though it doesn't exist.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule B
https://www.irs.gov/forms-pubs/about-schedule-b-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Oh, you did what? I can't believe you did that! Call me next time. Accountants and attorneys could have saved you money. You, too, can annoy and laugh at others at family and social gatherings and parties.
In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors discuss how to write off rental property expenses, as well as answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Can losses from real estate syndications be taken against active income if you or your spouse are real estate professionals, or is there more criteria? Real estate syndications are treated pretty much the same way that any other type of real estate property would be that's for rent. If you do a cost segregation, you have accelerated depreciation. You can deduct stuff as a real estate professional that you may not be able to deduct as just somebody investing in real estate. * Can I owner finance or lease purchase a property that currently has a mortgage on my personal name and the deed is titled on my LLC? Yes, you could do this as a Subject 2. They're not taking over the mortgage, they're buying it subject to the existing mortgage. * Trying to buy a short-term rental. If I sign for the loan personally and title the property in an LLC, would that be considered co-mingling personal assets with LLC to break the corporate veil? No, that doesn't really break the corporate veil, but you should keep the transactions as separate as possible. If you're just buying the property and then transferring it to the LLC, that's not a big deal. * Can I start filing taxes for LLCs I created for two of my rental homes, even though the real property deeds have not yet been transferred/filed/recorded to said LLCs? It depends on how the LLC is being taxed. If they're disregarded to you personally, report them on your 1040. If it's going through an entity, they're not titled to that entity, that's more problematic. You still have to file the taxes.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: The Build Back Better Framework
https://www.whitehouse.gov/build-back-better/
Tax Cuts and Jobs Act
https://www.irs.gov/tax-reform
MileIQ
https://mileiq.com/
Uniform Gifts to Minors Act (UGMA)
https://www.investopedia.com/terms/u/ugma.asp
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you get started in real estate investing outside of your local area? Are you struggling to get started in a different state? Trying to figure out how to find properties outside the area in which you live?
Today, Clint Coons of Anderson Business Advisors talks to Gary Beasley, Co-founder and CEO of Roofstock, a leading real estate investment marketplace. Gary explains how to start investing in real estate that is not in your local area, but in markets where you get higher cap rates and properties without having to put in hundreds of thousands of dollars.
Gary has spent most of his career building businesses in the real estate, hospitality, and technology sectors. Before starting Roofstock, Gary led one of the largest single-family rental platforms in the United States through its IPO as Co-CEO of Starwood Waypoint Residential Trust, now part of Invitation Homes.
Highlights/Topics: * Numbers Game: Sizable portfolio with multiple properties for multiple cash flow streams * Roofstock: Unlocks asset class for investors to break down geographic barriers * Result: Real estate investors buy homes with tenants to create efficient marketplace * Differences between Roofstock, Redfin, and Zillow when it comes to property research * Risk-Reward: What returns will be generated and what risks are you willing to take? * Where to get properties? Organically, customer acquisition, PR, educational content * Rent Ledger: Access data in the system and view tenant payment history * Best of Both Worlds: Opportunity to buy it now and all returns are based on that price * Roofstock Academy: Sign up and get proprietary access to experts who help you * Different Sellers, Motivations. Some want to sell quickly, and some are more patient
Resources Gary Beasley on LinkedIn
https://www.linkedin.com/in/gary-beasley-956647
Roofstock
https://www.roofstock.com/
Roofstock Academy
https://www.roofstockacademy.com/courses
The Remote Real Estate Investor
https://podcasts.apple.com/us/podcast/the-remote-real-estate-investor/id1502473360
Great Jones
https://www.greatjones.co/
Salesforce
https://www.salesforce.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are you going to inherit a house from your parents? Also, how will the new IRS rule on third-party payer apps, such as Venmo and Zelle, affect a landlord to collect rental payments? Beware of gift taxes from real estate, 1099-K and 709 forms, and other tax implications.
In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors discuss gift taxes from real estate and new IRS rules on CashApp as well as answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I am from Dallas, Texas. My parents have a primary home and rental house. They want to give me their rental house, but they owe $42,000 to the mortgage company. What’s the best way to inherit the house, how do I deal with the gift tax, what tax implications do I need to be aware of, and how can I avoid the taxes if possible? If you are gifted an encumbered property, it decreases the gift amount. Take over the loan, or if you are not able to pay off the loan and the parents continue to pay it, then that would be considered a gift. Otherwise, do nothing. * Can one circumvent the $16,000 maximum yearly gift tax exclusion by giving $16,000 to multiple persons who in turn also give $16,000 to the same single final recipient? No, you can't do this step transaction, a collapsible transaction. The IRS looks at what happened from the beginning to the end and will find that you actually made that gift yourself to that single recipient. * How will the new IRS rule on third-party payer apps, such as Venmo, Zelle, etc., affect a landlord to collect rental payments via a phone number or email linked to one bank account. The landlord will get a 1099-K for payments received, which is personal income, but taxable revenues are split amongst rental entities. What’s the best way to handle this? If all the properties are in your name, it will not make any difference. If you have one party collecting for yourself, partnership, or S Corp, then it can create an issue.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Form 1099-K
https://www.irs.gov/businesses/understanding-your-form-1099-k
Form 709
https://www.irs.gov/forms-pubs/about-form-709
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt Financing Income (UDFI)
https://www.irs.gov/charities-non-profits/unrelated-business-income-from-debt-financed-property-under-irc-section-514
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How are taxes calculated when renting only one room in your home for Airbnb? How are the expenses calculated, such as cleaning fees, lawn care, pest control, maintenance, snacks, and other amenities offered to guests?
In this episode of Tax Tuesday, Toby Mathis and Jeff Webb of Anderson Advisors discuss calculating Airbnb taxes and answer additional tax-related questions.
Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * What are your thoughts on using a nonprofit that is funded with cryptocurrency? The cryptocurrency will need to be converted to cash and appraised when donating it. * When purchasing a self-storage facility, should it be in it’s own LLC and can it be combined in an LLC that already has a property within its entity? It’s recommended to put it into two LLCs: Property in one and business in the other. Always separate them. * How are taxes calculated when renting only one room in your home for Airbnb? How are the expenses calculated for amenities offered to guests? Depends on if it is a rental or for a business. There are two kinds of expenses that need to be calculated - direct (only applies to specific rental space) and indirect (utilities, mortgage interest, homeowners association fees, etc.).
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: How Women Achieve Financial Freedom With Stocks & Real Estate (Feb. 5, 2022)
https://infinityinvesting.com/infinity-women-investing/
Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Form 709 - United States Gift
https://www.irs.gov/forms-pubs/about-form-709
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Should you use your personal name as a beneficiary of a Lady Bird Deed or should you set up a new entity to receive ownership?
In the first Tax Tuesday episode of 2022, Toby Mathis and Jeff Webb of Anderson Advisors discuss how to set up a beneficiary deed and answer additional tax-related questions.
Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Are the profits from my real estate syndication investment considered passive income? It’s highly likely that your syndication income is passive in nature for two reasons - you’re probably a limited partner and it’s real estate, which are both passive activities. * Should I use my personal name as a beneficiary of a Lady Bird Deed or should I set up a new entity to receive ownership? Medicare can take a real estate asset to pay for care, but a Lady Bird Deed is an enhanced life estate allowed in five states for a beneficiary to protect their home as an inheritance. * How does a C Corp pay me (the homeowner) for the use of part of my house as office space? Don’t report it on your 1040. It’s a tax-free reimbursement. However, if you rent your home to the corporation, then it is taxable income. * Can we still rollover a regular IRA to Roth? For now, you can still do a Roth conversion.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Lady Bird Deed
https://www.medicaidplanningassistance.org/lady-bird-deeds/
Business Structures
https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
Coronavirus Aid, Relief, and Economic Security (CARES) Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Retirement Plans
https://andersonadvisors.com/retirement-plan/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Weather the retirement storm by strengthening your business with an 831(b) plan. It’s legal and highly effective for tax deferral today to address tomorrow’s risks.
Today, Toby Mathis of Anderson Business Advisors talks to Ed Bryan, Director of Business Development at SRA. Ed has more than 20 years of sales and operations management experience and brings a consistent history of leading high-performing sales teams and operational excellence.
Ed is responsible for developing business strategies to improve representative and client relationships. He works closely with Field Marketing Representatives to identify opportunities and provide education to keep them abreast of industry news and latest product knowledge.
Discussed in the Episode * 831(b): What it is and how it compares to 401(k) and other retirement accounts * Options: Allow money to grow, declare a qualified dividend, or realize investment gains * COVID Claims: Making employee retention credit retroactive has hurt businesses * Where people go wrong - they don’t share risk and/or operating principles of insurance * Typical Clients: From builders to doctors - there’s no shortage of risk in any industry * What can be insured? Threats to business cash flow (brand, cyber security, other risks)
Links Ed Bryan’s Email
ed@831b.com
SRA 831(b) ADMIN
https://www.831b.com/
Captive Insurance: The BIG Business Tactic YOU Want To KNOW!
https://andersonadvisors.com/podcast/captive-insurance-the-big-business-tactic-you-want-to-know/
Internal Revenue Service (IRS)
https://www.irs.gov/
FAQs: Employee Retention Credit under the CARES Act
https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act#:~:text=The%20Employee%20Retention%20Credit%20under,financially%20impacted%20by%20COVID%2D19.
Opportunity Zones
https://www.irs.gov/credits-deductions/businesses/opportunity-zones
Entity Formation
https://andersonadvisors.com/entity-formation/
Toby Mathis
https://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Happy Holidays! In the last episode of the year, Toby Mathis of Anderson Advisors goes through a long list of tax questions from listeners to give quick answers, such as whether you can turn a 1031 exchange property into your primary residence. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * When you gift more than $15,000 a year to one family member, do you have to pay tax on it? Any individual can give $15,000 to another individual without having to submit a gift tax return, but a gift tax return is required if the amount exceeds $15,000 * How do I pay taxes on rental properties that I own in Canada while I am in the United States? The United States accepts Canadian LLCs, but still charges you tax on all income generated from any properties anywhere in the world * Can I turn a property that I acquired through a 1031 exchange into my primary residence? Yes, you can convert it under Section 121 * What is the difference between a family trust and living trust? Same type of document, but a family trust is irrevocable and for the descendents; a living trust can be revocable and changed
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: 1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Real Estate Professional Requirements
https://www.aicpa.org/resources/article/tax-rules-for-real-estate-professionals
Entity Formation
https://andersonadvisors.com/entity-formation/
Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Toby Mathis and Ian Hanuscin of Anderson Advisors talk about how to deduct taxes when purchasing a home and answer other tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- How can I eliminate paying capital gains? I recently sold my rental property because I needed the cash to pay off a divorce settlement. What are my options? Since you already sold the rental property, doing a 1031 exchange is no longer an option, but a qualified opportunity zone is an option to defer the tax
- Which is better? A 1031 exchange with limited time and capital availability or paying capital gains with unlimited time available and no restrictions on capital? Depends on your income bracket, so before doing a 1031, talk to your tax person
- After receiving a sizable amount of money, how soon after do taxes need to be paid? Usually, it’s 90% of the current year’s income or either 100 or 110% of last year’s income for tax liability
- If I register a vehicle under my company name, is this tax deductible? If it’s 100% business use, yes; if not, determine the percentage of use and deduct that amount
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Real Estate Professional Requirements
https://www.aicpa.org/resources/article/tax-rules-for-real-estate-professionals
Qualified Opportunity Zones
https://www.irs.gov/credits-deductions/businesses/opportunity-zones
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Happy Thanksgiving! What are you thankful for? Toby Mathis and Jeff Webb of Anderson Advisors talk about how to use LLCs for your wholesale real estate, retirement plans, and other tax questions. They relate seasoning and cooking the turkey as well as words of wisdom from Bobby Boucher in Waterboy to tax topics. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Roth Account: I’m not 59 ½ yet. I know I can withdraw my contribution/conversion amounts without paying taxes, but will I be penalized? If you withdraw your contributions from a Roth IRA, there’s no taxes or penalties, but if you take out earnings from a Roth IRA held for less than 5 years and you’re under 59 ½, you’re subject to taxes, penalties
- Wholesaling: Should that be an LLC by itself? One LLC per deal or just use the same one? Depends on whether your state has a series LLC because it’s easy to create a series but it’s difficult to open bank accounts for them
- I’m thinking about delivering packages for a delivery service to supplement my income. My current car is paid off. Should I buy or lease a vehicle for business use? Should my earnings fall under the protection of an LLC and Employer Identification Number (EIN)? Do not lease a vehicle for something like this because you will quickly exceed the mileage limitations, but do set up an active entity (S/C Corp, LLC) for liability protection
- If I purchased a course or educational support not in my LLC’s name, can I still deduct it for my business? Yes, if it is directly related to your business, but get reimbursed
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing
https://infinityinvesting.com/
Retirement Plans
https://andersonadvisors.com/retirement-plan/
Entity Formation
https://andersonadvisors.com/entity-formation/
Capital Gains and Losses
https://www.irs.gov/taxtopics/tc409
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Do you know how to invest in real estate, evaluate property, and spot potential? Learn how to wholesale, invest, and change your life for the better. Once you can understand value, you can create enormous amounts of wealth.
Today, Clint Coons of Anderson Business Advisors talks to Jamil Damji, an internationally known real estate investing/wholesaling expert, about identifying real estate potential.
Jamil is known as the “Wholesale Genie” and hosts Triple Digit Flip on A&E. Also, Jamil is a co-founder of KeyGlee, the #1 wholesale company in the world with more than 180 current franchises. He teaches students around the world with his mentorship program, AstroFlipping, where students constantly crush their goals and find financial freedom.
Highlights/Topics: * Triple Digit Flip: Dives into and pulls back the curtain on real estate businesses * KeyGlee: Nationwide wholesale operation that’s franchised across the country * How to Find Properties: Door knocking, driving around, and developing relationships * Decision-Making Process: Break down reasons to wholesale or fix and flip properties * Property Assets: Can people see where the value is? Can they be taught to do that?. * Asset Classes: Working-class neighborhoods to luxury flips (value-add opportunities) * Nationwide Buyers List: Nearly half a million people and growing every single day * Inflation: Cost of living in a world (and specific locations) that is out of control * Private Equity Companies: Unprecedented new form of demand in real estate market * Cyclical Market: Interest rates, demand, and global socio-political things drive pressure * Natural Human Behavior: People either jump into the market or relax out of the market * Trends: Profit from buying properties for yourself and others that make huge profits * Housing Piece: Need cash in an investment vehicle that's protected against inflation * Patterns: Look for activity to determine whether to buy or sell property from somebody * Skip Tracing: Available resources to find contact information for a homeowner or LLC * How to Comp Properties: Don't take somebody’s word on how much something is worth * Common Criteria: When appraising houses - don’t leave subdivision without viable comp
Resources Jamil Damji on YouTube
https://www.youtube.com/channel/UCDqJP0mZNOSR9JiIRE02NxQ
Jamil Damji on Instagram
https://www.instagram.com/jdamji/?hl=en
Triple Digit Flip
https://www.aetv.com/shows/triple-digit-flip
KeyGlee
https://www.keygleehomes.com/
AstroFlipping
https://www.astroflipping.com/
How Buy Real Estate with Seller Finance with Pace Morby & Clint Coons
https://www.youtube.com/watch?v=oIVrrK1CL2s
Breaking Down Wholesale Real Estate with Max Maxwell
https://andersonadvisors.com/podcast/wholesale-real-estate-with-max-maxwell/
iBuyer
https://ibuyer.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
What business expenses can be deducted? Are memberships, technology, coaching, training, and supplies included? Jeff Webb and Eliot Thomas of Anderson Advisors talk about how to claim business expenses on year-end taxes and other topics. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Can the owner of a C Corp and the founder of a nonprofit have a 401k plan for the C Corp and a 403b plan for the nonprofit without there being a control group? Depends on who is controlling the nonprofit (i.e., directors vs. shareholders) * Are capital gains from stock sales/options trading included in calculating minimum income for IRA/Roth IRA limit? Capital gains from stock sales/options are all considered portfolio or non-earned income * When trading crypto, if you trade an altcoin for bitcoin, is that a taxable event? Yes, it’s similar to securities but more of a direct conversion; whenever you buy something or trade with bitcoin, that is a taxable event * I have rental property that I would like to sell. Can I find a replacement property first and still do a 1031 transaction? Yes, you can do a reverse 1031, but you need to loan money to a qualified intermediary (QI) to buy the replacement property on your behalf
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing by Toby Mathis
https://www.amazon.com/Infinity-Investing-Rich-Richer-Same/dp/1950863271
Retirement Plans
https://andersonadvisors.com/retirement-plan/
Entity Formation
https://andersonadvisors.com/entity-formation/
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
1031 Exchange
https://andersonadvisors.com/1031-exchange/?highlight=1031%20exchange
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Cost segregation is one of the best tax strategies for anybody in real estate investing, such as short-term rentals, to create losses that offset active and passive income. Find out how to keep your taxes as low as possible.
Today, Clint Coons of Anderson Business Advisors talks to Erik Oliver, Managing Director of Cost Segregation Authority. Erik shares cost segregation techniques that you should apply on your properties to reduce your income taxes.
Also, Erik speaks at local, regional, and national events. He brings with him a passion for identifying cost savings and educating commercial real estate owners on the benefits of cost segregation. Prior to joining the Cost Segregation Authority, Erik was an operations manager for a multi-million-dollar landscaping and design firm in Long Island, NY.
Highlights/Topics: * What is cost segregation? Accelerated depreciation of property assets * How does cost segregation work? Get cost seg study done to get deductions sooner * Past vs. Present: Cost seg was only for commercial properties, now includes residential * Bonus Depreciation: Benefits are bigger, fees are less for cost seg study of properties * Missed Depreciation: Fix asset depreciation w/ cost seg study, w/out amending returns * Why not do a cost segregation study? Passive loss issue or huge carry forward * What about inflation? No other reason to wait, get deductions sooner than later * Partial Asset Disposition: If assets are disposed of early, write-off book value as expense
Resources Request a FREE Cost Segregation Benefit Analysis
Cost Segregation Authority
Cost Segregation Services
Cost Segregation Study
Erik Oliver’s Email
Erik Oliver’s Phone: 602-568-0032
Tax Cuts and Jobs Act (TCJA)
Capital Gains and Losses
Clint Coons
Anderson Advisors
If you do wrong by your investment clients, who are they going to blame? The name on the door.
Today, Toby Mathis of Anderson Business Advisors talks to Andrew Spaventa of The Spaventa Group about how to invest in the next innovative company via a venture round investment.
Andrew is a high-energy, outgoing, positive person who loves what he does and that’s why he started his own investment firm to create wealth for his clients and workforce.
Highlights/Topics: * The Spaventa Group: Embodies/represents work culture, leadership, growth, guidance. * Pre-IPO: Large, private company that exists 5-10 years and within 2-5 years of liquidity. * Technology: Advancing at a rapid pace and changing the way companies operate. * Risk Capital: Does not mean investing all in, but the likelihood of losing it all is slim to none. * No Regrets: Don’t miss opportunities, make decisions quickly because shares sell fast. * Expectations: Due diligence, limited access, client influx, more rounds or other situation. * One-Stop Shop: Spaventa Group striving to be a full-service, alternative investment firm.
Resources: The Spaventa Group
https://www.thespaventagroup.com/
The Spaventa Group on Twitter
https://twitter.com/tsginvest
The Spaventa Group on Facebook
https://www.facebook.com/tsginvest/
The Spaventa Group on LinkedIn
https://www.linkedin.com/company/the-spaventa-group/
Andrew Spaventa’s Email: dspaventa@thespaventagroup.com
Andrew Spaventa’s Phone: 631-614-2615
SpaceX
https://www.spacex.com/
WeWork
https://www.wework.com/
Investment Opportunities in the Companies of Tomorrow
https://andersonadvisors.com/podcast/investment-opportunities-in-the-companies-of-tomorrow/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are you interested in wholesaling? You need to learn how to invest, but you don’t have to have money to make money. You can build wealth through real estate without a ton of cash to do it.
Today, Clint Coons of Anderson Business Advisors talks to Max Maxwell about wholesale real estate. In the business of wholesaling, Max and his team solves problems for people that typically don't fit in the box that society has created.
Max loves wholesaling. No matter what part of real estate people get into—from doing single family homes, all the way to building high rises—learn how to identify a deal. A good deal never searches for money. Money always searches for a good deal.
Highlights/Topics: * Good vs. Bad Failures: What made Max ready to absorb what real estate gives him. * What is wholesaling? Foundation of real estate investing. Know the area to get results. * Hot vs. Cold Market Trends: One rule - never identify or buy anything that is for sale. * Mindset Change: Don’t ignore, but start to see more opportunities than ever seen before. * Out of Box: Do something different; hang out with people who are where you want to be. * Competition and Conversations: Be real and genuine. Human instinct is to help people. * Simple Process: Identify house, identify owner, call them, agree on price, write contract.
Resources Max Maxwell’s Website
https://www.therealmaxwell.com/
Max Maxwell’s YouTube Channel
https://www.youtube.com/channel/UCnkmQCJ4f6rRl1PXCblppvA
Max and Nas - One Deal Away Webinar
https://www.maxandnas.com/
Driving for Dollars
https://www.millionacres.com/real-estate-investing/house-flipping/driving-for-dollars-explained-what-it-is-and-how-it-works/
Facebook Marketplace
https://www.facebook.com/marketplace
Chip and Joanna Gaines
https://magnolia.com/about/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Anderson Advisors
https://andersonadvisors.com/
Real estate syndications involve taking down larger deals, using other people's money, and bringing in partners for deals. Be careful because the last thing you want to do is break the law, or you’ll be wearing an orange jumpsuit. There are no second chances when it comes to joint ventures with other people if it borders on syndication.
Today, Clint Coons of Anderson Business Advisors talks to Kim Lisa Taylor from Syndication Attorneys, PLLC, about creating syndications.
Kim is the author of How to Legally Raise Private Money, hosts the “Raise Private Money Legally” podcast, and teaches at real estate trading events. She started Syndication Attorneys, PLLC, to help entrepreneurs create sustainable, successful real estate investment companies.
Highlights/Topics: * Joint Venture vs. Syndication: What's the difference? Whether or not you're selling securities. In a joint venture, all members play an active role in generating their own profits. In a syndicate, passive investors rely on the promoter to generate profits.When passive investors rely on you to generate profits, you're selling an investment contract. * What is an investment contract? Investment contracts are securities. The Securities Act of 1933 created a definition of what constitutes securities. * What is the friends and family exemption? It's called Regulation D Rule 506(b). It's the federal exemption, but each state has its own securities agency. Most people follow the federal rule because it preempts all these individual state laws. * How are investors sophisticated? If they are interested in being in the deal that you are proposing, whether or not this is a good fit for them, you have to document that conversation before you even tell them about a deal. * When should you get a syndication, operating agreement going? Kim recommends three things: A deal under contract, review of the financials, and physically visit the site. By the time you've done those three things, you're 90–95% likely to close. * How long does it take to generate legal documents? About 140–180 pages of legal documents are generated and you have to review them until 100% correct. Then, you're ready to start raising money. The whole process takes two to three weeks. * What's the appropriate structure and what's going to pass with the lender? Draft the securities compliance documents (a private placement memorandum that describes all the risks of the investment), and a subscription agreement, where investors certify to you that they read the private placement memorandum, understand the risks, can afford to take the risks, and how much they're going to invest. * With a non-recourse loan, how could they still be a guarantor? There are things called carve-outs for anything illegal that happens at the property that causes the loss. * What are some common mistakes that people make? Drafted documents are inconsistent and incorrect. Sometimes, starting over costs less and is necessary.
Resources Syndication Attorneys, PLLC
https://syndicationattorneys.com/
Free Ebook: How to Legally Raise Private Money.
https://syndicationattorneys.com/how-to-legally-raise-private-money/
Raise Private Money Legally Podcast
https://podcasts.apple.com/us/podcast/raise-private-money-legally-for-real-estate/id1553530036
Securities Act of 1933
https://www.investopedia.com/terms/s/securitiesact1933.asp
U.S. Securities and Exchange Commission (SEC)
https://www.sec.gov/
Regulation D Rule 506(b)
https://www.sec.gov/smallbusiness/exemptofferings/rule506b
Form D
https://www.sec.gov/about/forms/formd.pdf
Banking Secrecy Act
https://www.irs.gov/businesses/small-businesses-self-employed/bank-secrecy-act
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
While Congress is busy planning changes before the end of the year, such as taxing unrealized gains for the wealthy, Toby Mathis and Jeff Webb of Anderson Advisors talk about how to protect your Turo car rental business and other tax topics. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- If I invest in a Turo car sharing business, should I put the vehicle inside the business (cleanest) or own individually and let the business use it every weekend? If the business owns it, am I restricted from using the vehicle for personal use, or might it be covered by the 14-day rule? Keep track of the mileage because a Turo business is the rental of personal property where you lease out a vehicle you own to other people unrelated to you - it’s like Airbnb for cars
- During the pandemic, I have been using our boat as well as our house as an office. Would I be able to claim the time on the boat as a legitimate business expense? You are only allowed to have one admin office, and the boat does not meet the exclusive use test
- What is the difference between “Admin Office” and “Home Office” deduction? Home Office is reported on Schedule C, but the Admin Office follows different rules - for your business but not owned by your business
- I want to employ my daughter to help with my business, where do I start? I have an LLC, but do I need it to be an S Corp? No, any entity including a sole proprietorship can have a payroll
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Turo
1031 Exchange
Capital Gains Exclusion
Entity Formation
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
If you are a real estate investor, Toby Mathis and Carl Zoellner of Anderson Advisors talk about how to fill out your tax returns. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Can you speak about conservation easements as a way to decrease taxes in the correct and legal way? Conservation easement is donated property for a specific purpose * Can an LLC buy back member units from individual members? Technically, your LLC as a whole could buy back member units, but usually when looking at member units in an LLC, ownership’s dictated as a percentage * Is doing this when members are IRA accounts, a prohibited transaction? It depends * What line numbers on tax returns are the most important when trying to qualify for funding as a self-employed sole member LLC as a real estate investor? Refer to schedules A, C, E, and K-1 on Form 1040 * If I want to establish an Airbnb from my timeshare, how do I structure my entities? What is the best way to operate that to save tax? Depends on timeshare rules and then refer to IRS’s Publication 925
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: State and Local Tax (SALT)
https://taxfoundation.org/tax-basics/salt-deduction/
Wills and Trusts
https://andersonadvisors.com/asset_protection_trusts/
Gene Guarino - Residential Assisted Living Academy
https://residentialassistedlivingacademy.com/meet-gene/
Coffee with Carl
https://andersonadvisors.com/category/shows/coffee-with-carl/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you use a 1031 Exchange to sell real estate? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Is the Section 1031 option applicable on personal-use property in case the same property is sold less than two years of use by the owner? This option is not applicable to personal-use property (primary residence or second home) unless it is converted into some type of investment or rental property * Who would you get a 1031 Exchange from when getting ready to sell property? If you are planning to do a 1031 Exchange, you need to start talking to a qualified intermediary before starting the sale * I have a second home in my personal name in a different state. It has appreciated. If I sell the property, how would it be taxed? The entire gain would be capital gain - there’s no 121 exclusion, no 1031 (unless made a rental property first); gain will be taxed at the federal level and the state it is in and in which you reside
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Entity Formation
https://andersonadvisors.com/entity_formation/
Self-employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
Section 121 - Capital Gains Exclusion
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you set up an LLC for your home or administrative office? It’s important to know the differences between the two, which to choose, and why. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * How do you set up a home office under a corporation or LLC? Depends on the type of entity, but if it’s a corporation or S Corp, set it up as an administrative office for that entity where you are being reimbursed for the expenses of using that office * Is it advisable to have the house you live in under an LLC? Preferably, do not put your house under an LLC because of homestead and capital gains exclusion issues that arise * When do I switch from wholesaling under my name to wholesaling as a corporation? Sooner than later; do not wholesale under your personal name in case you get sued * How do I get credit approvals under the business entity? It takes cash, collateral, or credibility to get business credits, so you will need personal guarantees
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Entity Formation
https://andersonadvisors.com/entity_formation/
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions, including which business structure is best for real estate agents. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- What is the 1031 exchange? How is it used and is there any concern that it may go away? Section 1031 allows you to sell an investment property through a qualified intermediary (QI) and then replace that property; there’s no logical reason for the 1031 exchange to go away because it is a tax deferral not a tax avoidance technique
- As a new wholesaler, what is the best way to set up my business structure? Through a corporation because a wholesaler is somebody that gets a property under contract and then sells the contract with a right to close on that property
- How does the tax work on rent-to-own? The non-refundable deposit, monthly cash flow, and the backend? IRS views non-refundable deposit as a lease-purchase option or sale
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop (Free virtual event on September 11)
https://aba.link/IIW
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Entity Formation
https://andersonadvisors.com/entity_formation/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Are you a landlord who has their fair share of horror stories? Do you need help evicting tenants, or finding and placing the best tenants? Who should you be renting to so that you don’t bring tenants in and then have to kick them out later? Applicants can be nice or be nightmares.
Today, Clint Coons of Anderson Business Advisors talks to David Pickron, President of Rent Perfect, an investigative screening company that helps clients onboard tenants from the initial background check to leasing and payment collection.
David is a licensed private investigator and landlord who manages several short- and long-term rentals. Also, he hosts the Rent Perfect Podcast, which offers the latest industry news and provides expert tips on how to manage properties.
Highlights/Topics: * How much is a good tenant worth? The key to managing your own cash flow.is to have stable tenants. * What’s going on with moratoriums to collect rent? The government wanted to pass another one, but it did not go through. Landlords are partners with the government right now because they can’t evict someone or take their property. * How do landlords protect themselves? They want long-term renters and holds to set it, forget it, and let them go. * What can landlords do to find the right renters? There are still a lot of regulations stacked against landlords, and there are a lot of courts that are withholding data. * Why did credit bureaus pull off all evictions, judgments, and liens? They were getting sued for putting the wrong data on the wrong people's files * Have you heard of that new Experian Boost? They're realizing that they're not giving us all the information we need on those credit bureaus. They're allowing consumers to start reporting their own credit to their own credit bureau. * If you are screening a tenant, can you find out if they were evicted because they weren't paying rent during the pandemic? There's an eviction moratorium, but some people could be or were evicted because of set parameters. * Why ask tenants for 12 months of bank statements? It shows if they paid their rent or prioritized spending money on other things, such as a new boat. * What are detailed criteria? Exactly who qualifies for your property so everybody's treated the same. Don't allow anybody with a felony record within the last 5 years or misdemeanor within the last 3 years; or collections against landlords for the last 2 years. * What is fair housing? If they have a criminal history, do an individual assessment - How long ago did the crime occur? How old was the person when they did it? Have they been in any rehabilitation that they can prove? Does this affect your property? * What does Rent Perfect offer? No more waiting for checks in the mail, no more dropping off checks. It's a complete platform and helps you find that right renter. * How much does Rent Perfect cost? There’s a one-time $4.95 signup fee. Applicants pay for everything else, such as $39 for the background and credit checks.
Resources: Rent Perfect Landlord Registration
Rent Perfect
Rent Perfect Podcast
Sample Criteria: Email info@rentperfect.com.
Rent Perfect: 877-922-2547
National Real Estate Investors Association (REIA)
Arizona Multihousing Association (AMA)
Experian Boost
Paycheck Protection Program (PPP)
Clint Coons
Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions related to retirement plans, partnerships, real estate, wills, and trusts. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Are there any restrictions on being a real estate professional (REP) during retirement? No, if you are retired, not working anywhere else, and spending a substantial amount of time working on rentals; depending on amount of losses, you may not have to be a REP * Why would someone invest in a Publicly Traded Partnership (PTP)? How are they taxed? Is PTP a good option to invest in for diversity? Be careful, some PTPs are complex, but as far as traxation, there’s nothing special about PTPs - look at them from an investment, not a tax perspective * I have converted my primary home to a short-term rental (STR) this year.If I complete 100+ hours of material participation and more than anyone else, can I deduct the losses from my W-2 wages (active income)? Yes, but if it’s rental income and you accelerate depreciation, you could lose your REP status * I plan to donate my timeshare. Does that relieve me of my maintenance fee yearly? There are two types of timeshares - right to use and for deed; the nonprofit may use them personally, within the entity, or sell it to a third-party - know who is taking over the liability/responsibility of the asset
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Free Tax and Asset Protection Workshop - Aug. 28
https://aba.link/AP
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Entity Formation
https://andersonadvisors.com/entity_formation/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Airbnb
https://www.airbnb.com/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Secure Act
https://www.congress.gov/bill/116th-congress/house-bill/1994/text
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Coronavirus Aid, Relief, and Economic Security (CARES) Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Schedule K-1
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Old Age, Survivors, and Disability Insurance (OASDI)
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Cost Segregation Authority
https://costsegauthority.com/
Form 3115
https://www.irs.gov/forms-pubs/about-form-3115
Form 8949
https://www.irs.gov/forms-pubs/about-form-8949
IRC 469(c)7
https://www.law.cornell.edu/uscode/text/26/469
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule D
https://www.irs.gov/forms-pubs/about-schedule-d-form-1040
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
If you don't qualify for a home loan because you don’t make enough to pay the mortgage, there are ways to creatively do it. Creative landlording is essential to gain maximum personal satisfaction and financial profit.
Today, Clint Coons of Anderson Business Advisors talks to Danielle Villegas, an artist and landlord who shares some of her real estate investing strategies, including how she takes investments and maximizes their value.
Danielle spent years struggling as a film and theater artist. She set her sights on home ownership and managed to become a landlord. Over time, Danielle developed a unique housing model for an underserved growing population.
Highlights/Topics: * First Home: Make sure it includes rental rooms to earn extra income * House Hacking: Don’t pay your own rent or mortgage if you don’t have to * Financial Adviser: Danielle learned how the rich get richer and other tricks/tools * Creative Financing: Refi made all the difference and cut mortgage in half to be profitable * When selecting renters/tenants: + Priority #1: Make sure they have at least one job to pay the rent + Priority #2: Offer furnished rooms/rentals because it’s easier to move them out * Weekly, monthly, or longer? Danielle rents out space weekly to make more money * Private vs. Shared Space: People need own space, common space is wasted money * Where Danielle tends to find tenants - she advertises mostly on Craigslist * Potential Tenants: Let them tell you what you want/need to know to minimize risk * Used or Not: Make money with rooms not used, won’t be used, used for something else * It’s not just about the money: Make a difference - it's very rewarding
Resources: Danielle Villegas’ Email
mailto:artoflandlord@gmail.com
Art of Landlording
https://artoflandlording.com/
Craigslist
https://www.craigslist.org/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Can you sell your rental property as a 1031 exchange? It depends. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Can I offer my condo as a rent-to-own rental for six months and sell it as a 1031 exchange? If you’re offering the condo as rent-to-own, you’re contemplating the sale of that property, so it becomes a sale property, not a rental property, and taxed differently * Should I invest into limited partnership (LP) multifamily syndications with the same LLC as I have active personal rentals? Ideally, everything should be in its own LLC or you may be at risk for outside liability * I am a co-founder of a startup (C Corp). Can I establish a self-directed Roth IRA and put my company share in it? Yes, you can, but it depends on how you go about doing it - Rollover as Business Start-ups (ROBS)
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
IRS - Section 168
https://www.irs.gov/pub/irs-drop/rr-14-17.pdf
IRS - Section 179
https://www.irs.gov/newsroom/irs-issues-guidance-on-section-179-expenses-and-section-168g-depreciation-under-tax-cuts-and-jobs-act
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Entity Formation
https://andersonadvisors.com/entity_formation/
Cost Segregation Authority
https://costsegauthority.com/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Airbnb
https://www.airbnb.com/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Tax Reform Act of 1986
https://www.investopedia.com/terms/t/taxreformact1986.asp
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Old Age, Survivors, and Disability Insurance (OASDI)
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Fannie Mae
https://www.fanniemae.com/
Freddie Mac
http://www.freddiemac.com/
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Schedule K-1
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
Rollover as Business Start-ups (ROBS)
https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project
IRC 469(c)7
https://www.law.cornell.edu/uscode/text/26/469
Secure Act
https://www.congress.gov/bill/116th-congress/house-bill/1994/text
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
The IRS is 35-million tax returns behind by their own admission, and they managed to answer 3% of the calls that were placed last year. If you need an answer to your tax question, don’t call the IRS. Toby Mathis and Jeff Webb of Anderson Advisors are here to help and answer your tax questions sooner than later. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * What is the process for a non-profit to invest in syndication? Depends on whether you are required to be an accredited investor or not * What are the pros and cons of moving a company to Puerto Rico for tax planning purposes? You have to be a bonafide resident in Puerto Rico to get any benefit at all * Are life insurance proceeds taxable if a revocable living trust is the beneficiary? No, life insurance proceeds, in general, if you did not deduct the premiums, are not taxable * Is tuition for professional learning deductible? CPE, CME, and CLE credits/courses are deductible when something new for your career, but not when starting a new career * Can I buy an Airbnb with money inside and outside of an IRA? Yes, but form a partnership between yourself and your IRA, so it does not become a prohibited transaction or if you are a disqualified party
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Infinity Investing
https://infinityinvesting.com/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Entity Formation
https://andersonadvisors.com/entity_formation/
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
IRC 469(c)7
https://www.law.cornell.edu/uscode/text/26/469
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Airbnb
https://www.airbnb.com/
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Cost Segregation Authority
https://costsegauthority.com/
Franchise Tax
https://www.investopedia.com/terms/f/franchise_tax.asp
Form 568
https://www.ftb.ca.gov/forms/2020/2020-568.pdf
Continuing Professional Education (CPE)
https://www.aicpa.org/cpe-learning/cperequirements.html
Continuing Medical Education (CME)
https://www.accme.org/
Continuing Legal Education (CLE)
https://www.americanbar.org/events-cle/mcle/
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Qualified Opportunity Fund/Zone
https://www.irs.gov/credits-deductions/businesses/invest-in-a-qualified-opportunity-fund
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How was your 4th of July? Did you enjoy your time off and travel to visit family and friends? Now, back to reality and talk about taxes. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Business Vehicle: Buy or lease? What are the pros and cons of each? Do trucks and SUVs have an added deduction? Better to buy than lease larger vehicles, but it’s better to lease versus buy vehicles, such as sedans and coupes, under 6,000 lbs because depreciation is limited
- Can I pocket money when I file taxes when there is no profit with the business? Yes, if it’s your business; the only time you can’t take money is in excess of your business and you are not at risk for the business
- Are solo 401ks impacted by the new IRS rules for IRA accounts? Play by the rules and don’t begrudge those who win by playing the rules
- How many properties should one have before considering doing a cost segregation? One property is all you need to do a cost segregation
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson Advisors Tax and Asset Protection Workshop (July 17)
http://aba.link/TAP17
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Entity Formation
https://andersonadvisors.com/entity_formation/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Merrill Lynch
https://www.ml.com/
Edward Jones
https://www.edwardjones.com/us-en
Airbnb
https://www.airbnb.com/
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Cost Segregation Authority
https://costsegauthority.com/
Franchise Tax
https://www.investopedia.com/terms/f/franchise_tax.asp
MileIQ
https://www.mileiq.com/
Qualified Opportunity Fund/Zone
https://www.irs.gov/credits-deductions/businesses/invest-in-a-qualified-opportunity-fund
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
SECURE Act
https://www.congress.gov/bill/116th-congress/house-bill/1994/text
IRC Section 280a
https://andersonadvisors.com/section-280a-deduction-explained/
CARES Act
https://home.treasury.gov/policy-issues/coronavirus
PayPal
https://www.paypal.com/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
WeWork
https://www.wework.com/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Do you want to be the next Elon Musk of Tesla Motors? Do you have stocks that you want to buy, sell, or borrow against? Find out first if they have tax benefits or consequences by asking Toby Mathis and Jeff Webb of Anderson Advisors your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Can we defer capital gains tax or spread it across multiple years? Use the 1031 exchange with real estate only to defer the capital gains; or the qualified opportunity fund/zone for any other capital gains installments over multiple years
- Can I do a 1031 exchange from a single house rental into a percentage group rental? Or to a partial interest in multiple rentals? Only if you are a tenant in common (TIC), but not in a partnership
- How does an LLC that’s a disregarded entity differ from a living trust in terms of estate planning? What if you have both? How do I use both in estate planning? An LLC is for liability protection, so the recommendation is to have both - LLC owned by the living trust
- Are the gains in a traditional self-directed IRA taxed the same as the rest of the money in the SDIRA when doing a conversion to a Roth SDIRA? There is no such thing as capital gains in IRAs
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson Advisors Tax and Asset Protection Workshop (July 17)
http://aba.link/TAP17
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Entity Formation
https://andersonadvisors.com/entity_formation/
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Old-Age Survivors and Disability Insurance (OASDI) Tax
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Schedule K-1 (Form 1065)
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule D
https://www.irs.gov/forms-pubs/about-schedule-d-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Airbnb
https://www.airbnb.com/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Section 1244 Stock
https://www.investopedia.com/terms/s/section-1244-stock.asp
Cryptocurrency
https://www.investopedia.com/terms/c/cryptocurrency.asp
Cost Segregation Authority
https://costsegauthority.com/
Qualified Opportunity Fund/Zone
https://www.irs.gov/credits-deductions/businesses/invest-in-a-qualified-opportunity-fund
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Are you thinking of investing in or buying real estate during the housing boom? What lending options and products are available for investors and other homebuyers?
In this episode, Toby Mathis of Anderson Advisors talks to Benson Pang from NestMade Mortgage in Monrovia, Calif.
Benson started his career as a civil engineer. Then, he pivoted to mortgage lending and obtained his broker’s license. Benson decided to start his own company, which has helped more than 1,000 individuals and families with their home purchase journey.
Highlights/Topics:
- Housing Boom: People want to own a piece of the real estate market.
- Why? Rent and home prices are on the rise, and interest rates remain low.
- Money Options: Trillions of dollars are being pumped into the economy.
- Who’s looking to buy? Healthcare workers, families, and homebuyers wanting another home or to upgrade with new money.
- Home Prices: Depending on the location, buyers are offering thousands to millions above the asking price.
- Appraisals: Buyers need to work with their lenders to close escrow quickly and require financing contingencies to compete with cash offers.
- Delay Financing, Refinance, or Lien.Ways to get a home and then get your money back.
- Deed of Trust. After escrow closes, get a rate-and-term refinance loan from the lender.
- Worst Case Scenario: Understand risk of removing any of the financing contingencies.
- Cash Flow Crunch: Your tax scenario may not be your cash scenario.
- Inflation: With more money being printed, comes inflation and raising interest rates.
- Reality Check: What are you paying in rent? What can you afford to not be house poor? Make an educated choice and lifestyle change before buying a home.
- Forgotten Upgrade Costs: Once you own a house, you want to do things to it.
- Should you pay off your home mortgage loan? It depends.
Resources:
Monrovia Mortgage Broker - NestMade Mortgage
https://nestmade.com/
Fannie Mae
https://www.fanniemae.com/
Freddie Mac
http://www.freddiemac.com/
Form W-2: Wage and Tax Statement
https://www.irs.gov/forms-pubs/about-form-w-2
Debt Service Coverage Ratio (DSCR)
https://www.multifamily.loans/apartment-finance-blog/what-is-dscr
Principal, Interest, Taxes, and Insurance (PITI)
https://www.investopedia.com/terms/p/piti.asp
Toby Mathis
http://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Tax and Asset Protection Event
http://andersonap.com/
What’s the best way to handle the ups and downs of investing and tax consequences? Sit on your hands long enough until everything is okay, again. The hardest thing sometimes is waiting. In the meantime, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * Does day trading cause a higher tax consequence than long-term investing? Typically, if you have gains, it’s going to have a higher tax consequence, primarily because the day trading is all going to be short-term trades; however, long-term capital gains is subject to that long-term capital gain treatment - usually a much lower tax percentage * If I own a property and I owe back taxes, can the government take it? If you owe back taxes, the government can certainly take your property and put a tax lien on it; then if it’s not paid, the government can sell it to make up for the taxes * Can I rent a house owned by one of my LLCs? You can’t rent to yourself your own house * How does rental income get taxed? Rental income is taxed at ordinary rates, it’s ordinary income; however, it is passive income and passive losses are limited
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Entity Formation
https://andersonadvisors.com/entity_formation/
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Cryptocurrency
https://www.investopedia.com/terms/c/cryptocurrency.asp
Nexo - Banking on Crypto
https://nexo.io/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Renewable Energy Tax Credits
https://www.energystar.gov/about/federal_tax_credits/renewable_energy_tax_credits
Federal Solar Tax Credit
https://www.energystar.gov/about/federal_tax_credits/renewable_energy_tax_credits
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019
https://www.congress.gov/bill/116th-congress/house-bill/1994
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Section 26 U.S. Code 469
https://www.law.cornell.edu/uscode/text/26/469
Old-Age Survivors and Disability Insurance (OASDI) Tax
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Cost Segregation Authority
https://costsegauthority.com/
26 U.S. Code Section 1256
https://www.law.cornell.edu/uscode/text/26/1256
Form 8283
https://www.irs.gov/forms-pubs/about-form-8283
Form 3115
https://www.irs.gov/forms-pubs/about-form-3115
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
If you Google conservation easements, you get the IRS’s Dirty Dozen list of those that have abused them. Make no mistake, laws are written to allow certain situations to benefit the taxpayer. There's a difference between doing it right and wrong.
In this episode, Toby Mathis of Anderson Advisors welcomes back Tyler Surat to talk about the right way that conservation easements can benefit investors. Tyler works in the alternative energy sources industry and helps farmers and others with the conservation and preservation of their land by creating easements.
Savvy tax investors or business people and individuals use conservation easements to do two things—help society and the environment, and get a tax benefit as a result. If you are not interested in helping the environment, then it's probably not something for you to do. The purpose is conservation.
Highlights/Topics:
- What is a conservation easement? The U.S. government quit using funds to purchase land to conserve and expected constituents or the public to do so.
- How did the government incentivize them? Through taxes, which is its greatest asset to offer. It’s a trade. You take a viable development or property that could be developed in some form that has a large market value. It must be developed; hold conservation piece.
- Does it actually hold that conservation effort? The government will offer a tax deduction for the market-developed value of that property.
- What's the good, bad, and ugly of conservation? Somebody with land or something may use conservation easements to benefit themselves. The investor can be involved, too.
- What if ranchers have land that can be developed? If they do, can they continue to farm and ranch that land? If they can, then they typically take beautiful portions of the ranch or what they own, something that somebody would desire. They have true conservation.
- Is it at the same multiple in private and group investments? Probably not, but their purpose is true conservation. Benefit from it.
- What is given up or away with conservation easements? You're basically giving up the developed rights. Once you conserve and place that easement on that land, that land's not worth $2,000 an acre anymore. It's worth less because a land developer can't buy it. The only person that would want to buy it - somebody that wants green space.
- Are green spaces in highly developed areas? They can have townhomes.
- What are good investors doing now? Reaching out to local appraisers and getting that local feel. A good provider provides ample documents for investors to be well informed.
- When you become a partner, you're investing in real estate development. What are the three options? Do nothing, develop, or conserve.
- Do all states follow conservation easements or allow the deductibility? Most states go off adjusted gross or taxable income. They never get to see the conservation portion.
- Do most people know about the statute of limitations for conservation? Three years from the time you exhaust the deduction.
Resources:
Tyler Surat on LinkedIn
https://www.linkedin.com/in/tyler-surat-1a17881b
Tyler Surat’s Email
mailto:tsurat@onetreeadvisors.com
Tyler Surat’s Phone Number: 719-580-3051
Steel City Solar
https://steelcitysolar.us/
Conservation Easements
https://andersonadvisors.podbean.com/e/conservation-easements/
Internal Revenue Service (IRS) - Dirty Dozen List
https://www.irs.gov/newsroom/dirty-dozen
Mar-a-Lago
https://www.maralagoclub.com/
Residential Energy Credit: Instructions for Form 5695 (2020)
https://www.irs.gov/instructions/i5695
Ducks Unlimited
http://www.ducks.org/
Operation Surf
https://operationsurf.org/
Toby Mathis
http://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Tax and Asset Protection Event
http://andersonap.com/
Did you miss the April 15 tax deadline? Are you safe from significant penalties? What’s the best way to legally, morally, and ethically not pay taxes? It depends. Jeff Webb, Tax Director, and Eliot Thomas, Senior Tax Advisor, of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- If you experience a one-time large capital gain from exercising stock options, is it absolutely imperative that you figure out quarterly payments to avoid penalty, and if so, what if you missed April? There’s a safe harbor for calculating tax estimates and it requires paying in 90% of the current year tax or 110% of the prior year tax; and estimated tax penalties are typical not significant, but handle missed payment soon
- What is the best way to take advantage of Section 179 for new vehicles over 6,000 pounds? Typically, most people do not use Section 179 because of bonus depreciation, restrictions, and limitations
- How are crypto currencies taxed, and what’s the best way to legally, morally, and ethically not pay taxes? Depends on how you are getting the crypto currency; if you are buying and selling, it is treated as a security and other rules apply; if you are mining crypto currency, find out the value of that crypto bitcoin the day it is created
- What will happen if you open an LLC with Corp status but you missed the deadline? What should you do? If you missed the tax deadline and have a loss on your Corp, it typically doesn’t affect you; if you have a lot of startup costs, you need to file your initial tax return on time
- Does tax on depreciation recapture, like capital gains, go away when property is inherited? When you inherit property, everything resets and goes away, like capital gains
- Do I have to report a home I lived in and sold even though I purchased a new home? Previous Section 121 states as long as you buy a more expensive home than the one you sold, you can defer any gain until the age of 55; Section 121 now states if you lived in the home for two of last five years, you can defer a large part or all the gain
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop on June 5
http://aba.link/iiw
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Section 179 Tax Deduction
https://www.section179.org/section_179_deduction/
Bitcoin
https://bitcoin.org/
Nexo - Banking on Crypto
https://nexo.io/
Entity Formation
https://andersonadvisors.com/entity_formation/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Form 1040
https://www.irs.gov/forms-pubs/about-form-1040
Zcash
https://z.cash/
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Employee Retirement Income Security Act (ERISA)
https://www.dol.gov/general/topic/retirement/erisa
U.S. Department of Labor (DOL)
https://www.dol.gov/
Schedule K-1, Form 1065
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Cost Segregation Authority
https://costsegauthority.com/
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Toby Mathis
https://tobymathis.com/
Abatement Letter
https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
If you are a real estate investor, you’ve probably been thinking about multifamily investing because there’s going to be scale in that space. Start house hacking and raise capital!
Today, Clint Coons of Anderson Business Advisors talks to Matt Faircloth from the DeRosa Group about how to get started in multifamily investing. Matt is a full-time investor and has successfully completed projects involving fix and flips, single family homes, apartment complexes, and office buildings.
Also, Matt is a regular contributor and podcast guest on BiggerPockets and has an active YouTube Channel dedicated to educating investors. He is the author of Raising Private Capital - How to Build Your Real Estate Empire with Other People's Money.
Highlights/Topics: * Getting Started: Matt read Rich Dad Poor Dad and discovered the power of passive investing, creating assets, and not trading hours for dollars. * Bigger and Better Deals: Matt and his wife didn’t get into real estate to start investing in multifamily, but worked their way up into larger deals with apartment complexes. * Self-managed Properties: Matt learned about tenant relations, how to select tenants, and what it takes to manage and scale single-family properties for a small portfolio of rentals. * Best Bang for Your Buck: Start with a small multifamily deal because it’s cheap debt and very little money down. * Real Estate Syndication: Scale into larger multifamily assets faster by selling equity and raising capital. * Words of Wisdom: Observe the masses and do the opposite to be competitive. * Affordability Analysis: What’s the median income in the city and surrounding area of multifamily space? * Can tenants afford a rent increase to justify improvements? Property management companies tend to approve tenants that make more than 3x the rent as their earned income before taxes. * 50/50 Mix: Matt recommends seeking multifamily properties with a mix of one- and two-bedroom units, then add amenities, such as family oriented and pet parks. * Self-manage vs. Property Management Companies: Depends on if you want to stay small and retain control or reduce vacancy rates and execute business plan to scale. * Affordable/Low-Income Housing: Owners should perform due diligence because despite the stigma, tenants don’t want to lose their Section 8 status. They must follow rules or face penalties and be evicted. Low-income housing tax credits can be lucrative.
Resources: DeRosa Group
https://www.derosagroup.com/
DeRosa Group on YouTube
https://www.youtube.com/user/derosagroup
BiggerPockets
https://www.biggerpockets.com/
Raising Private Capital: Building Your Real Estate Empire Using Other People's Money
https://www.amazon.com/Raising-Private-Capital-Building-Peoples/dp/1947200984
Rich Dad Poor Dad by Robert T. Kiyosaki
https://www.richdad.com/
Federal Housing Administration (FHA)
https://www.hud.gov/program_offices/housing/fhahistory
U.S. Securities and Exchange Commission (SEC)
https://www.sec.gov/
Fannie Mae
https://www.fanniemae.com/
Freddie Mac
http://www.freddiemac.com/
Section 8 Housing
https://www.hud.gov/topics/housing_choice_voucher_program_section_8
LoopNet
https://www.loopnet.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
What is wholesaling and how do you make seven figures doing it? If you are interested in becoming a wholesaler and finding fix-and-flip real estate deals, learn from a problem solver extraordinaire who is part of a supergroup.
In this episode, Toby Mathis of Anderson Advisors talks to Jamil Damji about the art of wholesaling. Jamil has been in the real estate business since 2002 and successfully built KeyGlee, which is a national franchise with 100+ employees, spanning 180 U.S. markets.
Also, Jamil runs a mentorship called, AstroFlipping, where he mentors and educates hundreds of entrepreneurs on how to be successful in their own wholesaling real estate business. He is the co-host of the fastest growing podcast on wholesale real estate called, Wholesale Hotline, and he started his own podcast called, To the Moon, where he highlights student success.
Jamil’s mission in life is to impact as many lives as possible and share knowledge he has gained with those that have a desire to learn.
Highlights/Topics: * Who invented wholesaling? As far as Jamil knows, he did in Canada, not Ron LeGrand * How to wholesale? Find condos, apartments, and single-family homes to buy then sell * Developers: Working and looking for raw materials for property conversions * Skip Transfer: Get two contracts, one to buy, one to sell property to make a profit * Business Model: Search classifieds for rentals to amass a small fortune, only to lose it all * Financial Crisis: Parents cosigned construction loans and all residences were foreclosed * Standup Comedy: Plan, prepare, strategize to take care of family cause it’s your fault * Potential Properties: Wholesalers look at as-is value and after-repair or after-risk value * Potential Property Sellers: Cash transaction is solution or only option to situation * KeyGlee’s Core Competency: Building cash buyers, flippers, and buy-and-hold renters * Keys to Success: No cash or credit necessary, it takes consistency and hustle * Indicators: Lending criteria is significantly harder and inflation is a true fear
Resources: Jamil Damji on Instagram
https://www.instagram.com/jdamji/?hl=en
Jamil Damji on YouTube
https://www.youtube.com/channel/UCDqJP0mZNOSR9JiIRE02NxQ
KeyGlee
https://www.keyglee.com/
AstroFlipping - Real Estate Education
https://www.astroflipping.com/
Wholesale Hotline Podcast
https://www.youtube.com/watch?v=RYxRy710erI
To the Moon Podcast
https://www.youtube.com/watch?v=lQTvL0755MU
Ron LeGrand
https://www.ronlegrand.com/
HomeVestors
https://www.homevestors.com/
We Buy Ugly Houses
https://www.webuyuglyhouses.com/
Blackhawk
https://www.dnb.com/business-directory/company-profiles.blackhawk_parent_llc.77000ae18ddcfae81d823a112bd88e4b.html
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Did you happen to watch Saturday Night Live with Elon Musk? Was it a waste of time and money? Maybe you should ask Toby Mathis and Jeff Webb of Anderson Advisors to answer your questions about buying a Tesla, investing in bitcoins, and other cryptocurrencies. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * I would like to make my investment condo my primary residence for tax benefits upon its sale - without sleeping there 731 days over five years. Is that only a safe harbor measurement or a hard-and-fast rule? Refer to Section 121 - Capital Gains Exclusion because your primary residence is where you spend the most nights * How can I take profits out of an S Corp without paying a lot in taxes? If you are the 100% shareholder of the S Corp, whatever profit that S Corp has, that’s your income and you pay tax on that income, regardless of whether you take money out of that S Corp or not * How do you account for remodeling expenses versus maintenance expenses for a rental property? Maintenance expenses or repairs are expenses for keeping the asset at its current value; remodeling expenses are improvements such as renovations or a betterment to increase the value of the asset * Can an employer contribute to a profit-sharing retirement plan if there was no profit for the year? It has nothing to do with profit, but it does help to have profit to pay the contributions or create a loss * If my business and house are in my revocable living trust when I die, what kind of tax will my kids (the beneficiaries) have to pay on getting the business or the house? When you die, a portion of the assets in the revocable living trust go into an irrevocable trust, so your estate may pay tax, but beneficiaries will never pay tax on inheritance or gifts
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Opportunity Zones FAQ
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Entity Formation
https://andersonadvisors.com/entity_formation/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Bitcoin
https://bitcoin.org/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Section 26 U.S. Code 1400Z
https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1400Z-2#=0&edition=prelim
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Section 121 - Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
Cost Segregation Authority
https://costsegauthority.com/
Nexo - Banking on Crypto
https://nexo.io/
Section 168(k) Tax Deduction
https://www.irs.gov/newsroom/additional-first-year-depreciation-deduction-bonus-faq
Section 179 Tax Deduction
https://www.section179.org/section_179_deduction/
Form 1040
https://www.irs.gov/forms-pubs/about-form-1040
Form 3115
https://www.irs.gov/forms-pubs/about-form-3115
Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
Form 1041
https://www.irs.gov/forms-pubs/about-form-1041
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Renewable Energy Tax Credits
https://www.energystar.gov/about/federal_tax_credits/renewable_energy_tax_credits
American Family Act
https://www.bennet.senate.gov/public/index.cfm/american-family-act
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Section 26 U.S. Code 469
https://www.law.cornell.edu/uscode/text/26/469
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do underwriters evaluate loans to LLCs or land trusts? By effectively guiding a loan from application through underwriting to a successful closing and helping mortgage lenders comply with regulations.
Today, Clint Coons of Anderson Business Advisors talks to Andrew Duane, Associate Attorney at Polunsky Beitel Green, LLP. Andrew’s focus on lender support includes file underwriting, complex loan products, and post-closing matters.
Andrew is Due Diligence Certified (DDC) by the International Due Diligence Organization and a professional member of the State Bar of Texas. Previously, he worked with the firm’s document review and preparation team while attending law school.
Highlights/Topics: * What if a client or investor wants to refinance a transaction and pull property out of a land trust? Find a lender willing to refinance the property in the name of the trust. * Why create a living trust? You don't want to tell the lender to move it out of the trust and have another effect on their asset protection portfolio or other kinds of disastrous effects. * What was the solution? Convert the land trust into a living trust because all trusts can be amended and restated. * What is Andrew’s role? He is an attorney that represents lenders. He doesn’t represent individual borrowers, but banks and lenders closing home loans in the State of Texas. * Why does Andrew perform underwriting and review guidelines? What are lenders like Fannie Mae and Freddie Mac experiencing on origination? Andrew backs up, not just the closing process, but that underwriting process. * Why is Andrew’s firm the backstop for lenders? There are other attorneys that do this. When the underwriter gets a document such as a land trust or limited liability company (LLC), they don't understand it and want to make sure it is legitimate and can be used. * When the loan originator/lender can't sell it, they don't want to hold it. They don’t deal with that land trust? When investors/clients talk to their loan officers, Fannie Mae requires direct negotiation for the land trust. Freddie Mac doesn't. Freddie buys the land trust where they are statutorily authorized and the individual beneficiary is the borrower. * If the property was in an LLC and it's a residential loan, would it get across the goal line? It’s doubtful. Fannie and Freddie do not allow for LLCs. In their general borrower eligibility section, they like a natural person.Then, they make exceptions. An LLC for people selling to Fannie and Freddie isn’t possible because it’s a residential mortgage. * If you put it into a land trust and the land trust is owned by the LLC, you can convert the land trust to a living trust, get the loan, and it doesn’t state your name? If you're thinking about your structures and you plan to refinance the property, if you don't want it in your name, consider using a land trust held by an LLC for your asset protection. * If you buy or close on new investment property, are there any traps to be aware of before going to the lender? Get your documentation ready to go. If it's closing in a trust, check with the attorney that did it. If it's been a few years, it might be time to restate and update it. It makes the process smoother all around for borrowers and lenders. * What’s FHA’s anti-flipping provision? It’s in the HUD handbook. FHA is concerned that houses are going to get flipped for an artificial value and FHA will have to insure all of them. Guidelines and recommendations include waiting 180 days from the time that the deed is delivered, when they acquire legal ownership, to go under contract. * If you transfer property to yourself, deeded in the corporation, when you list it for sale, and a first-time homebuyer will not qualify because of that transfer? FHA wants the seller on record to be the person making the sale. * When it comes to putting deals together if you're a real estate investor, do you need an authorized signer? When selling a property that might be held in an LLC, or you're with a private bank or wealth company that could close in an LLC, get an authorized signer.
Resources: Andrew Duane’s Email
mailto:andrew.duane@mortgagelaw.com
Polunsky Beitel Green
https://www.mortgagelaw.com/
International Due Diligence Organization
https://www.international-due-diligence.org/
Texas Government Code A3.001
https://statutes.capitol.texas.gov/Docs/GV/htm/GV.2001.htm
Fannie Mae
https://www.fanniemae.com/
Freddie Mac
http://www.freddiemac.com/
Land Trusts
https://andersonadvisors.com/land_trusts/
Living Trusts
https://andersonadvisors.com/living_trusts/
Entity Formation
https://andersonadvisors.com/entity_formation/
Federal Housing Administration's HUD Program
https://www.hud.gov/program_offices/housing/fhahistory
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
From entity formation, income, and inheritance to losses, proceeds, and profits, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * How does a single, high W-2 earning individual take advantage of passive losses? It’s difficult because passive losses for a high earner are going to be subject to limitations * How are inherited stock shares treated when sold? If you inherit stocks, they are valued at fair market value now, not when they were bought due to the step-up in basis * Should an S Corp pay profits as dividends? An S Corp does not pay dividends; it passes on profits and losses to shareholders * Is it preferable to have a C Corp or an LLC as your holding entity? It’s better to have an LLC as your holding entity; there’s no tax treatment for an LLC * Are proceeds received from winning a court case ($20 million) taxable? It depends on the source of the claim, as a matter of rule, and attorney fees are no longer deductible
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Anderson Advisors’ Infinity Investing Through Stocks and Real Estate - Free event on May 15
http://aba.link/iiw
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Entity Formation
https://andersonadvisors.com/entity_formation/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Kiddie Tax
https://www.irs.gov/taxtopics/tc553
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
California Proposition 19
https://www.boe.ca.gov/prop19/
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Old-Age, Survivors, and Disability Insurance (OASDI) Program
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
121 Capital Gains Exclusion
https://www.irs.gov/taxtopics/tc701
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Section 162 - Trade or Business Expenses
https://www.irs.gov/pub/irs-drop/rr-99-7.pdf
Form 1040
https://www.irs.gov/forms-pubs/about-form-1040
Form 1099
https://www.irs.gov/forms-pubs/about-form-1099-misc
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Rich Dad Poor Dad by Robert Kiyosaki
https://www.amazon.com/Rich-Dad-Poor-Teach-Middle/dp/1543626610
Insperity
https://www.insperity.com/
Payroll City
https://payrollcity.com/
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Looking for land? It’s tough to find.So, where do you find the niches to find the riches to invest in raw land?
Today, Clint Coons of Anderson Business Advisors talks to Seth Williams, founder of REtipster, an online community that offers real-world guidance for real estate investors.
Seth discusses how he realized that land is probably the better way to go. It’s easier to find deals on land than houses and it costs a lot less.
Highlights/Topics:
- Raw Land Investments: Low liability, low risk, no tenants, and property taxes are cheap.
- What’s worth buying or not? Vacant land is simple, but is not easy.
- Always Ask: Is the property zoned right? Are there restrictions? What are the setbacks?
- Environmental Due Diligence: How much is spent on raw land development? A fortune.
- DataTree: You can get most of the information you need without spending a fortune.
- How to get started? Identify market, location, seller financing, state laws, and tax rules.
- Where? New Mexico and Southwest—less complex and fewer variables to understand.
- Invest to Sell: Market property with Facebook Marketplace, Craigslist, and Zillow FSBO.
- Leads: Pros and cons of using direct mail, automated offers, and not knowing markets.
Resources: REtipster
https://retipster.com/
REtipster on YouTube
http://retipster.com/youtube
DataTree
http://retipster.com/datatree
Land Investing
https://retipster.com/category/land-investing/
The Land Flipping Lifecycle
https://retipster.com/land-flipping-lifecycle
The Truth About Land Investing
https://retipster.com/truthaboutlandinvesting
LandWatch
https://www.landwatch.com/
Land and Farm
https://www.landandfarm.com/
MLS
http://www.mls.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
With all the lack of tax knowledge going around and politicians being pushed by their parties, get your tax questions answered by Toby Mathis and Jeff Webb of Anderson Advisors. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- When you have a PLLC, what do you put on a personal or business credit card? If you have a business credit card that’s great, but a lot of the credit card companies are not willing to issue credit cards to new small businesses; use a personal credit card and make sure to separate personal and business expenses
- How do you claim the solar credit on your personal residence? Use Form 5695
- Should I file a return with my kids as dependents or should they file their own return if they are paid from the family business? If they are dependents and not supporting themselves, they are still dependents on your return; however, the children can file their own return as well and claim the standard deduction up to the amount of their earned income plus $300
- I have a rental property in California. When I go there to work on it, can I use per diem plus mileage rather than actual receipts for housing and meals? Depends if you are self-employed or you have the rentals owned personally, you cannot use the per diem for housing but can use it for meals
- I haven’t done taxes for 2020 and I’d like to know how to write-off bills for my emotional support animal. Can that be done with business taxes? Maybe, depends on the IRS’ primarily for and but for tests
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Anderson Advisors Tax and Asset Protection Workshop (April 24)
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics
https://www.energy.gov/sites/prod/files/2020/01/f70/Guide to Federal Tax Credit for Residential Solar PV.pdf
Form 5695 - Residential Energy Credits
https://www.irs.gov/forms-pubs/about-form-5695
Entity Formation
https://andersonadvisors.com/entity_formation/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
MileIQ
https://www.mileiq.com/
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Old-Age, Survivors, and Disability Insurance (OASDI) Program
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Cost Segregation
https://andersonadvisors.com/using-cost-segregation-residential-real-estate/
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Section 162 - Trade or Business Expenses
https://www.irs.gov/pub/irs-drop/rr-99-7.pdf
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
26 U.S. Code Section 168K
https://www.law.cornell.edu/uscode/text/26/168
Kiddie Tax
https://www.irs.gov/taxtopics/tc553
Americans with Disabilities Act (ADA)
https://www.ada.gov/
HIPAA
https://www.hhs.gov/hipaa/index.html
Small Businesses Affected by Border Closures
https://andersonadvisors.com/podcast/small-businesses-affected-by-border-closures/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
People don’t like to talk about taxes or being separated from their money, especially because of the country’s complex tax system. So, how do the rich get richer? Learn a lesson from the super-rich about minimizing taxes and maximizing income and infinity investing.
In this episode, Toby Mathis of Anderson Advisors talks to Mike Consol, Editor of Real Assets Adviser – one of seven titles published by Institutional Real Estate, Inc. (IREI).
Mike is responsible for the magazine’s editorial content and production and has been a professional journalist since 1983. He has spent his entire career working for business publications. Mike joined IREI in 2012 as editor of Institutional Real Estate Americas. Prior to IREI, he spent 17 years with American City Business Journals (ACBJ), the nation’s largest publisher of metropolitan business journals with 40 weekly newspapers.
Highlights/Topics: * How does the tax code system work in the United States where the rich get richer and the people of average means stay right where they are? There is a misunderstanding of what assets and liabilities are, and people end up buying more liabilities than assets. * Assets put money in your pockets. Every year, does it increase what’s in your bank account that you can buy groceries with, or does it take it away, like does it cost you money? If you use that analysis, you won’t be misled. * Tax Code Highlights: Incentivizes investing in specific types of assets and punishes you if all you have is ordinary income. * Social Security: Regressive taxes hurt the poor worse than they hurt the rich. The 15.3% tax is embedded in all earned income. Make other types of income that are not subject to that regressive tax. That’s your unearned, passive, and portfolio income. * Things written in the tax code are specific to an individual company or industry and given extremely gracious treatment. Sometimes, investments are not made based on fact and reason, but tax efficiency or tax break. * Cheat by Copying: What do rich people do? Diversification, which involves rents, royalties, dividends, interest, and short-term capital gains on sale of options. * Zero Corporate Tax: Don’t tax corporations but people. When the United States lowered its corporate tax, other countries followed. It created tremendous worldwide growth, but pushed wealth into the hands of very few people. * What is infinity investing? Changes the way you think of your net worth. How many days can you survive without working? Consider passive income sources so you never have to work again.
Resources: Mike Consol
https://aba.link/mike
Institutional Real Estate, Inc. (IREI)
https://irei.com/
Real Assets Adviser
https://irei.com/real-assets-adviser/
A lesson in what the super-rich know about minimizing taxes and maximizing income
https://irei.com/video-and-podcast/lesson-super-rich-know-minimizing-taxes-maximizing-income/
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program
U.S. Code: Title 26
https://www.law.cornell.edu/uscode/text/26
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Real Estate Investment Trust (REIT)
https://www.investopedia.com/terms/r/reit.asp
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
David Cay Johnston (former New York Times tax reporter)
https://www.nytimes.com/by/david-cay-johnston
The Gospel of Wealth by Andrew Carnegie
https://www.carnegie.org/about/our-history/gospelofwealth/
CARES Act
https://home.treasury.gov/policy-issues/cares
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Infinity Investing: How The Rich Get Richer And How You Can Do The Same
https://www.amazon.com/Infinity-Investing-Rich-Richer-Same/dp/1950863271
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Don’t be a fool in April! Make sure to get your tax questions answered by Toni Covey and Jeff Webb of Anderson Advisors. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Do wholesalers of land need to pay self-employment tax? If you are wholesaling that is going to be ordinary income, so if it’s reported on your personal tax return, it’s subject to self-employment tax; instead put it in a corporate entity
- If I run my real estate business from home, can I deduct a portion of all home expenses (i.e. property tax, utilities, and insurance)? Yes, but there are a few rules that need to be followed such as for a home office deduction and Schedule C
- Startup S-Corp has no revenue yet. If I file taxes jointly with my spouse, any concerns? No, but make sure to file a tax return to prove profit motive
- What is the best way to pay my children (teenagers) when they work in my business? Payroll? Cash at time of service? Year-ending 1099? To pay your children, consider what they are capable of doing and what they are going to be paid, which can be done via W-2 or 1099
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
Schedule K-1 Form 1065
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Self-Employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Form 1099
https://www.irs.gov/forms-pubs/about-form-1099-misc
26 U.S. Code Section 168K
https://www.law.cornell.edu/uscode/text/26/168
Section 179
https://www.section179.org/
Entity Formation
https://andersonadvisors.com/entity_formation/
Cost Segregation
https://andersonadvisors.com/using-cost-segregation-residential-real-estate/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Wills and Trusts
https://andersonadvisors.com/living_trusts/
CARES Act
https://home.treasury.gov/policy-issues/cares
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Form 1040
https://www.irs.gov/forms-pubs/about-form-1040
Form 8829
https://www.irs.gov/forms-pubs/about-form-8829
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
While sitting poolside, Pace Morby discovered the insane power of social media. Now, he has a huge following and landed three major clients by posting before-and-after photographs of his construction work on Instagram.
In this episode, Toby Mathis of Anderson Advisors talks to Pace Morby, who has done more than 7,000 renovations and built more than 150 new homes from the ground up.
Pace owns several businesses, including American Home Offers, which does 150 wholesale transactions per year, and Blue Acorn Development, which does 50 fix-and-flip deals per year. He owns about 130 single-family homes purchased through SubTo and Seller Finance; ConstantClose transaction coordinator business; Title Alliance of Phoenix title company; VAhub virtual assistant business; SubTo creative finance education business; BombCRM software business for new investors; and Driving for Dollars BatchDriven software business.
Also, Pace has three successful podcasts, Sunday Service, Wholesale Hotline, and Get Creative; a YouTube channel; and negotiating with A&E Television for a six-year contract to do a renovation TV show.
Highlights/Topics: * Creative Finance: Content that double, triples, and quadruples conversion rate * Day in the Life of Pace: Just a guy who wants to help everybody–come along for the ride * Estate Planning: Who do you trust to inherit and manage your properties? * Zero Equity, Loan Pain: Reasons seller sells at a discount or on seller finance * REI: Replace expenses with income * Ways to Wholesale: Direct to seller, referrals, and reviving dead leads * Previous Sellers: Where Pace gets private money to invest in more deals * Pace’s Three Choices: Live on cash flow, reinvest, or pay down lender * Art of Storytelling: Craft and tell a story from experience, not the shame of not knowing * Frequency Illusion and Full Picture: To see it, it has to be relevant for anyone doing it * The Challenge: With no resources, money, or food–get a real estate deal in 30 days
Resources: Subto
https://www.subto.com/
Pace Morby
https://shor.by/gT0I
Pace Morby on Instagram
https://www.instagram.com/pacemorby/?hl=en
Pace Morby on Facebook
https://www.facebook.com/pacemorby/
Pace Morby on YouTube
https://www.youtube.com/pacemorby
Opendoor
https://www.opendoor.com/
Zillow
https://www.zillow.com/
Offerpad
https://www.offerpad.com/
HomeVestors Franchise
https://homevestorsfranchise.com/
HUD
https://www.hud.gov/
Depreciation
https://www.investopedia.com/terms/d/depreciation.asp
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Using Cost Segregation in Residential Real Estate
https://andersonadvisors.com/using-cost-segregation-residential-real-estate/?highlight=cost%20segregation
Charitable Contributions
https://www.irs.gov/charities-non-profits/charitable-contributions
Outkast Mural
https://wishatl.com/pages/thegallery
Estate Planning - Living Trusts
https://andersonadvisors.com/living_trusts/
Greg Boots
https://www.amazon.com/Private-Vault-Gregory-J-Boots-ebook/dp/B00G71IKNA
Brain Teaser: Can you count the Fs in this sentence? Finished Files
https://sharpbrains.com/blog/2006/09/10/brain-exercise-brain-teaser/
Blue Crab Mentality
https://www.developgoodhabits.com/crabs-bucket/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are you lucky to be alive and taking care of your taxes? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * If a non-profit (NP) organization opened a trading account and got options income less than $50,000, does the NP file an income tax return (besides a 990-N)? If you have gross receipts less than $50,000, you only need to file a 990-N (e-Postcard) * Are losses from gambling deductible? If you have gambling losses, they are deductible on Schedule A as long as you have gambling winnings on tax return * I have a rental property that is owned by my self-directed IRA. Does it need to be in an entity or is it safe in the IRA? Individual owner of an IRA is always personally reliable for the acts of the IRA, so put in an LLC or self-directed IRA * How do you claim the solar credit on your personal residence? Use Form 5695 - Residential Energy Credits; put in how much you paid for solar and multiply times percentage credit (26%) * Doing a cost segregation on a condo that was purchased out of my inherited trust to pay off other beneficiaries. Can I take bonus depreciation? Yes, and you can write-it off twice if you inherit it * Can I include my roof replacement for the solar tax credit? You can write-off roof if for dual usage; roof replacement is not part of the solar installation and labor * How is the in-home office deduction being treated since most of us have been working from home? Still a red flag for realtors? If you are an employee, there is no home-office deduction; the home office is only for sole proprietors and if you’re being taxed on Schedule C and receive a 1099, then you can deduct reasonable expenses
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson Advisors Tax and Asset Protection Workshop (Free 1-day virtual event on March 27)
http://aba.link/MarchTAP
Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis
http://aba.link/infinitybook
IRS - Coronavirus (COVID) Tax Relief
https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
990-N
https://www.irs.gov/charities-non-profits/annual-electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard
26 U.S. Code Section 168K
https://www.law.cornell.edu/uscode/text/26/168
Section 179
https://www.section179.org/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Self-Directed IRA (SDIRA)
https://www.investopedia.com/terms/s/self-directed-ira.asp
Entity Formation
https://andersonadvisors.com/entity_formation/
Cost Segregation
https://andersonadvisors.com/using-cost-segregation-residential-real-estate/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics
https://www.energy.gov/sites/prod/files/2020/01/f70/Guide to Federal Tax Credit for Residential Solar PV.pdf
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Section 1245
https://www.investopedia.com/terms/s/section1245.asp
Section 1250
https://www.investopedia.com/terms/u/unrecaptured-1250-gain.asp
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule K-1 Form 1065
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
CARES Act
https://home.treasury.gov/policy-issues/cares
72t - Substantially Equal Periodic Payments
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-substantially-equal-periodic-payments
Setting Every Community Up for Retirement Enhancement (SECURE) Act
https://www.investopedia.com/secure-act-4688468
TurboTax
https://turbotax.intuit.com/
Form 5695 - Residential Energy Credits
https://www.irs.gov/forms-pubs/about-form-5695
Section 48 - Business Assets
https://www.law.cornell.edu/uscode/text/26/48
Form 8829
https://www.irs.gov/forms-pubs/about-form-8829
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
When the COVID-19 pandemic hit, the Canada/U.S. border closed, putting great stress on businesses and families on both sides who depend on international traffic.
In this episode, Toby Mathis of Anderson Advisors talks to Lars Jacobson, a businessman and entrepreneur who has owned and operated his own businesses for more than 20 years.
Lars and his family left southern California and moved to the panhandle of Idaho. He expected to semi-retire, buy 100 acres of land, and become a farmer. However, plans changed. In June 2019, Lars and his family acquired the “Little Town of Porthill, Idaho” that includes a convenience store, gas station, restaurant, and package depot on the Canadian border.
Highlights/Topics: * Picking up Packages: People don't want to ship packages from the United States to Canada because it's so expensive to get them across the border. * Starting a Business: After living in southern California, Lars shared things by learning, travelling, and teaching entrepreneurialism. * Forget about Retiring: After a year or so, God told Lars to buy a town. Wait, what? Pray about it and make it a family adventure. * God is Good: Business was fantastic and awesome, but when the coronavirus hit, the border closed, and God gave Lars a challenge. Whatever happens, persevere. * How much longer until the border opens? Remain hopeful and keep calling because nobody seems to have a clue. * What about the Americans? The closest town nearby has a couple of supermarkets, gas stations, and fastfood, but is about a half-hour away and costs much more money. * Got Money? The Economic Injury Disaster Loans (EIDLs) and Paycheck Protection Program (PPP) was supposed to be given to people and businesses that needed it. * Was it enough? No, Lars’ business is losing more than $10,000 monthly and still cutting back. All the employees were laid off except a maintenance person. Everybody’s gone. * Financial and Emotional Impact: Consider every option and do everything possible after losing what you worked so hard for all your life. Get yourself and your assets and liabilities structured, organized, and prepared.
Resources: Jake’s Landing USA
https://jakeslandingusa.com/
GoFundMe - Save Jake’s Landing
https://www.gofundme.com/f/save-jake039s-landing?utm_medium=copy_link&utm_source=customer&utm_campaign=p_lico+share-sheet
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/covid-19-economic-injury-disaster-loans
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
AllSearch
https://www.allsearchinc.com/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Don’t be embarrassed or feel like an idiot when it comes to taxes. You’re not alone. A little knowledge goes a long way. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * What are the requirements for being a real estate professional, and what are the benefits? Either you or your spouse must have 750 hours and greater than 50 percent of personal services in real estate, and both spouses must materially participate per property unless the aggregation election is selected; and the benefits are that you get to write off losses that you typically wouldn’t be able to write off as a landlord * I have a fully depreciated rental in a high-tax state. Can I do a 1031 exchange and buy some farmland in a different state and not pay taxes to the high-tax state? Yes, temporarily, unless or until you sell the farmland property * I have an S-Corp business. I hired my 12-year-old son to work and he gets a W-2 with an annual income of about $1,400. Does he need to file a tax return? If he does not file a tax return, will that increase my chances of getting an audit for my business? If your son makes less than the standard deduction, he does not need to file a tax return, and your business is unlikely to be audited * Can I write off my monthly car payment if it’s financed and in my corporation’s name? Write off the expenses and interest, but depreciate the car if in the corporation's name; you may have more income from that vehicle than the vehicle is worth–track and reimburse your mileage * I have a rental property that is owned by a self-directed IRA. Does it need to be in an entity or is it safe in the IRA? Having the property in an LLC within the IRA is preferred, especially if there are other assets in the IRA * On a “subject to” deal, who pays capital gains and who pays depreciation recapture when the owner grants the deed to the “subject to” buyer? Seller takes care of their own capital gains and depreciation recapture; buyer resets basis and starts depreciation
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Infinity Investing Workshop (Free 1-day virtual event on March 13)
https://andersonadvisors.com/
Tax Toolbox
https://andersonadvisors.com/taxtoolbox/
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Entity Formation
https://andersonadvisors.com/entity_formation/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
26 U.S. Code 469(c)(7)
https://www.law.cornell.edu/uscode/text/26/469
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
MileIQ
https://www.mileiq.com/
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Self-Directed IRA (SDIRA)
https://www.investopedia.com/terms/s/self-directed-ira.asp
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Form 1120
https://www.irs.gov/forms-pubs/about-form-1120
Cost Segregation
https://andersonadvisors.com/using-cost-segregation-residential-real-estate/
Schedule K-1 Form 1065
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
FHA Loan Requirements
https://www.fha.com/fha_loan_requirements
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
It’s never a good idea to gift things to somebody. Instead, make them work for it. Take care of yourself, your family, and your taxes. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics: * How do I gift my son a fully depreciated rental property without causing a tax consequence? Typically, gifts do not cause tax consequences; however, it is not always wise to do so * We are considering purchasing a vehicle, which will be used about probably 75% of the time for our real estate business. Should we purchase it in the LLC (an S Corp) or personally? What are the advantages and disadvantages of both? Consider liability, tax consequences, cost factor, and value of vehicle; unless it’s a maintenance or utility vehicle, put it in your personal name and get reimbursed for the mileage because commercial insurance is much more expensive * Excluding the 1031 Exchange, is there any way to legally avoid paying depreciation recapture tax when you sell a rental property? Don’t have a gain on your sale * I have several vendors refusing to give me their W-9, and I have to threaten to withhold payments. When should I collect and not collect W-9? Vendors need to complete the W-9, but you are not required to issue them 1099s—although you should anyway * Can we sell our home on an installment sale to an Intentionally Defective Grantor Trust (IDGT) and then lease it back? And at the same time, have the depreciation and other costs flow to our return because of IDGT taxation rules? IDGT is an irrevocable trust that is not actually irrevocable because of adding ‘Grantor’ wording to make it intentionally defective for tax purposes
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Tax and Asset Protection Workshop (Free 1-Day Virtual Event on Feb. 27)
http://aba.link/TAP227
Wills and Trusts
https://andersonadvisors.com/living_trusts/
MileIQ
https://www.mileiq.com/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Doing Business As (DBA)
https://www.entrepreneur.com/encyclopedia/doing-business-as-dba
Entity Formation
https://andersonadvisors.com/entity_formation/
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Form W-9
https://www.irs.gov/forms-pubs/about-form-w-9
Intentionally Defective Grantor Trust (IDGT)
https://www.investopedia.com/terms/i/igdt.asp
Section 121 Exclusion
https://www.irs.gov/taxtopics/tc701
FHA Loan Requirements
https://www.fha.com/fha_loan_requirements
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Form 1099
https://www.irs.gov/forms-pubs/about-form-1099-misc
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Self-Directed IRA (SDIRA)
https://www.investopedia.com/terms/s/self-directed-ira.asp
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Conservation Easements
https://www.conservationeasement.us/what-is-a-conservation-easement/
Solar Investment Tax Credit (ITC) https://www.seia.org/initiatives/solar-investment-tax-credit-itc#:~:text=Quick%20facts,large%2Dscale%20utility%20solar%20farms.
Taxpayer Certainty and Disaster Tax Relief Act of 2020
https://www.finance.senate.gov/download/section-by-section_-taxpayer-certainty-and-disaster-tax-relief-act-of-2020
Step-Up in Basis
https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Rollovers as Business Start-Ups (ROBS)
https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What’s the difference between 831(b) and 401(k) planners? Not much, just a different tax code. Both allow clients to put away profits today to weather tomorrow’s storms.
In this episode, Toby Mathis of Anderson Advisors talks about captive insurance with Van Carlson, CEO and founder of Strategic Risk Alternatives (SRA).
Van has more than 25 years of experience within the risk management industry. He began his career with Farmers Insurance Group as an agent. Now, he focuses SRA on risk management primarily and facilitates SRA to assess and solve for clients’ risks. Van’s primary goal is to continue the upward growth of SRA and develop new products to bring to market.
Highlights/Topics:
- S. Tax Code and Americans: The tax code is used for tax planning, but should be used for its original purpose to be a risk mitigation tool.
- Umbrella Policy and Casualty Insurance: You find out how good of a policy you have when you need it. An umbrella policy isn’t over the top, but it doesn’t cover everything.
- COVID-19: Read the fine print of policies and seek advice from agents. Pandemic coverages are not considered a coverage under the Business Interruption Endorsement.
- Captive Insurance: Set up your own insurance company—you own it and you're paying premiums you deduct. The insurance company doesn't have to pay tax on premiums.
- Who is it for and what type of risk could it insure? Risk is not a problem. Business owners that are advanced in their thought processes and more forward-thinking recognize and understand asset protection and the risk it takes.
- Actual Physical Loss: Business Interruption Policy pays for your employees and building loans, unless it doesn't have direct physical loss.
- Right to Defend on Liability Policies: Even if there's no coverage but you get sued, general liability policies cover the legal defense. Lawsuits are going to be the next big thing when people, guests, and patients, not employees, contract COVID.
- Rules and Regulations: Two tax codes allow you to defer income out of your business. 401(k) for the retirement of yourself and employees, and 831(b) to build up reserves, take profits today and in the future.
- Four-Part Test: Do transfer risk, risk distribution, insure only things that can happen by accidents (not business risks), and act in a principal’s insurance to elect under 831(b).
- Gross Revenue: Cap it because if your gross revenue goes up, your premium increases. The more gross revenue you have, the more exposure you have for claims.
- Cancel Culture: Detrimental to businesses; have cash on hand because banks aren't going to help you out all of a sudden.
- Declare a Dividend: Take it out as a long-term dividend rate and shut it down, pull out capital gains, or put it to work.
- Investment Agreement: What can be done with the reserves? There are rules, but for the most part, clients just leave it to the bank and go forward with the risk.
- Brand Damage: Dependent on third-party vendors, you can’t go and unlock your door, open it, and open for business. Get there, reach in, and obtain client information.
Resources:
Strategic Risk Alternatives (SRA)
https://strategicriskalternatives.com/
SRA’s Email
mailto:info@strategicriskalternatives.com
831(b)
https://www.captive.com/articles/the-basics-of-the-831(b)-election-for-captives
401(k)
https://www.irs.gov/retirement-plans/401k-plans
Business Interruption Insurance Policy
https://www.investopedia.com/terms/b/business-interruption-insurance.asp
Errors and Omissions (E&O)
https://www.investopedia.com/terms/e/errors-omissions-insurance.asp
Health Insurance Portability and Accountability Act (HIPAA)
https://www.hhs.gov/hipaa/for-professionals/privacy/laws-regulations/index.html
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Tax season is near. Toby Mathis and Jeff Webb of Anderson Advisors answer your bookkeeping, real estate, and other tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- What happens when you donate a business vehicle that you used Section 179 on in 2019 and 2020 and then you donate it to a non-profit organization in 2021? If you take Section 179 before five years of ownership, you will need to recapture the gain
- I have a rental in Phoenix, Arizona, that I am installing solar on. I’ve seen that I would qualify for the 26% federal tax credit as well as take the depreciation for the remaining amount that is being financed. Is this accurate? You can take a 26% credit for personal solar, but a deduction lowers your income; for business purposes, you can take 26% plus depreciation
- If I invested in an Opportunity Zone last year with capital gains, I understand the taxes are deferred until 2026. Are those taxed at 2020 rates or 2026 tax rates? The 2026 rates because the income, not the taxes on that income, is being deferred until 2026
- I’m selling a house that I inherited. I am on Social Security disability. Will the sale of the house affect my status? A sale of a home or any property has no affect on your Social Security; only early retirement income impacts your disability status
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax and Asset Protection Workshop (Free 1-Day Virtual Event on Feb. 27)
http://aba.link/TAP227
Section 179
https://www.section179.org/section_179_deduction/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Kars4Kids
https://www.kars4kids.org/
Form 940
https://www.irs.gov/forms-pubs/about-form-940
Form 941
https://www.irs.gov/forms-pubs/about-form-941
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Solar Investment Tax Credit (ITC)
https://www.seia.org/initiatives/solar-investment-tax-credit-itc#:~:text=Quick%20facts,large%2Dscale%20utility%20solar%20farms.
Section 38
https://www.law.cornell.edu/uscode/text/26/38
Section 48
https://www.law.cornell.edu/uscode/text/26/48
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Homestead Exemption
https://andersonadvisors.com/what-is-a-homestead-exemption/?highlight=homestead%20exclusion
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Retirement Plans
https://andersonadvisors.com/retirement_plan/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Form 1099
https://www.irs.gov/forms-pubs/about-form-1099-misc
Self-employment Tax
https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Old-Age, Survivors, and Disability Insurance (OASDI)
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Entity Formation
https://andersonadvisors.com/entity_formation/
Section 754 Election
https://tax.thomsonreuters.com/blog/consequences-of-a-section-754-election/
MileIQ
https://www.mileiq.com/
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Section 121 Exclusion
https://www.irs.gov/taxtopics/tc701
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
COVID-19 has created massive changes in the commercial working environment. The pandemic has taken a bite out of commercial spaces, retail is getting decimated, and people are starting to reconsider office space. According to the IDC, 1.8 billion people in the workforce worldwide are working permanently two or more days a week outside their primary office space.
In this episode, Toby Mathis of Anderson Advisors talks to Frank Cottle, founder of Alliance, which has about 1,200 facilities representing 30-million square feet of space in 54 countries.
Frank is one of the largest players in the virtual office space and has a unique global management perspective. He has been in the service office industry and flexible workspace sector for 40 years.
Highlights/Topics:
- Remote Work:
- One day a week equals a 20% vacancy factor in commercial office space
- Two days a week, it’s 40%
- Today, most people now work three-and-a-half days a week at home
- Corporate America: Office space isn’t needed; policies to work wherever you want
- Who wants to commute? Nobody, especially when told not to take public transportation
- Real Estate Cyclicality: Good and bad markets sometimes equal vacancy or waiting list
- Repurpose Space: If not used for original intent, turn it into residential, retail, other uses
- New Hybrid Office: Work from home, near home, or electronically commute to office
- Property vs. Technology: Property companies require capital, don’t scale on same basis
- Membership Care/Pass: Allows access to office facilities worldwide anytime, anywhere
- Flexible vs. Fixed Office Space: Seek solutions to get away from inefficient fixed cost
- Conference Rooms: Use for Zoom, Teams, Webex, GoToMeeting—it’s all ubiquitous
- Constant Change: With every new lease and tenant, how can you make improvements?
- Unreimbursed Business: Provide complete remote workspace technology or access to it
- Dual Hybrid Model: When the government stops making rules, we’re back to normal
- Virtual Office vs. Virtual Address: What’s the difference? Pay as-needed or 24/7
- Office Space Models:
- Classic: People, place, and technology provide business growth
- Incubator: Same thing but provides mentoring
- Accelerator: Does what an incubator, but provides access to capital
Resources:
Alliance Virtual Offices
https://alliancevirtualoffices.grsm.io/AndersonPodcast
Allwork.space
https://allwork.space/
IDC
https://www.idc.com/
WeWork
https://www.wework.com/
International Workplace Group (IWG)
https://www.iwgplc.com/
Regus
https://www.regus.com/
Spaces
https://www.spacesworks.com/
UPFLEX
https://www.upflex.com/
Deskpass
https://www.deskpass.com/
Collo
https://www.upwork.com/l/dz/freelancers-in-collo/
Alliance Access
https://www.swift.com/our-solutions/interfaces-and-integration/alliance-access
Tony Hsieh’s American Tragedy: The Self-Destructive Last Months Of The Zappos Visionary
https://www.youtube.com/watch?v=lBZt_wngSQA
Zoom Rooms
https://zoom.us/zoomrooms
Microsoft Teams
https://www.microsoft.com/en-us/microsoft-teams/log-in
Cisco Webex
https://www.webex.com/
GoToMeeting
https://www.gotomeeting.com/
Cube
https://cube-usa.com/
Flexi Zone
https://www.nokia.com/networks/products/flexi-zone/
BizSpace
https://www.bizspace.co.uk/
Novel Coworking
https://novelcoworking.com/
Clean Air Act
https://www.epa.gov/clean-air-act-overview
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Office Evolution
https://www.officeevolution.com/
Venture X
https://venturex.com/
All Good Works Foundation – Office Leasing Meets Nonprofit
https://andersonadvisors.com/podcast/all-good-works-foundation-office-leasing-meets-nonprofit/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Practicing social distancing to avoid getting sick and livin’ la vida loca to experience the calm before the storm of tax season, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- How can you accelerate a large capital loss carryforward instead of just offsetting from capital gains every year? To get rid of large capital loss carryforwards, there must be capital gains to offset them
- When would it make sense for stock/options traders to do the mark-to-market election? If you’re a trader, you should do 750+ trades per year and expect no time off or W-2 income; you need to do the mark-to-market election sooner than later (by April 15) and if you’re going to lose lots of money
- Is there any additional tax benefit besides the federal solar tax credit when you install the solar on a rental property? Yes, the current tax credit is 26 percent for 2020 through 2022, and 87 percent of the solar installation cost can be depreciated
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson Advisors Tax and Asset Protection Workshop on Jan. 30, 2021
http://aba.link/TAP130
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Schedule K-1
https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
MileIQ
https://www.mileiq.com/
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Small Business Administration (SBA)
https://www.sba.gov/
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loans
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Solar Investment Tax Credit (ITC)
https://www.seia.org/initiatives/solar-investment-tax-credit-itc#:~:text=Quick%20facts,large%2Dscale%20utility%20solar%20farms.
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Mark-to-Market Election
https://www.irs.gov/taxtopics/tc429
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
Form 2553
https://www.irs.gov/forms-pubs/about-form-2553
Form 8332
https://www.irs.gov/forms-pubs/about-form-8332
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
State and Local Tax (SALT) Deduction
https://taxfoundation.org/tax-basics/salt-deduction/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What does every real estate investor need to know in 2021? Obtain the right insurance at the right time for your properties. Make sure if something goes wrong, you're protected.
Today, Clint Coons of Anderson Business Advisors talks to Shawn Woedl, President and CEO of the National Real Estate Insurance Group (NREIG). Shawn’s responsible for overseeing all aspects of the agency, specifically focused on maintaining strong carrier and industry relationships, developing new and innovative product offerings, and managing internal sales and service processes. He is an industry recognized speaker and educator with an emphasis in commercial property insurance
Shawn has helped grow NREIG into the largest insurance program in the country, insuring more than 88,000 locations. Through Shawn’s efforts, NREIG has expanded to accommodate investment properties up to 20 units, vacation rentals, and non-performing notes. He has enhanced coverage options for terrorism, earthquake and sinkhole, tenant protector plan, and cyber liability to fill gaps that investors may experience in their property and liability coverage.
Highlights/Topics: * If you're going to be a landlord, you're going to buy property, and you're going to hold it long-term, what type of policy or coverage do you need? At minimum, you need property and liability coverage. * What’s covered and what’s not? Not every carrier is the same. Read your policies to figure out vacancy versus occupied provisions. * A tenant’s pet gets sprayed by a skunk, and everything smells like skunk. If I'm a landlord and the tenants vacate, how do I protect against that type of event? Require your tenant to carry renter's insurance and make sure that policy has a provision that covers damage by pets. * What about toxic mold? Most property policies do exclude that completely. Build into policies at least a sub-limit. If a lender says you’ve got to have limited mold coverage, that sub-limit will provide enough coverage to satisfy them. * When I build out my portfolio and have eight properties, do I need to acquire a separate policy for each property, or can I get an umbrella policy that covers everything? You don't necessarily need eight policies for eight locations. Doing that puts you at the mercy of the underwriter on what they want to assign as property and liability rates for each risk. * What about an excess liability policy? There are two options: Umbrellas go over multiple lines of coverage, and excess liabilities go to one line of coverage. * Would we use the word, ‘additional insured in this policy’ anywhere? The only place to put additional insured or who would be listed as additional insured would be your lender. * Do you need to see documents when doing this? What do you need from the client to put something like this together for the policy? No closing documents. Carriers don’t ask for that. They’re okay with just what the insured provides. * When we’re setting up structures, anonymity is important. You’ll put it in the name of the trust, that’s no big deal? It’s in the name of the trust, but you can list the trustee in the name insured in addition to that actual trust name. * Is there a special type of policy you need with an Airbnb? Not really. The Airbnb industry took the insurance industry by storm. For the longest time, trying to obtain insurance coverage for an Airbnb was difficult because liability exposure was written differently. Insurance coverage is not cheap on the liability side.
Resources National Real Estate Insurance Group (NREIG)
https://nreig.com/
NREIG’s Resources
https://nreig.com/resources/
NREIG's Tenant Protector Plan (TPP)
https://nreig.com/products/tenant-protector-plan/
NREIG Affiliate
https://affiliate.nreig.com/anderson
Real Estate Investors Association (REIA)
https://nationalreia.org/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
It’s the first Tax Tuesday of the year. This time, you’re not only listening but watching Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * If we received PPP in our business, then get approved for forgiveness, will we still be able to deduct the rents and utilities we applied for the PPP to? Any loan forgiveness is not taxable, anything paid for with PPP is fully deductible, and any PPP loan forgiveness gives you basis * I recently read that Elon Musk is moving his private foundation from California to Texas. Is there a tax advantage for moving a private foundation or a nonprofit from California to Texas? No tax advantage, but both states highly regulate nonprofits * Do you have to be married to create an entity that allows you to hire your children? No, as long as they are your children * How long after the sale of a primary residence do you have to apply the proceeds to a new home purchase to avoid taxation? No law ceased to exist, refer to Section 121 Exclusion and 1031 Exchange * I’m 70 years old and haven’t made a deposit to my Roth in 10 years. Am I free to withdraw all my account without penalty, or am I limited by cost basis? Once you have the Roth for at least five years and over 59.5 years old; you can take it all out, but then you have no protected active income stream
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Post-Pandemic Real Estate Investing Class with Toby Mathis and Aaron Addams
http://aba.link/REI2021
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
California State Board of Equalization - Proposition 19
https://www.boe.ca.gov/prop19/
California Proposition 13
https://www.californiataxdata.com/pdf/Prop13.pdf
Community Property with Right of Survivorship
https://lslcpas.com/real-estate-ownership-community-property-right-survivorship-better-joint-tenancy/
Kiddie Tax
https://www.irs.gov/taxtopics/tc553
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
MileIQ
https://www.mileiq.com/
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Form 1099
https://www.irs.gov/pub/irs-pdf/i1099gi.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Small Business Administration (SBA)
https://www.sba.gov/
Labor Laws
https://www.dol.gov/general/aboutdol/majorlaws#:~:text=The%20Fair%20Labor%20Standards%20Act,most%20private%20and%20public%20employment.&text=It%20requires%20employers%20to%20pay,the%20regular%20rate%20of%20pay.
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Hobby Loss Rule
https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide
26 U.S. Code Section 121 Exclusion
https://www.law.cornell.edu/uscode/text/26/121
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
1244 Election
https://www.law.cornell.edu/uscode/text/26/1244
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loans
Old-Age, Survivors, and Disability Insurance (OASDI)
https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf
Tax-Wise Business Ownership by Toby Mathis
https://andersonadvisors.com/shop/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How are you doing, really? Just don’t watch or listen to the news because it’s tough living in paradise—whether it’s California, Hawaii, or Iceland. However, Toby Mathis and Jeff Webb of Anderson Advisors are still here to offer answers to your tax questions with a side of awesome sauce. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics: * How much can you give to charity and receive a full credit, even if filing a standard deduction? Choose between taking a standard deduction or an itemized deduction on Schedule A to give a cash donation to charity and write-off 100 percent of it against your adjusted gross income (AGI) * What is Section 1202? Can a corporation managing real estate qualify for 26 U.S. Code Section 1202? Section 1202 refers to partial exclusion(s) for gain from certain small business stock and designed to get people to invest in manufacturing-type companies * The recently passed California Proposition 19 will allow California to reassess any non-primary residence properties transferred to heirs at market rate? Yes, starting Feb. 16, 2021; for more information, visit the state’s Board of Equalization * I’m trying to meet my goal of $50K for Infinity investing. I have about $30K that I could use to buy stocks, ETF, etc. Could I use all $30K to purchase stocks without violating the annual $6,000 contribution limit? Learn how to be a stock market landlord, buy assets, settle liabilities, and systematically make passive income to not work again
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources: Tax Toolbox
http://aba.link/taxtoolbox
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Form 1023 - Application for Recognition of Exemption
https://www.irs.gov/forms-pubs/about-form-1023
Form 1024 - Application for Recognition of Exemption
https://www.irs.gov/forms-pubs/about-form-1024
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule D
https://www.irs.gov/pub/irs-pdf/f1040sd.pdf
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Internal Revenue Code Section 1202
https://www.irs.gov/pub/irs-regs/ia2694.txt
California State Board of Equalization - Proposition 19
https://www.boe.ca.gov/prop19/
California Proposition 13
https://www.californiataxdata.com/pdf/Prop13.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Lifetime Gifts - Form 709
https://www.irs.gov/forms-pubs/about-form-709
Medicare
https://www.medicare.gov/
Social Security Administration
https://www.ssa.gov/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Community Property with Right of Survivorship
https://lslcpas.com/real-estate-ownership-community-property-right-survivorship-better-joint-tenancy/
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
HUD
https://www.hud.gov/
Kiddie Tax
https://www.irs.gov/taxtopics/tc553
State and Local Tax (SALT)
https://taxfoundation.org/tax-basics/salt-deduction/
Schedule K-1 (Form 1065)
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Form 5498
https://www.irs.gov/forms-pubs/about-form-5498
Conservation Easements
https://www.conservationeasement.us/what-is-a-conservation-easement/
Alternative/Renewable Energy Tax Credits
https://www.americanprogress.org/issues/green/reports/2020/05/28/485411/renewable-energy-tax-credits-case-refundability/
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Erik Dodds
https://afsplan.com/erik-dodds-2/
Tax-Wise Business Ownership by Toby Mathis
https://andersonadvisors.com/shop/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What’s the difference between President Donald Trump’s current tax laws versus tax policies/proposals from President-elect Joe Biden? Toby Mathis and Jeff Webb of Anderson Advisors provide only the good, bad, and painful facts—not a partisan party. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What are the differences between Trump vs. Biden tax plans?
-
- Additional payroll taxes on high-earners
- Increased income tax on high-income individuals
- Increased capital gains rate imposed on high-income individuals
- Tax wealth ideas include annual wealth tax and greater estate/gift taxes
- Increase corporate income tax rate
- Eliminate 199A
-
- What should be done in 2020/2021, if you’re worried about tax increases?
- Gain Harvesting
- Roth Conversion
- 100% AGI
- Carryforward NOLs
- Wait on Harvesting Losses
- Gifting
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax Toolbox
Here's where Biden and Trump stand on your taxes
Tax Cuts and Jobs Act (TCJA)
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
Unrelated Debt-Financed Income (UDFI)
Unrelated Business Income Tax (UBIT)
Rollovers as Business Start-ups (ROBS)
Capital Gains and Losses
Real Estate Professional Requirements
1031 Exchange
Alternative/Renewable Energy Tax Credits
State and Local Tax (SALT)
Section 199A
Bob Keebler
Opportunity Zones
U.S. Government Accountability Office (GAO)
Medicare
Social Security Administration
Self-Employment Tax
Credits and Deductions
Conservation Easements
Charitable Organizations
Pease Limitation on Itemized Deductions
Affordable Care Act (ACA)
Form 1040-NR
Wills and Trusts
CARES Act
Bonus Depreciation
Paycheck Protection Program (PPP)
Home Office Deduction
26 U.S. Code Section 280A
Tax-Wise Business Ownership by Toby Mathis
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
Anderson Advisors Tax-Wise Workshop
Anderson Advisors Infinity Investing Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Did you vote and submit your ballot for the U.S. General Election on Nov. 5, 2020? Then, your focus may have shifted to taxes. Toby Mathis and Jeff Webb of Anderson Advisors answer tax questions related to personal and professional matters. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- If a new C Corp is started and the owner is the only employee during the initial years, does the owner/employee still need to draw a salary, even if the C Corp is not profitable for the first few years? With a C Corp, there are no salary requirements; compensation is anything of value, such as a salary or car or you may not be paid at all
- Does the IRS consider your business a hobby if you have not turned a profit within five years? Three of 5 years is presumed to be a hobby
- How can I live in a home owned by my LLC that is not producing income? Putting your primary residence in an LLC is a bad idea; may cost you an unlimited exclusion (equity) or effect your 121 exclusion
- Real estate investor start-up expenses on education, classes, materials - can I write all that off my taxes once my LLC is formed? Put those expenses in a corporation, not LLC, because the corporation has to make money before expenses can be deducted
- I am a physician and work for a university hospital. During the pandemic, I have been working from home. Can I get a deduction for rent? If you are a W-2 employee for the university hospital, there is no reimbursement for rent; if you are a 1099 employee, you can get a home office deduction
- I used the HELOC of my primary residence to purchase an investment property. Any tax deduction/advantage I can take? You can’t use HELOC interest as mortgage interest on Schedule A; can only be used to improve or buy your house
- I have insurance policies in India and would like to bring the money once they are matured. Do I need to pay taxes on this money? Depends if you are a citizen or resident of the United States; use designation 15CB from chartered accountant in India that states money has been paid
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax Toolbox
http://aba.link/taxtoolbox
Here's where Biden and Trump stand on your taxes
https://www.cnbc.com/2020/10/20/heres-where-biden-and-trump-stand-on-your-taxes.html
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Health Savings Account (HSA)
https://www.healthcare.gov/glossary/health-savings-account-hsa/
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
IRS - Business Structures
https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
Schedule K-1 Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
Conservation Easement
https://www.conservationeasement.us/what-is-a-conservation-easement/
Alternative/Renewable Energy Tax Credits
https://www.americanprogress.org/issues/green/reports/2020/05/28/485411/renewable-energy-tax-credits-case-refundability/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
1099 Formhttps://www.irs.gov/pub/irs-pdf/i1099gi.pdf
https://www.irs.gov/pub/irs-pdf/i1099gi.pdf
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
26 U.S. Code Section 183
https://www.law.cornell.edu/uscode/text/26/183
Hobby or Business? IRS Offers Tips to Decide
https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide
121 Exclusion
https://www.irs.gov/taxtopics/tc701
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Woody vs. Commissioner
https://casetext.com/case/woody-v-commissioner-of-internal-revenue-1
HELOC
https://www.investopedia.com/mortgage/heloc/
Small Business Administration (SBA)
https://www.sba.gov/
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/disaster-assistance
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
St. Louis Federal Reserve Economic Data (FRED)
https://fred.stlouisfed.org/
Form 15CB
https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007843.pdf
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Workshop
https://andersonadvisors.com/asset-protection/
Anderson Advisors Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
Anderson Advisors Infinity Investing Workshop
https://andersonadvisors.com/investing-workshop-passive-income-generating-machine/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What’s the next big thing to invest in? Have you been paying attention to skyrocketing shares in companies, such as SpaceX, Spotify, Lyft, or Rivian?
In this episode, Toby Mathis of Anderson Advisors talks to Drew Spaventa, who runs a venture capital firm that specializes in private investments.
Accredited investors work with The Spaventa Group to access late-stage private companies that people want a piece of before going public.
Highlights/Topics:
- Pain Point: Once a primary investor comes in, what about other retail investors?
- Private vs. Public: Gain access to secondary market within private industry with insiders
- Placements: Pick private companies w/available shares, valuation, revenue, recognition
- Risk and Reward: Make sure to have extra money in bank because you could lose it all
- Next Big Things: Food alternatives, financial tech, space, mixed reality, electric vehicles
- Cash Flow vs. Carrot Fee: Short- or long-term investments and option to buy/sell shares
Resources:
The Spaventa Group
https://thespaventagroup.com/
Drew Spaventa on Twitter: @DrewSpavy
https://twitter.com/drewspavy?lang=en
The Spaventa Group on Facebook: https://www.facebook.com/thespaventagroup
The Spaventa Group on LinkedIn: https://www.linkedin.com/company/the-spaventa-group/
Drew Spaventa’s Email: dspaventa@thespaventagroup.com
Drew Spaventa’s Phone: 631.210.7263
SpaceX
https://www.spacex.com/
WeWork
https://www.wework.com/
Impossible Foods
https://impossiblefoods.com/
Beyond Meat
https://www.beyondmeat.com/
Rivian
https://rivian.com/
Chime
https://www.chime.com/
Robinhood
https://robinhood.com/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
What could happen to the step-up in basis and estate tax depending on what state you live in and how you vote in the upcoming presidential election? Before you take drastic action to change your tax plan, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- I’m a computer engineer in California with a 350k salary. This year, I got an extra bonus of about 100k and received 70k short-term capital gain from investment. Is there anything I can do by the end of this year to still save on tax? Yes, maximize your retirement plan contributions and offset capital gains by harvesting capital gain losses
- Our beneficiary IRAs become self-directed (SD) IRAs to purchase rental properties. We are retirement age, but don’t have to take required minimum distribution (RMD), yet. Our goal for this year is to pay 12 percent taxes on AGI. That percentage may increase in future years. Can we convert the SD IRAs to Roths? There is no limitation as far as age is concerned to convert a traditional IRA into a Roth IRA; if you have an RMD, then you have to pay the RMD before converting the traditional into a Roth IRA
- I am a high-income earner and have a short-term rental in service for 12/2020. In order to take advantage of tax benefits, would you recommend cost segregation this year and use losses toward active income? A short-term rental does not always go on Schedule C; substantial services must be provided to short-term tenants and average stay must be seven days or less or will go on Schedule E
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax Toolbox (aba.link/TaxToolbox) (Only $595, Regularly $1,500)
http://aba.link/taxtoolbox
Neuro Diverse Living (NDL) Inaugural Fundraiser and Silent Auction (ndl2020.org/silentauction)
http://ndl2020.org/silentauction
Here's where Biden and Trump stand on your taxes
https://www.cnbc.com/2020/10/20/heres-where-biden-and-trump-stand-on-your-taxes.html
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
St. Louis Federal Reserve Economic Data (FRED)
https://fred.stlouisfed.org/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Capital Gains and Losses
https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Conservation Easement
https://www.conservationeasement.us/what-is-a-conservation-easement/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
MileIQ
https://www.mileiq.com/
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
1099 Form
https://www.irs.gov/pub/irs-pdf/i1099gi.pdf
Puerto Rico Tax Incentives (Act 20 and 22)
http://puertoricotaxincentives.com/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
HUD
https://www.hud.gov/
CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf
Old Age, Survivors, and Disability Insurance (OASDI)
https://www.investopedia.com/terms/o/oasdi.asp
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/paycheck-protection-program
Form 1065
https://www.irs.gov/forms-pubs/about-form-1065
Unrelated Debt-Financed Income (UDFI)
https://ira123.com/learn/understanding-udfi/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Do you freak out about your money when the stock market crashes or during other financial crises? Do you need someone to listen and offer sound stock market strategies?
In this episode, Toby Mathis of Anderson Advisors talks to Erik Dodds, an independent fiduciary who focuses on stock market investing. Also, Erik is the managing consultant for Anderson Financial Services (AFS) and mastermind for the Infinity Investing Workshop.
Erik finds talking about stocks, dividends, mutual funds, and other financial matters to help people with their money is fun!
Highlights/Topics:
- Current Marketplace: COVID takes market down at rapid pace and creates panic
- Future Marketplace: Erik predicts possible bigger, better stimulus in February
- Advice for Traders: Take some winnings off table; no need to actively trade all the time
- Preferred Portfolio Options: Hedge from volatility indices/instruments to cash balance
- Puts and Calls (Naked or not): What they are, how they work—always protect yourself
- Select System: Traders need to be disciplined on when to buy and sell; keep it simple
- Dividend Kingdom: Are you an aristocrat or king stock/option? What’s the difference?
- Growth vs. Value: Pay for consistency and cash flow, not up years
- Real Estate and Stocks: Don’t fight feds that keep rates low—buy assets
Legal Disclaimer
Futures, stocks, and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks, and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains.
If the market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are responsible for all the risks and financial resources you use and for the chosen trading system. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.
CRG Wealth, LLC ("RIA Firm") is a registered investment adviser located in Las Vegas, NV. CRG Wealth, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
CRG Wealth, LLC, Canyon Ridge Group, LLC, and their representatives do not provide legal, tax preparation, or accounting advice. Persons who provide such advice do so in a capacity other than in the capacity of working with the above-referenced firms.
Anderson Financial Services, LLC, Anderson Business Advisors are unaffiliated with Canyon Ridge Group, LLC & CRG Wealth, LLC.
Resources
Erik Dodds’s Email:
erik@canyonridgegroup.com
Infinity Investing Workshop
https://infinityinvestingworkshop.com/mm/
Bob Evans Farms
https://www.bobevansgrocery.com/
Bob Fitts on LinkedIn
https://www.linkedin.com/in/bobfitts1
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
In case you missed it, Oct. 15 was another tax deadline. However, you still have some time to decide who you want to vote for in the upcoming presidential election: Donald Trump or Joe Biden? Toby Mathis of Anderson Advisors answers your tax questions about the impact of their proposed tax plans. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What are the differences between Donald Trump’s and Joe Biden’s proposed tax plans?
- Individual Rates: Trump to lower-middle rates; Biden to increase top-bracket rates
- Corporate Rates: Trump wants 21%; Biden wants 28%
- Dividends: Trump wants 0, 15, 23.8%; Biden wants 0, 15, 23.8, 43.4%
- Credits: Biden wants to increase child credits to give families more money
- Payroll Taxes: Trump to forgive OADSI; Biden to add OADSI
- Estate Taxes: Trump to keep TCJA; Biden to expire it with no step up
- Itemized Deductions: Trump to remove miscellaneous itemized deductions; Biden to reset deductions and add SALT
- What are actions that you may want to take in 2020/2021 considering Trump’s vs. Biden’s proposed tax plans?
- Gain Harvesting
- Roth Conversion
- 100% AGI
- Carryforward NOLs
- Wait on Harvesting Losses
- Gifting
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax Toolbox (Only $595, Regularly $1,500)
http://aba.link/taxtoolbox
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Old Age and Disability Survivor’s Insurance (OADSI)
https://www.investopedia.com/terms/o/oasdi.asp
State and Local Tax (SALT) Limitation
https://www.efile.com/state-and-local-tax-deduction-salt/
Section 1231
https://www.investopedia.com/terms/s/section-1231.asp
26 U.S. Code Section 121
http://www.irs.gov/pub/irs-drop/rr-14-02.pdf
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Internal Revenue Service (IRS)
https://www.irs.gov/
1099-Misc Form
https://www.irs.gov/forms-pubs/about-form-1099-misc
Bankruptcy
https://www.uscourts.gov/services-forms/bankruptcy
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Unrelated Debt-Financed Income (UDFI)
https://ira123.com/learn/understanding-udfi/
199A Deduction
https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs
3115 Change of Accounting Method
https://www.irs.gov/forms-pubs/about-form-3115
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
MileIQ
https://www.mileiq.com/
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
Tax-Wise by Toby Mathis
https://andersonadvisors.com/tax-wise/
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Are you a real estate investor that wants to learn how to keep more of what you earn? Seek simplified and easily understandable legal and tax strategies from a uniquely qualified guide to plan your income goals and accumulate wealth.
Today, Clint Coons of Anderson Business Advisors talks to Greg Boots, a licensed attorney and insurance agent. Also, Greg is a Certified Financial Educator (CFEd®) and Retirement Income Certified Professional (RICP®).
Greg is an authority on business formation, estate planning, and retirement planning strategies. He works with clients nationwide on executive wealth accumulation, non-qualified plans, retirement income planning, and college funding. He has extensive experience working with professional practices on executive compensation and business continuation goals. Also, Greg is active in retirement income planning for federal employees.
Highlights/Topics: * Life and Death: Insurance is a valuable tool in spite of traditionally designed policies * Capital Accumulation: Create something that can be actively used for entire lifetime * Types of Life Insurance Policies: + Term: Inexpensive, but no value until death + Perm: Lifetime benefits with cash growth component * Index Universal Life (IUL) Policy: Links to upside growth of stock market performance * Zero Risk: Never lose underlying capital with protection from stock market corrections * Private Vault: Capital reserve actively utilized any time to get into other investments * Policy Money: Always access money tax free by taking out loan and dictating terms * Compounding Capital: Take money out and policy continues to grow * Premium Finance: Borrow policy money to accumulate wealth via super safe funding
Resources The Private Vault by Greg Boots
https://www.amazon.com/Private-Vault-Gregory-J-Boots-ebook/dp/B00G71IKNA
Free Consultation and Strategy Session with Greg Boots
https://aba.link/gregconsult
26 U.S. Code Section 7702
https://www.govinfo.gov/app/details/USCODE-2011-title26/USCODE-2011-title26-subtitleF-chap79-sec7702
Dave Ramsey
https://www.daveramsey.com/
Suze Orman
https://www.suzeorman.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are you ready for the debates and upcoming election? In the meantime, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions about Donald Trump’s and Joe Biden’s tax returns. Maybe you, too, can become a multimillionaire. William H. Rehnquist once stated, “There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.” Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Can you withdraw some earnings from a Roth IRA, if you held it for five years or more and you are not older than 59.5 years old? Yes, you can take out earnings without being penalized or forced with required distributions
- If I live in one state and use my home office for a tax deduction, but have rented an apartment in another state for business purposes, can I use the apartment and utilities for a business deduction? Apartment in other state probably needs to be rented by entity or business; don’t do a home office, but an administrative office in your home
- What are the laws for purchasing a vehicle for business to use as a deduction? If business buys vehicle, track mileage and don’t fall below 50%; if you buy it, track miles and get reimbursement (55 to 58 cents per mile)
- Is there a way to get around being taxed from the gains/profit from doing flips? Find other expenses to run against that income
- If you rent out a condo and take depreciation on it, and then the following year, decide to live in the condo yourself, what do you do about the depreciation? Depreciation stays where it’s at until you decide to sell the property
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
http://aba.link/iiw
Tax-Wise by Toby Mathis
https://andersonadvisors.com/tax-wise/
Donald Trump’s Taxes (New York Times)
https://www.nytimes.com/interactive/2020/09/27/us/donald-trump-taxes.html
Mar-a-Lago
https://www.maralagoclub.com/
William H. Rehnquist
https://www.oyez.org/justices/william_h_rehnquist
26 U.S. Code Section 7213
https://www.law.cornell.edu/uscode/text/26/7213A
26 U.S. Code Section 469(c)(7)
https://www.law.cornell.edu/uscode/text/26/469
26 U.S. Code Section 480A
https://www.law.cornell.edu/uscode/text/26/26
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
26 U.S. Code Section 121
http://www.irs.gov/pub/irs-drop/rr-14-02.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
MileIQ
https://www.mileiq.com/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
CARES Act
https://www.sbc.senate.gov/public/index.cfm/guide-to-the-cares-act
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Schedule K-1/Form 1065
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Need a vacation, but don’t think you can afford it? Invest in short-term rentals to spend time relaxing with friends and family to realize that life goes on. However, Airbnb-style investing isn’t for everyone. Unless, you know how to do it right and treat it as a business.
Today, Clint Coons of Anderson Business Advisors talks to Richard Fertig, founder of Short Term Rental University (STRU).
Richard provides insight to overcome challenges that make short-term rentals create cash flow. They’re supposed to be a value add to your life and income, not a distraction.
Highlights/Topics: * Why start STRU? Out of frustration with the Airbnb platform. * What is your personality type and approach? Hands-on or outsource and automation. * Why short-term rentals? Single largest rate of return out of all real estate investments. * Would you stay there? There are properties/places all over that are desirable locations. * Is there competition? Narrow niche to charge a premium and be unique, not generic. * What about reviews? Trust feedback from peers; guests rate hosts, hosts rate guests. * Is it a way to make easy money? Depends on location, location, location. * How has COVID impacted rentals? If you're in the right location, you can have the best year yet. * Where are the best places? Places off the beaten path or on people’s bucket list. * What are the general guidelines? Depends on budget; the same number of baths/bedrooms. * What are the common mistakes to avoid? + Find something interesting, and then price it at a premium. + Attract your tribe to be much more profitable. + Don’t invest in condos where 300 other people are competing against you. + Don’t view occupancy as a Key Performance Indicator (KPI).
Resources YT Playlist with Best Videos for STR Hosts Starting Their Journey
https://geni.us/cYwzHGy
STRU YouTube Channel
https://www.youtube.com/struniversity
STRU Facebook Group
https://www.facebook.com/groups/113927182423791/
Airbnb
https://www.airbnb.com/
VRBO
https://www.vrbo.com/
AirDNA
https://www.airdna.co/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Who can or wants to work forever? If not, then learn how to invest in cash flowing rental properties as a passive way to make money.
Today, Clint Coons of Anderson Business Advisors talks to Kathy Fettke, co-CEO of Real Wealth Network and host of the Real Wealth Show and Real Estate News podcasts. Also, Kathy is the best-selling author of Retire Rich with Rentals.
Kathy is passionate about teaching people how to better understand real estate market cycles to thrive during booms and protected during busts. She helps people build passive income streams through high cashflow real estate investments.
Highlights/Topics: * 1031 Exchange: Overcome fear of going other places to invest and make money * Top Factors: Job growth, population growth, affordability plus infrastructure investment * Appreciation: Find it anywhere and everywhere by getting ahead of growth and progress * COVID: Massive migration accelerated to leave high-priced markets for new normal * Landlord/Tenant Laws: Proposition 13 passed in California drives up taxes, kills profit * Where to invest? Texas, Florida, and Alabama due to job growth and lower taxes * Lack of Supply: When market collapsed, demand increased for affordable housing * Rent Collection: People don’t want to get evicted; continue to pay for place to live * Manipulated Economy: Nothing makes sense or is predictable * Real Estate Survival Rate: Depends on what federal reserve does with interest rates
Resources Real Wealth Network
http://realwealthnetwork.com/
Real Wealth Show
https://www.realwealthnetwork.com/category/podcast/real-wealth-show/
Real Estate News Podcast
https://www.realwealthnetwork.com/category/podcast/real-estate-news/
Retire Rich with Rentals
https://www.amazon.com/Retire-Rich-Rentals-Ongoing-Forever/dp/1500881589
How to Do a 1031 Exchange
https://www.realwealthnetwork.com/learn/how-to-do-a-1031-exchange-rules-definitions/
Kathy Fettke’s Email
kathyfettke@realwealthnetwork.com
Kathy Fettke’s Phone: 888.796.3896
Proposition 13
https://www.californiataxdata.com/pdf/Prop13.pdf
Paycheck Protection Program (PPP)
https://www.sba.gov/funding-programs/loans/paycheck-protection-program
Extreme Success by Rich Fettke
https://www.amazon.com/Extreme-Success-Program-Succeed-Struggle/dp/0743223144
Rich Dad Poor Dad by Robert Kiyosaki
https://www.richdad.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Give your children a purpose, not money. Toby Mathis and Jeff Webb of Anderson Advisors answer tax questions related to passive versus active income reported on payroll for people of all ages to flipping properties and real estate investments. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- If I have a small business, do I need to make it an LLC to hire my children, or can I just be an independent contractor and hire them? LLC is not required for small businesses, but it is recommended for liability protection; your children’s wages should be run through payroll, even if they don’t have social security numbers
- I just bought a house, paid 30k in cash, and spent about $15k in rehab. What expenses of this deal can I write off, besides the rehab cost? Depends on whether you are flipping the property or using it as an investment property; capitalize all of it because you can’t write off the expenses as repairs
- If I am a real estate professional in 2020, can I offset previous years’ passive losses in this year? No, only for 2020 and only for years you were a real estate professional
- Can you put a primary residence into a land trust and/or LLC to maintain anonymity, if you have a commercial bank loan? If not, are there other options available? LLC or land trust is possible, but it’s not the best idea because it could impact homestead
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
The Tax Toolbox (only $595; regularly $1,500)
http://aba.link/ttb920
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop-for-businesses-investors/
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Opportunity Zones
https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Qualified Opportunity Fund
https://www.irs.gov/credits-deductions/businesses/invest-in-a-qualified-opportunity-fund
Form 8996
https://www.irs.gov/forms-pubs/about-form-8996
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
CARES Act
https://www.sbc.senate.gov/public/index.cfm/guide-to-the-cares-act
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Small Business Administration (SBA)
https://www.sba.gov/
1099 Form
https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
26 U.S. Code Section 469(c)(7)
https://www.law.cornell.edu/uscode/text/26/469
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
MileIQ
https://www.mileiq.com/
Mar-a-Lago
https://www.maralagoclub.com/
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Federal Reserve Economic Data
https://fred.stlouisfed.org/
Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster
https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
Paycheck Protection Program (PPP)
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Paycheck Protection Program (PPP) Flexibility Act
https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
The Private Vault by Greg Boots
https://www.amazon.com/Private-Vault-Gregory-J-Boots-ebook/dp/B00G71IKNA
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Do you and your family want to live a better life? Be intentional and deliberate. Most families and businesses don’t realize that the financial transformation they are seeking is not in alignment, but opposed to the transformation they desire.
In this episode, Toby Mathis of Anderson Advisors talks to Eric Dunavant, president and CEO of Paradiem. Since 2007, Eric’s leadership has guided multiple families and businesses to discover greatness, growth, governance, and generosity that makes an impact every day. Before Paradiem, Eric served as a vice president at Charles Schwab and was an associate at Fidelity Investments in charge of managing money market mutual funds.
Eric is a Certified Financial Planner (CFP), Qualified Kingdom Advisor, and Financial Planning Association affiliate. In addition to his certifications, Eric was named New Orleans City Business Money Maker, New Orleans Area Five Star Professional Wealth Manager, and Safe Harbor’s Real Man of St. Tammany Parish. Eric’s book, What If We’ve Been Doing It All Wrong, focuses on how your worldview often interrupts all your financial thinking and behavior.
Highlights/Topics:
- Meaning and Purpose: Paradiem means beyond the day, and Eric’s organization empowers families and businesses to live a better story by being more intentional.
- ROI: Return on investment versus return on intention, which is more important? Too many families focus too much on return on investment, not return on intention.
- Mission, Vision, Values: Culture eats strategy for breakfast, so make sure values are aligned to have a real direction that’s bigger than dollars.
- Business owners and families tend to take on trajectory building wealth, rather than no real purpose when stress and anxiety come along.
- Unintended Consequences: Start small, but over time, they lead to miscommunication, and eventually, addiction.
- Be Deliberate: Money doesn't cause problems and is not an issue. Money can magnify and expose all the areas being neglected and ignored inside your family and life.
- Finances Fragment Families: After Eric’s mom died, his dad pursued business growth and not doing what he was told—workaholic, not home, and not focused on health.
- Four categories of families should focus on to think beyond where they are today:
- Greatness: Why does your story matter?
- Growth: What is the ROI of your story?
- Governance: Who tells your story?
- Generosity: What can your family come together on to make a difference?
- Walk the Walk, Talk the Talk: Start conversations, voice opinions, gain feedback, minimize friction, and achieve buy-in to discover, build, and teach family values.
- How healthy is your family? Resources are available to transform your family.
- What are you willing to work on? There's not anything that's completely out of reach, if you're willing to do the work and go into the pain and darkness of it.
Resources
Family Impact Kit: eric@paradiem.org
Website: https://paradiem.org/
https://paradiem.org/
What If We’ve Been Doing It All Wrong by Eric Dunavant
https://www.amazon.com/What-Weve-Been-Doing-Wrong-ebook/dp/B0733WBKT5
Peter Drucker
https://www.drucker.institute/perspective/about-peter-drucker/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Besides guidance from the Internal Revenue Service (IRS) regarding U.S. President Donald Trump’s executive order to allow deferral of the employee portion of Social Security payroll tax, Toby Mathis and Jeff Webb of Anderson Advisors provide further clarification. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- If I sell a piece of land and keep the primary house, what is the 1031 valued at? Is it a $0 or 150k purchase price in 2012? Get each parcel of land appraised to identify value for the basis
- Can I write off an RV, if I use it for business travel? It is possible to write off the RV by using it 100% for business, not personal use as a second home
- How does a trust work in relationship to LLC in real estate? Provides anonymity for beneficiary and LLC
- Can you take depreciation on a rental condo? What do you use for the basis? Yes, you can take depreciation on a rental condo, if you own the condo, not as a renter
- Is there an option to give employees a bonus without being charged a luxury tax? You can give employees bonuses, but bonuses are subject to regular payroll taxes
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
The Tax Toolbox (only $495; regularly $1,500)
http://aba.link/ttb920
Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster
https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/
Internal Revenue Service (IRS)
https://www.irs.gov/
IRS: Notice 2020-65
https://www.irs.gov/pub/irs-drop/n-20-65.pdf
1031 Exchange
https://www.irs.gov/pub/irs-news/fs-08-18.pdf
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Airbnb
https://www.airbnb.com/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Form W-2
https://www.irs.gov/forms-pubs/about-form-w-2
Form 1065: Schedule K-1
https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
CARES Act
https://www.sbc.senate.gov/public/index.cfm/guide-to-the-cares-act
Small Business Administration (SBA)
https://www.sba.gov/
Cost Segregation
https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-1-introduction
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Hobby Loss/Safe Harbor Provision
https://www.irs.gov/pub/irs-utl/irc183activitiesnotengagedinforprofit.pdf
Earned Income Tax Credit
https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit
MileIQ
https://www.mileiq.com/
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
California Assembly Bill 5 (AB5)
https://www.investopedia.com/california-assembly-bill-5-ab5-4773201
Franchise Tax Board (FTB)
https://www.ftb.ca.gov/
QuickBooks
https://quickbooks.intuit.com/
ADP
https://www.adp.com/
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
Toby Mathis
http://tobymathis.com/about-toby-mathis/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
How do you take an existing asset and find alternative ways to profit from it? Or, how do you buy more house than you can afford and live rent-free by building equity and cash flow? House hacking.
Today, Clint Coons of Anderson Business Advisors talks to Captain Kevin Brenner, co-host of the Active Duty Passive Income (ADPI) Podcast and head coach of Operation A.T.O.M. (Action Takers Only Mastermind). Kevin teaches military real estate investors how to build passive income through smart investments.
Kevin started his real estate investing journey in late 2018, after using his Veteran Affairs (VA) Loan Entitlement to house hack a quadplex in Savannah, Georgia. Through careful quality improvements, Kevin renovated each unit and raised the rents $500 per month/per unit. In July 2019, Kevin joined the ranks of the ADPI team and is dedicated to helping other service members and veterans.
Highlights/Topics: * What is house hacking? Easier way to reduce, eliminate, or cash flow mortgage * How to take advantage of house hacking? Seek properties where you can rent out bedrooms, separate spaces, and more areas * What is a carriage house? Separate space or apartment that’s part of a single-family property that you can rent out to pay your mortgage while living in the main house * What is the ideal property for house hacking? Depends on number of units, not number of bedrooms; look for the right property and strategy * How can a house hacker level up? Start with roommates, then live a life of luxury in the comfort of your own home paid by others * Where are the best places to house hack properties? Depends on market and occupancy regulations, but college towns and tourist destinations tend to be popular * Do you have to house hack with people? No, there are other options to create cash flow, such as renting out your garage for storage space * What type of insurance coverage is needed? Contact insurance provider about short-term rental and supplemental policies * When, where, and how to research rental agreements? Ask for advice and reach and to other investors and attorneys to find out their processes and precedence * What are some differences between conventional residential, VA, FHA, and other loans? Down payment percentage, occupancy regulations, and mortgage insurance * What are potential house hacking pitfalls to avoid? Work and responsibility are still involved, so consider managing your own property if you’re wise in real estate
Resources Kevin Brenner’s Email
kevin@activedutypassiveincome.com
Kevin Brenner on Instagram
https://gramho.com/media/2042907707006247179
Kevin Brenner on Facebook
https://www.facebook.com/kevin.brenner.16
Kevin Brenner on LinkedIn
https://www.linkedin.com/in/kevin-brenner-pmp-783471b6
Active Duty Passive Income (ADPI)
https://www.activedutypassiveincome.com/
Active Duty Passive Income (ADPI) Podcast
https://www.activedutypassiveincome.com/podcast
Operation A.T.O.M. (Action Takers Only Mastermind)
https://www.activedutypassiveincome.com/sales-page-action-takers-only-mastermind-atom
Military House Hacking Book
https://www.activedutypassiveincome.com/#cb09368810
Military Real Estate Investing Academy
https://www.activedutypassiveincome.com/sales-page-military-real-estate-investing-academy
Nimbus Capital Investment Co.
http://risewithnimbus.com/
Airbnb
https://www.airbnb.com/
Veterans Affairs (VA)
https://www.va.gov/
Neighbor.com
https://www.neighbor.com/
Federal Housing Administration (FHA)
https://www.hud.gov/buying/loans
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
What are ETFs and why have they become so popular as a way to invest in your favorite companies? These days, ETFs represent a multi-trillion-dollar industry.
In this episode, Toby Mathis of Anderson Advisors talks to William Rhind, founder of GraniteShares, an independent exchange-traded fund built for investors seeking simple, cost-effective access to differentiated investments. It is backed by leading fintech venture capitalists, such as Bain Capital Ventures and Clocktower Technologies.
William has built and managed businesses in the ETF market for almost his entire career and previously served as CEO of World Gold Trust Services, which is the largest commodity fund in the world.
Highlights/Topics:
- Exchange-Traded Fund (ETF): Fund listed like a share on the stock exchange that becomes new technology in the asset management space.
- Right Place, Right Time: People are embracing ETFs as a significantly low-cost alternative to mutual funds.
- Active or Passive Management: Mutual funds are active, ETFs tend to be passive.
- ETF Advantages: Low cost, and buy and sell whenever you want.
- Challenges for Investors: What is in the portfolio? What do you own? It’s a secret.
- Follow Index: The set of rules govern how the ETF has to be managed, how many shares must be included, what types of shares they are, and how often they rebalance.
- Management Fee: Small percentage of a fund’s assets that’s calculated on a manual basis and typically run from 0.17 to 0.7 percent.
- Some people still invest in mutual funds because the majority of mutual fund assets are held in 401(k) retirement accounts.
- GraniteShares: Focuses efforts on real assets, income, and large-cap equity investing.
- Wall of Worry: COVID crisis and economic collapse encourages as much investing and liquidity as possible.
- Moral Hazard: In the past, people that caused the banking crisis benefited from it. Now, people aren’t blaming banks or companies but specific people and countries.
Resources
GraniteShares
https://www.graniteshares.com/
GraniteShares on Twitter
https://twitter.com/graniteshares
William Rhind on LinkedIn
https://www.linkedin.com/in/william-rhind-5434367
Bain Capital Ventures
https://www.baincapitalventures.com/
Clocktower Technology Ventures
https://www.clocktowerventures.com/
World Gold Trust Services
https://www.gold.org/news-and-events/press-releases/world-gold-trust-services-names-william-rhind-ceo
BlackRock
https://www.blackrock.com/corporate
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
As COVID-19 and tax-related relief questions continue, Toni Covey and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Due to the AB5 Law, my clients can no longer hire me as an independent contractor. Instead, they are hiring out-of-state contractors. Do I need to switch to an S Corp or move my company out of California? It depends and offers various options, such as a worker must be customarily engaged in an independently established trade occupation
- For a preschool that received Coronavirus relief, will the PPP loan forgiveness amount, the grants, and the EIDL advance be taxable as income? PPP loan and grants are not considered taxable income, however, an EIDL of $10,000 will not be forgiven or tax-deductible from PPP
- I have solely owned a second home long-term in New York. Do I need to file taxes separately from my wage-earning wife to minimize my capital gains tax considering my present income is limited to Social Security? No, but it primarily depends on how much the wife is earning
- My wife and I own several rental properties and manage/maintain them mostly ourselves with no other employees. Does setting up a corporation to manage the rental properties (each on their own LLC) make sense from a tax standpoint? Consider a corporation to manage the rental properties or manage the LLCs that hold the rental properties
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Uniform Transfers to Minors Act (UTMA)
https://www.investopedia.com/terms/u/utma.asp
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
Paycheck Protection Program (PPP)
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Paycheck Protection Program (PPP) Flexibility Act
https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944
Small Business Administration (SBA)
https://www.sba.gov/
Internal Revenue Service (IRS)
https://www.irs.gov/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Unrelated Business Income Tax (UBIT)
https://www.irs.gov/charities-non-profits/unrelated-business-income-tax
Unrelated Debt-Financed Income (UDFI)
https://www.irs.gov/pub/irs-tege/eotopicn86.pdf
California Assembly Bill 5 (AB5)
https://www.investopedia.com/california-assembly-bill-5-ab5-4773201
Franchise Tax Board (FTB)
https://www.ftb.ca.gov/
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Form 1065: Schedule K-1
https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Form 8805
https://www.irs.gov/forms-pubs/about-form-8805
1040NR
https://www.irs.gov/forms-pubs/about-form-1040-nr
Passive Activity Losses (PALs)
https://www.investopedia.com/terms/p/passive-activity-loss-rules.asp
Schedule A
https://www.irs.gov/forms-pubs/about-schedule-a-form-1040
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Section 105
https://www.irs.gov/pub/irs-drop/rr-03-102.pdf
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
26 U.S. Code Section 280A
https://www.law.cornell.edu/uscode/text/26/280A
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
What type of expense do you prefer to deduct? There are deductions that you recapture, there are deductions that you don't. There's bonus depreciation, and there are flat out expenses. They're all different.
In this episode, Toby Mathis of Anderson Advisors talks to Warren Dazio, Executive Vice President – Business Development for Cost Segregation Services, Inc. (CSSI). The engineering-based consulting firm focuses on the tax law for commercial buildings.
As a natural leader, Warren brings ethics and integrity into every aspect of his life and work. He spent the first 20 years of his career in ministry and has a degree in theology. Later, he pursued an advanced degree in business and received an MBA.
Highlights/Topics:
- What is cost segregation? Accelerated depreciation on building to reduce income taxes.
- Why is self-storage so popular with investors? Self-storage is a strong investment option because of TPR, cost segregation, and sometimes, 179D.
- Can tenants be a pain to deal with? People still deal with tenants, but automation means doing less with those tenants.
- What’s more beneficial from a tax standpoint, build or convert self-storage buildings? Converting existing buildings into self-storage gets massive deductions from cost segregation. Building a self-storage facility from ground up has tax benefits, as well.
- Besides the cost segregation, are there tax credits that are like cash? Yes and no. A deduction that self-storage can qualify for is 179D. Research and development is a credit for credit, and a 45L associated with residential rentals is a credit.
- Is there a dollar amount with 179D that you get per square foot? Yes, it's anywhere from 30¢ to $1.80 per square foot. Focus on the building envelope, HVAC, and LED lighting.
- Is that subject to recapture? Gains are under other deductions on your tax return. If it's a deduction, it may be subject to recapture. Tangible property regulations don't have to be recaptured, but bonus depreciation does.
- If you’re building a self-storage facility or making a modification, if you do it right, you can get major tax relief, correct? Yes, you probably already covered the associated TPRs, and might have covered partial asset disposition (PAD).
- Is there a PAD available? Have you talked to your CPA about it? If your CPA is not aware of it, call a firm that helps you put a dollar amount to the write-off to gain from it. CPAs may not be qualified to do this work.
- Can you capture qualified improvement property? Can you capture a bonus? You can capture Section 179, which is a bit different from 179D. Section 179 and bonus are similar. 179D is the energy piece.
- What are the different types of cost segregations? The gold standard is the engineering-based method that captures accounting and construction dollars.
Resources
Cost Segregation Offer: https://bit.ly/CSSIGREGBALL
Warren Dazio’s Phone: (225) 241-9823
Warren Dazio’s Email: daziow@costsegserve.com
Cost Segregation Services: https://www.costsegregationservices.com/
179D Commercial Buildings Energy-Efficiency Tax Deduction
https://www.energy.gov/eere/buildings/179d-commercial-buildings-energy-efficiency-tax-deduction
Section 179
https://www.section179.org/section_179_deduction/
45L Tax Credit
https://www.kbkg.com/45l
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Schedule K-1
https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065
Tangible Property Regulations with Toby Mathis and Kevin Jerry
https://andersonadvisors.com/podcast/tangible-property-regulations/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Is right now, the right time to buy and invest in real estate? Where should you put your money? Is it safe to put it into single-family, commercial, or multifamily real estate?
Today, Clint Coons of Anderson Business Advisors talks to Matt Faircloth, a full-time investor who has successfully completed projects involving dozens of fix and flips, office buildings, single-family homes, and apartment buildings.
Matt is a regular contributor and podcast guest on BiggerPockets and has an active YouTube channel dedicated to educating investors. Also, Matt’s the author of Raising Private Capital, How to Build Your Real Estate Empire with Other People's Money. He started with a $30,000 private loan and has completed more than $40 million in transactions using private money.
Highlights/Topics: * What’s Matt seeing in the market, right now? Affinity for multifamily assets, not A+ markets, but more tertiary working-class markets. * How has COVID changed the market? So many deals and a new market that addresses financial distress and willingness to change from a pre-COVID to post-COVID price. * Are funding sources starting to dry up and pull back on access to capital? Yes, people got caught at the wrong time. Closings were canceled during the COVID shutdown. * What is a bridge lender? Someone who takes dilapidated real estate and helps you bridge where you stand today to where you can refinance them out to agency debt. * What’s the criteria for a bridge loan if you don’t have multifamily experience? Produce a balance sheet. Lenders want $2-$3 million deals and may require an equal net worth. * What are the typical terms? How long are they? Are there prepayment penalties? You’ll bridge into Fannie Mae or Freddie Mac to not be your amortized long-term lender. You may have to pay additional interest and an exit fee at closing. * How does Matt compare what’s going on now to what went on in 2008-2010? The 2008-2010 crisis was related to debt. Loans were poorly underwritten, badly created, or should have never happened. In 2020, it’s an income crisis that supports those loans. * What type of jobs do tenants hold? If they’re in workforce housing and work in the service industry, it’s going to be slow to recover. If tenants can work from home and stay productive, they keep going. * Are there certain areas that are overbuilt or underbuilt? A-Class markets need to entice renters, while B- and C-Class markets are underbuilt. There’s a need and shortage for housing in middle-of-the-road markets, but a glut of housing in higher-end markets. * What are common mistakes? Jumping in, being cavalier, and taking uncalculated risks. * Who wants to get into multifamily space? Everybody thinks it’s a key to financial freedom. It’s a great asset for fundamental reasons, but not everyone should do it.
Resources DeRosa Group
http://www.derosagroup.com/
Raising Private Capital, How to Build Your Real Estate Empire with Other People's Money
http://www.biggerpockets.com/privatemoneybook
DeRosa Group’s Insiders Community
http://www.derosagroup.com/insiders
Free Resources: Text DeRosa to 66866
Fannie Mae
https://www.fanniemae.com/
Freddie Mac
http://www.freddiemac.com/
CrowdStreet
https://www.crowdstreet.com/
Investment Securities & PPM with Dugan Kelly
https://andersonadvisors.podbean.com/e/investment-securities-ppm/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Knowledge is power when talking about taxes. The more you know, the more tools you have to be successful. While Toby Mathis is taking some much needed rest and relaxation after Tax Day on July 15, Michael Bowman and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Does it make sense to use an LLC as the property manager for self-managed rentals? Separate and isolate rentals to protect assets; consider Inc. instead of LLC
- If I put my property in a land trust, will it be difficult to sell? Land trust is basically a revocable trust with a grantor; land trust should sell the property but not via turn of title
- What is the best entity to do wholesaling? Disregarded LLC down to a corporation
- Property Aggregation: What is it and what are the reasons to do it or not? Primarily used with real estate professionals for material participation to combine multiple properties
- What’s the difference between a tax deduction and a tax credit? Tax deduction reduces your taxable income; tax credit reduces your actual tax
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson Advisors Tax and Asset Protection 1-day Event
http://aba.link/TAP88
Healthcare Reform (Affordable Care Act)
https://www.healthcare.gov/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
TurboTax
https://turbotax.intuit.com/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
529 Plans
https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html
Internal Revenue Service (IRS)
https://www.irs.gov/
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Publication 520
https://www.irs.gov/pub/irs-prior/p520--1995.pdf
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Cost Segregation
https://andersonadvisors.com/podcast/cost-segregation-with-brett-hansen-replay/
Form 5500
https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500
Form 1065: Schedule K-1
https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Franchise and Excise Tax
https://revenue.support.tn.gov/hc/en-us/sections/200549025-Franchise-Excise-Tax
Credits and Deductions
https://www.irs.gov/credits-deductions-for-individuals
Section 105(b) Deduction
https://www.irs.gov/pub/irs-drop/rr-03-102.pdf
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Michael Bowman
https://andersonadvisors.com/michael-bowman
Toby Mathis
http://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Is now a good time to buy, sell, or invest in real estate? If yes, where do you find motivated sellers and deals? Cut out the middleman to make great returns on real estate investments.
Today, Clint Coons of Anderson Business Advisors talks to Chase Maher, a real estate investor and entrepreneur in San Diego. Chase is the owner of Maher Real Estate, a house flipping and wholesale business that transacts in multiple markets across the United States. He also hosts a Top 200 ranked podcast called, "Life Worth Chasing." It focuses on real estate, investing, and high-level business strategies.
Chase is passionate about creating generational wealth, while living a fulfilling lifestyle. Real estate is all about the numbers. The better the numbers, the more money made.
Highlights/Topics:
- Multi-Million-Dollar Decision: Chase chose real estate over cars for time to travel/surf
- House Hack: 10% down to buy $200,000 home, rent rooms, refinance, create cash flow
- Trial-and-Error Education: Chase learned from experts and listened to BiggerPockets
- Secret Sauce Strategies: Sales skills, door knocking, texts, cold calling, Facebook ads
- Triple Ds of Real Estate: Divorce, death, and defaults to find/filter names and numbers
- Rejections: Be transparent, create script, systemize, comply to do business the right way
- Creative CRM Strategies: Subject to arrangements, lease options, deal opportunities
- Deals/Dealers: Wholesalers, real estate agents, and direct-to-seller marketing channel
- Lead Generation: Consistency and volume over time are keys to success
- Staying in San Diego? May move elsewhere to enhance commercial asset class
Resources iTunes Podcast: https://podcasts.apple.com/us/podcast/life-worth-chasing/id1460272793
Spotify Podcast: https://open.spotify.com/show/0QiBcKBZORxuAQKF5Xa6mf?si=criYzilTSeeEPK1koh1mUg
Newsletter: https://mailchi.mp/d3e05e6954c7/lwc
Chase Maher on Twitter: https://twitter.com/IamChaseMaher
Section 8 Housing
https://www.hud.gov/topics/housing_choice_voucher_program_section_8
BiggerPockets
https://www.biggerpockets.com/
Interactive Data (IDI)
https://www.ididata.com/
ListSource
https://www.listsource.com/
PropStream
https://www.propstream.com/
XenCALL
https://www.xencall.com/
RooR
https://www.roor.app/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
The market has shifted, strategies that worked seven or eight years ago are not doing well now. So, it’s time for real estate investors to learn new, successful strategies to land deals.
Today, Clint Coons of Anderson Business Advisors talks to Chris Prefontaine of Smart Real Estate Coach. Chris is an avid real estate investor and expert in buying and selling on terms. He shares a new way of investing in real estate. Actually, it’s not new. It's been around awhile, but people are unaware of it. Make purchases without using your own money!
Highlights/Topics: * Smart Real Estate Coach: Chris teaches strategies that take investing to a new level * Market Shift: Past few months brought three times as many properties under contract * Seller’s to Buyer’s Market: Sellers suffering due to minimum credit scores on loans * Lease-Resistant Path: How to get deals without using your own money * Lease Purchase: Built-in agreements with a $10 deposit and purchase attached to it * Good, Bad, Otherwise: Debt relief to pre-empt any potential problems or expired listings * Terms Deals: No healthier way to structure deal for the seller, investor, and buyer * Your Price, My Terms, My Price, Your Terms: Fair to offer during negotiation * Different Paydays on Deals: Now money, overtime money, and end-of-the-road money * Subject to Existing Financing: Sell property without paying off underlying mortgage * Due-on-sale Clause: Banks are in the business of loaning money, not owning property * Rent-to-own Property: Put person into property to create sense of ownership * Owner Financing: Structure deals with free and clear properties for estate/tax planning * Smart Real Estate Coach Academy: Constantly changing resource center/online course
Resources Smart Real Estate Coach
http://smartrealestatecoach.com/
Ebook: https://hugewhy.isrefer.com/go/ebook/andersonadvisors/
QLS Live: https://hugewhy.isrefer.com/go/QLSLIVE/andersonadvisors/
QLS Course: https://hugewhy.isrefer.com/go/QLS2/andersonadvisors/
Webinar: https://hugewhy.isrefer.com/go/Web/andersonadvisors/
Webinar Freebies Request: https://hugewhy.isrefer.com/go/WEBFREEBIES/andersonadvisors/
Edelman Group
https://www.edelman.com/
Clint Coons
https://andersonadvisors.com/clint-coons/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Are you smarter than your accountant, especially when they tell you there’s nothing they can do? Toby Mathis and Toni Covey of Anderson Advisors answer your tax questions to provide clarity and understanding. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- I have an empty plot of land. If I sell it and have a loss, am I able to write-off the loss on my taxes? If treated as a capital loss because it’s a capital asset, the loss is deductible against any other capital gains or up to $3,000 of ordinary income
- Can you set up a hedge fund or other entity where you can trade your stocks, so you’re not taxed as long as the proceeds stay in the fund you created until they are reinvested? Hedge funds are usually operating in an LLC taxed to a partnership or limited partnership, which flows through owner’s tax return
- Are there any strategies to reduce paying taxes on benefit or pension income and Social Security benefits? Distributions from a retirement plan are taxable income most of the time; Social Security benefits may/may not be taxable, depending on other income
- What are the tax benefits of setting up a charity? Charity doesn’t pay any tax and you can give it assets
- Can I use my self-directed IRA as a hard money lender? Yes, but you’re personally responsible for excess liabilities with an IRA
- I was a passive real estate investor and I have passive activity losses (PALs). Now, I’m a real estate professional. Can I use those PALs against my ordinary income, if I’m a real estate professional? No, they’re suspended until you substantially dispose all the activity
- I’ve noticed that taxes on new construction properties are generally lower for a year or two before increasing. Why? Property taxes are based on assessed value of the home
- What are the limits for bonus depreciation? There are none; you can create $1 million worth of loss and not pay tax for a long time
- Does getting a disaster loan and PPP affect taxes? No
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
New Opportunities in Real Estate Accounting with Aaron Adams
https://andersonadvisors.com/new-opportunities-real-estate-accounting
Tax-Wise Business Ownership by Toby Mathis
https://andersonadvisors.com/shop/
Infinity Investing Workshop
http://aba.link/iiw
1-day Online Tax-Wise Class
https://andersonadvisors.com/tax-wise-workshop/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
CARES Act
https://home.treasury.gov/policy-issues/top-priorities/cares-act
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
Paycheck Protection Program (PPP)
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Paycheck Protection Program (PPP) Flexibility Act
https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944
Small Business Administration (SBA)
https://www.sba.gov/
457 Plan
https://www.investopedia.com/terms/1/457plan.asp
Cost Segregation
https://andersonadvisors.com/podcast/cost-segregation-with-brett-hansen-replay/
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
469(c)(7)
https://www.law.cornell.edu/uscode/text/26/469
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Form 1065: Schedule K-1
https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
403(b) Plan
https://www.investopedia.com/terms/1/403bplan.asp
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Camp YouCan
https://www.midwestyoucan.org/camp-youcan
Internal Revenue Service (IRS)
https://www.irs.gov/
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Schedule D
https://www.irs.gov/forms-pubs/about-schedule-d-form-1040
Schedule E
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
Form 3115
https://www.irs.gov/forms-pubs/about-form-3115
Statute 12B-4.014
https://www.flrules.org/gateway/RuleNo.asp?id=12B-4.014
UCC-1 Statement
https://www.investopedia.com/terms/u/ucc-1-statement.asp
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Rollover as a Business Start-up (ROBS)
https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project
Form 941
https://www.irs.gov/pub/irs-pdf/f941.pdf
Form 1040-EZ
https://www.irs.gov/forms-pubs/about-form-1040-ez
Traders in Securities
https://www.irs.gov/taxtopics/tc429
Section 199A Deduction
https://www.irs.gov/newsroom/qualified-business-income-deduction
Toby Mathis
http://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Anderson Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Societal issues surrounding autism not only create challenges for children, but their entire family. Parents of children with autism experience anxiety and uncertainty, especially as their children grow up to become adults with autism. Chances are, they will survive their parents. Then, what will happen? Where and how will they live as adults with autism?
In this episode, Toby Mathis of Anderson Advisors talks to Jim Richardson from Neuro Diverse Living. Jim has more than 35 years of consulting services experience and has been investing in real estate for 40+ years. As a principal in a commercial real estate capital consulting firm, Jim raises and manages discretionary investment capital. As a parent of a grown son with autism, Jim’s business vision and personal mission is to connect in a meaningful way.
Highlights/Topics:
- What will happen to Jim’s son, Michael? Every parent raising an autistic child has or will consider available options to plan for future living accommodations.
- What are options most parents consider? Many families make plans with a sibling, such as a brother, sister, aunt, uncle, or other family member, which may only be temporary.
- What about a permanent move? Jim wanted to find a place where Michael could move to and theoretically live for the rest of his life.
- Why? Change for an autistic adult can turn their world upside down. Once might be fine, but not multiple moves.
- What about group homes? These temporary properties tend to be for people with severe disabilities. Unless Michael gets to the point where he needs that next level of care, a group home can’t accommodate him.
- What’s a parent to do? Create their own long-term housing solution to meet Michael’s needs as an adult with autism. Jim and his wife, Nancy, started Neuro Diverse Living.
- Does Michael live with Jim and Nancy? Yes, because they are setting up their first personal care home, also known as residential assisted living (RAL).
- Will the personal care home only be for adults with autism? Neuro Diverse Living is a 501(c)(3) charity with a blended residence of autistic adults and neurodiverse people.
- Will Neuro Diverse Living offer 24/7 care? To be a legitimate business, Jim needs to follow local, state, and federal regulations. Jim’s business will provide housing based on the level of daily living that each individual needs.
- How many people have autism? Nationally, on average, 1 out of 49 people are on the autistic spectrum. In the next 10 years, 1 out of every 4 or 5 adults could have autism.
- Why create an intentional design for Neuro Diverse Living? Jim intends to make the design model available to other families that want to do something similar.
- Is it difficult for autistic adults to get a job? For every 10 jobs available, about two could go to an autistic individual.
- Why does Jim have a separate group that buys properties for him? There’s a tremendous need/opportunity for long-term leases for autistic and neurodiverse homes.
- Did autism used to be confused with schizophrenia? Yes, years ago. People thought it was some sort of major mental defect. They didn't know what it was or how to treat it.
Resources
Neuro Diverse Living
https://neurodiverseliving.org/
501(c)(3)
https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations
Drexel University’s Autism Research Foundation
https://drexel.edu/autisminstitute/
Madison House Autism Foundation
https://www.madisonhouseautism.org/
Gene Guarino
https://residentialassistedlivingacademy.com/meet-gene/
Rain Man Movie
https://www.imdb.com/title/tt0095953/
Toby Mathis
https://andersonadvisors.com/tobymathis-2/
Anderson Advisors
https://andersonadvisors.com/
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Anderson Advisors on YouTube
https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
Real estate investing is like a three-legged stool. One leg is tax planning, second leg is asset protection, and third leg is business planning. Always remember to grow the business side of your real estate investment.
Today, Clint Coons of Anderson Business Advisors talks to Andre Johnson of Deal Mastery about real estate investing from the business planning side. Look at real estate investing as a business to turn cash into something sustainable.
Highlights/Topics: * Pathway to Financial Freedom: Live rent- and mortgage-free by having tenants * Strategic Partners and Business Operations: Work on your business, not in it * Unlock Scalability: Fire yourself from as many roles and responsibilities as possible * Foundational Building Blocks: Mindset, marketing campaigns, and making money * Basic Marketing Systems: Opportunities via cold calling, yellow letters, and door hangers * Financing: Almost every business opportunity might need to get a small business loan * F-ing Focus: Find, fund, fix, and flip by drawing, sticking to, and working that plan * Virtual Assistants (VAs): Hiring virtual workers doesn't mean the work stops * Shiny Object Syndrome: Real estate investing is simple, not easy or overnight success
Resources Deal Mastery (Download Best-Selling Book by Andre Johnson) https://www.dealmastery.net/ Deal VAs (Free Consultation with Andre Johnson) https://www.dealvas.com/ Andre Johnson’s Deal Mastery Website https://www.dealmastery.com/ Clint Coons https://andersonadvisors.com/clint-coons/ Anderson Advisors https://andersonadvisors.com/ Anderson Advisors Tax and Asset Protection Event https://andersonadvisors.com/asset-protection/ Anderson Advisors on YouTube https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ
It’s the middle of a sweltering summer and the July 15 deadline to pay your income taxes is fast approaching. Don’t worry because Toby Mathis and Jeff Webb of Anderson Advisors offer a bevy of knowledge to avoid getting burned. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What is the most tax-efficient way for 401(k) to Roth 401(k) conversion? Entire amount does not need to be converted in one year, or you’ll take a major tax hit
- How do I start a real estate business with income from our current businesses? Is this possible? Yes, pull money out of businesses to establish new real estate entity
- How do I elect trader status? State that you are a trader or select mark-to-market election method of accounting for securities traders
- How can I identify tax breaks at certain income levels? If your income is below the $100,000 threshold, use standard deduction, IRAs, and more to not pay any or much tax
- What is the easiest or best accounting software to keep up with your business expense and get the best tax reductions? Most prevalent software used for accounting and bookkeeping services is QuickBooks
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
http://aba.link/iiw
Tax-Wise Business Ownership by Toby Mathis
https://andersonadvisors.com/shop/
1-day Online Tax-Wise Class
https://andersonadvisors.com/tax-wise-workshop/
Individual Retirement Arrangements (IRAs)
https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras
Traditional and Roth IRAs
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
1031 Exchange
https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
CARES Act
https://home.treasury.gov/policy-issues/top-priorities/cares-act
Economic Injury Disaster Loan (EIDL)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
Paycheck Protection Program (PPP)
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Paycheck Protection Program (PPP) Flexibility Act
https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944
Small Business Administration (SBA)
https://www.sba.gov/
Wills and Trusts
https://andersonadvisors.com/living_trusts/
Bonus Depreciation
https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act
Depreciation Recapture
https://www.investopedia.com/terms/d/depreciationrecapture.asp
Real Estate Professional Requirements
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Capital Gains Exclusion/Section 121
https://www.irs.gov/taxtopics/tc701
Self-Employment Tax
https://www.irs.gov/taxtopics/tc554
Internal Revenue Service (IRS)
https://www.irs.gov/
Tax Cuts and Jobs Act (TCJA)
https://www.irs.gov/tax-reform
Federal Realty Trust (FRT)
https://www.federalrealty.com/
1099 Form
https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return
Traders in Securities
https://www.irs.gov/taxtopics/tc429
Form 4797
https://www.irs.gov/pub/irs-pdf/f4797.pdf
Charitable Organizations
https://www.irs.gov/charities-non-profits/charitable-organizations
Form 2553
https://www.irs.gov/forms-pubs/about-form-2553
Affordable Care Act (ACA)
https://www.healthcare.gov/
QuickBooks
https://quickbooks.intuit.com/
Peachtree
https://www.sage.com/en-us/products/peachtree/
JD Edwards
https://www.oracle.com/applications/jd-edwards-enterpriseone/
Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
Schedule C
https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
Cost Segregation
https://andersonadvisors.com/podcast/cost-segregation-with-brett-hansen-replay/
Toby Mathis
http://tobymathis.com/
Anderson Advisors
https://andersonadvisors.com
Anderson Advisors Events
https://andersonadvisors.com/all-events/
Events@andersonadvisors.com
mailto:Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
https://andersonadvisors.com/asset-protection/
Tax-Wise Workshop
https://andersonadvisors.com/tax-wise-workshop/
Anderson Advisors on YouTube
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Anderson Advisors Podcast
https://andersonadvisors.com/podcast/
Do you know everything there is to know about tangible property regulations? Did you know they even existed? You’re not alone because 90-95% of building owners and investors have never heard of them. In this episode, Toby Mathis of Anderson Advisors talks to Kevin Jerry, Executive Vice President of Sales at Cost Segregation Services, Inc. (CSSI). Kevin is a Master of Taxation (MST) and nationally recognized speaker on cost segregation and tangible property.
Highlights/Topics:
- What are tangible property regulations? Extremely taxpayer-friendly regulations that represent biggest tax change for industry since 1986
- What’s the benefit of cost segregation for clients? Short depreciation life for many assets for a bigger tax deduction
- What is cost segregation? When you separate property that can be removed from a building, instead of the structure of the building
- How are new tangible property regulations different from those before 2014? For assets currently in service; when a repair/expenditure is made, if you take the expenditure, regulations determine if you spread it over 27.5 or 39 years, or expense it in first year
- What are some things you can write off right now? A lot of expenses by breaking a building into components
- What are the three safe harbors?
- De Minimis: If an invoice has an item on it of less than $2,500, generally, it can be expensed.
- Small Taxpayer: If you take the cost of your building minus land and take the lesser of 2% of that cost for $10,000.
- Routine Maintenance: Based on experience levels, industry standards, and warranties, expense the repair/replacement of a component.
- What if safe harbors don’t apply? There are three other rules: per property, component, or taxpayer; you can’t do both a safe harbor and rule, pick one or the other
- How do you know if your CPA knows what they're doing? Ask if they:are applying the tangible property regulations to your trade or business
Resources
CSSI Building Analysis Request (CSSIGBALL) https://cssistudy.wufoo.com/forms/z1gdt1xu19ickzm/
Cost Segregation Services, Inc. (CSSI)
Kevin Jerry’s Email jerryk@costsegserv.com
Kevin Jerry’s Phone: (502) 216-5941
Tangible Property Regulations
26 U.S. Code Section 263(a)
Section 179
Code Section 481(a)
Form 3115
Depreciation Recapture
Bonus Depreciation
Capital Gains
1031 Exchange
American Institute of CPAs
California CPA Association
Florida CPA Association
Tax Cuts and Jobs Act (TCJA)
Toby Mathis
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Rather than investing in real estate with emotion, try a more measured approach. Crunch numbers because data beats gut feel and you can’t manage what you can’t measure.
Today, Toby Mathis of Anderson Advisors talks to Neal Bawa, founder and CEO of Grocapitus, a commercial real estate investment company. Neal is the CEO of MultifamilyU, an apartment investing education company. He’s known as the Mad Scientist of Multifamily and uses the power of numbers to acquire properties and create profit for investors.
Highlights/Topics:
- Why should you celebrate failures? A certain number of failures creates a very high rate of success. Failure is a necessary step to success.
- What are the impacts of COVID-19 on real estate? Some good, but mostly bad effects, such as an increase in confirmed cases, job loss, and economic weakness.
- Should investors consider buying or selling real estate right now? Plan ahead to project future wealth by buying and holding onto properties to generate cash flow.
- Should you invest in the Stock Market, real estate, or both? Why? The Stock Market is stressful. Even when real estate values go down, rents tend to go up during a recession.
-
What should you consider when buying property?
-
Population growth
- Income growth
- Home price growth
- Crimes
- Jobs
- What’s the future of real estate, interest rates, and economy? Things will get back to normal. Opportunities will be available to invest in real estate.
Resources:
Grocapitus
Neal Bawa on Udemy
RealFocus (Free Real Estate Investing Course)
Neal Bawa's Email
MultifamilyU
MultifamilyU Bootcamp
WeWork
Infinity Investing Workshop
Anderson Advisors Tax and Asset Protection Event
Toby Mathis
Anderson Advisors
Anderson Advisors on YouTube
Anderson Advisors’ Podcasts
Confusion continues with the CARES Act and related tax relief programs due to COVID-19. Toby Mathis and Jeff Webb of Anderson Advisors provide clarity by answering tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- I’ve had my work hours cut due to COVID. Under the CARES Act, can I access my 401(k) from work or solo 401(k)? You can access the solo 401(k) through a distribution or loan, but access to a work 401(k) must be approved by the plan administrator
- How should I handle sales tax within my eCommerce store? Do I follow my state use tax or do I need to get the buyer’s? Depends on various factors, but sales tax is tax on things you sell, and use tax is tax on things you buy
- Do we have to pay taxes on an SBA loan? No, unless loan is not repaid
- Can you accept the EIDL, if you’ve already accepted the PPP loan? Yes
- Will there be any issues with PPP forgiveness, if you accept EIDL? Depends on whether you received the emergency cash grant
- Am I able to purchase real estate with my solo 401(k) account and rent the house to my brother? Yes, your brother isn’t a disqualified party, but you must charge him a fair rent
- Did the deadline for Roth conversions get extended? No, it’s still Dec. 31
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
Tax-Wise Business Ownership by Toby Mathis
1-day Online Tax-Wise Class
CARES Act
Paycheck Protection Program (PPP)
Paycheck Protection Program (PPP) Flexibility Act
Economic Injury Disaster Loan (EIDL)
501(c)(3)
Wills and Trusts
Form W-9
Form 6252
Form 1120
Schedule C
Schedule E
1099-C
457 Plan
Capital Gains Exclusion/Section 121
Certificate of Need
Applicable Federal Rates (AFR)
Bonus Depreciation
Depreciation Recapture
Real Estate Professional Requirements
SECURE Act
Self-Employment Tax
Hobby Loss Rules
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
Internal Revenue Service (IRS)
Small Business Administration (SBA)
U.S. Department of the Treasury
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Do you want to enjoy a lifestyle free from tenants, toilets, and trash? Maybe it’s time to invest in the self-storage business. Today, Michael Bowman of Anderson Business Advisors and Bowman's Business Brief talks to Scott Meyers of Self-Storage Profits, Inc., which offers educational courses, events, and mentoring/coaching.
After becoming a penniless landlord in the single-family rental and apartment business, Scott began investing in self storage. He quickly sold all his single-family rentals and apartments to create a small empire of self-storage facilities nationwide. Scott focuses on syndicating self-storage deals and helping others launch their own self-storage business.
Highlights/Topics:
- What’s Scott’s story and evolution into investing? Shifted from being a hobby to business, but not as much cash flow and free time as anticipated
- What was the first downturn that Scott experienced? During the tech bubble and recession in 1999-2000, when most of his tenants left to buy their own homes
- Why are self-storage facilities in demand? During economic downturns, people lose their jobs, times are tough, and extra stuff is moved into storage until things turn around
- What are the details of self storage? Scott talks to and teaches people about the benefits of self storage and what not to do
- Why did Scott decide to teach others about self storage? Divine calling and mission field due to his story being similar to others struggling in real estate
- Is funding available for self storage? There’s no shortage of lending sources and supplying money flowing into self storage
- What are Scott’s tips and tricks to getting into self-storage business? Start sooner than later, know how to value market, evaluate numbers, get mailing lists to send out mailers, talk with brokers, and find facilities
- Why isn’t Scott afraid of aggregators? Nobody’s forcing owners to use aggregators; look at the market, Websites, traffic, and placement to spend money that draws people in
- What is Scott’s Self Storage Evaluator? Underwriting software that analyzes storage facilities and shows about 150 income and expense categories and calculations
Resources
Self Storage Investing
Community Reinvestment Act (CRA)
Lehman Brothers
Dave Ramsey Classes
ETRADE
Realty Mogul
CrowdStreet
Fundrise
Good to Great by Jim Collins
Priceline
Public Storage
Extra Space Storage
CubeSmart
Michael Bowman
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Anderson Advisors Podcast
With hundreds of tax questions to answer from thousands of people, Toby Mathis and Jeff Webb of Anderson Advisors requested backup. Additional team members include: Eliot Thomas, attorney and accountant; Piao Sam, tax supervisor, and Tavia Harter, bookkeeping services. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- If you lend money to your business, can it be interest-free? If there must be interest, then how much is required? Depends on loan amount; under $10,000, interest isn’t required
- What questions should be asked when interviewing a bookkeeper for a syndicated apartment investment? Ask for their real estate, multifamily syndication, and partnership experience to determine if they understand concept of accounting for such investments
- Is it possible to sell a piece of raw land to our real estate entity to have the entity pay taxes upon sale, instead of personally paying? Yes, but instead, consider contributing raw land to real estate entity rather than selling it to them
- My husband and I use our self-directed IRAs to loan hard money to real estate investors. We hold the note on the property and interest is paid back directly into the IRA at closing, when the note is paid off. What tax documents do we have to provide the borrower each year? Form 1098 and/or Form 1099-INT
- If I transfer my rental property that has a mortgage to a land trust that’s under an LLC, what happens to the depreciation that I’ve been using for the past years when I do my taxes? No difference; depreciation, basis, and more all stay the same
- If my job has been furloughed and I want to take money out of my work’s 401(k) and move it to a self-directed IRA, are there new rules to follow? Will it be counted as income? New laws allow you to do certain things, such as rollover money, but your 401(k) plan must also allow the transfer, but it won’t be considered income
- What is the best entity to use as a real estate agent? S Corp, if state allows it
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax-Wise Business Ownership by Toby Mathis (Promo Code for free copy/shipping: TUESDAY) Infinity Investing Workshop
1-day Online Tax-Wise Class
CARES Act
Paycheck Protection Program (PPP)
Paycheck Protection Program (PPP) Flexibility Act
https://andersonadvisors.com/shop/
Real Estate Professional Requirements
Applicable Federal Rates (AFR)
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
501(c)(3)
Wills and Trusts
Schedule E
Bonus Depreciation
Depreciation Recapture
Section 179
Cost Segregation
Schedule K-1/Form 1065
Unrelated Business Income Tax (UBIT)
Unrelated Debt-Financed Income (UDFI)
1098 Form
1099 Forms for Sole Proprietors
1099-INT
1099-R
Self-Employment Tax
QuickBooks
26 U.S. Code 280A
Rich Dad Poor Dad
Capital Gains Exclusion/Section 121
The IRA Club
Tax Code 7702
Franchise Tax Board
U.S. Department of the Treasury
Internal Revenue Service (IRS)
Small Business Administration (SBA)
Taking your Real Estate Business to the Next Level
Healing Veterans Through Surfing – Operation Surf
1 Veteran Foundation
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Once a professional surfer, Van Curaza has dedicated his life to helping others suffering from Post-Traumatic Stress Disorder (PTSD) through surfing. Today, Toby Mathis of Anderson Business Advisors talks to Van about Operation Surf—Healing Veterans Through Surfing. The program has therapeutic results. It’s not therapy or treatment. It's life-changing and life-saving.
Highlights/Topics:
- Why establish Operation Surf? Going through his own journey of recovery through addiction, Van wanted to not be so selfish, but give back.
- What started the process of helping active duty warriors? Rodney Roller, a Navy Corpsman and amputee surfer wanted to go surfing, again.
- Why focus on service members? Van understands wanting to be good at what you want to do when given a purpose and feeling of self-worth/self-efficacy to succeed in life.
- If a veteran is suffering from PTSD, do they get referred to Operation Surf? Due to extensive airtime, Van gets inquiries from all over the United States, as well as from locals that want to be involved.
- Why are outdoor recreational programs beneficial to veterans? Research studies and data prove that getting people out into nature, into the ocean is helpful for PTSD.
- What does it take to surf? An attitude adjustment. Most people think being able to surf means standing on two legs and standing on a surfboard. You're not going to surf like Van. You're going to surf like you.
- Just say, “Yes,” why? To create connections and relationships. Learn the effects and challenges that others are trying to overcome. Help somebody for the right reasons.
- Why vett veterans? As a non-profit organization, Operation Surf’s vetting process has veterans express their willingness to move forward and achieve maximum effectiveness
- What does Van look for in volunteers/instructors at Operation Surf? Ability to work together and understand your population by speaking their language to trigger specific behaviors, words, or actions.
- How can people help Operation Surf? Volunteer, donate, sponsor, participate, and bond. Whether it’s time, money—whatever you can do.
Resources
Operation Surf
Twitter @operationsurf
Instagram @operationsurf
Facebook @operationsurf
Resurface (Netflix Documentary)
The Impact of Ocean Therapy on Veterans with Post Traumatic Stress Disorder by Dr. Russell Crawford
Operation Comfort
Charities and Non-Profit Organizations
Form 1023
Toby Mathis
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
When it comes to investing in single-family homes, it's about the market and understanding the location. Does it have what you want—cash flow, appreciation, or a combination of the two? Today, Clint Coons of Anderson Business Advisors talks to Marco Santarelli about passive real estate investing and single-family properties. Marco is the founder and CEO of Norada Real Estate Investments, a nationwide provider of turnkey cash-flow investment properties. Also, he’s the author of Passive Real Estate Investing and host of the Passive Real Estate Investing Podcast. Marco is on a mission to create wealth and passive income by giving people a path to financial freedom with real estate.
Highlights/Topics:
- Why did Marco become an out-of-state real estate investor? Competition and high prices forced him out of his market. Investing in markets miles away made more sense.
- Why invest in only red or blue states? As far as returns go, a lot of that has to do with property or state taxes, or unintended consequences of policies from politicians.
- How many new investors are going to be interested in investing in that market in the future? None. In California, they’re intentionally trying to destroy the rental market.
- What’s Marco’s criteria when finding properties? It's not always and only about the property. When investing, take a macro view of things.
- What are Marco’s Rules of Successful Real Estate Investing? No. 6 is to take a top-down approach. Select real estate markets that align with your investment goals.
- With real estate, are there enough opportunities? The United States has more than 400 major metropolitan statistical areas and large regions.
- Is all real estate local? There's truth in that. Some even think all real estate is not just local, but hyper-local.
- What are the ABCs of ‘hot’ markets, right now? Atlanta, Baltimore, Carlton, and Dallas. When it comes to making investments, it’s all market data-driven.
- Can Marco’s business actually source properties for people? Yes, that's one of the many value-added services. People and properties make his business work.
- What criteria does Marco consider? What’s his process for helping investors? Everything always starts with a strategy session. It's free and takes 15 minutes to an hour, depending on the level of complexity and questions asked.
- Why is Marco not a fan of the one-stop-shop concept? There are different resources available to investors, including lenders, property managers, title companies, home inspectors, appraisers, asset protection attorneys, CPAs, and tax advisers.
Resources
Free Book: https://www.noradarealestate.com/freebook/
(https://www.noradarealestate.com/freebook/?utm_source=AndersonAdvisors)
Free Strategy Session: https://www.noradarealestate.com/contact
(https://www.noradarealestate.com/contact/?utm_source=AndersonAdvisors)
10 Rules of Successful Real Estate Investing
Section 8 Housing
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Is it time for a fun and educational drinking game? It depends. Do you need clarification on different options in the CARES Act? You’re not alone, so does the Internal Revenue Service (IRS) and U.S. Department of the Treasury. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- How do I go about researching business tax strategies? Where can I find a list of strategies? Get a free copy of Toby Mathis’s book, Tax-Wise Business Ownership
- With COVID-19, will the IRS grant forgiveness with arrears on payroll taxes? No
- Can I take the 10K advance from the Economic Injury Disaster Loan (EIDL), deny the loan, and roll it into the CARES Paycheck Protection Program (PPP)? An up to $10,000 advance is a grant that doesn’t need to be paid back and isn’t rolled into PPP
- As a flipper in VA, is it worth incorporating to avoid dealer status and is avoiding such actually possible? Yes, if you have the intent to rehab and sell a property, not rent/invest
- What are the basic benefits of the S-Corp? Limited liability, income not subject to self-employment income, and accountable plan
- If I haven’t yet filed a tax return for my corporation, can I still qualify for EIDL or PPP, as the sole owner/operator? Yes, you’ll qualify for EIDL, if in business on Feb. 15
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Tax-Wise Business Ownership by Toby Mathis (Promo Code for free copy/shipping: TUESDAY)
Infinity Investing Workshop
1 Veteran Foundation
CARES Act
Internal Revenue Service (IRS)
U.S. Department of the Treasury
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Real Estate Professional Requirements
501(c)(3)
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
Cost Segregation
Depreciation Recapture
Bonus Depreciation
Section 179
CoreVest Finance
Equifax
Dun and Bradstreet
TransUnion
Coronavirus Tax Relief
Families First Coronavirus Response Act
Tax Code 7702
1031 Exchange
Self-Employment Tax
Schedule E
26 U.S. Code 1231
Wills and Trusts
Tax Cuts and Jobs Act (TCJA)
Unrelated Business Income Tax (UBIT)
Unrelated Business Taxable Income (UBTI)
Franchise Tax Board
Capital Gains Exclusion/Section 121
Form 1023 Application
Form 1099-R
Trader Tax Status
457b
403b
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Events@andersonadvisors.com
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Remember when you used to thumb through actual yellow and white pages of a phonebook to find people and services? In this episode, Toby Mathis of Anderson Advisors talks to Fred Lovingier, District Manager for Insperity, a professional employer organization (PEO). Fred has more than 15 years of management, marketing, and sales experience.
Highlights/Topics:
- What is a PEO? Outsourcing firm that provides services to small- and medium-sized businesses
- Why work with Insperity? Buying power and outsourcing
- What are the two main reasons why you should consider a PEO? Stabilize high volatility in healthcare costs and employee liability
- What are business owners’ top concerns? Don’t want to deal with other people
- Does Insperity offer employees access to a group health plan at the same price as other big companies? Yes, just like Walmart, Coca-Cola, and UnitedHealthcare
- What about workers’ comp benefits? Workers’ comp is based on a safety rating or mod number addressed as so much per hundred of payroll
- What’s Insperity’s rule of thumb? Vetted company that becomes a client, automatically reduces its current workers’ comp 10%; dangerous fields costs more money
- Whenever a PEO charges or consumes savings, what happens? Buying power is used to create offsets that help make the cost of doing business tolerable
- What if business owners carry health insurance? Most business people know that they’ll get a new rate, typically higher, every year
- What’s typical misconceptions about who’s liable? It's almost impossible to get a group plan these days; but you can go in combination with a group
- Can people be fired or released? Yes, but they may maintain direction and control of their company and receive onboarding/offboarding assistance
- What's the magic number or sweet spot for a PEO? Groups between five and 5,000
- How much does it cost? Typically, it’s less than the cost of hiring somebody, but the quality is significantly higher
- What is Insperity’s vision and mission? Give people the support and tools they need to grow and help businesses succeed for communities to prosper
- How long do Insperity’s clients stay? On average, clients stay 6.8 years, which represents an 80–85% renewal rate each year
Resources
Fred Lovingier on LinkedIn
Insperity
Fred Simonds's Website
Fred Simonds’s Office: 10845 Griffith Peak Dr., Suite 500, Las Vegas, NV 89135
Fred Simonds’s Phone: 702-470-1948
Fred Simonds’s Mobile Phone: 702-203-0063
Fred Simonds’s Fax: 866-422-1927
Yellow Pages
Family and Medical Leave Act (FMLA)
UnitedHealthcare
Workers’ Comp
COBRA Management
National Association of PEOs
Toby Mathis
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
There are different ways to invest in real estate. Have you tried them all? If not, consider mobile/manufactured homes. Today, Clint Coons of Anderson Business Advisors talks to Glenn Stromberg of Stromberg Investment Group. Glenn describes the profit potential in alternative types of real estate investments. He began his real estate career in 1982 and has 37 years of experience in the mobile home industry. Glenn is giving our listeners 50% off his online course to learn how to invest in mobile/manufactured homes: Mobile Homes Investment Education (Coupon Code: Anderson).
Highlights/Topics: * What is Glenn’s take on investing in real estate, specifically single-family homes? Buy manufactured homes and follow the same strategy. * What are mobile and manufactured homes? Real estate, not trailers. Homes go on concrete runners and tied into concrete. Many are wood-frame or vinyl construction. Siding and skirting options vary. * Do mobile/manufactured homes qualify for financing? Yes, the same FHA financing as a single-family house is possible. * Are construction standards associated with mobile/manufactured homes? Homes built since 1990 meet construction standards. * What do most people not understand about mobile/manufactured homes? Homes that meet construction standards are built just as strong or better than other homes. * Why are these homes cash cows and gold mines? They're built in a factory, they come out at a better price, and they cost less. * What do these homes offer investors and tenants? They get more square footage for the dollar, whether they buy or lease them. * Are these homes listed on MLS, as manufactured and/or mobile homes? Yes. * Is there much competition from companies considering manufacturing/mobile homes? No, they skip that designation because they view it as inferior. * Do mobile/manufactured homes depreciate? A personal property mobile home will depreciate. When on land, it goes up/down with single-family house business. * When you remodel a manufactured home, is there anything you have to know? It's much easier because permits don’t need to be pulled, and the process is completed sooner. * How much do mobile/manufactured vs. traditional homes cost? $80,000-$90,000 vs. $250,000-$275,000. * Are there zoning requirements for mobile/manufactured homes? Depends on location, city, county, and state.
Resources Mobile Homes Investment Education (50% off coupon code is: Anderson)
Stromberg Investment Group
Clayton Homes
Federal Housing Administration (FHA)
MLS
Think Realty
Ben Carson
Fannie Mae
Freddie Mac
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Signs are pointing to big opportunities, so position yourself to take action when investing in real estate. However, avoid mistakes that put you in the ‘big house’ wearing an orange jumpsuit. For example, do you know how to put together an operating agreement to buy an apartment complex? Today, Clint Coons of Anderson Business Advisors talks to Dugan Kelley, a securities attorney and co-founder of Kelley Clarke, PC. As chairman of the firm’s securities and real estate practice group, Dugan assists clients in all phases of multifamily, commercial, and residential acquisitions and sales. Also, Dugan serves as a mediator for other attorneys or settlement counsel for complex litigation matters that require unique solutions.
Highlights/Topics: * Should you partner with friends/family on real estate investments? Manage expectations. Anytime you take money from someone, they expect a return on that investment. * What’s the difference between raising capital as a security versus a capital contribution? There’s no friends or family exemption to securities. Contributing equal shares is a joint venture and involves an active role in buying/managing the entity/asset. * What are the penalties for legal mistakes? Avoid being cheap by taking short-cuts on the legal side. There’s potential for severe/massive fines, penalties, and criminal charges. * What is the purpose of a Private Placement Memorandum? Protect yourself as a sponsor or syndicator and your investors by identifying potential real estate risks. * When and who should create a Letter of Intent (LOI)? After a property is under contract and through your entity, not your individual name. * When should new operators/investors call a securities attorney? After conducting due diligence to determine the possibility to raise capital on property. * What information needs to be provided to the securities attorney to set up a syndication or transfer entity to start raising capital? LOI and Private Placement Memorandum. * Is public registration necessary for private placement offerings? Two exemptions: 506b (pre-existing, substantive relationships) or 506c (restricted to accredited investors). * Should an individual manager create a separate entity to be responsible for the debts and obligations of the syndicated entity? Anybody can be sued for anything. Securities is not something that you want to mess with—cover your assets. * How to vet deals and investors by identifying red flags? Know what you are buying, your rights and obligations, and who gets paid what and when.
Resources Dugan Kelley's Email
Kelley Clarke, PLLC: Legal Services
Purpose, Passion & Profit
Treasured Vessels Foundation
U.S. Securities and Exchange Commission (SEC)
Rule 506 of Regulation D
506(b)
506(c)
Grant Cardone
LegalZoom
Freddie Mac
Fannie Mae
HUD
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Do you loathe the Internal Revenue Service (IRS) and Small Business Administration (SBA)? Why? Lately, both are doing everything possible to undo what Congress is doing to provide financial assistance and relief related to the coronavirus pandemic (COVID-19). Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions and clarify information about the CARES Act. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Updates on Tax Impact of CARES Act:
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loan (EIDL)
- Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act
- My wife is 60. In 2019, she had $13,200 of Social Security income and $0 in income earned from work. Can she contribute to her health savings account (HSA) for 2019? High-deductible health plan is required to make contributions to HSA
- What’s the best way to set up a real estate LLC, if you’re an investor that does both buy and hold, and fix and flips? Split them; put buy and holds into LLC or partnership, and fix and flips into S- or C-Corp
- If I pull equity from a house, does the money need to go back into the house or can I use it on another property or for other things? You can use it for whatever you want, but deduct interest on Schedule A
- Can we write off donations to our nonprofit, even though we still haven’t been approved for 501(c)(3) status? Yes, you have 27 months from the application date to get approval
- Is it too late to apply for a PPP loan for a contract worker? No, but apply ASAP
- Will there be a penalty (forgiveness/tax) for paying an employee more than the average 2019 salary calculated (PPP) because of overtime or pension plan payments? There’s no penalty to help with forgiveness amount, but can’t pre-pay anything
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
CARES Act
HEROES Act
SECURE Act
Small Business Administration (SBA)
Internal Revenue Service (IRS)
U.S. Government Accountability Office (U.S. GAO)
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Coronavirus Tax Relief
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
IRS Payment Tool
Tax Cuts and Jobs Act (TCJA)
Self-Employment Tax
Unemployment Insurance
Non-Filers: Enter Payment Info Here
Real Estate Professional Requirements
501(c)(3)
Schedule A
Schedule E
457b
403b
Employer Identification Number (EIN)
Schedule K-1/Form 1065
Wills and Trusts
1031 Exchange
Cost Segregation
Section 1031
Section 1245
1244 Stock
Capital Gains Exclusion/Section 121
Form 1099
Form 1099-H
Depreciation Recapture
Bonus Depreciation
Franchise Tax Board
25 CFR 162.2
Lady Bird Deeds
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Events@anderssonadvisors.com
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Are you taking time to retool and rethink everything you’re doing in real estate investing? Don’t pass up opportunities. Today, Clint Coons of Anderson Business Advisors talks to Adam Adams from BlueSpruce Holdings. Adam took the plunge into part-time real estate investing, but it quickly became his full-time passion. He has educated and inspired thousands of investors and influencers to build and take their businesses to the next level.
Highlights/Topics: * How did Adam get started in real estate? Christmas present that led to paying property taxes as a child, although he didn’t do anything wrong; eventually, sold it for profit * What is BlueSpruce Holdings? Finds and manages apartment communities to allow passive investors diversification, cash flow, tax benefits, and freedom of time * What is Adam’s primary role in the company? Attract capital, so far successfully raising millions of dollars from private investors and continuing to grow his company’s brand * What leads to bigger and better deals? Whether people know, like, and trust you * Why are we here? Why are we different? Because...don’t fake it till you make it * What are the main components to success? Social media, live events, and meetup/mastermind groups * Why do people keep coming back? Even if weekly topic isn’t perfect fit, they make sure that they're there because they can start doing business with other serious people * Why does marketing matter when launching a podcast? + Episodes: Make sure to have more than one episode ready and post consistently + Ratings and Reviews: Ask for ratings and reviews to gain traction and get noticed + Avatar: Attract, understand, and think like your perfect client/target avatar * What podcast services does Adam offer? Create, manage, edit, and promote for a fee * What is Adam’s complete money back guarantee? By charging a set amount and understanding the algorithm, he can easily get a top 1% podcast
Resources BlueSpruce Group
BlueSpruce Holdings
Creative Real Estate Podcast
Adam Adams Real Estate Meetup
Best Ever Conference
Joe Fairless
Rich Dad Poor Dad
Russell Brunson
Steven Pesavento's Investor Mindset Podcast
BiggerPockets
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Do you know all there is to know about the relief provisions in the CARES Act for accessing money due to the COVID-19 crisis? It absolutely has an impact on health and the economy. None of it is going as planned, but additional guidance is available. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions during this challenging time. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Updates on Tax Impact of COVID-19:
- Paycheck Protection Program (PPP) and Health Care Enhancement Act passed, signed into law
- Other than deadline to July 15, states not allowing deferred payments
- Economic Injury Disaster Loan (EIDL) is not a loan, but an emergency grant
- How do I file for unemployment payments if I'm an independent contractor? Independent contractors are now eligible, but most states aren't set up yet to do distributions
- Do you know why some people received $1,200 in their account while others didn't? Even when they use ACH? People using TurboTax, H&R Block, Jackson Hewitt, and Liberty Tax got or asked for an advance on their refund for a small fee
- Does the CARES Act allow me to deduct losses from W-2 income with prior year accumulated passive activity losses? No changes were made to passive activity loss rules; if you accumulated PAL, you cannot carry those back
- Can I apply for unemployment and the PPP? Yes, the two are completely separate
- Can I deduct my entire home cost since all of us are working from home? No, if working from home as an employee, it's an employee/non-reimbursable expense
- I have not done my 2019 taxes. Can I still apply for CARES under government bailout programs? Yes, just use something as a backup
- Can I apply for PPP if I did with one bank that has not approved the loan? Yes
- How much EIDL can I qualify for? How is it calculated? Up to $2 million; half of your gross profit
- Any idea when money is deposited after signing the PPP loan? Yes, 10 days after receiving an E-tran number, bank has to provide funding
- Can passive losses from cost segregation be taken on W-2 income if spouse is a real estate professional? Yes, either spouse qualifies, as long as married and filing jointly
- Would getting my real estate license have more benefits for being a real estate professional? Depends if you're using it
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
Tax-Wise Business Ownership by Toby Mathis
Unlock Free Money from the New Stimulus Bill - CARES Act with Clint Coons and Toby Mathis
CARES Act
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Coronavirus Tax Relief
COVID-19 and the Family and Medical Leave Act Questions and Answers
Small Business Administration (SBA)
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
Self-Employment Tax
Unemployment Insurance
Non-Filers: Enter Payment Info Here
Airbnb/Short-term Rentals
Real Estate Professional Requirements
Depreciation Recapture
Schedule A
Schedule C
Schedule E
Capital Gains Exclusion/Section 121
Form 1099
26 U.S. Code Section 139
IRS Payment Tool
Tax Cuts and Jobs Act (TCJA)
469c7
K-1 Form
Wills and Trusts
501(c)(3)
1031 Exchange
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
How can you prepare for present and future real estate investment opportunities? Today, Michael Bowman of Anderson Business Advisors and Bowman's Business Brief talks to Aaron Adams, CEO of Alpine Property Management and Alpine Capital Solutions. Aaron shares statistics and insights on getting good deals during economic ups and downs.
Highlights/Topics:
- What’s the starting point to conduct macroeconomic research and evaluate real estate markets? Harvard University’s Center for Housing Studies Website
- What are counterintuitive things about the current economic state? Nobody knows how housing market will be impacted by Stock Market, Silver Tsunami, and other factors
- What are current risks regarding real estate? Mortgages, unemployment rate, property tax increases, and over-abundance of housing
- What’s different this time compared to the 2008 real estate market crash? No subprime mortgages, housing shortage, and lower vacancy rates
- How, when, and why reallocate retirement? Get financial house in order for opportunities and to address competition
- Is leverage the way to go? Leverage is a tool that shouldn’t be overused
- What are proactive tenant strategies? Educate, communicate, and waive fees
Resources
Aaron Adams
Alpine Capital Solutions
Harvard University’s Joint Center for Housing Studies
MLS
Section 8 Housing
Fidelity Investments
Zillow
Michael Bowman
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Anderson Advisors Podcast
Where’s the cash, and what will give you the most bang for your buck? As you learn more about COVID-19 and related tax relief options, you probably have more questions. Toby Mathis and Jeff Webb of Anderson Advisors offer clarification on how and when to consider early distribution, loans, and paycheck protection. Time is of the essence. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- COVID-19 Tax Impact Updates:
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loan (EIDL)
- July 15, not April 15: Deadline to file and pay income taxes
- If I don’t have W-2 income, how do I qualify as a real estate professional as LP investor in real estate deals? It’s about time, not income, but there are restrictions
- Are you qualified for a PPP as a sole member LLC? Yes
- How did the SECURE Act change treatment of spousal-inherited IRAs and required minimum distributions from those IRAs? SECURE Act didn’t change anything that had anything to do with spousal-inherited IRAs
- Can I still file 2019 taxes to qualify for the COVID relief funds? Yes, if you didn’t make too much money in 2018
- How does the stimulus affect taxes for property owners? CARES Act doesn’t impact taxes for property owners
- I didn’t file in 2018 or 2019, will I still get the stimulus, if I qualify? Depends, if you are on social security and/or you’re required to file a tax return or not
- Does the bill have provisions for unemployment compensation for those self-employed? Yes, federal government requires states to pay unemployment
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Infinity Investing Workshop
Tax-Wise Business Ownership by Toby Mathis
Unlock Free Money from the New Stimulus Bill - CARES Act with Clint Coons and Toby Mathis
CARES Act
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Coronavirus Tax Relief
COVID-19 and the Family and Medical Leave Act Questions and Answers
Small Business Administration (SBA)
Form 1045
Form 1139
Schedule C
Schedule E
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
1031 Exchange
Opportunity Zones
Real Estate Professional Requirements
SECURE Act
Capital Gains Exclusion/Section 121
Form 1099
Airbnb/Short-term Rentals
26 U.S. Code Section 139
Self-Employment Tax
Section 179 Tax Depreciation
Depreciation Recapture
Bonus Depreciation
501(c)(3)
Wills and Trusts
Employer Identification Number (EIN)
K-1 Form
Unemployment Insurance
UBIT
UDFI
Non-Filers: Enter Payment Info Here
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
How many real estate investment deals do you do? How much profit do you make on each deal? Number or profit, which should you focus on? Cut through the clutter to find more profitable real estate investments. Today, Clint Coons of Anderson Business Advisors talks to Max Keller from Customers Chasing You. Max has more than 15 years of experience in real estate, finance, and teaching. Also, he has flipped more than 100 houses. Max shares five ways marketing attracts motivated sellers.
Highlights/Topics:
- What makes Max an expert? Information he provides generates results
- What sparked Max’s interest in real estate investing? Avoid pain by flipping houses
- Why does Max choose to work with seniors? Raised right by grandmother; loyal niche needs help with deferred maintenance
- What are Max’s five ways marketing makes more money on your average deal?
- Direct Mail: Stack quality multiple lists and pieces with good data to track results
- Transitional Call to Action: Address pain points via benefits statement
- Customer Service vs. Sales: Understand customer’s buying cycle
- Develop Niche: Teach expertise to create better value proposition for customers
- Superpower Principles: Become author for authority, expert, and celebrity status
- How can investors differentiate themselves and cultivate customers? Answer the phone, make them a priority, and build a lead funnel
- What’s the fastest way to increase results in your marketing? Change customer’s perception of you in their mind
Resources
Customers Chasing You (Free Tools, Templates, Books)
Max Keller
Max Keller’s Book List
Dan Kennedy
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
As most of us experience financial hardship due to the COVID-19 pandemic, there is support through the new Coronavirus Aid, Relief, and Economic Security (CARES) Act. When doing your federal and state income taxes, stay up to date and safe. Toby Mathis and Jeff Webb of Anderson Advisors continue to practice social distancing to answer your tax questions. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What are updates on the tax impact of COVID-19?
- Tax Grace Period: July 15, not April 15 is deadline to file your federal taxes
- Families First Act: Addresses FMLA and other payments
- CARES Act: Options for everyone, from forgivable loans to stimulus checks
- Is the stimulus check based on adjusted gross income (AGI) or taxable income? AGI for 2018 or 2019 determines if you qualify for stimulus check
- How to apply for stimulus check, if you qualify? No need to apply, IRS direct deposit
- Can a partnership LLC be assigned directly to a living trust? Yes
- Can I hire someone outside the United States to do my bookkeeping? Don’t do it
- What are the best practices for a small business to record and track its profit/loss expenses? Check your numbers and hire a qualified bookkeeper
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Unlock Free Money from the New Stimulus Bill - CARES Act with Clint Coons and Toby Mathis
Tax-Wise Business Ownership by Toby Mathis
Infinity Investing Workshop
CARES Act
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Coronavirus Tax Relief
Families First Act
Family and Medical Leave Act (FMLA)
SECURE Act
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
COVID-19 and the Family and Medical Leave Act Questions and Answers
501(c)(3)
K-1 Form
Form 1065
Form 1099
Employer Identification Number (EIN)
Affordable Care Act
Wills and Trusts
Tax Cuts and Jobs Act (TCJA)
1031 Exchange
Capital Gains Exclusion/Section 121
QuickBooks
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Where can you find good deals? It’s getting harder to do because investors compete for the same properties. If a property is on MLS for more than five days, it's not a deal. Today, Clint Coons of Anderson Business Advisors talks to Keith Aichele of FSBOVault.net. Keith is a real estate investor who has sold more than 1,200 deals and found a way to make a profit from MLS properties. Keith’s upstream investing system finds deals, beats the competition, and takes investing to the next level.
Highlights/Topics:
- What opportunities are real estate investors missing, and why? People aren’t looking at available opportunities and need help/guidance
- What are Keith’s investing strategies? Real estate investors are marketers who need to market their business and structure financing
- How does Keith find deals and buy MLS properties? Access to lists of foreclosed and auction properties—MLS is full of these types of properties
- What happens when you're not even competing with the people downstream? They're not on the ‘no default’ list
- How does Keith differentiate himself from other people who inundate the market? Focus on marketing, be where the competition's not, and create relationships with sellers
- When and why do sellers get distressed? Most markets have more than 9,000 properties on the market for more than 90 days; Keith makes offers before distress sets in
- What is Subject To Investing? Is it equity stealing? Buying and creating pretty homes and decorating them is not that easy to do, and ‘Subject To’ goes over people's heads
- What is a Contract for Deeds? When you work with a seller, they may not need to sell and get all their cash out of the property
- What are ‘Subject To’ risks? Property drains cash flow out of your bank account; don't go into foreclosure and destroy your credit
- What is FSBOVault’s predictive behavior process? Search for stale listings, seller’s mindset shift, and reduced listing price
- How can you prevent the realtor from ruining a deal? Get the realtor on your side; it's in their best interest to not lose the listing
- What’s FSBOVault.net’s Guaranteed Offer Platform? Investors leverage the platform to make multiple and full-price offers on properties guaranteed within 1-7 days
- What multiple options does Keith tend to give sellers? Full-price offer with caveats or serve as a backup buyer
- Why look at foreclosure lists? All properties going to foreclosure, auction, or share of the sale are missed opportunities by investors
- When investors buy properties ‘Subject To,’ are they taking over the seller’s mortgage? No, they’re paying the mortgage to keep it current
- What does FSBOVault.net teach investors to help people earlier upstream to avoid foreclosures and auctions? Don't focus on properties; focus on sellers and people
Resources
FSBOVault.net
NextGen Real Estate Investing (Regularly $297, only $47 with Promo Code: ANDERSON)
MLS Property Listings
Blue Ocean Strategy by Chan Kim
Zillow
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Despite delays, closures, and quarantines due to the Coronavirus (COVID-19), you still need to file your taxes. So, Toby Mathis and Jeff Webb of Anderson Advisors spent St. Patrick’s Day answering tax questions to help you through this difficult time. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What are the updates on the tax impact of COVID-19?
- April 15: Deadline to file your taxes still applies, but individuals that owe less than $1 million and businesses that owe less than $10 million can file a 90-day grace period extension to pay their taxes without being charged penalties and interest
- Families First Act: Passed by House of Representatives, but still under review by Senate because major mistakes need to be corrected to address Family and Medical Leave Act (FMLA) and other payments
- If I get married while owning a property in an LLC, will my spouse also be protected under the same LLC? LLC is not necessarily protecting you and your spouse, but the property in the LLC and whatever happens to it
- If I purchase a business from someone, how does the entity transfer over? Two types of business purchases: Stock purchases or asset acquisitions
- My business started in 2019, and we don’t have money for a CPA. Can I submit a 1065 partnership form for my small business myself? Yes, you can, but it’s not recommended because failing to file a 1065 on time has a $205 penalty per month/per partner
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Anderson’s Guide to Creating Your Private Vault by Greg Boots (Coupon Code: PV2020 for $20 off)
Tax-Wise Business Ownership by Toby Mathis
Coronavirus Tax Relief
Families First Act
Family and Medical Leave Act (FMLA)
SECURE Act
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
501(c)(3)
Form 1065
Form 1099
Form 8832
Form 1120
Real Estate Professional Requirements
Self-Employment Tax
Wills and Trusts
Freddie Mac
Fannie Mae
Capital Gains Exclusion/Section 121
Section 338(h)(10) Election
Schedule C
Cost of Goods Sold (COGS)
How to Buy a Business
Business Structures
UBIT
UDFI
Section 179 Tax Depreciation
Depreciation Recapture
Bonus Depreciation
1031 Exchange
Opportunity Zones
Cost Segregation Tax Breaks!
Form 1040
Form 1040-NR
Rollovers as Business Startups (ROBS)
Form 2553
Employer Identification Number (EIN)
Affordable Care Act
CoreVest
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
If you have a corporation or LLC, you’re going to be dealing with securities. Do you know what you need to know when it comes to fundraising and securities compliance? In this episode, Toby Mathis of Anderson Advisors talks to Chris Myers of Holland & Hart about the basics of raising capital for investment and real estate projects. Chris assists public companies with corporate transactions and investment advisers with the formation and operation of private investment funds.
Highlights/Topics:
- Securities Transaction and Compliance: If someone gives you money, and you take that money to build your business, you are expected to give it back
- Fundraising Pitfalls: Securities regulators are out to get all those that intentionally or unknowingly commit fraud via securities transactions
- Debt or Equity: Securities transactions may allow regulated exemptions or exclusions
- Examples of Exclusions: Something isn’t considered a security and doesn’t need to be regulated, such as bank stocks
- Examples of Exemptions: Security involving pre-existing accredited investor and doesn’t need review; refer to Section 482 and Jumpstart Our Business Startups (JOBS)
- General vs. Non-General Solicitation: Unlimited or limited number of investors known or not, such as friends and family, buying security and owning equity in your business
- Loans and Less Risk: Corporate diligence picks up non-compliance securities offering
- Non-Compliance Penalties: Depends on broken rules and involves decision by securities regulators, investors, and commissions
- Road Trip: When raising money, move in the right direction by following the rules and regulations, such as Rule 506(c) and Regulation D
- Offering Memorandum: Describe, document, and disclose key risk factors to investors; avoid misunderstandings and missing funds
Resources
Chris Myers
Chris Myers’s Phone: 702-669-4621
U.S. Securities and Exchange Commission (SEC)
Financial Industry Regulatory Authority (FINRA)
Bernie Madoff
IRC Section 482
Tax Cuts and Jobs Act (TCJA)
Jumpstart Our Business Startups (JOBS) Act
MapQuest
Form D
Toby Mathis
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
Tuesday, March 3, 2020: Was it super for you? It depends on facts and circumstances. Who and what is best for you? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions related to mental health care, short-term rentals, and retirement because life is about more than just money. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- Are there tax rules that allow farmers to accelerate depreciation for farm equipment? Farmers can take Section 179 and bonus depreciation, but they have a slower recovery
- How do you keep track of your reimbursable expenses before your corporation makes a profit? Make sure corporation is reimbursing you for all your expenses and report them at corporate level as loss
- What tax rate do I have to pay on an early withdrawal from my IRA? Some exceptions, such as age and financial hardship, but marginal tax rate is about 22% plus 10% penalty
- How can we write off the tuition for our training? If already in a field or career, tuition for training should be written off to business; if not, write off as a startup expense
- My sister and I are partners in our LLC. She is now on disability. How can she receive profit from the business now? No material participation to receive passive income
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Wills and Trusts
Section 179 Tax Depreciation
Depreciation Recapture
Bonus Depreciation
Airbnb/Short-term Rentals
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
Capital Gains Exclusion/Section 121
Cost Segregation Tax Breaks!
1031 Exchange
Opportunity Zones
501(c)(3)
Form 1099
Bitcoin
Ponzi Scheme
Tax Cuts and Jobs Act
Schedule A
Real Estate Professional Requirements
Rollovers as Business Startups (ROBS)
Form 1065
UBIT
UDFI
Health Savings Account (HSA)
Home Office Deduction
Self-Employment Tax
26 CFR 6203
26 US Code 280A
Form 1099-INT
Affordable Care Act
1 Veteran Foundation
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Texas is a great place to invest in residential real estate for cash flow and appreciation. If you’re looking to invest, find the right market and the right real estate professional. Why? Most agents don’t know how to help investors buy or sell properties. Today, Clint Coons of Anderson Business Advisors talks to Jason Reynolds of Visions Realty & Investments, Inc., which offers client-focused service for investors wanting to buy or sell real estate. Jason is a full-time licensed broker and realtor in the Dallas/Fort Worth Metroplex. He has sold more than 300 units, closed over $40 million in volume, and hosts the Real Estate Now Podcast.
Highlights/Topics:
- Why did Jason start in real estate? Followed in the family business. His great-grandfather was a broker from the 1950s till the 1990s in Corpus Christi, Texas.
- Who trained Jason to be a broker? Steve Fithian, company founder and current broker.
- Why be a broker working with investors? Few brokers focus on investment properties and understand how to look at them, find them, work with the client, and analyze it.
- Why do most agents not work with investors? They don’t have the bandwidth or understanding. It takes a lot of knowledge, time, and expertise.
- How to find investment-grade residential real estate? Local Board of Realtors, find names of top sales agents, interview a few, pull MLS data, and perform due diligence.
- Do you have to be all in with either investors or homeowners? Depends on the person or company. Visions Realty takes pride in doing 90–95% of its business with investors.
- What issues occur with occupant vs. investment transactions? Unexpected and unique issues that are unfamiliar to real estate agents that don’t work with investors daily.
- If someone wants to buy investment property through financing, do investment brokers have lenders to refer people to? Refer them to at least three recommended providers.
- Is the realtor or investor expected to find property management teams? If you’re the investor, you’re making the decision. Get recommendations, but always vett them.
- What’s the difference between new build vs. existing for investment property? Depends on the client’s goals, stage, and long-term plan.
- Are new properties going to turn into a rental vs. existing property? Will that CapEx impact your cap rate? With new builds in the DFW area, typically you reduce your cap rate a couple points, as opposed to a pre-owned property.
- For an investor coming into a new market, should they find an area with more owner-occupied properties? Yes, it will help you to attract and keep tenants.
Resources
Jason Reynolds’s Cell Phone Number: (817) 269-0988
Visions Realty
Frontline Property Management
Real Estate Now Podcast
MLS Real Estate Listings
1031 Exchange
Form 1040
Employer Identification Number (EIN)
Fannie Mae
Clint Coons
Anderson Advisors
Anderson Advisors Tax and Asset Protection Event
Anderson Advisors on YouTube
What’s the answer to all tax questions? Calculate, calculate, calculate. Fortunately, Toby Mathis and Jeff Webb of Anderson Advisors provide additional information to help you determine what makes sense from a tax standpoint. Do you have a tax question? Submit it to taxtuesday@andersonadvisors.
Highlights/Topics:
- What do you have to file when you have an S Corp and take a salary? Payroll tax forms, possible registration with state, county, and/or city for withholding
- I’m a small business owner who didn’t make any income last year. Do I have to file? Depends on type of small business, but filing is recommended, especially for losses
- How much of my remodel can I claim on my taxes as expenses vs. improvements? Remodel tends to mean improvements; separate improvements from repairs
- Can you claim both the home office deduction and the Section 280A for the same C Corp? No, for technical reasons; reimburse yourself for home office costs and corporate use of house for meetings
- How do you report real estate rental income for properties in a trust? Depends on type of trust and how it’s taxed; may be taxable to grantor
- What determines your state residency when you live in a non-fixed location (RV, boat, etc.)? States typically follow the 183-day primary rule, so depends on where you spent most of your nights, as well as where you’re registered to vote and your driver’s license
- I have a family limited partnership that is going to get a large sum of money. I plan to put it all into a nonprofit. Any taxes owed? A large sum of money is typically a source of adjusted gross income (AGI), which is only 60% deductible
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Wills and Trusts
Employer Identification Number (EIN)
Individual Retirement Arrangements (IRAs)
Traditional and Roth IRAs
26 US Code 280A
Real Estate Professional Requirements
UBIT
UDFI
Capital Gains Exclusion/Section 121
Form 1099-INT
Schedule K-1
Unemployment Insurance
Workers' Comp
Professional Employer Organization (PEO)
ADP
Paychex
Patriot Software
Schedule C
Self-Employment Tax
Cost Segregation Tax Breaks!
Section 179 Tax Depreciation
Depreciation Recapture
Bonus Depreciation
MACRS Depreciation
Form 1041
Form 1040
Schedule E
Form 2553
Form 1128
Form 1040-NR
Opportunity Zones
501(c)(3)
Rollovers as Business Startups (ROBS)
1031 Exchange
SECURE Act
PayPal
Airbnb/Short-term Rentals
HELOC
Form 1099-COD
American Home Shield Warranty
Toby Mathis
Anderson Advisors
Anderson Advisors Events
Anderson Advisors Tax and Asset Protection Event
Tax-Wise Workshop
Anderson Advisors on YouTube
Anderson Advisors on Facebook
Anderson Advisors Podcast
Flipping real estate has been a hot topic for the past few years as a way to make money. Some flippers find success, while others struggle to survive. What are they doing right, wrong, or different? Today, Clint Coons of Anderson Business Advisors talks to Tucker Merrihew, owner of TTM Development Company and host of the Real Dealz Podcast. Tucker describes systems and processes he developed to become a successful real estate flipper.
Highlights/Topics:
- How did Tucker get started in flipping real estate? While starting and growing a mortgage company, he flipped properties on the side to make a profit
- Why did Tucker start TTM Development in 2008? Mortgage markets imploded and real estate changed; created company to buy REOs from MLS and at auctions, as well as negotiate short sales to avoid foreclosures
- What has changed at auctions since then? Advances in technology and additional service providers have made it more competitive and difficult to get worthwhile deals
- What is direct-to-seller marketing? Tucker takes out the middleman and works directly with those who own real estate
- What’s the key to successful marketing that generates the biggest return rates? TTM Development’s marketing stands out from its competition by trying, testing, tweaking, and retesting ways to be different
- Marketing costs money, so how does Tucker’s company make money? Three buckets:
- Long-term Money: Redevelopment/new construction
- Medium-price Point: Renovation
- Wholesale: Buy property, then sell it for various reasons to generate profit
- How does Tucker’s team determine where to drop mail? Driving 4 Dollars (D4D) App
- How can real estate flippers raise money to get their business funded? Internal capital, private money, and hard money
- How and where to find good contractors? You get what you pay for, if you value cost over quality, pick one or the other or something in the middle
- What will impact the real estate market in 2020? Supply, demand, and interest rates
- What are must-dos for new investors? Understand it’s a marketing business first and real estate business second
Resources
TTM Development
D4D App on iTunes
D4D App on Google Play
Real Dealz Podcast on iTunes
Deal Finders Academy
REOs
MLS
Yellow Letters
Deed of Trust
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