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.
- 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 another 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 a business buys a 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
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Full Episode Transcript
Welcome to the Anderson Business Advisors podcast. The nationally recognized preferred provider for asset protection and tax planning in the nation. This show is for investors and business owners looking to save on taxes and build long term wealth with Toby Mathis—an attorney, author, business owner, and a featured instructor at Andersons Tax and Asset Protection event held throughout the country. Enjoy the show!... Read Full Transcript
Toby: Hey, guys. This is Toby Mathis.
Jeff: And Jeff Webb.
Toby: And you’re listening to Tax Tuesday. Welcome to another Tax Tuesday. The eve of the presidential debates—the first between Trump and Biden. Or Toby and Jeff. We’re ready. We’re going to dive right in because I want to let you guys get out of here at a reasonable hour. So that you can get in and get your popcorn, watch the theatrics.
First off, Tax Tuesday rules, you can ask live questions, and we’ll do our very best to answer before the end of the webinar. We sometimes have about 10,000 people registered. Sometimes it’s a lower number. We’ll see how we’re doing tonight. I have a feeling that a lot of you guys are getting ready for the debates. We’ll see what ends up happening. If you have a question tonight, it’s a very good chance that we’ll be able to answer.
If you need a really detailed, specific answer to your particular question, you really do need to become a platinum member, which is $35 a month. There’s a sign-up fee. It can be waived depending on what you do with us as far as structuring and the organizations that you come through. You want to make sure you reach out to us and see what that is. That is $35 a month, unlimited Q&A from our attorneys and planners. You can ask a tax question in writing, and they’ll get an answer to you. Or you can become a tax client, and I’ll do your prep and everything.
This is fast, fun, and educational. We want to get back and help educate. Every Tax Tuesday is about you guys and making sure that we get all the questions answered. Interesting stuff that we’re going to be going over tonight. First off, we’re going to delve into the New York Times article on Trump’s taxes. There’s a lot of commentary on it. Can’t turn on a news channel where they’re not having some opinion as far as what’s going on with Trump’s taxes.
We’re going to look at Biden’s to be fair, just to level it out a little bit since he seems to be getting by without too much scrutiny as to his taxes, which he just released is 2019’s today. You’re talking about two millionaires that are going to be on that stage tonight—makes quite a bit of money. We’ll see what they use, what kind of structures they use, and what they’re planning entails. We’ll go over that tonight.
Here are the questions also that we’re going over. “Can you withdraw some earnings from a Roth IRA if you held for five years or more, and you are under 59 ½ years old? Do you know the IRS code that supports your answer?” I don’t know about the code. We’ll get you the answer in all of these.
“We mention someone who makes $3 million in income who saved in taxes by routing $1 million to a C-Corp that was acting as a lending arm. How did he structure this? Wasn’t there an issue with the accumulated tax or personal holding company income?” I’ll give you guys a little bit on this when we come to it, but we’ll answer that.
“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 for a business deduction, utilities as well?”
“What are the laws for purchasing a vehicle for business to use as a deduction?” We’ll go over that.
“Is there a way to get around being taxed from the gains profits from doing flips?” Flips is real estate buying a property, fixing it up and selling it.
“If you are renting out a condo and taking depreciation on it and then the following year decide to live in the condo yourself, what do you do about depreciation?”
“I’m selling my house in Mexico and I’m being charged 35% capital gains tax. I’m being charged in the currency that is double 10:1 to 20:1. Can I avoid that? My home has not increased in value, only the currency devalued. Do I also need to pay capital gains tax or anything of the sort for the US?” Good question. I threw that in there because this is fun, and it might be interesting for some of you guys that do have properties that do have properties outside the United States.
“My cousin and I are looking to purchase a flip property. Can we both use our separate LLCs for the transaction? Or is it better to create a new partnership LLC?” We’re going to go over all of these tonight. We’re going to have a lot of fun.
Before we do that, because I like giving stuff away (we always do), I’m just going to tell you guys, join us for October 17. It’s another Infinity Investing Workshop. If you have not been to one, please join us. They’re a lot of fun, and you’ll learn what we do from the backside of doing taxes. You get to see who’s successful and who’s not. Who’s full of donkey doo versus who’s actually making money. They’re usually pretty quiet. They don’t talk about it much.
We know the trades. We see it repeatedly who does well and who does not. The people that make money tend to have common traits. By all means, join us. It’s a one-day event, bring some young people. I always say bring the teenagers before they get in debt. Bring the young adults so they understand the power of a dollar and what it means to actually create wealth. We’ll go over that.
Now, let’s talk about our presidential candidates. Tonight is the night. New York Times article. Jeff, I know we’ve chatted a little bit about it, but they seem to be upset with them. You had a pretty good comment. You’re more concerned about the debt than the actual tax, right?
Jeff: Yeah. I just looked at that picture and just sigh.
Toby: Jeff, we’re not going to ask you politics, but you’re looking at two candidates. When you sigh, […] statement.
Jeff: I must say that listening to debates that my IQ may actually drop.
Toby: You […] the debate committee saying, you made me dumber. No, no, no.
Jeff: I know there are strong supporters on both sides. A lot of the strong supporters are going to be slinging their […] on the other side. There’s been much to do about Trump’s tax returns. and now I’m sure it will be Biden’s tax returns. One of the things I thought for the past several years as they’ve been trying to get Trump’s returns out of him is what do they expect to see in there that’s really going to give them any kind of secret information?
Toby: He is required to disclose the financial information. Every time you see him say, hey, I disclose everything. My returns aren’t going to tell you that much. Anybody who’s done real estate knows this is the case. Your return doesn’t really tell you that much. I could look at somebody’s K-1 and not really get an idea of whether it’s making much.
Maybe I can look at the distributions and say, hey, they’re pulling some cash out of it. But if they’re at risk for it, shoot, I can refi a building, I can refi my house and pull the money out, and I don’t have to pay tax on it.
Toby: I think it’s a bit of a misnomer. They’re going to say, oh, let me look at these returns. All they’re looking for is got yous.
Jeff: And he has been audited for a number of years.
Toby: He’s being honest about that and saying, I can’t release them. I think his attorneys are probably saying, do not release your returns because you’re going to have $100,000 amateur accountants taking a whack at it. And anybody else that wants to get him, just trying to look for, again, got you. This is private. This is what really bothers me.
I’ll show you guys the code provision. It’s not just Trump either. The New York Times did its piece on Trump. I would say that it cast him in a pretty negative light, but Biden did this stuff too. What people forget is that when Vice President Biden got out of office—in those following couple of years—he made somewhere north of $13 million. He and his wife did not run that money like a sole proprietorship. They ran it through S corporations.
There have been articles written about how much money he saved by doing so. But by all estimations, because he avoided the old-age, death and survivors, and the Medicare tax by using the S-Corp because you’re not taxed on that punishing tax above your salary when you’re going through an S-Corp. He saved—by all estimates—about a half a million dollars. You don’t hear much about that, right? But of course, he paid a lot more tax personally as a percentage of his income than perhaps Trump did.
We don’t know because we haven’t seen all of the returns. What we know is only what the New York Times said in their article which is 10 of 15 years he did not pay any tax. What they don’t say is what he did in those other five years.
Jeff: A lot of times these big tax breaks that you hear about, for example, you use the president’s Trump building that he took a very large deduction for. A lot of these breaks are more deferral-based than just completely you’ll never have to pay the tax. If he was to sell that building, he would end up having a very low-cost basis in that building. And would pay substantial taxes on it when he sold it.
Toby: Exactly. I should note, by the way, we have Elliot on here, tax. He is an attorney, an accountant, and a fantastic guy. He’s answering some of your questions. If you see him, trying to think I have Susan and Patty on, I wasn’t unfair. Should have told you guys we have people working really hard to get your questions answered and to make sure that everything is going well. I could see a lot of commentaries here. So that I’d be remiss if I didn’t point out that it’s not just Jeff and I. There are other individuals answering your questions.
There are always hundreds of people on these, trying to look right now. We’re over 400 folks on live. Again, we have a lot of people that just listen to the podcast, et cetera. It’s a good group. Again, somewhere around the 10,000 range that requests the event every two weeks. That’s good.
Going back, Jeff, what you said is 100% accurate. What a lot of people don’t realize is that he’s cramming his deductions into a small range of time. Just like you would if—I’ll use an example yesterday on this. If you’re a doctor, you’re making $1 million a year, and you invest in some equipment for your practice. That equipment, you buy it and you finance it over the next 10 years, 20 years, or whatever. You could choose to accelerate the depreciation and write all that off in year one. But now you don’t get any more deduction.
They always act like this is some sort of horrible thing. I’m like, wait a second, this is exactly what you want. Now, you’re going to pay tax over time because they don’t get to write it off twice, and they have a tax appetite meaning they may buy more equipment. They’re doing exactly what the code is incentivizing, and that’s exactly what Trump is doing. He’s buying real estate. If you haven’t figured out that real estate’s the holy grail of tax planning, you need to spend a little more time with us because real estate is the holy grail of tax planning.
Literally, they’re giving you—right now, under the Tax Cuts and Jobs Act, and the CARES Act, they’re giving us all sorts of incentives to jump in. Somebody says, “It’ll be nice to see you, and I instead of staring at nothing.” I’m going to give you guys something fun.
Years ago, it was Justice Rehnquist, this was the transcript of a hearing and in the Old Dominion case. I just grabbed it so you guys aren’t going to be able to read the little words. I’m just going to pull up the part where they’re responding to the government.
This was on carryback of losses as to whether you could carry them back 2 years versus 10 years on—I forgot the type of lawsuit. I believe it was a casualty loss. The reason this is important is because this is exactly what Trump did. He released it and said, hey, instead of going back two years, you carried it back five years. All he did is take advantage of the law as Congress passed it. Now, they want to beat him over the head with it.
This was the exact same scenario in a case and here is exactly what Rehnquist said. He goes, “Mr. Jones, there is nothing wrong with the strategy to avoid the payment of taxes. The internal revenue code doesn’t prevent that.” It seems like we want to beat up on people for taking advantage of the laws as written.
Now, speaking of the laws as written, some of you guys know that there’s a code out there that prevents individuals from disclosing your tax return. It’s a private document. They’re not supposed to have it. Some of you guys might remember a resident of the federal penitentiary now—a lawyer by the name of Avenatti, who is in the press quite a bit. He came about some suspicious activity report by a gentleman by the name of John Fry who worked for the government. They disclosed it, ended up in the papers, he used it in his lawsuit and ultimately made a big brouhaha over information that was illegally disclosed.
Do you know who went to jail besides Avenatti? But Avenatti didn’t go to jail over this. Do you know who went to jail on that one? John Fry. And then you have Natalie Edwards feeding BuzzFeed the FinCEN, the Federal Crimes report on Manafort. Yeah, they got Manafort, he went out in the news, and it was all over the place. But you know who else went to jail? Natalie Edwards. You’re not supposed to do this. You’re weaponizing the administration. It makes me sad.
Why aren’t they able to prosecute the New York Times? Why do we keep having this? This is actually the Julian Assange opinion where you had the court rule 6–3 in favor of the First Amendment preventing the recipient of illegal documents from being held responsible. This is good cocktail hour stuff where you can throw this out and you could put your finger out and your pinky out and say, hey, this is it.
Here is the stuff that actually came out in the New York Times. They said President Trump paid $750 in taxes in 2016 and 2017. He also donated his entire presidential pay. He had a big fat zero in income tax in 10 of the 15 years, the tax record shows he made hundreds of millions of dollars a year yet he had racks of chronics losses and aggressively employs to avoid taxes. You have to decide whether you think that’s a bad thing or whether maybe it’s lawmakers that need to have a long hard look and say, what type of things are we incentivizing?
Jeff: The keyword there is he avoids taxes. He doesn’t evade taxes. There are poor ends from each other.
Toby: Yeah. Somebody says, “Who wants to talk about taxes and politics?” This is taxes. This is cocktail hours. I had a look at it and I say it’s smart accountants. One thing about Trump is he said I hire good people. He apparently hired a pretty good accountant because they’re doing a good job in accelerating its depreciation.
Jeff: He’s probably got an army of tax accountants.
Toby: I would imagine so. The funny thing is I think they wanted his tax returns because they could show that he was beholden to Putin and all that.
Jeff: But those returns are not going to show that.
Toby: I know. That’s why they keep saying, why do you keep asking for the tax returns, his financial disclosures. Here is another one that Trump uses quite often, and I’m going to relate this and I’ll get out of this. I’ll relate this to something that’s happened here in Las Vegas. We have an area uptown in Summerlin, Queensridge. Snoop Dogg used to live in the towers there, Queensbury or something like that.
Anyway, they have a golf course. Their golf course wasn’t making any money. Now he’s let it go brown, he let it die, and he’s going to build on it. All these people that bought lots on the fairway on a golf course are now going to have people in their backyard. They’re madder than the mops. If you moved on to a golf course, you expect it to stay a golf course.
One of the things Trump does do with his golf course is he gives away the development rights to conservation charities. In English, what that means is nobody can develop the land. If you have a piece of property that if you developed it was worth $20 million, and you give away the development rights. It’s just going to stay an open area. It might drop the value down to $10 million. You get to take as a deduction. The $10 million is a charitable deduction. Trump has done that in just bought every one of his golf courses.
Jeff: And he’s not the first one I’ve seen. I’ve had a client that did that with his golf course and got millions of dollars in the conservation easement.
Toby: Somebody asked, “Has Trump paid millions of taxes since announcing his candidacy?” It depends on how you define has Trump paid because he has personal taxes that he’s paying, real estate taxes that he’s paying. He’s paying taxes on the employer side of even household employees. It runs in the tens of millions of dollars on an annual basis. I would say, yes. His attorney says he has. His tax attorney that was contacted by the New York Times says you’re not understanding.
Federal income taxes, he’s not being required to pay federal income taxes. But a lot of these only offset your income tax, not your other types of taxes. The point being is it’s just a lot of people are going to slide it whatever is in their best interest. For example, Biden avoided the social security tax. Very easily, you could say, hey, this is a guy who’s saying he’s going to defend social security, but he’s not paying into it.
His running mate, by the way, Kamala, did pay. They received their distributions as a sole proprietorship. She did writing and other things. As far as I could tell, she’s paying self-employment tax on it. She could say, yes, I am for social security. But then, somebody might say, wait a second, there is no such thing as social security because they put it in a general fund and they don’t actually put it aside. Do you have anything to add to that?
Jeff: We’ll save the Social Security Trust Fund discussion for another day.
Toby: Yes. We’re going to have to do it sooner than later, right? The answer to you guys is it depends on how you want to interpret it. It’s that old Clinton, “It depends on what your definition of ‘is’ is.”
Jeff: I think we need a keyword for the debate tonight and everybody drinks keywords. Anytime somebody says it…
Toby: I think we need a safe word. Pepperoni means you back off. “With rental properties, how many years of losses can you claim?” Brandon, you can carry forward losses indefinitely. You can carry them back if you are a real estate professional. Meaning that they become net operating losses. You can carry those back five years.
I’ll just tell you exactly what happened with Trump is he was able to carry him back two years. He accelerated depreciation on a building to the tune of 70 some odd million dollars that he could not take that he was going to carry forward. Which means you’re not going to pay tax in the future. And then they changed the law and said, if you want, you can carry it back. I can’t remember whether it was four or five years. I think it’s probably five.
Jeff: That was five years.
Toby: Five years? Okay. Sometimes I think it’s four, but I think you’re right. It’s five years.
Jeff: During the great recession.
Toby: He carried it back those additional years and got this big tax refund. Apparently, that’s what’s causing the audit. The big question is, are his passive losses ordinary? Somebody says, “Do you have to be a licensed real estate professional?” No. The test is a section called 469(c)(7) where there’s an exception to the passive activity loss rules and it’s 750 hours. Also, being your personal major source of income is in the construction, development, or sale of real estate—even not your own. One spouse has to qualify, and then you have to maturely participate with your real estate.
Probably the question with Trump is whether he maturely participates because he runs his 12 companies. He’s definitely a real estate professional if you look at what he does every day—when he’s not being a president, before that. I imagine the question really comes down to maybe material participation.
Jeff: Maybe material participation. I was wondering if there was a cancellation of debt. But I think the only time he would’ve had that was in entities that filed bankruptcy. In that case, there is no cancellation of debt.
Toby: That’s what gets weird. There are a few things that are a mystery to us, and maybe we’ll actually see more information and we could do it. You guys have a lot of questions. Let’s answer this question and I’ll go to a bunch of your questions online. We’ll knock them out. “Can you withdraw some earnings from a Roth IRA if you have held for five years or more and you are under 59 ½ years old?” Do you know the IRS code? That’s for sure answer, Jeff.
Jeff: Yes. The qualifiers are you’re over 59 ½, or you’ve held a Roth for five years. There are a couple of other special cases like inheritance, death, and disability. Yes, if you’ve held the Roth for five years—even if you’re under 59 ½—you can take earnings out. Keep in mind, your contributions are never taxed when you pull those out. They always come out before your earnings come out. The code section for that is 480A(d)(2).
Toby: You are a nerd. I was going to try to look that up. I was getting all sleek. 480A, what is it, (c)(2)?
Toby: Whoever is out there looking, let’s say that you’re 22 years old and you put money into a Roth. Let’s say five, six or, seven years later, you’re in your late 20s and you need the money. You can take it out with no penalty, no interest, no nothing?
Jeff: Correct. But you are going to pay tax on the earnings. No, I’m sorry, you’re right. You’re not going to pay any tax at all.
Toby: Which is pretty good. “Can’t you annuitize the Roth if under 59?” No, no, no. You’re thinking of something else. You’re thinking of Section 72(t) on a traditional where you decide to spread it out. You still pay tax on that. “Really there are no required distributions under Roth?”
Jeff: Correct. There’s no RMDs.
Toby: Somebody says, “Can you take money out for a home and things like that?” You could take it out of a traditional.
Jeff: You can also take it out of Roth. If you do take it out early, you can exempt up to $10,000 for the first time home buyer.
Toby: There are a few little things like if you’re in financial hardship. And then the big one this year, which went away two days ago. I shouldn’t even tell you guys this, because if you needed to do it, you’re going to be really mad at me. But we talked about it. It was $100,000 early withdrawal from your IRA 401(k), 403(b), 457. You could take an early withdrawal. As long as you pay it back within three years, there’s no 10% penalty or income tax. It’s treated as a trustee to trustee rollover.
That went away on September 27. You could still borrow from your plan up to $100,000 if your administrator allows it. If you have your own 401(k), you’re a Solo 401(k), you just say yes and then we’ll go from there.
We got a bunch of questions. Somebody says, “Is there a way to see if everybody’s questions?” Jay, no because you are putting stuff up here. I guarantee you, if I put 1500 people online and let you guys see everything, they’re going to solicit. We already see it in some of our other events. No, I don’t want your name to be tied to something that you type in. You may be saying, hey, I did XYZ and I want you guys to ask the question not to be worried that someone’s going to rat you out.
“Can you please clarify on the tax reduction or exemption for first time home buyers?” Yeah. If you’re a first-time homebuyer you can withdraw money out of your plan—your traditional IRA.
Jeff: I don’t think you can do it in a 401(k).
Toby: Without penalty. You have to pay income tax on it, but you won’t have to pay the penalty tax.
Jeff: First time home buyer doesn’t mean the first time you bought a home. It’s the strangest thing. It actually means you haven’t owned a home (I believe) within the past two years.
Toby: It’s some period of years. What we would say is if you’re in a situation where you need the funds, talk to us and we’ll see whether there are any reasons you can get it out. Somebody says, “I thought you pay tax on Roth earnings when you’re less than 59 ½ regardless of the five years. The difference is the 10% penalty.” We’ll look at it. I know for certain that you can take the money out. Maybe this is the penalty that you avoid, and then maybe you pay a little tax on the earnings.
Jeff: Yeah, it could be.
Toby: We’ll look at it. We’ll either have Elliot dig it or Jeff here is rapidly into his Google phone. “I’m confused about borrowing from your 401(k). Can you borrow a loan yourself up to half the value or up to $100,000?” It’s actually 100% this year. There’s a couple of moving pieces to it. It’s $100,000 up to 100%. If you have $100,000 sitting in a 401(k), you could borrow the whole amount out. You don’t have to pay deferred interest in 2020. You’d start in 2021. When it was early this year, they say, oh, you have six years to pay it back.
What ends up being now is you pay it back over 5 years starting next year. First-quarter, come March, you’d make your first quarterly payment and you pay it in equal amounts over five years, so 20 quarters.
Jeff: 20 quarters for five years.
Toby: You pay it quarterly over five years at about 4%. You could actually set it to be monthly too. I know that one, that’s 60 funds. Trying to do my math. Sometimes quarters mean thirds in accounting. I don’t think this is one of those cases.
Jeff: Yeah. Within the employer plan, they have some leeway to decide what that term is. It’s not going to be longer or it’s going to be shorter.
Toby: It depends on your plan documents if you did it. Says, “Do we have the same CARES Act loan abilities with pension plans?” Yes, you can. Sometimes, I tell people, look, if you’re hurting for money—COVID’s been tough on a lot of folks—or if you have economic opportunities—you have a property you could buy something like this—you may as well borrow it from yourself. You’re paying yourself back that interest, and it’s a pretty good interest rate. Now you’re putting your money to work as opposed to having it sit in, dealing with what’s going on in the market.
The S&P 500 and Dow Jones have been recovered—which we knew they would—but it’s a lopsided recovery. You have the S&P 5 and then the S&P other 495. The other 495 haven’t done so well. The S&P 5 which is your Amazon, Apple, Google, Netflix, and Facebook are killing it. But not everybody else. It really was.
Somebody says, “Wasn’t the deadline for CARES three-year distribution until the end of the year?” No. The first distribution, they gave it a period of days. I think it ended on September 27, I believe. You could always look this up if it’s relevant to you.
Somebody says, “If I start a Solo 401(k) before the end of the year and roll over an IRA, can I still take a 100% loan this year?” Yes.
“From IRS Q4, what is a coronavirus rated distribution?” You have to have been affected. You make a statement, hey, I was affected.
Oh, it says, “Related interest made eligible from January 20.” It looks like they may have given it a full year. They may have extended it. Under the CARES Act, it was a period of days. It looks like they may have extended it. If you want to look at that. It was just a one-off. We could always look it up for you too.
All right, there were a couple more questions. Somebody’s asking about options. “If I run my business from home and take home office, do I need to pay those deductions later?” It depends on how you do it. Home office deduction that is done through your sole proprietorship is depreciation recapture and you could be looking at up to 25% tax on it. If you’re doing a home office reimbursement through an S-, C-Corp, or an LLC taxes, an S- or C-Corp, then, no. You wouldn’t have to worry about it.
“What is the best structure entity to have for options trading to minimize tax payment and take deductions?” I think he means tax. Do you want to hit on that one?
Jeff: No, go ahead.
Toby: When you have a brokerage account and you’re trying to take deductions against it for your expenses, it’s a little bit of a problem because number one, they call you an investor, and they don’t let you take normal deductions. Even more importantly, they don’t consider you a trader business, unless you meet a really high threshold. The threshold is a moving threshold. If you’re a brown thousand trades a year, you’ll probably be okay. If you are under that threshold, you’re in a gray area at about 700. If you’re under 700 trades, it’s pretty much a no.
If you do try to take deductions as an investor, you’re under Schedule A, or if you’re trying to take deductions by paying a manager, you’re under Schedule A. It used to be that you would be able to take miscellaneous itemized deductions and write some of those off, and now they’re gone—problem. They did away with it under the Tax Cut Jobs Act.
Jeff: What we like to do is have a partnership or LLC with you as one member and your corporation is the other member.
Toby: What Jeff is saying, I’ll draw it up for you guys. Some of you guys are still yelling at me because you can’t see the questions. We never put your questions up. He says put the brokerage account here and this could be either an LP or an LLC. But whatever the case, it is taxed as a partnership. What’s the other component?
Jeff: As far as you mean having the corporation—be a member.
Toby: Then you have a corporation managing the LLC or being a partner for tax purposes. This might be 10%, 90%. The reason we do this is because if we pay the corporation, we have something called a guaranteed payment. They call it guarantee payment to the partner, plus it gets its percentage, and then you use the corporation to expense things. The 90% flows down to you after it’s paid. If you need to pay more, you can.
Jeff: Any of those investment expenses like you buy investors daily—your software, or any number of things—those would be expenses to the corp. We don’t want them in the partnership because there’s no place to deduct them on your return.
Toby: You miss it. Good one. Somebody has asked a related question, they had health insurance premiums at $9000 that was limited because the partnership only had $4000 of income. What happens to that? They had a loss. Sounds like they only were able to pay the corporation a small amount. The guaranteed payment you can make a loss, by the way.
Toby: It just carries forward as being reimbursable later on. You don’t lose it. But the day you pay it is the day that you actually have a loss. If it’s a capital loss—which this wouldn’t be. This would actually be an ordinary loss.
Jeff: It would be an ordinary loss, yeah.
Toby: We don’t have to go down that path. Capital losses are limited to your capital gains, or if you run out of capital gains, $3000.
Let’s see, “Toby mentioned someone makes $3 million a year.” You were listening to one of my other classes. We’re using an example. Here is your example. I’m just going to give you guys broad ones. Let’s say there is you and you have company one. Company one sells widgets. It sells Widget X. Let’s say that all that income flows down to you. Company one is more than likely an S-Corp. All that income flows down to you.
Company one makes $3 million. $3 million dollars is going to end up in your 1040, and that’s going to leave a divot. It’s going to hurt. The best thing I can tell you if that’s you are charities, you are going to be your friends, oil and gas, and real estate. Anything to try it to offset—defined benefit plans, defined contribution plans. We’re looking for anything you can do to shave off that $3 million.
What if you have other taxpayers? Let’s say that you have kids. For example, in Trump’s case, he was paying about 20% of his income that was coming through his companies to Ivanka. But you could pay something to people that actually earn it. If you have kids, that might help. You don’t have kids, then we look at other taxpayers. And our other taxpayers, we’re going to fall under categories like retirement plans. That would be more than likely a DB or a defined contribution.
If any of these goes over your head guys, by all means, join us for a Tax and AP class. We teach them at least once a month. Be on the lookout. We will give you free access to come to tax and asset protection. Usually, when we teach them live, they’re three days. But we can […] into a lot of these. Let’s just say that I’m going to have some go-to retirement, or if I can put on another hat, it could go to company two.
Company two could be taxed as a C-Corp, which means it’s taxed at a flat 21%. You do save some money if you’re going to leave the money sitting in the capital too. “Does the kid have to be over 18?” No. They just have to be able to do something. There are kids that are in the tax corp cases that are 9 and 10 and they’re earning pretty good money—especially in the arts. They’re actors, things like that. But realistically, make sure you’re paying your kid fair market wages. Just talk to your accountant or go google it and say what could they be paid?
Let’s just say that we paid company two. Company two can’t be in the exact same business of selling X, but company two can be doing things like marketing, taxes, bookkeeping, management. We always say management corporations. They could be steering and doing all the vision. Every time you’re an executive, you put on your hat for company two, and every time you’re a salesman you’re putting on your hat for company one. All you have to show is that this is documented and reasonable. Now we can move money that would be flowing into your 37% tax bracket and move it over here into the 21%. We save 16%.
You have to ask yourself whether it’s worth it. And then once that money is there, now they’re looking at, hey what about accumulated earnings tax. I never saw anybody get hit with that.
Jeff: Accumulated earnings tax is pretty easy to beat. What the tax is on is when you keep accumulating the money into your corporation. What you need is just to have a written plan on what you’re planning on doing with that money. Your working capital, you’re planning on lending it out. Is it doing something other than just sitting there avoiding taxes?
Toby: If you have a reason for it. Because we have publicly traded companies, they have billions of dollars sitting in them. They’re always like, yeah, we might have an acquisition. This guy, I just said, hey, well, just make it a lender. In this particular case, this gentleman had cash desires for other companies. He could become a lender to those other companies. Now, if it’s in the business of lending, we don’t have to worry about the personal holding company at all. But if it’s just doing periodic, it’s just lending off, and it makes too much on interest—realistically a savings account or whatnot if it exceeds 50%–60%.
Toby: It exceeds 60% from rents, royalties.
Jeff: Interest and dividends.
Toby: Interest and dividends, then it would be a personal holding company. It’s basically taxed at about 37%.
Jeff: That portfolio income that you’re looking at there gets taxed an additional 20% on top of the tax.
Toby: But keep in mind that it just made a million dollars in management fees. You’d have to make an awful lot of loans to push it into the personal holding company issue. It’s not even an issue. Anyway, that’s kind of fun. Somebody says that they’re about ready to be done with COVID and come hang out. Yes, it’s more fun.
Somebody says, “Do you have any recommendation term words when naming a new management C-Corp?” I don’t really care too much. I’d never seen that used except when you use banking and financial terms. It’s usually the state. The IRS doesn’t really care. What they care about is there’s an agreement.
I’ll just give you a little trick here. I’m setting up and almost always—probably 92% of the time—when we set up a management company, it’s an actual statutory manager of the entity. It’s statutory. We’d only have to have the agreement. By terms of the statute, it is a manager. That’d be good. We don’t even have to sit there and have the separate agreement hammered out, although we do that too. But you actually are a statutory manager. If you are in a limited partnership, for example, we make sure that the C-Corporation is the general partner. Because then statutorily, it’s entitled to be paid reasonable compensation.
And then somebody says, “For a trading business example, is it easier to just do everything through an S-Corp?” In the very beginning, depending on whether you’re going to zero it out, the answer is yes. If you just use a corporation, I tend to like C-Corps because I can reimburse all of my medical, dental, and vision, including my copays and deductibles.
For most people, that’s $4000 or $5000 a year at a minimum. On the high-end, probably on the $9000 or $10,000. I get to write that off. Whereas in an S-Corp, I don’t. I’m, generally speaking, going to have to side with starting with the C-Corp. Which is the opposite of what your accountants are going to say because they immediately think you’re making a million dollars and distributing it as a dividend, which is silly. When was the last time you saw a dividend by a private company?
Jeff: I see them occasionally but not very often. Maybe once or twice a year.
Toby: Yeah, it’s kind of weird. “Difference between an S- and a C-Corp.” S flows under your return. Atomically it goes on page two of your Schedule E. It comes via K-1. C-Corp pays its own tax. Somebody says, “Can you write off medicare fees?” Anything that comes out of your pocket you can reimburse. If it’s medical, dental, or vision—anything that comes out of your pocket.
Jeff: If you’re an S-Corporation and you’re doing the health insurance, you should also be reimbursing yourself for Medicare because that’s also considered self-employed health insurance.
Toby: Yup, absolutely. It’s almost always going to be better if you have high medical expenses, be a C or at least have it in your arrows. We use the speaker Pelosi. I have arrows in my quiver—put it in your quiver.
“Can a C-Corporation operate with two different DBAs?” Yes, having two different NAICS codes. I don’t know about the two different NAICS. I believe it can. If not, you create a subsidiary.
“Has the question regarding the home in Mexico been answered?” No. We’re going to get to that here pretty quick. I’m going to zip through some of these.
“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 for the business deduction? Utilities as well.”
Jeff: We may have different opinions on this. For this to work out best, the apartment in the other state probably needs to be rented by the entity or the business.
Toby: Yeah. I could agree with that. Otherwise, if you did it, it’s still an administrative office. If you have a second home—I actually looked this up because it was a client in California. Get this. Husband and wife and the husband was a college professor, had a home office where he did a lot of his stuff. But then he has a house study he rented down by the college so he could work during the day. It was basically his office. The campus one was too chaotic so he did it. He’s able to do both. He wasn’t an employee of the university. He had his own consulting company and was contracted with.
Jeff: Let’s say I’m paying $1000 a month for rent plus utilities and other whatnots. What portion of that am I able to deduct?
Toby: If it’s only for business purposes, if I have that apartment simply for business, then it’s 100%. In other words, I’m just using it when I travel there and I don’t use it personally, then it’ll be 100%. But if it’s just a second house that I use but sometimes I go and use it, then I’m going to have to cordon off what portion is business, and I’m only going to get a percentage.
Jeff: By using it personally, I can actually taint that 100%?
Toby: Absolutely, I would just use it as an office and say it’s exclusively used for the office. If I want 100%, I have to. I don’t have a choice. Let’s say I have a home office—this is a buzzword that we don’t like—do not do the home office. You want to do an administrative office in your home. The reason being is a home office is only for sole proprietors, and you have depreciation recapture. The administrative office in your home is not an accountable plan. When a company reimburses you for its use to your house, you don’t have to report it anywhere. Kind of cool.
I want to get through this. There’s one question here. “With the election up, the candidate promises to raise the C-Corp tax. What happens if that candidate wins? Should you change tax status? How soon should you do it?”
Jeff: Yeah, I’ve thought about that. If you were an S and changed to a C-Corp with a tax law change, you have to wait five years before you can change back to an S again. Like we often say, you got to crunch the numbers to figure out what works out best in this case.
Toby: Yeah, I would say don’t do anything. Because the president doesn’t get to change the laws, though you wouldn’t know that. But the bevy of executive orders that are shooting out there, now governors think they’re presidents too. Because congress still has to change things. If Congress raises it, it doesn’t mean you have to keep operating. I wouldn’t change it to an S. I would just close my C and open up a new S. Transfer the assets of the old into the new or buy it and say, I’m going to buy your assets.
Somebody says, “Move to an island.” Move to Puerto Rico. You don’t really have to pay taxes there.
“How do you set up an accountable plan?” […], it has to be an S- or a C-Corp, or an LLC taxed as an S- or C-Corp. In the administrative office in the home cannot be done by a sole proprietor because you can’t be an employee of a sole proprietor, nor can it be used by a partnership when you are a partner. I hope that answers your question. We need to have an S- or a C-Corp floating around in there from a tax standpoint.
“What are the laws for purchasing a vehicle for business to use as a deduction?”
Jeff: If you’re going to purchase it inside the business.
Toby: Yeah. So we’ll say business buys 50% or greater.
Jeff: You’re not going to be able to take the grand deductions if you’re using it for personal.
Toby: Track miles, and if you fall below that 50%, you have this heinous recapture at ordinary tax, and the business buys or you buy. If you buy, you just have a mileage reimbursement. You have to track miles no matter what. I think that’s 58¢.
Jeff: Last I looked it was 58¢ or 55¢.
Toby: Yeah, I should look. I have something floating around here. It’s probably 2019. I think you’re right. It’s either 55¢ or 58¢. It fluctuates and sometimes they move it around. Sometimes it goes up when energy is expensive. Right now it’s low so it’s probably closer to 55¢, but then you don’t have to report anything.
Somebody says, “Does a business have to earn revenue before buying a vehicle?” No. Here is the hidden one. The answer is no, the first time met him. The bigger one is your insurance is going to be more expensive with the business. Be careful about buying a car through it. You had to get commercial insurance.
Jeff: My personal feeling is if you don’t absolutely need a vehicle in that business to perform that business, you probably should just put it in your personal name, deduct the mileage, reimburse for the mileage.
Toby: Yeah. Somebody says, “If you buy a custom van with an area to sleep and a bathroom, should you buy it personally or deduct it as a mobile home?”
Jeff: No, you can’t do that because it doesn’t have a kitchen.
Toby: Right. He has to say he has a kitchen in an RV. What I would do is I would say no, you’re always better off reimbursing mileage because you’re going to have personal use. Here is the deal, personal use, if the business has, you have tax on personal use. Going to tax you at its least value of the portion. It could be pretty ugly.
Jeff: We used to do that for a client who actually purchased company vehicles for his people—his employees. Every year we have to do W-2 adjustments to add on that personal use.
Toby: Somebody asked a good question, “Charitable deductions?” You have a $300 above the line deduction this year, which means I can give $300 to a charity and I don’t have to do itemized, and you have a 100% AGI limit this year. You can give away all of your income to a charity and write it all off. Only in 2020. Then it goes back down to 60% and nothing above the line.
Jeff: Because of the tax law changes in ’17. 2018 and 2019 have not been particularly good years for charities.
Toby: Yeah, it’s been ugly. When people struggle and we need to use the charities more. Unless you’re a BLM. It’s feast or famine. Some just have had a ton flow through, and then others are being shunned—they’re not getting anything.
“Is there a way to get around being taxed from gains, profit from doing flips?”
Jeff: I wouldn’t call it getting around, but what you’re going to do is you’re going to find other expenses to run against that income.
Toby: Yeah. You’re going to be an S- or C-Corp or LLC taxed as an S- or C-Corp because an LLC does not exist in the internal revenue code. Those of you who have been on around. And then you’re going to do things like 401(k), DB, expenses, equipment—which is expenses too— and you’re going to minimize and try to get down and lower the amount of actual income.
When you’re flipping, it’s no different than buying any other product and putting it on a shelf. You don’t get to depreciate the flip, it’s your basis. It’s the cost of goods sold. Someone who sells—that’s it. Somebody says, “What’s a DB?” This is equal to a defined benefit plan. In a defined benefit plan, last year, the most we were able to put one in. We had one that was $615,000, right?
Jeff: Holy cow.
Toby: Some people are putting in $200,000, $300,000 a year tax-free.
Jeff: I have a client, the couple were both maximizing […] compensation within the DB plan. They will get to put a ton of money away. I love the DB plans.
Toby: The DB plans are potent. You just have to do it. Guys, I’m going to jump into this one because we’re already passed an hour. “If you are renting out a condo and taking depreciation on it and then the following year decide to live in the condo yourself. What do you do about depreciation?”
Jeff: That depreciation stays right where it’s at until you sell the property. If you sell the property again somewhere down the road, you may have what we call depreciation recapture.
Toby: Recapture is when you write something off. You’re taking a deduction against the house or condo here. When you sell it, then it’s not capital gain. It’s depreciation recapture at your ordinary rate capped at 25%. I’m going to tell you guys, sometimes I give away our book. I see a lot of questions about S and C, some of them are the basic stuff.
Patty, if you’re listening, if we have the link to give away Tax-Wise, I don’t expect you to put it up anywhere, but for some of these people, I like getting in some of these others. If you could give them the book, just let them know, to reach out, then we’ll send it out to them so that they can read up a little bit on it.
I know some of these concepts will go pass some of you guys, but I wrote all about it. I’d be happy to make sure that we give you an electronic version. If you want the hard copy, that’s fine too. We want to make sure that you guys—we’re all getting on the same page.
Jeff: Something that often confuses people on this recapture though is your recapture will never be more than the total gain on what it is you sold. If you have $20,000 of possible recapture and you only have a $10,000 gain, your recaptures are only going to be $10,000. If you have a loss, you’re not going to have any recapture. It’s only if you have gains
Toby: Basically, it goes to recapture first, and then everything else. Everybody’s asking for a copy of the book, so I just screwed up poor Patty. Maybe if you have the link out there, Patty—this is what I do sometimes4. I like to make them pop on their toes. Either send an email to Patty, or we’ll send you guys a link later and we’ll make sure that we get you your copy of TaxWise. It’s TaxWise version 4. It’s Tax-Wise Business Ownership, 4th version. I know you’d say, “Why didn’t you stop at 1?” Because 2 is so much better, 3 is better, 4 is better.
All right, let’s go into this one, the Mexico. This gets really interesting. If somebody’s selling a house in Mexico and they have this 35%—I think it’s 32%, but whatever—gains tax. “I’m being charged on the currency that is doubled 10:1 and 20:1. Can I avoid that? My home has not increased in value, the only currency gets devalued. Do I need to pay capital gains tax or anything of the sort in the US?”
Jeff: When you purchase a property in foreign currency or purchase anything on foreign currency, you value that at that point in the US. If you bought it for something, for say ₱1000, that would be worth $100. If you later sold it for ₱2000, that’s still only going to be worth $100.
Toby: Exactly. It’s not going to punish you. What you’d end up doing is, you’d end up going back and saying, “What’s that?” When you sell it, you’re going to put it back into US currency. If it hasn’t gone up in value, all that’s going to happen is you’re going to get back to $100,000, and you’re not going to pay anything on tax. The other thing and it just happens to be Mexico—because one of our accountants is an accountant in Mexico. Also, if you lived in it as your primary residence in Mexico, then you pay no tax.
Now in the US, let’s say you move here, now the US is going to tax everything that you make anywhere if you are a resident. You don’t even have to be a US citizen. You could literally move here and become a Green Card or reside here. The second you decide to reside here, it’s going to want to tax that, too. But if you lived in it, we have something called IRC 121, which allows you to avoid the tax, if you’re single on $250,000 of capital gains on the sale of your house, or if you’re married, $500,000. So single, married filing jointly. It still applies even if you have a foreign residence. Do you agree with all that?
Jeff: Yes. IRC 121 applies against your primary residence. The exclusion applies to your primary residence, regardless of where it’s at.
Toby: I think this person may actually be on it. If yes, we have an accountant who was also an accountant in Mexico. Can you avoid the capital gains on the devalued currency?”
Yeah. What we’d do is we’d break the home, and we do the conversion and we’d see what’s the actual value. If the currency moved, it wouldn’t actually create a taxable event just because the currency moved. I hope that makes sense. We’re going to sell it. Whatever it gets converted into, it’s going to end up not being taxable. If you lived in it, it’s not going to be taxable. If that was your residence, it’s not going to be taxable. There are ways to avoid it.
Jeff: Anytime you pay tax outside of the United States and you have to follow US return, you’d want to let us know about that foreign tax you pay because it’s possible you’ll get either a credit for it or at least an itemized deduction for it.
Toby: Hey, somebody is asking about Mexican tax. Logan, if you want to email Patty, Lulu would be able to help you. She knows their stuff pretty well. Some other questions, lots of people asking about the book. Sorry, Patty. I’m going to get in trouble. They asked me right beforehand, “Hey, are you going to throw anything else at me?” And I was like, no, I’m just going to do the […].
Jeff: You said that?
Toby: Yeah. Somebody says, “Can you do a 1031 exchange, and later move it into a property, into a personal residence?” Yes. I think it’s 5 years that you can’t do the 121 exclusion. The primary resident reduction, you have to have lived in it. Instead of 2 over the last 5 years, I don’t think you can 121 it within that. I think you have to wait for 5 years, but we can look at it.
Somebody says, “Can a husband and wife who are separated and not divorced, claim primary residence? They live separately.” This is where it gets weird, yes and no. Yes, the time that you lived together and that still counts for the person remaining. But for the actual time frame, the 24 months, they’re going to look and say, “How much of it did you guys live together in it?”
Then they’re going to say, who owns it at the end if you got it in a divorce decree and you ended up owning the house, just your own separately.” Let’s say they separate, and I put the money in the house in my name. They still let you have the marital amount. If you sell it, they’re going to treat it as being one. I think if it’s sold within a certain timeframe. I think it’s 2 years, but I’m not sure.
And there’s Joe, a buddy from Tacoma. I see him. He’s getting a book. Joe, you could reach out to me, brother. I can always get it. Patty’s going to be really slow.
My cousin and I are looking to purchase a flip property. Can we both use our separate LLCs for the transaction, or is it better to create a new partnership LLC?
Jeff: Let’s assume that each of you has a disregarded LLC, but you’re the sole owner. You can do what’s called tenants in common in that case where you own a certain portion, he owns a certain portion. The books are all done together. Then you take your share of their income and your share of the expenses and report each on your own return. If the LLCs are owned by more than one person, I don’t believe you’re able to do that.
Toby: What I would do since you each have an LLC, so we have one and two—the existing. So LLC-1, LLC-2— I would set up a partnership, an LLC-3. So that whoever’s going to manage it, you could actually specify, “Hey, I’m the manager,” so someone doesn’t do anything weird with it. But you’re going into a tenant in common. They have the right to occupy. They can do all sorts of stuff that obligates you on that account. I’d rather have it to where they’re going to, at least, look at that partnership agreement or the operating agreement of the LLC, and then it’s owned 50/50 by your respective LLCs.
Jeff: No. I agree with that. Tenants in common usually need a really good property manager to do things. Another thing I’ve seen with tenants in common is there’s nothing to prevent you from selling your interest to somebody else.
Toby: Yup. So they could go. Along comes the ex-spouse and says, “Hey, I really want to get so and so bad.”
Toby: Somebody says—I might’ve missed this, “How can I avoid paying taxes from withdrawing 401(k) for real estate investment?” You can borrow it up to $100,000 this year. There’s a couple of questions about The CARES Act. Send me an email, send Patty an email, or just go to Tax Tuesday. I’ll give you guys all the numbers here.
First off, you can always listen to our podcast. We put all of the Tax Tuesdays in the podcast. I think we do two per session so you don’t have to listen to—sometimes we go 2 hours. Tonight, we’re going to get done a little early so you guys can watch the debates.
Jeff: That’s a nice one. You’ve been with us for 11 years, and that’s awesome. There’s my buddy Joe.
Toby: There’s my buddy Joe. the feeling’s mutual. You guys, always good and he’s up there by our office. To go on, I’ve had a few conversations with Joe that I still recall. He’s a good man. Leave it at that. You can go into iTunes and you’ll see him. Sometimes they’re sitting there, let’s say at Tax Tuesday. We should call it Tax Tuesday with Jeff and Toby so that I don’t see my name all over the place. Sorry, man, that’s just mean.
Here are all of our wonderful podcasts. You can go in and listen to them. We usually send you the recordings, too. I know it’s sometimes heavy, but you guys might be surprised that when you go back and listen, what little things you’re catching because I’m getting stuff from Jeff the whole time. I’m getting stuff from you guys. There’s a bunch of CPAs, accountants, and smart people out there on the chat that are chirping in sometimes.
Usually, if I don’t know something, I’m going to learn it while we’re doing this, and that’s one of the coolest things. We don’t sit here and pretty much do everything. Sometimes I’ll grab something like tonight, the elections, I’m going to grab a few slides.
But when we get the questions, I give them to Jeff. You probably saw them about an hour before we started. There’s a huge list of questions that come in and we’re grabbing ones, I’m trying not to be super selective. I randomly grab them and then make sure that they make sense. The giveaway, by the way, Infinity comes out on October 17. I know we’re way out. Register anyway, and share it with your friends.
If you want to learn how to make money, my new thing—which by the way, today was the coolest because I had the guys that built an ETF. They’re called GraniteShares, and we did an advanced class with them where they were explaining their philosophy on building their ETF, and we were making fun of mutual funds together because we like to do that. But they were doing it in a much nicer way than I did.
It’s absolutely wonderful. You get to learn all sorts of cool stuff. I have guys that build Torrens. I have guys that do mobile home parks. We have guys that do RV parks.
Somebody says, “Has the best ETF ever. Yup, they do. GraniteShares does have a great gold ETF.
William Rhind is a super nice guy. They’re modest, they’re super nice, and they’re very kind to share with us. But they have the HIPS, which is an income-producing ETF, which you guys can just go buy these, by the way. He’s actually on the exchange. It’s public ETFs. But let’s make it 10% plus yields right now because it got pushed down. There’s nothing that’s happened to their revenue. It’s just, they got pushed down with the pandemic and people are running and chasing after Tesla and Amazon, which is great for us when you go buy those things. Anyway, it was fun to have them there.
We’re big income people. I’d rather not have a company go up 100%. I’d rather have 10% of income shooting in year after year for the next 50, 60, or 500 years (whatever you want it to be) and in just for an indefinite period of time. It tends to go up. We’re big income-producing assets, and join us at that if you like that sort of thing. Jump on in, it’s free.
You could share it with young people, or anybody that wants to learn what we know because Jeff and I and our team here see tax returns all the time. The people that make money aren’t the ones telling you that they’re making money. The people that tend to make money are the ones that are really quiet. They’re just really cool, and they’re really chill. We see who makes it year after year, over and over again. Sometimes we go, “Whoa,” and sometimes we’re surprised because they’ll say, “Do you know, and so and so…”
Jeff is looking. When we run reports, sometimes we’re like, “Whoa.” You have a seven-figure real estate earner, and you’re just laughing about it because that’s earnings guys. That’s even after all the depreciation and everything else.
Jeff: I have scoffed at clients only to eat a crow later.
Toby: I just figured out that. I don’t know. You also can come on into social media. Here’s where you get your questions answered. If you have a question, you can certainly ask us. If you want the free book, by all means, use that too. I know it’s going to go to Patty, anyway. If you like taxes and you want to minimize your tax bill, we’ll do everything we can to enable you to become Trump-esque in your tax planning.
Whether you like the man or not. He is our president, and he builds big projects, big buildings, big golf courses. He is doing exactly what Congress wants us to do. He’s reaping some tax benefits. Oh, somebody says, they’d go to Susan. Yes, they do. Susan, sorry. But like it or not, if you really wanted to say who’s had the biggest economic impact,\ is the person that’s building a building because they have thousands of people that are working on it and all that fun stuff.
Congress writes these laws to incentivize that behavior. I think it’s really mean and disingenuous to pick on people that do exactly what the tax laws say. I’ll just tell you from here, I’m going to do everything in my power for my clients to minimize their tax bill because I know that if they save money, they’re going to invest more. They’re going to do other things with it. They’re going to give more. They’re going to tithe more. They’re going to do more good for their communities than if they gave it all to the government. That’s a big part of this.
If we can help you guys build your portfolio and your fortune where you’re not getting big chunks taken out of you, so you can be more competitive. I always relate it back to something kind of goofy. But Ikea still cracks me up because it’s a nonprofit. I just love that. All I could think of is its people will be mad. I remember there were articles written like they’re paying a total of 4% tax. They employ 300,000 people across the country or across the world. It’s a huge number, and they bring in billions of dollars and they give it away.
I’m for that. I’m not going to argue. Tax laws, they’re there for a reason. It’s usually to incentivize certain behavior, and I think that we get more from incentivizing people than by beating them over the head. Think of that when you’re hearing somebody bang on somebody for their taxes. I think that there are other things that they could be focusing on other than following the laws as they’re written for a behavior that’s incentivized, and I’ll just leave you with this.
A lot of people bought electric cars because they got a tax credit and because they thought it would change things. Are you going to yell at them too for taking that tax credit? Anyway, it was fun. Jeff, anything?
Jeff: Nope. I’m going to get back to doing tax returns.
Toby: Jeff’s in the middle of it. I don’t think Jeff will be back with us until after the tax deadline, right?
Jeff: Yup. I’ll grab somebody else. I know somebody says, “This is the shortest session ever.” No, it’s 1 hour and 18 minutes. We are overtime. It’s just we’re less overtime than usual. Anyway. I just want to say, I appreciate you guys. Go out there, do good things and we will see you next time.
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As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, another great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets. One of my favorites as well is our Infinity Investing Workshop.