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
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Resources:
Section 121 – Capital Gains Exclusion
Full Episode Transcript:
Toby: All right, guys. You are watching Tax Tuesdays. Hopefully you’re able to hear us loud and clear. Hey, Jeff.
Jeff: Hey, Toby.
Toby: Hey, so we’re just playing around with computers. We’re live streaming this one out to the YouTube world in addition to doing our normal broadcast. Jeff here is in the middle of tax season. Two more weeks to go, right?
Jeff: Three weeks.
Toby: Three weeks? Two more weeks to go and then that extra bonus, no? Yeah, three weeks? We’re right at the end. How are you guys holding up?
Jeff: We’re still alive.
Toby: You’re still alive, all right. Anyway, there we go. We have some folks. Hey, tell me where you’re at. Somebody wrote Florida right away. Tell me where you’re at so we can see where everybody is. We have several hundreds of people plying into the room. We want to see where everybody’s at. If you’re on YouTube, you can still do it in the chat. Matthew or Ander, how are you guys doing that?
Matthew: We have somebody monitoring chat.
Toby: Cool. You’re going to be on a little bit of a delay, but we’ll still be able to get to you. That’s how we roll. Look at that. We have Clermont, Hawaii, Missouri, Texas, Georgia, DMV area, San Francisco, Fort Washington, Long Island, Chicago, Houston, lots of Florida, Idaho, Louisiana, Fredericksburg, Texas, Rancho Mirage, San Diego, Alaska.
We got Alaska, we have down to Florida and Long Island. Let’s see how far up north we can get on the east coast. Let’s see. We have Spring outside of…
Jeff: I’m looking for Bangor, Maine.
Toby: Bangor, Maine? El Paso, Irvine. That’s obviously not on the east coast. Gosh, we have a lot of folks on right now. That’s good. White Plains, New York. That’s pretty far up there, I think. I grew up in Philadelphia. Anything north? There’s Boston. A wicked […].
All right, we got lots to go over. Let’s see if we have any Delaware in the house. Queens, New York, Jersey, Lawrenceville. We have just too many. All right, and then somebody just immediately does a monster question. I’m going to let you guys know the chat is where you can put comments as we go through things.
You can ask questions that are more comprehensive on the question and answer. If you’re on YouTube, what would they be using Matthew? They’re just using the comment section on YouTube.
Matthew: Correct. Yeah, there’s a chat they can interact. We can interact with them there.
Toby: Okay, you just use the chat and what are you guys going to do? Move it over to question and answer if you want us to answer it?
Matthew: Correct.
Toby: All right. I know we have Dana, Eliot, Ander, Patty on, Matthew on. Who else do we have out there? I saw Ian’s name. We have so many people on. Troy is on, Dana, Christos is on, Piao is on. You got tax attorneys, you got CPAs, and you got EAs. You got a bunch of talent on to answer your question.
If you have a question to ask, this would be the day to do it because you have a whole bunch of people there getting on here. Earnings from Venmo, Cash App. Okay, we’ll talk about that stuff later. All right, what else we got?
If you have questions when we’re not doing the Tax Tuesday—we do it every two weeks every other Tuesday—what you do is email it in to taxtuesday@andersonadvisors.com. My little pillow was crooked and that’s going to drive me crazy. Let’s see. We have taxtuesday@andersonadvisors.com and you could absolutely pop it in there, and we’ll make sure that we get to you which would be fun. What else we got?
Today is fast, fun, and educational. I just want to bring you guys tax knowledge to the masses as we like to say. All right, here are the questions we’re going to be going over today.
This is interesting. “Is the Form 1031 option applicable on personal use property in case the same property is sold less than two years of use by the owner?” We’ll get into what that means. I know why they’re doing it. I can see just by those two years, and we’ll discuss the different options.
“What are some things one needs to know to do about taxes in reference to real estate. Who would you get a 1031 exchange from when you’re getting ready to sell a property?” I’d like a 1031 exchange and price.
“I have an S-corp and wanted to know if there are any tax advantages to buying real estate business to grow my S-corp? Is it more worthwhile creating another,” probably another S-corp, “instead of buying another to add my S-corp?” I don’t know, actually. That one’s confusing to me. We will dissect that one. Jeff, you’re going to have to answer that one. I don’t get it.
“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?” Good question.
“I have a client that purchased a home in 2016, lived in it for four years, and in 2020, they rented it to a friend. On their taxes, they reported that year of rental which they didn’t gain anything from. They want to sell it and help their daughter get into a new place. They don’t want to pay capital gains on the property. What would be the best course of action?” We got good news for you.
“I invested in real estate syndication with the SDIRA, which stands for a Self-Directed IRA, traditional IRA account. The account is soon to be extinct.” We’ll see what passes. “The account is deferred tax account. I received K-1 showing income. I’m told I have to pay UBIT now, unrelated business income tax. Do I also pay taxes when I take a distribution?” Wouldn’t that be double taxing or double taxation? We’ll answer that one.
“I plan to purchase a rental property with a loan with option to occupy several weeks out of the year.” You’re going to buy a rental property and they want us to stay in it. “Is it better to rent entirely or purchase a secondary home? If I am to use it as rental-only, how much travel expense am I allowed? Am I allowed to write off travel the year prior as it took time and several tries to actually obtain a property?” I just grabbed this stuff when they mail it in so sometimes it’s not me writing these out. Sometimes they’re a little butchered on the good old-fashioned grammar.
“Can my business pay 100% of my tuition for advancing my career? If yes, how do I set it up? With our C-corp, would it be best to pay us a minimum reasonable salary and supplement our personal income with dividend payouts assuming that dividends are taxed at a lower rate, not subject to self-employment tax?” We’ll talk about that.
“Considering investing in real estate with the associated deductions to offset some of the 2021 year period to capital gains. May the purchase of the real estate occur prior to filing deadline 2020 offset gains made in 2021 or it needs to occur the same year?” We’ll decipher that. Again, some of these, the writings are a little bit clunky, but we’ll get and distill it down to its essence and then talk about the rules.
“I am looking to domesticate my LLC from Nevada to Wyoming. I have previously done a flip in the LLC. Is it okay to move to Wyoming as a standalone entity? Is my anonymity already shot?” Good question, we’ll answer that.
“With all the proposed tax changes under this administration, are there any moves that we should be making now?” That should be made now. Actually, that’s better. “Are there any moves that should be made now?” That’s actually right. We’ll get into it.
Jeff: You’re not used to reading clear grammar?
Toby: Yeah, I’m always trying to figure out what they’re doing. It’s always fun. All right. I see a couple of you guys. Just reach in if you’re having any issues with the Zoom, and these guys will help you troubleshoot it. Zoom, like all the online platforms, sometimes, can do some funky things. They’re some of the easy workarounds, so we’ll help you with it.
Our guys are already jumping on. I could see them typing away and answering questions. Some of these are like, that’s a seven-part question right there that Eliot is working away at. It’s awfully nice.
“Is the Form 1031 option applicable on personal use property in case the same property is sold less than two years of use by the owner?” Jeff, what say you?
Jeff: I got to get something off my chest. It’s not Form 1031. It’s Section 1031 of the IRS. There is no Form 1031. This option is not applicable to personally used property such as your primary residence or second home unless you convert that property into some type of investment property, rental property, and so forth. So you could do that, live in it for—and I’ll go ahead and jump to the second part of the question, if it’s sold less than two years of use by the owner.
We have really two issues here. We need to make an investment property. You’d be able to use 1031. Then the two years, we’re talking about Section 121 Exclusion of excluding gain on the sale of your primary residence. If you have less than two years living there, there are a few exceptions. One is active duty being deployed, one is you are forced to move or relocate because of your job—
Toby: Health or extraordinary circumstances. If COVID has hit your family, they’ve actually done that where somebody had a smaller house and they had twins, then you could use a portion of the capital gain exclusion. The way it works is they have to live in it two out of five years. If I lived in at one, I would get 50% of the capital gain exclusion, which means for a single person, it’s $250,000, for a married couple, it’s $500,000. That means you lived there and owned it. So you’d get 50% of whatever that amount is.
If you’re a married couple, you get a $250,000 exclusion, not 50% of the capital gains. You actually get that big chunk of exclusion. If the property went up $100,000, you wouldn’t have to pay any tax on it. It’s not that you get 50% of the 100%.
Jeff: What I think I do here depends on how much gain I’m looking at. You’ve only held it for less than two years. If the gain’s material, I think I consider turning it into a rental property for a year and then selling it.
Toby: Yeah, it really depends on also whether you qualify under 121 as one of the other circumstances. It’s not horrifically difficult to qualify for the partial use of the exclusion. It’s under 26 USC 121. You can go look at Section 121. Jeff is right, it’s not Form 1031, it’s a section. It’s actually a code section. It’s Internal Revenue Code 1031.
It’s only for real estate, it’s only for investment properties, and it has to go name to name. What a lot of people don’t realize is that you can use a 121 Exclusion, that capital gain exclusion and the 1031 exclusion on the same property. And 1031, in a simple way, is I can trade real estate for more real estate. It’s not, I could sell one property and buy 20 properties. As long as they’re equal or greater value, I just roll my basis to this new property, I pay no capital gains, I pay no depreciation recapture.
It’s a very, very effective tool. You can marry that with that two-year capital gains exclusion. Here’s how it works. The 121 Exclusion, which is that $500,000 capital gain exclusion if you’re married, means you lived in it as your primary principal residence two of the last five years, not the last two years, two of the last five.
You could literally live in a house, and we’re going to see this later because I saw one of the other questions hit this point. I could live in a house for two years, and then I could rent it for up to three years, sell it, and I get my 121 Exclusion plus I get my 1031 too. What the 121 will do because people will say, why would I do that? Why would anybody do that? Why would you want to use the 121 Exclusion with the 1031?
Jeff: Because that wipes out gain immediately. It’s such a basis higher.
Toby: It steps up your basis so if you ever have a taxable transaction, if you die with a 1031 exchange, right now your basis resets at the fair market value, so nobody ever pays tax on that money. But if you sold your property later in life, you’d have an extra $500,000 of basis that you won’t pay tax on.
Jeff: The first thing I do if I want to do the 1031 with my primary residence is once I quit living there, I dumped that puppy into a single-member LLC for liability protection.
Toby: Yeah, after you’ve done the exchange if it’s your name. If you’re in an LLC, you close the new property and the LLC. Even if you’re going to make it into a principal residence, which you can do. You just have to go investment property to investment property. But you can convert that investment property back to personal use after. I love these discussions. That’s more technical than people probably wanted to get into, but it helps.
“Does the property have to be titled to you personally to take the 121 Exclusion?” The answer’s no. It could be a grantor trust or either grantor. It could be an LLC that’s a single owner LLC, but it has to be your residence, your principal primary residence. If you have two residences, it’s where you spend the majority of your time. You can’t have two, by the way. You can only use it two out of five years. It’s called the anti-washing rules. You can’t do this over and over and over again every year. Hey, I’m going to live in this one, I’m going to live in this one, and play that game. It’s every two years and then you have to occupy it and have it in your name.
If you’re married and the person lived with you, then that’s considered their occupancy and you’re satisfying the ownership test. The LLC, Ethan, cannot be a partnership. There is written guidance on LLCs that are disregarded but not for partnerships because they look at that and say, no, you’ve crossed over into investment.
Jeff: There are some special rules for divorce and death in Section 121. If you run into that, I’m sorry. You need to talk to your tax advisor.
Toby: You got to sell within two years or the use of a divorced spouse, you can get that period of time too because you have to be in it, you have to own it, and now it’s your ex-spouse. They’ll allow you to qualify, but I think it’s two years after. But 121 is a very lengthy section. You just talk to somebody who knows it. We put a lot out there on YouTube and other things that do it. I just thought of continuing education on it, but it’s a big difference when it’s sitting in front of you and you’re looking at it.
Hey, speaking of sitting in front of you, you guys can join us for this Saturday, the Tax and Asset Protection Workshop live, it’s absolutely free. My partner Clint Coons does a big chunk of the day and then I jump on and do tax and legacy planning. It’s a lot of fun.
If you want to join us, here’s the link, absolutely free. Spend a day. We don’t kill you with it. It’s 9:00–4:00 Pacific Standard Time. We get out of there a little bit early and we give you an hour in the middle of it to take a break. There are videos and stuff that play during that time. It ends up being pretty cool. Jeff does not have to join because he’s busy doing returns.
Jeff: Can you go back two slides?
Toby: Two slides? Did I do something?
Jeff: We didn’t quite answer this.
Toby: I just go below right past. “What are some things one needs to know to do with about their taxes in reference to real estate? Who would you get to do a 1031 exchange?”
Jeff: I’ll answer the second question first. If you are planning to do a 1031 exchange, you have to start talking to a qualified intermediary before you start the sale. They will keep you in line, they will keep you out of trouble, and handle a lot of the transaction itself. What are some of the things you need to know for real estate? We do tax-wise but three times a year.
Toby: Join us for the Tax and Asset Protection because we dive into the tax. The big thing for me is that rental is considered passive as the default, but you can destroy that. There are ways to do it to make it into ordinary active income. If it’s ordinary income, sometimes you’re subject to self-employment tax. Also, don’t fall for the default. Everybody thinks that real estate is either a 27.5-year property or a 39-year property. That’s not true. You can break your real estate down into two components. It’s called 1250 and 1245. You could accelerate the depreciation on somewhere around a third of your improvements on your property so that your buildings.
You could take those. Because of the Tax Cuts and Jobs Act, you could accelerate that into one year, which means if I buy a million-dollar building, part of it is the land which we can’t depreciate. But let’s say we have $800,000 of the improvement value, we could get $250,000 of deduction in year one. That’s why accountants like this guy will laugh at it. Sometimes we’ll say, hey, look, if you’re paying taxes in real estate, it’s because you want to. Because otherwise, we can pretty much get it to go away.
Somebody was shooting a question about Biden and his S-corp. You guys are funny. Some of you guys are just like, I know, I’m going to get him. I get it. He just didn’t pay himself enough salary. He used an S-corp to avoid the payment of a ton of old age, disability, and survivors insurance, and Medicare payment, which is max 15.3%.
Part of it phases out. Did he avoid a bunch of taxes? Yeah, but tax avoidance is illegal. The last president before Biden, Trump, they tried to string him up by his toes for it too. Anybody in the tax world just says like, this is what the rules are. Why are you yelling it for somebody for following the rules?
Hey, come to the Tax and Asset Protection. It’s fun.
All right, jump on. I have an S-corp. “I wanted to know if there are any tax advantages to buying a real estate business to grow my S-corp. Is it more worthwhile creating another instead of buying another to add to my S-corp?” I don’t even know what this means anymore.
Jeff: Real estate business, what are you thinking?
Toby: Here’s the thing. When you say business, I think business-like, are you an agent? Are you wholesaling? Are you flipping properties? Are you construction? Are you development? S-corp appropriate. Jeff, would you put rental real estate or investment property in an S-corp?
Jeff: I’m not averse to doing that.
Toby: If you take it out to refi, you’re going to get nailed. Any growth on that property, what do they call it? Any capital appreciation, there we go. I buy a house for $200,000. Some point in the future, it’s worth $200,000 and I refi it. If I take that out of the S-corp, I have to pay tax on the $100,000 of gain right at that point. That is not true of LLCs taxed as partnership. LLC is disregarded.
So I tend to be like, whoa, whoa, whoa, whoa, whoa. You get all this real estate there. The rents still flow down as passive. If you sell it, it’s still capital gains. But if you pull it out of the S-corp, which you’re going to have to do if you’re going to do a refi.
I love the chat. The chat, you guys, I’m watching you guys. I see you, David, I see you. Anyway, you got to be careful. You got to be careful because you have that.
Jeff: And depending on what your S corporation is already doing because it sounds like you wanted to add to your S-corp, you got to make sure you have the proper liability protection. You don’t want to mix other business assets with maybe real estate assets. That could go south on you in a hurry.
There’s no harm to having a second S corporation, but like you said, a partnership is my preferred method. If for flipping properties, my preferred method becomes my C corporation. I think I’ve talked about this before. I prefer the S corporations for what they call operating businesses.
Toby: If you’re a construction company and you’re flipping houses constantly, you’re doing four or five a year, I don’t mind an S-corp, but that’s how you make your living and you’re going to take the money out. If you are doing a bunch of different businesses and you have business one, business two, I’m a W-2 over here, I got some investment properties, and I’m probably saying, hey, let’s keep it off your return if you’re doing the flips if you know what you’re doing.
If you don’t know what you’re doing, then do an S-corp because if you have losses, then we want them to flow through. Let’s see if there’s something else. I’m going to keep going. Do you have anything else you want to hit on that one?
Jeff: No, but we heard you say it. If you don’t know what you’re doing, put it on an S-corp so we take those losses.
Toby: Yeah. I’m just saying, there’s no faster way to lose money than the flipper who doesn’t know what they’re doing or getting started. You have to expect that you’re going to have to run into some face plans here and pull whack.
Jeff: Sometimes what we envision is not reality.
Toby: Yes. Somebody says, can you switch from an S to a C pretty easily? Yeah. You can go C to an S once a year or if you miss the filing and it was your accountant’s fault, then you can blame them and you can get a late election. Once you go back, what is it, five years where you have to wait?
Jeff: Yeah, you can go to a C or an S fairly easily and you can backdate that somewhat.
Toby: An accountant just said backdate. You’re recorded. Everybody sees you.
Jeff: You can make the effective date a prior date and the IRS will approve that. Getting out of your S corporation period is a little more difficult. It’s effective the day they receive the revocation of your S election. So we usually recommend that they do it the first of the following year. Then as you were saying, once you do that revocation, you cannot elect to be an S-corp again with that entity for five years.
Toby: Yes, they give you a little period. They’ll let you go one to the other, no problem. One to the other and back again, then you have a timeout for five years.
Jeff: One other problem going from a C to an S is if you already have properties and things of that nature in.
Toby: Built-in gain?
Jeff: Yes, in the C-corporation, you have a built-in gain. I think the holding period is five years right now.
Toby: I think it’s five.
Jeff: Yeah. In other words, if you sell a property that you had in your C-corp that had already appreciated in value, you sell it in your S-corp and you could pay building gains tax on that.
Toby: You could pay tax at the corporate level. They say, hey, I have the same scenario, $100,000 property, it’s in a C-corp, it goes up to $500,000. I make an S-corp election and sell it. That $400,000 doesn’t flow to me as capital gains at that point. It’s going to be in a C-corp, which is going to be taxed at the C-corp level. Actually, that’s different. Would it be taxed? Appreciated asset is in a C-corp, we might have an issue.
Jeff: Yes, but not the 721. 721 is hot assets. We’re not going to go into that. Just keep in mind, if you’re going to change your C corporation, that it has appreciated property. Change that into an S corporation that there may be some issues.
Toby: Just talk to your accountant and say, hey, this is what I plan to do. Just make sure that you got somebody to blame if things go wrong.
Jeff: Yeah, absolutely.
Toby: That’s what I always say. You got blame insurance when you use your professionals, just make sure it’s in writing.
I see this, “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?”
Jeff: That entire gain would be capital gain. There’s no 121 Exclusion. There’s no 1031, unless you make it a rental property first. Your gain is going to be taxed at the federal level and it’s also going to be taxed in the state that it’s in. You’re also going to be taxed in the state you reside in, but you’re not going to pay the same tax twice between the two states.
Toby: Technically, let’s say I have a second home and a personal name, different state. That’s personal property, it’s not investment property. If you make it a rental and you turn it into a rental, which could be done with as little as more than 14 days of rental, then technically, you could 1031 it and roll that basis into something else. If you have used it as your primary residence at two of the last five years part of that sale, then you could potentially get the basis stepped up on that and the 1031 exchange at the same time like we talked about earlier, or if you didn’t need it, you could just do it as capital gains.
Keep in mind that if you use it as investment property at all, more than those 14 days or more than 10% of the total—we don’t have to worry about that, it’s just more than 14 days—you have depreciation recapture. Whether you took it or not, the IRS makes you recaptured no matter what.
Jeff: The other thing I’ve been asked is, can I just make my second home my primary residence? It’s not that easy.
Toby: They have a bunch of tests. You got to have your driver’s license there. They’re going to be looking at where you vote, where your kids go to school, where you’re using the most utilities, all that stuff.
Jeff: Right, and they’re going to be counting the number of days also that you live in that house.
Toby: They do that. All right, so we’ve talked about hot assets and S-corps? Yes, Julie, we’re aware of that. That’s actually a term, hot assets in the accounting world. They all get excited because it means it’s going to be ordinary income, which we all go, oh my God, there’s going to be ordinary income. Anyway, it sounds more exciting. Now that I say it out loud, it doesn’t sound that exciting.
Questions, questions. Somebody says, “I’m in California and I have a rental. I overheard something that if I move out of state and then sell California clause back the capital gains, is this correct?” Yeah, in fact, they do it even if you’re 1031 Exchange. You have to keep track of the gain.
There’s a great case, I think it’s the Hyatt v. Commissioner where the guy moved out of California, moved to Vegas, and they actually deployed agents here and violated his civil rights. He won, got this huge judgment against them. It goes to the Supreme Court, they win, but then they had some limitation on him. It wasn’t complete immunity, but they had like a $50,000 cap on damages against the agents even though they broke into the guy’s house and violated his civil rights.
Long story short, it was all about gains that occurred while he lived in California. Then he moved and he had this big mass of like $30 million or some massive amount of sale and California wanted its fees. He probably spent more on legal fees than just paying the tax, but that’s what they do. Absolutely, they’re vampires. They just suck your blood until you’re like ahh.
Jeff: Once you become a resident of California, you can never leave.
Toby: Literally, if you do a 1031, that’s why you use a qualified intermediary. That qualified intermediary is going to track what that gain was in California. If you sell at any point in the future, that’s going to be taxable in California. It makes me not want to live in California. No offense, I love California, but I just don’t know. It’s a cost-benefit.
“I had a client that purchased a home in 2016.” It’s a financial person. “Lived in it for four years and in 2020, they rented it to a friend. On their taxes, they reported that year of rental, which they didn’t gain anything from.” Probably because you had depreciation. “They want to sell it and help their daughter get a new place. They don’t want to pay capital gains on the property. What would be the best course of action?” Jeff.
Jeff: I like these scenarios where I don’t have to give any bad news. Everything’s perfect. Running to a friend doesn’t matter. We’re assuming they were paying fair market value. I think I 1031 that property (just my opinion), get a new property, and put my daughter in the new property. What are you going to do? I was going to rent it to her for a year and then sell it to her.
Toby: It’s already an investment property. They lived in it for four years until 2020. In 2020, they rented it to somebody else. Now we’ve had another year. They have one more year to use 121 Exclusion. So you could sell it and avoid capital gains completely up to $250,000 if you’re single, $500,000 if you’re married. However, there’s that one year of depreciation, which will be about 3% of the value of the…
Jeff: Yeah, about 3.5%.
Toby: If you have a property that had a depreciable basis of $500,000, it means you’re going to have to pay tax at your ordinary rate capped at 25% on that $15,000. You’d end up paying a maximum $3750 under that scenario, so $3000. You’re not going to pay much in tax and you’re not paying zero in capital gains because depreciation recapture is not capital gains.
You could do that. If it’s too valuable, you don’t even have to rent it to your daughter, it’s already rented. You could just sell it, then I think you said this, buy an investment property, rent it. I guess you could rent it technically to your daughter since you own it, and you defer whatever gain could be in addition. We didn’t want to pay the recapture, you could do both. But I’ll just tell you, the qualified intermediary is going to cost you $800 to $1000. So you may as well, I would probably just do it.
Jeff: Let’s assume that you can do the 121 and we don’t need the 1031, then they have a few choices. They can buy a new property and just let their daughter live there, they could treat it like an investment property and rent to her, or they could do some kind of sale at a discount.
Toby: I know you can do it with siblings. You’d have to talk to your qualified intermediary whether you could go straight to your daughter or whether you’d have to put another investor in there, but you could absolutely make it work. If you choose to pay the taxes because you are agreeing to pay the tax, if you want to avoid it, you have the means to avoid it 100%.
Somebody was asking about the—and I missed it, they were both on the question and answer and in the chat—Biden proposals. I’m just going to go back to this real quick and talk about the IRA just for a second. That there is a proposal in the ways and means, and it’s showing up in the text at some of the bills that are being bounced around. Nothing’s been passed yet, but they want to do away with self-directed IRAs buying private placements or owning LLCs, and there’s a ton of these. They call it a checkbook LLC and you’re going to have two years to liquidate.
You’re going to have tax hit all over the place on people because there are folks with millions of dollars in their IRA that are held in private placements and they’re just going to get hammered. I don’t think that’s going to make it through. I think that’s a big boogeyman, a scary tactic to get them to agree to other things and basically say, that’s so scary. What can we do to avoid it? Oh, you can disagree to this and this. I always look at it saying, is it a tactic or is it reality? That would be vicious if it is reality.
As far as workarounds, there’s really not a ton. There are going to be tax mitigation strategies. When you get hit with that, you’re going to do it. Maybe you’re going to try to do it for the end of the year, but it’s not pretty. Yes, they are looking at that and they would take away a lot of those benefits.
This is timely. I didn’t realize this was the next question. This is the exact point that they’re trying to attack. They don’t like what they perceive as rich people investing their retirement accounts and blowing them up really big. They have the PayPal guy that invested in early shares for pennies in his Roth IRA and ended up making, I think, it was billions of dollars in his Roth IRA that is exempt from ever being taxed.
What Congress is saying, we don’t like that. We don’t want rich people having money in retirement accounts. In fact, we’re only going to let you have $10 million in retirement account. If you get above that, you have to distribute 50% of it every year until you’re back down there. It’s crazy.
Let’s do this one, “Invested in real estate syndication with a Self-Directed IRA, traditional IRA account.” That’s just a fancy way of saying I invested in real estate in my IRA. “The account is a deferred tax account.” Yup, it’s a traditional IRA. “I received a K-1 that’s from the syndication.” You didn’t get it from your IRA, you got it from the syndication.
“The IRA received a K-1 showing income to the IRA. Now they’re saying UBIT, which is interesting. I wonder what the syndication is. Do you have to pay taxes on it even if you take a distribution out?” Jeff
Jeff: I found this odd too. A real estate syndication is usually rental property. That is not UBI. But what I bet this is is not UBI, but DFI.
Toby: Yeah, unrelated debt financing company.
Jeff: Yes. IRAs are subject to both UBIT. Like I said, the DFI is also considered UBIT, isn’t it?
Toby: Yup, it’s going to be taxed.
Jeff: Technically.
Toby: But it is different. The easiest way to think about this, if I have a McDonald’s in an IRA, I’m competing with for-profit businesses. It says the IRA doesn’t get an upper hand. The IRA has to pay tax if it runs McDonald’s. If it owns McDonald’s as a passive investment, like the shares in a big company and it’s getting dividends, then that’s okay. But if it’s actively doing stuff, it doesn’t like it.
You’re okay to be doing rental property. You can own a syndication. The problem is IRAs cannot have debt. If it does have debt—in other words, it’s borrowing to buy an asset—then the portion of that debt to the asset is the portion of that income that you have to pay tax on.
Let’s say I have a property and I put down 50%. Let’s say it’s $2 million property and it makes $100,000 a year that it kicks down. Of that $100,000 of profit—after depreciation and everything else, don’t play, let’s just say it did do that. It made $100,000, 50% of it would be taxable as DFI or UDFI because 50% was generated by the leverage.
You know what doesn’t pay this, by the way? What type of entity could they have done instead of the traditional IRA? 401(k)s do not pay debt-financed income so you do not pay tax. You could have a 401(k) in an IRA, IRA pays the tax, 401(k) doesn’t. You could roll the IRA into the 401(k) and not pay it. Problem solved.
Jeff: Do I also pay taxes when I take distributions? Yes, you do. Would that be double taxation? The answer is no because what the UBIT is, that unrelated business income tax is, that’s a penalty tax for doing something they don’t like you doing.
Toby: It’s a leveling the playing field.
Jeff: An IRA is considered an exempt organization, a not-for-profit organization or entity. But when you participate in a for-profit trade or business…
Toby: Somebody says mine was in a 401(k) and I had to pay UBIT. […], if it was debt-financed, you wouldn’t pay it. If it was Section 408, I want to say, you’re not subject to it. If it was UBIT and the traditional unrelated business income tax because you are running an active business, then you would.
Jeff: Quick example, you go to the hospital, they have the gift shop that the hospital owns. They pay UBIT on that flower shop or gift shop because it’s unrelated to their—
Toby: Now he says they checked the box in the K-1. I don’t care. I would say I’m not subject to it.
Jeff: They could have been subject to the UBIT and not the DFI.
Toby: Correct, but he says that he had to pay it because they checked it on there. That would be something you have your accountant look at. I don’t care what the syndicator does. I’m going to correct it if it’s wrong, and I’m going to ask them to reissue it or I’m just going to correct it.
I’m going to stand by and say, hey, this is a passive investment vehicle that owns this. This is a 401(k), it is not subject to the debt finance income. Because usually what they’re doing is they’re saying, was their debt used in it? I forget the boxes, what does it say? What are the terms on the K-1 for debt that they have there?
Jeff: I don’t know. They’re all in the additional information portion anymore.
Toby: There’s a section where they’re asking whether you’re on the debt. Gosh, I’m blanking on all the different terms today. What is it when you have debt? Non-recourse debt. You can’t have recourse debt in the 401(k). You can have debt. You’re going to have non-recourse debt in the IRA as well, but you’re going to pay tax on the income-related from the debt. In the IRA, you’re not going to pay that on 401(k). You want to have somebody take a look at that.
We actually did ask a bunch of questions. Somebody says […]. You guys are having some fun in the chat room.
Somebody says, “I have a property that’s held my self-directed IRA, but it’s not a checkbook IRA, and the property is an LLC.” That is a checkbook IRA.
“The IRS custodian makes payments that I order. Will it be included?” Yeah, they would be included. Katie, what they’re talking about is the type of investment. The proposals, I’m not saying this is what’s going to pass. The proposal say you can’t have an LLC inside of an IRA or a 401(k). The proposal say that no matter what, you can’t invest in a private placement memorandum, something that’s very sophisticated or accredited investor.
I’m just saying we don’t know what the law is going to be because frankly, that thing is huge. It was like 1500 pages. Nobody’s even read the house version. The ways and means don’t write the law. They have their language that they’re agreeing on, but you still have lots of jockeying around. Until something comes out, I just take note of it and then I try to put it in the back of my head.
Let’s see what else we have. “I plan to purchase rental property with a loan with option to occupy several weeks out of the year. Is it better to rent entirely or purchase as a secondary home? If I am to use it as a rental-only, how much travel expenses am I allowed? Am I allowed to write off travel the year prior as it took time and several tries to actually obtain the property?”
Jeff: I got three different scenarios here. One, you plan to purchase a rental property but use it occasionally. If you do that, I wouldn’t do it for more than two weeks because that changes the nature of that rental property. Is it better to rent entirely or purchase as a secondary home? Those seem to be polar opposites to me. One is an investment property that you’re trying to make money on and one is just a second home, unless you’re planning on renting that out.
Toby: The IRS has funky rules. If I buy a rental property but I use it, the greater of 14 days or 10% of its rented day. If it’s rented for 200 days, I could use it for up to 20 days without having to declare, hey, this is personal use property. If I have personally use property, then it’s the opposite. I have 14 days to rent it without having to do anything and letting the IRS know, any days above that, now that’s investment property.
When you’re in either scenario where you’ve exceeded the amount they’ve allotted you, I buy an investment property and I use it 8% of the time, I’m probably good. It’s an investment property. I don’t have to break it out and say this is personal and this is investment, but I go above that.
I’m using it 20% of the time for me, I’m not going to get to depreciate 20% of the home, I’m not going to get to write off 20% of the expenses. There’s a portion of it that says, okay, it’s 20%, personal, 80% investment, you get 80% of all the deductions and everything else, but you don’t get the full amount.
Jeff: I believe at that point, your losses are limited to your income.
Toby: You cannot take the losses and offset other income with them either. You are limited to the revenue that’s generated on it. That’s why it comes pretty important. Especially when we see people doing Airbnbs and they’re going Airbnb. I have my Mexico property, I go down, and I stay in it all the time, but it’s an Airbnb and I’m going to accelerate the depreciation. I’m going to kick butt and they go to their account, and they say, wait a sec, you can’t do it. You violated. You stayed there too much.
What you don’t do is stay in your unit. If you’re going to do this, you rent your unit and then you use the rent that comes in off of your unit to rent somebody else’s unit, but you do not go stay in your unit if you’re going to exceed 14 days or 10% of those days.
Jeff: If I am to use it as a rental-only, how much travel expense am I allowed? Then the question becomes, how much travel was for the business? There’s not a limitation on how much is allowed, but it has to be business related.
Toby: Ordinary and necessary.
Jeff: If it’s travel looking for a home, you’re going to be able to not deduct that, but you would capitalize that into the cost of the property you end up buying.
Toby: You set up an active business, you’re capitalizing over 15 years, but they have a rule that says hey, it can write off $5000, a startup expense. In investments it’s I don’t get to write off the $5000, I just get to throw it into the basis and I’ll just not pay gain on it, kind of funky. You do that in a traditional business too, like a dealer property. If I’m flipping property too, I’m not depreciating anything at that point, I’m just adding it into basis.
If you were a Cadillac dealership, you don’t depreciate the cars. You write them off against the revenue. Wouldn’t that be cool though if you could?
Jeff: Oh, yeah. I’d never sell them
Toby: You’re just sitting there, hey, this is a great investment. I want a piece of a pretend car lot. All right. “Can my business pay 100% of my tuition for advancing my career? If yes, how do I set it up?”
Jeff: I think this is my favorite question. There are three sections of the code that deal with education expenses paid by employers. The first one’s for Section 117, but that has to do with schools, colleges, and all paying tuition for their employees.
Toby: This isn’t going to work, by the way.
Jeff: That’s not going to work. Section 127 is the Educational Assistance Program where you’re paying tuition for your employees and their family members. However, it has an anti-discrimination role.
Toby: You can’t get all the benefits out of it.
Jeff: No more than 5% can go to owners of more than 5% and their families. If you’re the only employee, then this doesn’t work. Then there’s Section 132, working condition fringe benefit. This will allow you to pay the education expenses unlimited. It has to be directly related to your business and has to be a condition of employment. There is no plan to set up. You do have to track the expenses.
Toby: You just reimburse it. If it makes you a better employee and does not create a new career for you, you can do it. If it is part of your licensing or is a condition then you can pay for it. Jeff is an accountant. How long have you been an accountant for?
Jeff: Thirty-two years.
Toby: Thirty-two years. Jeff can go get continuing education and the company can cover it for Jeff, pay it, reimburse him. You can do your continuing education anywhere. When Jeff says, hey, Toby, I’m going to do my continuing education in Hawaii, which we actually teach continuing education in Hawaii for a huge group of realtors from Alaska.
They come down and we teach two days, Thursday and Friday, Monday and Tuesday. We get the two days in between and the two travel days are all of those business days. They get seven, eight days. Business days are actually eight business days. They get to cover all those expenses. Their business can reimburse them, their employer can reimburse them, and 100% deductible because they have to do it. They’re his realtors.
Here’s somebody here and he says, hey, I want to go to college and I can get a degree out of this. Does a degree disqualify them from being able to deduct it?
Jeff: Not necessarily.
Toby: When I was at CLU, Boeing would send all of its engineers into the MBA program and they’d be sitting in there. There were always a bunch of them. Guess what? Boeing was paying 100% of their tuition. Guess who wasn’t getting his tuition covered? Me. I did furlough, I was a soccer player, but my last year I didn’t. I was out of pocket and I was like […]. They got to write it out. Business gets to deduct it. I didn’t get a deduction, but I didn’t make much money anyway.
Jeff: Another good example of this, the difference is in my medical practice I have, an LPN working for me, she wants to accomplish and get her RN. That’s not changing what she does. I can totally pay for less expenses. When she says, I’ve decided to go to med school, it’s disqualified. She’s now changing what she is getting her.
Toby: If I’m in a plumbing business and I go to accounting school and I have nothing to do with the accounting on the business, I can’t write it off. But like Jeff, if he said, hey, I want to go to law school, we probably could reimburse Jeff for law school because it’s part of what we do. The degree is just a bonus. So if you want to go back to law school, brother, I’ll reimburse you.
Jeff: That ship has sailed.
Toby: It’s never too late, Jeff. I’ve heard that. I’ve heard that it’s never too late. Hey, follow us on social media. There’s a whole bunch of links there. Honestly, just follow us on YouTube. That’s the best thing. I love Facebook and everything else, but YouTube is where you’re going to get the most juice right now.
My daughter is going to law school to help me with my business. Can I write off her law school? Shelly, no, but I’ll tell you how to pay her a salary out of your business so she pays taxes at her level. For example, my daughter, she’s 23. If my daughter was going to school, I don’t want to pay for her tuition. What I’ll do is I say to my daughter, hey, you have to do things for the business, and I’ll pay you, and then you get to pay your own tuition.
It could be the same amount. I pay her for whatever tuition is. Right now you get $12,550 a year tax-free whether you’re dependent or not. Then if they do get additional, hey, if it’s $50,000 a year, it’s still a lot better than your tax bracket. You’re having to pay that thing what could be 39.6%. I just want to get that thing lover.
All right, here, let’s go. “With our C-corp, would it be best to pay us a reasonable or minimum reasonable salary and supplement our personal income with dividend payouts, assuming the dividends are taxed at a lower rate and not subject to self-employment tax?” Jeffrey.
Jeff: A couple of different ways to go on this. Let’s start with salary. If I pay myself a salary out of my corporation, that’s a deduction for the corporation even though it’s income to me. If I pay myself a dividend out of my corporation, that is income to me, although at a lower tax rate, but it’s not a deduction to the corporation.
No, it’s not subject to self-employment tax, but this is one of those areas where you have to do the calculations to figure out what works best. If you’re married and making less than $80,000, I would probably go ahead and do the dividends.
Toby: The reason Jeff is bringing that up is because dividends out of a C-corp are taxable at your long-term capital gains rate. Your long-term capital gains rate is either 0%, 15%, or 20%. Really 23.8% because whenever you’re paying the 20%, you’re getting hit with the net investment income tax as well.
The beautiful part is that if you are a single person or a married couple, and if you’re single making less than $40,000 a year, you’re married, making less than $80,000 a year, you have an appetite for long-term capital gains. That’s going to come from dividends, that’s going to come from selling Bitcoin that you’ve held over a year, that’s going to come from futures that are 60/40, 60% long-term capital gain. You have some tax appetite.
This is frustrating for guys like me because at the end of the year, you’ll see somebody who has harvestable losses and they’re like, oh, you know, I’ll sell that. They have all this tax-free gain and they’re like, oh, but I don’t want to sell that. I’m like, you sell it and then buy it back. This is a long-term hold, you’ve held it for over a year. By all means, sell it, get that gain that’s at zero. Buy it back, you have a new basis that you’ll never pay tax on that ever again, and then continue to hold it.
Even if you sold it a month later and you’re like, well, that’s short-term gain, only on the amount of the increase over the new basis. Then you have somebody say, well, you have the wash sale rule. No, it’s the wash sale loss rule. There’s no such thing as a loss sale gain rule. There’s no wash sale loss rule right now on cryptocurrency. You could sell that whenever it drops and say like, hey, I got more loss. Buy it back, rent’s up.
Jeff: Let’s go back to why you might want to take a salary. Let’s say your C corporation is profitable and is going to pay tax, you’re in that below $80,000, $40,000, you’re in a lower tax bracket than the corporation is. Better to reduce the corporation’s tax by paying yourself a salary and paying a little tax on it yourself.
Toby: You’re never paying self-employment tax. Self-employment is only for partnerships and sole proprietors. You’re paying Social Security, the employer pays half, you pay half, you’re still paying into the system. You are going to reap a reward for that. The other reason why you might pay yourself a salary is to defer a bunch of it into a 401(k). If you’re under 50 then you’re at $19,500. If you’re over 50, then you’re at $26,500 per employee.
Jeff: Maybe $27,000. Yeah, they bumped.
Toby: Yeah, so then that would be, no it’s…
Jeff: $19,500 and $6500.
Toby: $6500 would be just $26,000.
Jeff: You’re right.
Toby: Maybe it’s $26,000. It means that you can put quite a bit into your 401(k) plan. Again, same scenario. I have a C-corp, it’s taxed at 21%. You talk to Jeff and he says, hey, pay yourself a salary before the end of the year of $25,000. You go, why would I do that? Jeff says because we’re going to put $19,500 immediately into the 401(k) and the company is going to make a contribution of 25% of that amount.
You’re going to pay tax on just a little bit of money that the employment taxes, which adds up to 14.1%. You’re going to not pay any federal or state income taxes, and you’re going to have a whole bunch of money in a 401(k). It’s going to put 25% that would normally be taxed at 21% as the corporation, it’s going to pay that. If you paid yourself $25,000, you’d be able to put about $6750. You’re going to get $26,000, $27,000 immediately into your 401(k).
Great place for it because then you can just make money to your heart’s content in the market and doing whatever. Just don’t run an active business, just do investments. Clint’s over 50. Yes, he is, but he doesn’t look a day over 60. I’m just picking on people here.
By the way, on this one, I just always point out, the corporation pays its rate at 21%. The company does not get a deduction. Like Jeff said, it’s paying you out the dividend. A lot of people will just leave it in the corp. You don’t have to pay that as a dividend. You can just say, hey, it’s taxed at 21%, I now have that cash to use for other things. I’m reimbursing expenses that always come up, I’ll get the money out later. I’m not in any big rush. It’s just better than being taxed at my rate, especially if you’re above 30.
If you have state income taxes, in some states, it goes up. When we hit 39.6%, it’ll be over 52%, 53% again. Just nuts. Can you believe that, giving half your money? Anyway.
“Considering investing in real estate with the associated deductions to offset probably to get benefits in 2021. May the purchase of the real estate occur prior to filing deadline 2022 to offset gains made in 2021? ” In other words, can I make investments after the end of the tax year and use them for last year? No.
I’m […] this one, but what you can do for 2021 is you can make tax elections up until you file your final tax return or up until the final tax return deadline if you file it earlier. Even for last year, so let’s just say this last year, 2020, we’re doing the taxes right now. You have about three weeks to make a change of accounting method. You could do cost segregation and accelerate depreciation. Even if you’ve already filed your tax return, you could still make this change.
For anything else, hey, I want to make charitable deductions, I want to pay payroll, and things like that, it needs to be done during the calendar year with very few exceptions. There are HSAs, 401(k)s, IRAs, and things like that that are up until the original deadline. There’s making contributions to employee retirement from the employer up until it files its tax return. There are a few little things that are kind of funky, but you can’t just go buy things now and use them for last year.
Hey, there’s YouTube. Subscribe, aba.link/youtube. I see a lot of questions on Airbnb and things like that. I just put some new stuff up, went into detail, seven days or less, significant services—all that fun stuff. I know there are some people out there with questions. There’s some bad information on the internet that makes it more complicated, but it’s fairly straightforward when you look at it. Let’s go to another one since we’re going over it. Jeff’s a chatty Cathy today. Just keep talking.
All right, “I am looking to domesticate my LLC from Nevada to Wyoming,” which you can actually do, it’s no problem. “I have previously done a flip in the LLC. Is it okay to move to Wyoming as a standalone entity? Is my anonymity already shut?”
Jeff: This is actually really easy to do. Nevada and Wyoming, what’s called, conversion or?
Toby: You can convert into Wyoming.
Jeff: As far as your anonymity being blown shot, Nevada and Wyoming both have really good anonymity. I don’t see that happening unless you put your name out there yourself.
Toby: Nevada requires the listing of the three officers and a director. It’s the president, the treasurer, and the secretary. We use nominees in all of ours. If you’re with us, chances are, my name is on there. Then if you convert it, there’s no name on there. So you don’t have any blown anonymity.
If you flip the property and there’s something in the state that’s in a public record somewhere tying you to the property, it’s kind of weird. When you do national searches, when you’re using the big engines or you use a private investigator to do the asset searches, they’re looking for things that are currently there. Even if they saw, like, hey, I did a flip, they’re looking for the Nevada entity. They’re going to see it being revoked, terminated, or converted. Then they might be able to follow it under those circumstances.
If they see a conversion and then they go and say, all right, where was it converted to? It’s the same exact name then they would follow Wyoming, but that doesn’t cause you any issues. That just means the entity itself has a liability. If you’re worried about liability, the easiest thing to do is to shut down that existing LLC and set up a new one.
Jeff: I was just going to say that I think, if I’ve previously done a flip in a Nevada entity, I will probably shut that one down and form a new Wyoming LLC.
Toby: We have kind of rules of thumb. It’s like no more than five flips in any one entity. If there’s a liability where you’re looking at it going, oh, man, I have a bad feeling—dissolve it. Be done with it, set up something else. Patty shared all those links. I did say subscribe to our channel, please. It helps us to communicate.
Again, there are no gimmicks. We just share a lot of information. We’ve been doing this for 23 years. Jeff’s been doing it a lot longer. You have this ruthlessness in you. You look really good, though, for your age.
“With all the proposed changes under the administration, are there any moves that should be made now?”
Jeff: Okay, I’m going to go here. I learned my lesson in 2012. There were massive changes happening to the tax law. It was a week or two before they were supposed to be released. We were doing presentations about it. It was set in stone. We found out it was sandstone. Everything changed within a week.
I’ll be honest, I don’t pay a lot of attention to proposed tax law unless I see it and the full house or Senate voting for it, then I start paying attention. One of the things we talked about is the proposed changes to IRAs that I don’t think ever happened either.
Toby: We’ll see. I’ve been wrong a lot, but congress is congress. They’re going to do what they think is in their best interest.
Jeff: Right now, if you’ve been listening to the news, the republicans are blocking a couple of things that need to happen this week. That’s probably going to force the democrats to pull back on what they’re requesting.
Toby: I’ll put it this way, there are a few things that you could do that you don’t hurt yourself. What I saw a lot of and what we were trying to combat is there’s a few aggressive accountants that would say, oh, the estate tax is going back down to one million. It’s going back down to three million. They’d go after somebody who has property that they’ve owned for a long period of time that has lots of capital gain in it and the recapture. They would convince them to gift it to their kids.
Hey, let’s get this out of your estate. We’ll gift it. They would gift it to the children and it cost them a step up in basis on those properties. One in particular just sits in my head, which was millions of dollars that would have been non-taxed. None of the stuff the accountant said actually occurred, but the guy gave away the assets, he passed away, the kids did not get a step up and basis. So when they sold the building, they had all this gain.
I remember it was just a nightmare because the building had been in that family for about 50 years. It was really low basis. They had a large tax hit. I remember, I didn’t want to roast the accountant, but, well, you know, it could have been. It could have been bad. I was looking at and say, hey, you know what, if you want to freeze something, then you can do some gifting, like, hey, right now we know we have $11.5 million or whatever it is, estate tax exclusion, but I can gift that too.
If I wanted to gift it to somebody, gift it into a trust or something for my kids, I could do that if that’s really what my intent is, or I could get it out of my estate in another means. I prefer using charitable organizations where I get a benefit and then I don’t really care. The only thing that’s critical is if I’m gifting it to my kids directly.
For example, if I’m going to give Jeff my estates above whatever the threshold is where I think it’s problematic, probably right now, I think they’re talking about $6 million. Anything over $12 million with a couple, I’m like, all right, your estate’s worth $25 million. Let’s get some of this out at this high level that we know what it’s going to be in case it gets smaller. All right, maybe I’ll give away non highly appreciated assets or some things that don’t have a bunch of built-in gain.
Or I’ll sell it on an installment sale to a trust for the kids and do something like that, and say, you know what, I’m going to sell it to you, I’m going to recognize this income. If they don’t change things, I’m just going to gift it to you afterward. I’ll undo it by giving you the note at some point in the future, but at least, as the person who’s giving it, I haven’t completely screwed them at that point because I could still step up the basis on that asset if I did an installment note.
Jeff: I like the idea in that example, if I have considerable cash, I give that to them. Let’s say I don’t want them to have it right now. I gift it to an irrevocable trust, that’s a completed gift. It’s out of your estate.
Toby: You have to have a third party that’s managing it, but you could do that pretty easily. All incidents of ownership, they’re just the new beneficiary. It’s out of your estate.
Jeff: One thing that this question asks about moves that should be made now, we don’t want you making moves that could harm you if the tax laws don’t change. If you make a change in regard to the proposed tax laws, you need to look at them like what happens if they do change the tax law, what happens if they don’t?
Toby: Use one flexibility in your […]. Don’t make it more difficult than it is. If you have a good structure, you’re going to be able to take advantage of any of the—there’s always a safety net and they’re really going neutral to a certain extent. Every time they take something away, they really give us something else, we just have to go find it. There are 1500 pages of things to find or whatever it is. There’s always something guys, and don’t ever fret. There’s always something.
In fact, here’s something. Come to the Tax and Asset Protection event on Saturday because we go over a whole bunch of tax strategies. By the way, you can always give it away. You could do a chair remainder trust, you could do, hey, I can give away 100% of my cash this year. If I make a million bucks, I can give away a million bucks and pay zero tax in 2021. If they do something crazy, give away a whole bunch of money, convert your traditional IRA into a Roth before they close that loophole. There’s always stuff you can do.
Trust me, there’s going to be accountants and attorneys coming out of the woodwork with really great ideas. There are really smart people out there. We steal all their ideas, and then we tell them to you at the Tax and Asset Protection Workshop. So come to the Tax and Asset Protection Workshop, spend a day with us, and learn all about LLCs, land trust, trust, living trust, series, LLCs, corporations, S-corps, and C-corps. If you have a question about those things, come join us and it’s a lot of fun.
Hey, if you like this type of information, we do put Tax Tuesdays out as podcasts. We’ve cut them up into two pieces, bite-sized pieces, so you can always be getting your little bit of tax kick. If you’re like, hey, I need some tax knowledge. I’m feeling a little bit groggy and I really want a pick me up. So if you want some tax knowledge, that’ll do it for you. It’s either that or Red Bull. Red Bull is not good for you, but tax knowledge is.
Then if you have questions, shoot them to us at Tax Tuesday at Anderson Advisors. We get hundreds and we try to get through them. We try to make sure that we’re answering it. There we go, someone’s going to submit it. There’s the podcast. Tax Tuesday at Anderson Advisors. We don’t charge you for this, guys.
People always say, why are you doing this? Because it’s good, it’s fun, you have to reap and sow. You better plant seeds out there. We plant seeds with you all and then when something comes up, hopefully you’ll use us. If you don’t, it doesn’t matter. We’re giving good information out there that’s why we’re broadcasting it on YouTube.
You don’t have to sign up, we don’t need an email. This isn’t a we’re going to market the hell out of you, we just like giving out good information. If you do good things, you get rewarded in the long run. We believe that and we practice what we preach. That’s why we do it.
Plus, Jeff would just stay in his office all day and he wouldn’t talk to anybody. I didn’t drag him in here and make him do it. Well said. I’m just teasing you. It’s always fun to do the Tax Tuesday. We’ll see you in two weeks. Jeff, do you have anything you want to say? He’s going to be in the middle of the tax season. I think we’re going to grab Michael Bowman. I’ll make Bowman do it with me, but we’ll make sure that we get it.
Jeff: Unless he’s going to come say tired or snarky things because I’m tired and cranky.
Toby: It’ll be funny. He’ll just keep repeating. Could you please get me your documents? Could you please get me your documents? It’s in review. It’s in review. That’s pretty much by the end of it. He’s always doing it.
Jeff: No, dog food is not deductible unless you’re in that profession.
Toby: I’m going to write off my leashes. All right, guys. We love working with you guys. We love having fun. I really appreciate it. Good luck out there, guys. Until we see you again. Thanks for joining us.
Thanks Eliot, Piao, Ian, and everybody else if I’m forgetting you because you guys just do a fantastic job answering all those questions. Ander, Matthew, Patty, and I’m forgetting Troy was on there, and Dana was on there too at some point. Those guys are just knocking it out of the park. Thanks, guys for doing all that. I appreciate you.
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
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