Welcome to another Tax Tuesday episode of the Anderson Business Advisors podcast. Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., explain tax strategies for listener-submitted questions. The conversation digs into S-Corp vs. C-Corp for property management, understanding Unrelated Business Income Tax (UBIT) for non-profits, qualifying for Real Estate Professional status, and cost segregation and bonus depreciation for rentals.
Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• “Is it better to have an S-corporation or C-corporation as your property management company managing your land trust and property held in your disregarded LLC? Are you required to have payroll with the S-corporation?” – With the management corporation, S or C, I personally like the C-corporation better.
• “Where and when does UBIT apply to real estate investing and generally to alternative investments? – You’re going to run into this when you have exempt groups or we’ll call them entities, nonprofits are also exempt.
• Does an accountable plan have identical benefits when comparing a C-corporation versus an S-corporation for a new business?” – being a new business or not shouldn’t change too much. It’s just a C Corp versus S Corp.
• “How do you know how much you can convert into a Roth IRA from a traditional one without getting pushed into a higher tax bracket when you don’t know what your investment gains will be?” – we don’t look at the taxable gains – whatever your tax bracket is, that’s what’s going to determine.
• “Augusta rule. I am my own real estate broker office scene out of my home. I just hosted a large client appreciation party at my house using rooms in a garden that are not my office. Can I apply an Augusta rule to it? If yes, could applying the Augusta rule increase my chances for an audit and to what percentage? – Augusta rule is 288. You can rent out your home up to 14 times a calendar year. This is entertainment, you could maybe deduct 50%, I wouldn’t use Augusta for anything entertainment.
• “My question is I’ve never been able to take real estate professional status due to full-time employment as a W-2 employee. I took early retirement on January 2nd of 2024 of this year. I am still being paid the remainder of 2024 biweekly, but not actually working. I’m a licensed real estate broker and spend a lot and most of my time on real estate rentals, subdivision development, et cetera. With this payout biweekly for the remainder of the year, can I qualify as REP (real estate professional) status for 2024?” – The prohibition to having W2 income is if you are actually working at your W2 job. Here, we’re not doing any work for that check. You’re just getting paid free money for 2024. You can go out and put your time into real estate.
• “Given the time of the year that we’re getting into with taxes being due especially in the fall, what are the first three steps in the tax planning process, and how does one approach the process differently for clients that earn less?” – Start with having excellent bookkeeping, identify where you are today, and plan where you are going in the future.
• “What is the best way to purchase an existing business for tax purposes?” – You’re going to buy the assets, you want to buy the assets because now you’re going to be able to get those at your fair market value that you pay for them. We call it stepped-up basis in your assets…
• “If I buy a short-term rental and do a cost seg the next year, I bought it, and listed it on Airbnb, can I rent it long-term for the following year or would that interfere with the cost seg done the prior year?” –This is a common strategy, there’s nothing wrong with that – you want to at least rent it once in year one as a STR.
• “If I claim bonus depreciation on my rental property, do I need to return or reverse it when I sell the property? What happens with bonus depreciation when I sell a rental property, or I necessarily have it in current?” – It depends on the transaction. If you sell a property then you have to have gain. If you don’t have gain on the sell, there is no depreciation recapture.

Resources:

Get Your Free Emergency Binder

Tax and Asset Protection Events

Anderson Advisors

Toby Mathis YouTube

Toby Mathis TikTok

Clint Coons YouTube

Full Episode Transcript:

Toby:  All right. Welcome to Tax Tuesday. My name is Toby Mathis. Hey, Eliot, are you out there?

Eliot: I am. I’m back in Vegas.

Toby: I am East coast today and you are West coast. But through the magic of technology, we can still have Tax Tuesday. First off, welcome everybody. If you see me looking over my left shoulder, it’s because I’m going to be looking at chat. Eliot’s going to be doing most of the heavy lifting today because he has broad shoulders, lots of strength, and he’s going to use his knees. Don’t lift with your back. We’re going to make sure we get into Tax Tuesday.

If you’ve never been to a Tax Tuesday, first off, give me a thumbs up or some reaction. There’s a thing that looks like a smiley face with a plus that says reactions. Give me any reaction just so I know that you’re new. There’s a bunch of people. There we go.

Welcome to Tax Tuesday. We’re just trying to answer questions, and what you’ll find is that there are, gosh, let me see if I can count how many people are on that are answering your questions. We’ve got Matthew, Eliot, Patty, Amanda, Dutch, Jeff, Tanya, Tricia, Troy, and a whole bunch of accountants, bookkeepers, attorneys to answer your questions. You can ask questions in the Q&A, and they will answer them.

If they get into too much detail, like you start talking about filling out a tax form or anything, we’re going to invite you to become a client before we answer any further. But if you have general questions, we just answer them. People say, why do you do it? You could charge for that. I’m like, yeah. There are a lot of things you could do. There are lots of things you should do, and this is one of those you should help people get answers to questions. And you don’t have to hit them up.

Hey, there’s Jared. I can see you, buddy, on there. We have another CPA joining Jerry and Jerry’s son. We got to give love to these guys. It is tax season, so they’re in the midst of it, but they’re taking time out of their days to come in here and answer your questions.

I’ll just have to say a big thank you to all the staff that comes on and does these. They don’t get anything special. We don’t sit there and say there are Tax Tuesday bonuses. We just say if somebody can come on and answer questions, that’s super helpful. Yeah, give them a big old heart if you appreciate people that are willing to answer questions and not get paid for it just because it’s the right thing to do. We have a little bit of fun while we’re doing it.

Eliot, I’m going to hand it to you because I can’t see the slides. You can tell us what questions we’re going to be answering today and going through all that fun stuff.

Eliot: All right. First of all, just a few rules that Toby usually goes over here. Ask your questions in Q&A, like you talked about. If you have questions, we pull all of our questions from ones that you’ve sent in through a taxtuesday@andersonadvisors.com. That’s where we get the questions and review them for the show, so feel free to throw them in there.

We’ll try and pick your question. We do about 10. We usually get a couple of hundred, so we’re not able to get all of them. We do try and answer those through our platinum portal as well. Like Toby said, we want to do everything we can to get your answers. Again, if you need a detailed response, just remember, we need to have you as a platinum client or a tax client.

Moving on to the opening questions themselves. First question, “Is it better to have an S-corporation or C-corporation as your property management company managing your land trust and property held in your disregarded LLC? Are you required to have payroll with the S-corporation?” A popular question we get.

Next question. “Where and when does UBIT apply to real estate investing and generally to alternative investments? Does an accountable plan have identical benefits when comparing a C-corporation versus an S-corporation for a new business?”

Toby: You picked these questions. If they’re good, we give Eliot an applause. If they’re bad, we’re going to make fun of him.

Eliot: Yeah, I’m prepared for either. “How do you know how much you can convert into a Roth IRA from a traditional one without getting pushed into a higher tax bracket when you don’t know what your investment gains will be?” I really like that one. It brings up a lot to talk about.

“Augusta rule. I am my own real estate broker office scene out of my home. I just hosted a large client appreciation party at my house using rooms in a garden that are not my office. Can I apply an Augusta rule to it?” That is the 280A. “If yes, could applying the Augusta rule increase my chances for an audit and to what percentage?” We’ll talk a little bit about the finer points of 280A there.

“My question is I’ve never been able to take real estate professional status due to full-time employment as a W-2 employee. I took early retirement on January 2nd of 2024 of this year. I am still being paid the remainder of 2024 biweekly, but not actually working. I’m a licensed real estate broker and spend a lot and most of my time on real estate rentals, subdivision development, et cetera. With this payout biweekly for the remainder of the year, can I qualify as REP (real estate professional) status for 2024?”

Toby: I want that job.

Eliot: I think that’s what we call a lottery winner.

Toby: Don’t work, but we’ll go ahead and pay you anyway.

Eliot: Yup, and then, “Given the time of the year that we’re getting into with taxes being due especially in the fall, what are the first three steps in the tax planning process, and how does one approach the process differently for clients that earn less?” A lot there to look at.

Next question. “What is the best way to purchase an existing business for tax purposes?” We often are asked to work with that kind of scenario.

“If I buy a short-term rental and do a cost seg the next year, I bought it, and listed it on Airbnb, can I rent it long-term for the following year or would that interfere with the cost seg done the prior year?” We have short-term rental going to long-term.

Next, “If I claim bonus depreciation on my rental property, do I need to return or reverse it when I sell the property? What happens with bonus depreciation when I sell a rental property, or I necessarily have it in current?” and we’ll look at that. That’s it.

Toby: That looks like a YouTube channel. Hey, if you guys like this type of content, and you want to get more videos on specific questions, we post them into the YouTube channel. We post recordings into the YouTube channel. We post a lot of videos on the YouTube channel. Feel free to go there. You can just go into YouTube and type in Toby Mathis. There it is. Patty’s putting a link up there. Absolutely free.

Subscribe if you can. It helps us. There are only 800 videos sitting in there waiting for your review. There’s a lot of content, you can get lost in there sometimes. But usually, if you have a question, you can go in there and find it. There are some hearts. Thank you, guys. I like a few hearts. Keep clicking through.

Eliot: Just as a reminder, we’ve gotten asked a couple of times about the free estate planning starter kit. I certainly wanted to bring that into it. You can hit that link, aba.link/starter on our YouTube. Get to Toby’s YouTube, and that’s where you’re going to get that free estate planning starter kit. A whole lot of useful material in there. I don’t know if you want to describe it. Toby, what you got?

Toby: Yeah. Let me go over this real quick. It was actually a question. I said, hey, we should post it as a question. It said, Toby Mathis mentioned on YouTube that people should have an emergency kit, which is a brilliant idea whether or not the person has a living trust. This is absolutely true.

What we’re giving you here is something that you should have, period, and I’ll explain why. Please post it again because I cannot find that YouTube video. Thanks again for the awesome educational contributions. It’s posted on the YouTube page on my YouTube page as the permanent pinned video right now. It says estate planning starter kit. I think I put emergency binder for a little while there, but I tried to make it more descriptive.

There are about 20,000 people thus far that have actually put it into play. We like that. There is no cost to it guys. Here’s what it includes, things that you would normally not sit here and think of.

For example, if you have social media and something happens to you, who’s able to go on there and let people know what’s going on in your life, who can get into your Facebook, Instagram, who can get into your email, who can log on to your bills, who can make sure they’re paid, how do they get access? What this emergency binder is all about—I call it estate planning starter kit, but it really is an emergency binder to help you in the event of emergency—is it gives somebody some guidance on on what they can do to help you, everything from who your doctors are, dentists, what your investments are.

Here’s the rub. What we do is we take all of your sensitive information, and we put it on a password sheet so that the binder itself will not give somebody access to your private accounts. It might give them a username, but the password exists somewhere else on this password sheet and it’s numerical. Even if they had your password sheet, they have no idea what it’s tied to as far as which account, which username, and all that.

It’s just a generic password sheet. It would say like one, password is Eliotiscool7, but they have no idea what that is. In the emergency binder, it might say, hey, this is my bank account, my username is Eliotthomas07, and then my username is Eliot. It doesn’t have your password in the binder, it says number one, go to number one. So you could go look on your sheet and see that.

This stuff is really critical, guys. We’ve seen this come up so often. I’ve had numerous friends in the last few years have issues, everything from heart attacks to cancer has been making its way through a lot of the people we know. When you’re down for a little while, it’s very helpful to have this information, everything from taking care of your pets. If you have minor children, make sure that people understand, like if they need to be in the care of somebody else, it says who their friends are, what are their daily routines, what do they like.

This stuff is so critical if something happens to you, and we just make it available to you guys for free. Give me a big thumbs up if you think it’s important to leave some guidance to people. If something happens to us, I don’t care whether you’re incapacitated, if you pass away. I’m sure some of you guys saw on the news yesterday that there was a horrible shooting in Las Vegas that was about three blocks away from our office in downtown Summerland, and unfortunately it was an attorney that used to work with us. Just absolutely horrific.

Life comes at you fast and has a major impact on you. It’s just horrible, but these types of things do happen. We all have an expiration date, and we should make sure that we’re giving information, everything from burial instructions. If you’re a service member, first off, thank you for your service, but also leaving lay people or civilians with information on how they can get to your benefits, how they can make sure that you get appropriate honors and things like that.

Again, it’s soup to nuts. It’s about an 80-page binder. Absolutely no cost, never want to charge a nickel for it, comes with instructions. There’s about a 90-minute video that walks you through each section. Again, it’s yours for the taking just to make sure that you have that thing set up. I know we’re going to be talking about taxes, but it’s worth five minutes just to go over this to make sure everybody gets something that could help their loved ones out.

I don’t care how old you are, how young you are. These types of things are very, very helpful in the event something happens to you. I’m not just talking about passing away. If you’re incapacitated or if there’s an emergency, this really does help people. Enough of that. Move on, sir.

Eliot: All right. We got something to come up here with Clint. Looks like we have some tax and asset protection workshops coming up.

Toby: Yeah. He just did one this last Saturday, and he’s doing another one on the 13th, this coming up Saturday. We have another one the week after. You’re seeing a lot of tax and asset protection events that you can choose from. There’s absolutely no cost.

There is a cost to come to the live in-person events, although it’s very reasonable, and we’d love to have you come join us. We have another one coming up on June 27th through the 29th in Dallas, Texas. We just had one in Orlando. How many of you guys were in Orlando with us? Give me a thumbs up if you were in Orlando, I’m going to see if I have any of my fun folks that were there. We got a few.

We always have a good time. It’s just unplugging from the rest of the world, coming in and spending a few days on some things that are very important, and that can pay off dividends for the rest of your life. If you want to come join us, hang out with like-minded individuals who are also investors, it’s just a really cool group and we always have fun.

Big invitation to take advantage of any of those. Obviously, the free ones are easy and the virtual ones are easy. The live ones in-person, you’re going to have to get a plane ticket. They’re worth it. They’re a lot of fun.

Eliot: All right. Just a reminder on YouTube, go ahead and feel free to subscribe on our YouTube page, aba.link/youtube. I think we have YouTube going out. I think Amanda’s probably manning that. She answers a lot of questions over there today.

All right, questions. First one. “Is it better to have an S-corporation or C-corporation as your property management company, managing your land trust and property held in your disregarded LLC. Are you required to have payroll with the S-corporation?”

With the management corporation, S or C, I personally like the C-corporation better. The reason why is S-corporation is a flow-through entity. If you have dollar one of net profit, it’s going to come through to your personal return. It could be taxes we call ordinary income subject to not just income tax, but possibly employment taxes. Whereas a C-corporation, if you add a dollar there, certainly it’s going to still get taxed.

Both have a lot of deductions that we talk about, but we often like to have C-corporation as a separate barrier from your 1040, if you will. There isn’t necessarily one better always than the other. It depends which tool on the toolbox is best in your situation, but I do prefer the C-corporation myself.

As far as a requirement for payroll, you often hear about that with the S. That only comes up if you take money/cash, if we do what’s called distribution, out of the S-corporation, which most people would do. They do want to have their cash. If you take cash out, you might very well have to pay yourself a reasonable wage. Toby?

Toby: Yeah, I was going to say that when you’re looking at the S and the C, the difference between them is an S flows onto your tax return. All the profits are losses. C-corporation pays tax at a flat 21%. The losses can get trapped inside that C-corporation. You get them released when you dissolve it.

Sometimes there’s ordinary loss, but the big difference between them is, hey, do I want that income flowing under my tax return or do I not? Then there are some subtle differences from which type of benefits are available, which I think is another question coming up here in a couple that we’ll save for then.

The big one is, hey, is this going to be something that I am utilizing and I’m going to be accumulating money in? What tax bracket am I in? If I’m in a high tax bracket and I don’t need the cash, and I have the opportunity to create a family office that might be doing other things beyond just managing my real estate—maybe it’s managing some stocks and other activities, maybe it’s engaged in some lending—then I’ll probably be leaning towards that C-corp.

If I need the money to live off of, I’m probably leaning towards the S-corp. If I have high medical expenses that there’s no tax relief available to me for a variety of reasons because I phase out under Schedule A or I don’t meet the 7.5% threshold, and my health savings account isn’t enough, then I might be leaning towards a C-corp. But it really is facts and circumstances as to which one you use.

My preference is always going to be when we’re setting these types of things up because I can control the income, probably towards a C-corp, believe it or not. A lot of folks are surprised that Anderson still supports those C-corps. There are a variety of reasons, but number one is I can control it, and it’s a safety release valve that gives me another return when I need it and another tax bracket when I need it. It gives me some options. If you need that money though and you’re living off of it, then that S-corporation becomes your friend.

Eliot: Very good. All right, next question. “When and where does UBIT apply to real estate investing and generally to alternative investments?” UBIT, that’s unrelated business income tax. That’s what it stands for, often referred to as UBIT. You’re going to run into this when you have exempt groups, or we’ll call them entities, not just nonprofits.

We always hear about nonprofits as being exempt, but this is going to be your retirement accounts often that you could have some forms of UBIT going through maybe you’re solo. It can’t take on certain kinds of income. We run into far more, I think, with the IRAs. They’re a little more susceptible to UBIT.

There are two categories. Income from an active business coming on an ordinary basis. The terms the IRS uses, it doesn’t advance the exempt purpose of that particular exempt organization or in this case, usually a retirement account. That’s what UBIT is. It is taxed at a higher rate.

It is taking our tax bracket and going up. Maybe you take $300,000–$400,000 to get the top tax bracket if you’re on your ordinary 1040 when we get to that 30% tax bracket within like $10,000, because we use what’s called trust brackets. It increases really quickly. Before you know it, you’re paying top dollar on your UBIT tax. That’s why it’s something that people really want to pay attention to.

When we do real estate investing, I think often when you have flipping going on, that’s an ordinary activity. You very well might be subject to UBIT there. But as far as your traditional rentals, the rental income itself isn’t subject to UBIT. That’s okay, but maybe we use some debt to go ahead and get that rental building in there, then we might be subject.

If we’re in a solo, we typically are not subject. As a solo 401(k), we’re not subject to the UBIT for the debt. But if we are in an IRA, we would be. That’s what UBIT is. Where we run into it with the real estate as far as both flipping and long-term.

Toby: We should go over what exactly UBIT really is at its core and what rate it’s being taxed at because it’s treated like a corporate income. It’s when you’re exempt and you’re competing with something else that is taxable. If you’re running a McDonald’s inside of a charity, they’re not going to let you not pay tax on it. They’re going to say, hey, that’s not related to your exempt purpose. You’re competing with a for-profit that has to pay tax, so we’re going to make you pay tax.

There are all these gray areas when you get into things. For an IRA, like you just said, Eliot, hey, if you use leverage in real estate, we’re going to make you pay a tax. It’s called unrelated debt financed income taxed at UBIT. We’re going to make you pay a tax on that portion of the income that’s made from using leverage, which is getting a loan to make profit.

The rule doesn’t exist for some reason. For 401(k)s, it’s just bizarre that an IRA has it but a 401(k). But we don’t write the rules, we just try to follow them. Yeah, it gets into this weird area. Getting back to the calling of the question, when does it apply to real estate investing?

Generally, alternative investments when there’s debt or when the activity is no longer passive. For example, if you’re flipping a bunch of properties, UBIT’s eventually going to get triggered when that activity goes enough. Most people will be okay with a few. You start going above that and you’re going to see your custodian start to lose their mind, but there’s no hard and fast rule on it, facts and circumstances. They’re just going to say, oh, my goodness.

If you have debt, let’s say you’re doing syndications, you’re doing multifamily syndications, or storage where they’re using leverage to increase, you want to do that out of 401(k) so you can avoid having UBIT and UDFI. If you are doing active businesses where you’re really involved in a business, then you’re going to want to talk to somebody to make sure that that doesn’t end up being taxable in your exempt account.

Here’s the rub. If there are deductions available to that business, still, you’re only getting taxed on the net income. Some of these businesses are able to zero out every year, and it really doesn’t matter at that point. There’s no profit. But then if you sell it, let’s say that we had real estate, we had loan on it, and you’re like, oh, but we have depreciation, we didn’t have to pay a tax in your account and saying, oh, don’t worry, there’s no tax, we’re offsetting it. You’re in an IRA, everybody’s happy, and then you sell it and there’s a bunch of capital gain, the portion that’s related to the leverage is taxable.

All of a sudden, you’re hit and it’s sad. I don’t want you guys to be sad. I see a lot of sad emojis, crying emojis. We don’t want UBIT. Knowing a little bit, talking to your custodian, talking to us, we’ll make sure that we steer you in the right direction.

Eliot: All right. “Does an accountable plan have identical benefits when comparing C-corp versus S-corp for a new business?” First of all, being a new business or not shouldn’t change too much. It’s just a C-corp versus S-corp. As Toby was alluding to earlier, both S and C, you can do such things such as 280A, Augusta rule, have meetings. You can do an accountable plan for reimbursement.

Toby: What is an accountable plan?

Eliot: Accountable plan to me is just any time you pay for something out of your own pocket for the benefit of the corporation, and it’s for a reasonable business expense, then you can be paid back, reimbursed tax-free to you, and your corporation gets to take the deduction. Common examples, maybe you have an office in your home that you use for the business. You can be reimbursed, we call it administrative home office.

The big difference between the two of them though is the medical reimbursement. We see that a lot in 105 Plans, a lot more in the C-corporation than in the S-corporation. I personally think of the medical reimbursement plan being something different than an accountable plan, because you have to have some specific medical reimbursement language in there to set that up. Whereas an accountable plan, you really just have to say, you can be reimbursed. It doesn’t have to be quite as verbose and descriptive.

I throw those as different. I think both can have an accountable plan, it’s just that your C-corporation has the medical reimbursement, and that’s the real big difference in the benefits, I would say, probably the one we most commonly see.

Toby: Yeah. An accountable plan at its core is a written plan to reimburse an employee for expenses that they incur on behalf of the company. If the employee has a cell phone and the employer is getting a benefit from it, then there’s actually a law on this. The employer is supposed to reimburse them the fair market value of a cell phone, the cell phone data, the cell phone usage, if they’re using it as a phone.

Under the regs, that money is not taxable to the employee. If I reimburse Eliot—he’s an employee of a company and I’m the company—Eliot doesn’t have to report it. There’s no withholding, there’s nothing. There are no employment taxes, it’s exempt.

Now, this is not available to non-employees. If you’re a sole proprietor or partnership, you cannot have an accountable plan. You can only have an accountable plan if you’re in an employee-employer relationship, and that necessitates the use of an S-corp, a C-corp, or a non-profit. You can have an LLC taxed as an S-corp, you can have an LLC taxed as a C-corp.

Here’s the big difference between our friends, LLC is taxed as S-corps and LLC is taxed as C-corps or S-corps and C-corps. The big difference is, an S Corp, if they reimburse you for health-related items including insurance, it’s taxable to you. A C-corp, if it’s reimbursing you for health-related expenses, it is not taxable to you.

What happens is S-corps—people know about this all the time—reimburse for a group health plan, and then the owner has to report it. Then they say, well I wrote off the insurance premiums. Yes, as a self-employed individual, you can write off your health premiums. You’ll take that on your 1040, though. It’s still included in your income.

When you have a C-corp and it covers these things, you do not have to jump through that hoop. Plus, the C-corp isn’t limited to just the insurance premiums. It could reimburse you for anything. We have clients that have more than $20,000 a year of health-related expenses for a dependent or for themselves. A C-corp can reimburse you every nickel. It doesn’t show up on your tax return. It shows up as an employee expense on the corporate return and as a deduction. That’s it, and it works like a charm.

Do they have identical benefits for everything else? Yes. The only difference is really that health reimbursement plan. They’re available for C-corps as non-taxable benefits. S-corps could still do it, but it would be taxable to the recipient. Anybody that’s greater than 2% owner is going to be hit with that.

That’s why you’ll oftentimes see us when we’re doing our analysis, we’re looking at your Schedule A. We’re trying to get an idea of what your health expenses have been because we want to see whether there’s a reason to perhaps have the C-corp in the mix as opposed to an S-corp. Everybody’s facts and circumstances are different. We always say there’s no one size fits all, but that’s part of the analysis that a guy like Eliot is doing when they’re looking at somebody’s taxes.

Eliot: Very good. All right. “How do you know how much you can convert to a Roth IRA from a traditional one without getting pushed into a higher tax bracket when you don’t know what your investment gain will be?” I really liked this question because I think it’s a common misunderstanding that people have here, Toby. If I am moving from a traditional into a Roth, I have to pay taxes, but I’m not looking at those investments within it. I’m just seeing how much income the dollar amount that I got paid for that particular event.

Toby: It’s fair market value, right?

Eliot: That’s exactly right. That’s what’s going to be ordinary income. It’s not going to be a matter of taxable gain, it’s going to be whatever your tax bracket is. That’s going to determine so you do know. If you know if you have X amount of income, you do this rollover, and it adds that much more ordinary income, that’s going to tell you your tax bracket.

Toby: Yeah. Let’s say you convert a $20,000 traditional IRA to a Roth, you’re just going to end up with $20,000 of ordinary income. It doesn’t matter what the gains are inside that plan. It’s $20,000. You took a deduction going in, and now we have to undo the whole thing.

They’re basically saying, hey, you’re paying tax on the whole amount when you convert it. That’s because all those gains were tax-deferred. We were going to pay tax on that gain, and then the money we put in there was tax-deferred. We have to pay tax on all of it because once it goes into that Roth, you’re never paying tax on it again.

Somebody was trolling me on one of the social media channels, because I said there are people that have billions of dollars in Roths. They said, that’s never happened, you’re an idiot or something joyous like that. Sometimes they say mean things. I was like, Peter Thiel, come on. That’s pretty much public knowledge. He has about $5 billion Roth IRA because he put his initial shares of PayPal in there, regardless of all the potential pitfalls that come when you’re a founder of a company, whether you’re a disqualified party, and all that fun stuff.

He navigated those, and he ends up with a huge retirement plan that’ll never pay tax. He’ll never pay tax in those billions of dollars because his estate’s going to get hit with it. People always say it’s tax-free. No, not when you have billions. Billions, you’re going to pay tax from the estate tax. It’s going to be 40% on almost all of it. It’s going to leave a dent, but it’s not going to be subject to income tax.

Eliot: All right, good. “Augusta rule. I’m my own real estate broker. I’m taking an office out of my home to do so. I just hosted a large client appreciation party at my house, using rooms in a garden that are not my office. Can I apply an Augusta rule there? Can I take it as a deduction? If yes, could applying the Augusta rule increase my chances for an audit? And to what percentage?”

I want to tear this one apart. First of all, we’re talking about the Augusta rule, or we often refer to as 280A. That’s the idea that you can rent out your home up to 14 times a calendar year, no more. That income is basically tax-free to you. You don’t even have to report it on your return. If you happen to do it through your S-corporation or C-corporation—that’s the one we’re doing the renting—then they get a deduction for it. It can be a real win-win for you.

One thing that got my attention here is we had this large client appreciation party. We start getting into the realm of entertainment. I want to be careful there when I do something like that to make sure I don’t mix that really with Augusta rule. I think what we have going on here is probably under the entertainment or the lack thereof deduction for entertainment. You could probably deduct maybe 50% of meals, beverages, and things like that, but we want to be real careful.

I probably wouldn’t use Augusta rule myself for a party or anything entertainment like. I’d really stick to the things that we know work, and that would be probably meetings. Although it can be broader than that certainly, I don’t know if I want to do any entertaining. I think that’s a little bit of a flag to watch out for.

Having the Augusta rule, using it certainly should not increase your chance of audit. Even if it did, you’re probably going to win as long as everything was reasonable. You had good documentation. As far as what percentage, I don’t think it would raise it any percentage. What say you, Toby?

Toby: There’s never been an issue where you saw the Augusta rule cause an audit because it doesn’t say Augusta rule, there’s literally a deduction for a lease expense on a corporate return, and you have nothing on your return because it’s not taxable income. There’s nothing there. Zero, nothing. It’s not a paper trail here that the IRS sees that says, oh, here, let me go look at these. As opposed to the home office deduction as a sole proprietor, we know those guys get tased a lot and get hit for audit about 800% more than the rest of people in those same income categories.

Here, we’ve never seen anything. In 25 years, I think I’ve seen this come up twice with clients. We do over $10,000 returns a year. Just to give you an idea of how often we’ve even had it pop up on our radar, almost never.

There was a case that just came down. I forget it, but it was Planet Fitness. A bunch of guys that owned a bunch of Planet Fitnesses, and they were doing 280A. They were round-robining. I think it was four of them. They were meeting every week at somebody’s house. It was once a month per person. They got 14 days. They didn’t have any documentation, and they didn’t have quotes from anybody. The only documentation they had was on 14 of the days, and they got $500 per meeting, even though it was silly. They just had nothing. They were just basically taking it.

This is what I would do. I’d use our 280A kit, which we have in our tax toolbox, or if you’re a client, you probably have it in your Platinum portal. You can go in there and see the documents that we have.

What it does, it has you call three places that are similar accommodations and find out how much a typical meeting room would be in your area for a similar meeting. Here, they just hosted a large client appreciation party. You would just say, how much could I have rented something else out in the neighborhood? Maybe a hotel down the street or in the same city.

We had one audit, which was out in the middle of North Dakota. We just found a hotel. There wasn’t a lot nearby, so we used one that was about 20 miles away. That was 15 years ago. It was $500 a day. It depends on your area as to how much they’re going to quote you.

You’re just saying, hey, corp, you can use my house. It’s no different than you could go rent a hotel meeting room and have a party and a customer appreciation. You could use my home and do it. That works. 280A actually says you don’t report it on your adjustable gross income, so it’s not included as income on your return. There’s nothing on your personal tax return that says I got this money from my corp for 280A. There’s zero. It’s just literally not there, so there’s not an audit chance.

What the corporation is doing is saying, hey, I could have paid a hotel, I’m just paying a shareholder. No different, and it just shows up as a lease expense. Again, we’ve been doing this for 25 years. I still have the article. I wrote an article on it in 2001 that got published in a magazine, and we still use it as a backup.

In all that time, in tens of thousands (maybe more), hundreds of thousands of returns, we’ve seen two audits. There’s nothing that says this thing’s screaming audit trigger. If anything, it does the opposite.

Eliot: Yeah, I wouldn’t call backup. That’s at the front. We hand that out to just about everybody, that white paper you did. We still use that quite heavily. It’s a great article.

Toby: This is the rule, Congress gave it to us. You got to understand that they took away a lot of the benefits of having a home office underneath 280A. When you read the chapter, it’s not a positive statute. It’s disallowance of certain expenses in relation to the use of a home, so it’s taking away, and then this is what they gave back.

They said, okay, but here’s a little silver lining, probably because somebody from Georgia in the Augusta area where the masters are of a year says, hey, how about this for my area, and I’ll vote for this thing too. We call it the Augusta rule because it was clearly for those folks that rent their house out once a week when the masters come into town and somebody is paying them $10,000 per day for a house.

Eliot: No doubt. All right. Next, “My question is, I’ve never been able to take the real estate professional status due to being a full-time employment as a W-2 employee. I took early retirement on January 2nd of 2024 of this year, but I’m still being paid the remainder of the 2024 a year biweekly, but not actually working. We’re getting a check, but we’re not doing any work. I’m a licensed real estate broker, spend most of my time on real estate–related things, rentals, subdivisions. With this payout that I’m getting biweekly for the remainder of the year, can I still qualify as a real estate professional in 2024?”

This is fantastic because the rules for REP status—and we’re probably going to go in those pretty deep here—is based on whether or not you can do it. The prohibition to having W-2 income is if you are actually working at your W-2 job. Here, we’re not doing any work for that check, you’re just getting paid free money for 2024. You can go out and put your time into real estate. Those hours are going to go towards your REP status calculations, and you don’t have to give one hoot that you’re getting W-2 income.

That’s not the criteria. The criteria is if you were working your other job, maybe in 2023, you would have had problems. But in 2024, you’re not doing that. Provided you meet all those other criteria, and maybe we’ll go a little bit more in depth on what the REP is, then you’re going to be good.

Toby: Yeah. The section for those of you guys who are familiar with real estate professional status is in section 469. It’s in subsection C7. What it is is a carve out when you’re doing passive activities like rental real estate that allows you to write those passive expenses often, releases them and makes them non-passive. It’s an exception to the rule. In order to qualify for it, you have to spend 750 hours on real estate trades or businesses during the calendar year.

Between January 1st and December 31st of the year, you have to do 750 hours, and it has to be more than 50% of your personal time. If you’re married and you’re filing a joint return, one spouse has to qualify. That 750 hours doesn’t mean you can’t have another job. It just means it’s really tough when you’re a W-2 employee because you’re going to have 2000 hours doing another activity. It’s almost impossible to put in 2000 hours because you have to do more than 50%, so you’d have to do 2001 hours. on your real estate activity.

Notice it doesn’t refer to the status of you, and it could be multiple part-time jobs. It could be businesses in which you’re working, all these different things. What they’re doing is they’re adding up all of your real estate trades or businesses—your development, construction, being a real estate agent, being a broker, being a property manager, any of those activities, being a developer—you add up all those and say, how many hours did I work during the year in these activities?

By the way, you have to materially participate in those businesses. If it’s an S-corp, C-corp, or something, you just have to be a greater than 5% shareholder and it gets applied to you. We add up all those hours. If it’s more than 750, then phase 2 is, is it more than 50% of everything I did during the year for my personal services?

You look at any other jobs you got here. Here, it wouldn’t matter that you were being paid as a full-time employee. What matters is how many hours you did as an employee. If you’re just getting paid for stuff you did in the past and they’re just paying you out, okay, that’s fine. I’ll take that. But that doesn’t mean that I spent any time on it.

It’s immaterial how you’re getting paid. What’s material is, how many hours did you spend on that activity? Is it more than your real estate activities? If the answer is yes, then it doesn’t matter what your status is. You wouldn’t be a real estate professional. If the answer is no, and you spent more time on your real estate trades or businesses, then you go to the next question, which is, did you materially participate on your rental properties?

Usually, you make an aggregation election and treat them all as one activity. You have to meet one of the seven tests for material participation, which most common one is 100 hours and more than anybody else. That one seems to be the winner-winner-chicken-dinner for most folks. It could be 500 hours, and then we don’t care about anybody else. But for the most part, that’s what you’re trying to do.

To answer this person’s question, it sounds like you’re going to meet prong one, which is the 750 hours and more than anything else you’re doing more than 50% of your time. Prong two is, did you materially participate in your real estate activities on your rentals? That’s up in the air.

We can’t tell from this question, but there’s a good chance that you are. Especially if you’re in the real estate business and you’re handling your stuff on your real estate investments, then chances are you’re going to be able to qualify. It doesn’t matter about your bi weekly payoff. It matters about the amount of time you’ve spent on your activities in 2024.

Eliot: Perfect. Good situation to be in. All right. Next, “What are the first three steps in the tax planning process? And how does one approach the process differently for clients that earn less?”

This is obviously a very open question. A lot of different people would probably throw out, Toby will probably have different ideas. But the one thing I think it all starts when you have a business, you have to have good bookkeeping. You got to talk to our buddy, Troy, who’s on here answering questions, our bookkeeping team. If you don’t have good bookkeeping, you don’t have good numbers. If we don’t have good numbers, reliable numbers to work with, everything else really could become suspect.

I always go with bookkeeping, I think that’s fundamental. I think knowing where we are today, what taxable entities you have, because we talk a lot about S-corp, C-corp, partnerships, all those can have little differences going on with them. So you want to know what you have in your tax planning and how those are impacted by taxes. Then I think you want to know to the best of your ability, where you’re going.

What is my goal? If I have a guide path, a North Star, so to speak, that’s going to help you align everything, the good bookkeeping with where we are today with our entities and where we’re going forward. I think those, if I had to boil it down to three, that’s probably what I would pick.

Toby: I would always say that you’re just trying to figure out. This is what I do with people that I treat like myself when I was getting started, which is a dollar to me when I was started was really important. A dollar to me is still important, but it doesn’t change my lifestyle at all. But if I could find somebody, $2000 or $3000 a year by watching nickels, dimes, and really making sure we’re maximizing our deductions for expenses we’ve already incurred, that can be a vacation for somebody that they otherwise wouldn’t be able to go on.

I tend to focus even a little bit more maniacal on finding things on folks that are $50,000 or below. I know a lot of tax people are like, no, I only want the big ones. It’s like, no, it doesn’t affect people nearly as much. When you’re dealing with somebody who’s making $10 million a year and you save them a million, they just thank you, and they think that’s cool.

When somebody is making $50,000 and you save them $5000, that’s a life-changer to that individual. Especially if you’re doing it repeatedly year after year, it has a pretty significant impact on their ability to retire and ability to enjoy life.

What I usually look at is, first thing, I’m looking for things that they’re already incurring, that they’re not getting a tax benefit for. It’s the usual suspects, the phones, the car, computers, electricity, their home, health expenses. We’re looking and saying, is there a way to get a tax advantage for that, even if it’s a small amount? What if it’s $500 a year? I don’t care. That $500 makes a big difference.

I remember my first meeting with an accountant, I had to save up for two weeks to save up $300. I still remember that. That was a pain in the katush. I wanted to meet with the guy, and he wouldn’t do it unless I paid him first because he probably knew I didn’t have any money. He’s like, you pay me first, otherwise I’m not going to chase it.

That makes a pretty big difference on somebody when you’re able to save hundreds of dollars on somebody when they’re living off of thousands. Obviously, we love the ones, Eliot, you just did a tax review. I saw $107,000 a year you’d found for a client using different types of retirement plans and a bunch of money they were leaving on the table, as far as the way they were treating their activity. $107,000 a year for that client makes a huge difference, but it’s not nearly as critical to the person. That $10,000, $5000, or $2000 can make a pretty big impact on somebody who’s counting dollars.

Whenever I’m looking at it, I’m seeing what’s already coming out. What is the low lying fruit? What are things we can implement right now at low cost? And then you move on to the next stuff where you’re saying, is the juice worth the squeeze when you start looking at things like structures and writing things off, certain types of expenses and using a business structure. That’s usually the next level.

Using the loopholes like cost segregations, accelerated depreciation, and really maximizing real estate losses, real estate pro, short-term rentals, and all those, those come in. But just good bracket management, just trying to figure out where the money’s coming in, what type of income it is, stuff I’m already paying, can I get a tax benefit out of it, that’s just your bread and butter. That tends to be what I’m looking at.

The first three steps would be to calculate things that you’re not getting a tax benefit for, calculate the types of income you have and whether there’s a possibility of recharacterizing some of those in a different way that’s beneficial to you, and then step three is, do structures change anything? Those are probably the first three for me.

Eliot: Perfect. Well said. All right, just a little break here. We got the tax and asset workshop. Just a reminder about that. April 15th, April 20th, back-to-back Saturdays. That’s going to be a virtual event. We have the big one in Dallas, live, June 27th-29th.

Continue on. “What is the best way to purchase an existing business for tax purposes?” This one, most often what we’re looking for maybe is a purchase of the ownership of it. Meaning if you’re buying an S-corp or C-corporation, you’re going to buy the assets. You want to buy the assets because now, you’re going to be able to get those at your fair market value that you paid for them. We’ll call it a stepped up basis in your assets. It’s going to help you out down the line as far as depreciation. That’s probably number one there for someone who’s purchasing.

Number two, purchasing that method, you’re only getting the assets. You’re not picking up the garbage. If you went out and bought my corporation by buying my shares, you’re going to take with it any garbage and baggage. Any lawsuits that are ready to happen, they come with that when you buy the whole building or the whole ownership of it, the shares.

Probably, I think an asset purchase is the most common. Best example for a buyer is you get that stepped up basis. You don’t have to worry about liabilities or anything like that, that you’re an old business happening from the business, the entity itself. I think that’s probably what you look for first as far as how to purchase.

Toby: Yeah, you just hit the big ones. I’ll just say that there’s a hybrid. There’s a 338H8 or H10 election that could be made. When somebody buys an entity, I think it’s an S-corp, and they want to treat it as an asset sale, they can do so, even though you’re buying the company.

Otherwise, the way to think of it is you can’t write off stock. If I buy Microsoft shares, I can’t depreciate it. If I buy real estate, I can because you’re buying it, and you got a depreciable asset. But when I buy stock, I can’t.

When you’re buying a business, you don’t want to buy the stock, you want to buy the stuff, what the business has, everything from its goodwill to its furniture, to all of its equipment, all of that stuff, because you can write it off. And you get a tax benefit.

If they don’t want to and they’re saying, hey, I still have to sell this thing, then sometimes you make it an S and you do a 338H8 or H10 election. You say, hey, you know what, ‘m going to treat it as an asset search, even though I’m buying your shares. For tax purposes, it’s treated as an asset purchase.

You just got to have somebody who’s done these a few times on your team to make sure that you’re buying it right. A lot of times, you see people buying businesses that are equipment rich, and you don’t want to see them buy the stock. Now, if I’m the seller, I want to sell the stock because it’s capital gains. In some cases, I’ll have a 1202 stock where I don’t have any gain.

We had a client a few years back that was able to avoid tax on about a $40 million transaction because of the way it was structured underneath the small business stock exclusion, which was just extraordinary, well thought-out, well-executed, and the benefit was they avoided a lot of tax. You had to sell the stock under that scenario. Obviously, somebody’s giving something up.

I’ve been in these where the 11th hour of a deal. The buyer did not know when they were buying a company that they would not be able to depreciate their purchase. They were buying something. I was involved in one that was about a $6 million transaction, and just nobody had addressed it with the purchaser. You can’t write these things off.

The first thing I did when he called me up was I was like, $6 million, you’re not deducting that, right? You’re not getting a tax benefit out of this transaction. He goes, what are you talking about? I’m going to write the $6 million off. I was like, it’s not how it works. Then we had to have a conversation with everybody that was negotiating the deal. It changed things because if you get no tax benefit out of it. That changes the economics of the situation.

The best way to purchase if I’m buying is to buy the assets or do a 338. If I’m selling, then I want to sell the stock. Those are competing interests, and they need to be factored into the deal. Sometimes that’s the negotiating point.

Eliot: Very good. All right. “If I buy a short-term rental, do a cost seg the same year I bought it and listed it on Airbnb, and I rent it long-term the next year, would that interfere with the cost seg done the prior year?”

This is a common strategy. Folks will go out and get a short-term rental, take the cost seg, take that massive loss and then next year, try and turn it into long-term because they don’t want to put the time commitment into it or something, or whatever’s going on with their day. There’s nothing wrong with that. You’ll have different accounts that have different takes on this.

I think our approach is that you need to have at least rented it. You really want to have rented it at least once before the year end in year one as a short-term rental, seven days or less and then of course, meet all the other criteria, material participation, provide some services, et cetera. If you do that, then what you do the next year is immaterial to the first year. You can go ahead and continue as a short-term rental, or you can do it as a long-term rental the next year. That should not have any impact on the previous year.

Toby: What Eliot’s referring to is there are regs that say that if the average use of a property is seven days or less, it’s not considered a rental property for the passive activity loss rules. That Airbnb is a pizza shop. If you have an Airbnb, it is no different than if you open up a pizza shop.

The Airbnb has become a pizza shop, and you have a pizza oven. It’s all that is. The box that’s on the land is a big old pizza oven. It’s 5-, 7-, 15-year property, and it’s the 39-year property because it’s considered a hotel. It’s going to be deducted over those time frames.

You can accelerate some of that depreciation to create a nice big fat loss, but during that taxable year, it’s a trade or business. The question is, did you materially participate? Those losses could be ordinary non-passive. Otherwise, they would just be passive, even though it’s not rental real estate.

Yes, you can get those losses and you could use it. The following year, you could convert it back into long-term. It’s always that 12-month period. Are you a real estate professional? It’s always January 1st to December 31st. They say, what are the facts and circumstances in that period of time?

If you are at the end of a year, you say it’s short-term, and then you immediately turn it into a long-term the following year, there’s a chance the IRS is going to be confused, saying there’s really not enough data for that year, you didn’t really didn’t use it much. I think it’s long-term and I see that you made it long-term. Therefore, the facts and circumstances support that. It was long-term even in this period.

You don’t want to leave yourself in that situation, so make sure that you’ve got at least a few rentals, probably five or six. If you had it for a month, do it. I would keep it as a short-term rental for a few more months if I had to, even if I was going to convert it into a long-term because again, they look at the 12-month period. You have a whole bunch of short-term transactions, and then you have one long one.

As long as you’re renting it long for about six months, I think you’re always going to be pushing yourself into a traditional rental, and you’re going to stay away from the short-term rental rules. But it makes a much stronger argument for that previous term it was short-term.

Again, if you buy it in December, you rent it out twice, say it’s an Airbnb, and then immediately turn it into a long-term, I think you’re begging for trouble. I would continue to make it short-term throughout January, February, March at least, and then turn it into a long-term rental after that.

Eliot:  Perfect. “If I claim bonus depreciation on my rental property, do I need to return or reverse it when I sell the property? Are we going to have depreciation recapture?” Again, it depends on the transaction. If you sell a property, you have to have gain. If you don’t have gain on the sell, there is no depreciation recapture.

You don’t always have depreciation recapture, but if you do have gain, then we’re going to look at what depreciation was taken, whether it was what we call 1250, it was just regular building, or did we break it into what we call 1245, that’s going to be your tangible personal property. Those have different rules and different tax rates for depreciation recapture.

If you’ve had the property long enough, let’s say you had a cost segregation done, and you had 5-year, 15-, 20-year property, if you were maybe over 5 years for some of that, then maybe we would just write that off. That would be your 1245 property subject to the highest tax brackets, and we will just write that off. That gain would go over on the other side to your 1250 property, your long-term capital gains, so you get the more favorable rates.

The bottom line here is that if you have capital gain, you’re going to have depreciation recapture. There are things we might be able to do depending on how that depreciation was taken to put it more favorably in your ballpark. But if you don’t have gain, no depreciation recapture.

Toby: Let’s make Eliot’s answer real with an example. Let’s say that we had a rental property, we did a cost seg on it, and we broke it into 5-year property, 7-year property, 15-year property, and then 27½ years for the structure, the depreciation recapture on that structure is 27½ years. It’s going to be recaptured at your ordinary rate maxed at 25%. People always say it’s 25%, but it’s whatever is less.

You have the personal property, the 5-, 7- and 15-year property taxed as ordinary income. It just goes into your tax bracket, but it’s valued. Let’s just pretend that you bought that house, you held it for five years, and you sold it. We go in there and we look at the 5-, 7-, and 15-year property, you’re not selling carpeting. That carpet’s worth nothing. you don’t pay any recapture. That goes all the long-term capital gains, which would be taxed at 0%, 15%, or 20% depending on your tax bracket.

The seven-year property, probably the same. There’s very little value in it, if any. Usually, you’re putting it on a schedule when you’re saying, hey, what are you buying? You’re going to say, is there any value to these things? Chances are there’s very little to no value. The 15-year property, you got to determine whether they’re even buying it. Again, a lot of it’s in that purchase and sale and what they’re actually buying.

They may not be buying. Land improvements are typical. You might have shrubs, trees, flowers, and things like that. They’re just going to rip it all out. That’s not what they’re buying. They’re buying the land and the structure. Then you would have almost no recapture on those items. It would all be the recapture on the structure, which would have been the 27½-year depreciation. That would be it. That’s how that stuff works.

We’ve seen cost segregation done after the sale for that very reason when somebody is selling industrial property, for example, warehouses, or multifamily. It’s not unheard of for there to be a pretty sizable difference. Usually, it’s about 10%–20% of the tax bill that can be saved by doing that cost seg. We’ve seen people go in and do that cost segregation after the sale.

Even when they no longer have possession of the property, they can go in and say, hey, you know what? It benefits us because, usually it’s if they held it for at least five years, because there’s no recapture on that item and it can make a big difference. The one I use as an example all the time was a tax bill that went from $278,000 to $200,000. It saved him close to $80,000 in taxes just by doing a cost seg.

Little to no risk, the company we’ve used has done over 26,000 cost segs and has had less than a dozen audits over the years. It’s very seldom you see a professional cost seg actually questioned because they do everything right, and they’ve never had a bad result. In those 10 audits, they want every single one of them because they’re doing the report the right way. The IRS is just looking to verify.

Here you are looking at it going, hey, can I get a tax benefit with little to no risk? Is the juice worth the squeeze? Is it paying me at least a lot more than what it’s going to cost me? If it’s going to cost me $5000 to do a cost seg, and it’s going to save me $50,000 I’m doing that all day long. That’s how that stuff works. It’s always worth taking a look.

Eliot: All right, perfect. That’s it for our questions today. We got this guy on YouTube.

Toby: Go in, sign up for the YouTube channel. Myself, Clint Coons has a great channel. His is more asset protection, mine tends to be more tax and financial planning. You’ll see a lot on there about types of things to invest in. In fact, hey, look, it says 5 investments that reduce taxes. I like stuff like that, 20 sources of tax-free income. That’s weird.

If you like that type of stuff, go in and subscribe, like some videos, put some comments in there. It helps us out. You’ll see there’s just a ton of content. If you have questions in the meantime, feel free to email us.

If you have questions between now and the next time we do a Tax Tuesday, which is two weeks, just email us at taxtuesday@andersonadvisors.com. Eliot picks the questions. There are hundreds that come in. We answer them all, but we like to pull out commonly asked questions. Eliot’s in charge of that. He grabs them and makes sure that we pick the 10 or 15 good questions every time. You get a big applause for you, Eliot. I’ll do the clap.

You get a big star. You did a great job. By all means, make sure that you’re asking those questions. So often we get, hey, I ran this and my accountant said, and it’s usually something that’s shades of truth and sometimes not knowing the right questions to ask.

Sometimes if they’re not up on it, they’re just down on it. I can’t blame them. I’m probably the same way. If I’m not familiar with something, I tend to look at it skeptically. That’s okay. But the law is the law, and the rules are the rules. You can absolutely use them in your favor, especially if it’s going to put some more dollars in your pocket.

We do teach the tax and asset protection workshop almost every week. Clint does a great job. We’re doing one this weekend and then the following weekend. We have in June our live tax and asset protection workshop. It’s a three-day affair in Texas. The 27th, 28th, 29th, we’re going to be doing just tax and asset protection on that one. That’ll be a lot of fun.

We tried to pick the hottest time of the year in Dallas because we want you to melt. No, I’m just kidding. I don’t know. Is it hot in Dallas in June? Maybe the rates were good. You better wear a hat. Everybody’s going to have to have a cowboy hat, because otherwise you’re going to end up with a sunburned neck, and then we’ll have to call you names.

We always have a good time, and feel free to check out information on that. Tickets are reasonable. We’d love to have all the folks that join us for Tax Tuesdays at those live events.

When I get up on stage, I can say, how many of you follow Tax Tuesday? Then everybody says, yay, I’m a tax geek. Then we say, yes, we love tax geeks. Everybody applauds and pat themselves on the back, and we have a good lovey moment. Then we get into more tax stuff. It’s always fun. Eliot, great job this week.

Eliot: Thanks, and just a reminder where we started. We got that free kit, that free binder on Toby’s YouTube page. That was an often-asked thing. We’ll make sure you have access to it.

Toby: Get yourself an emergency binder. If you have anybody that you know that could benefit, there’s nothing in it that’s a pitch. We’re just giving it away. Why do we give it away? I don’t know, because it’s the right thing to do and try to get people to do an estate plan.

Maybe they’ll use this for estate planning. That’ll be great. If they want that living trust, maybe they can reach out to us. The rest of the time, just let’s make sure that people actually are addressing those. Again, it’s electronic version. You can download it, print it out, stick it in a three ring binder, and make sure people actually know how to take care of you in the event something happens to make sure your affairs are taken care of.

It’s just the right thing to do. Nowadays, there are so many questions. So many questions that come up. People don’t know where you have accounts, how to access them, or what to do. An emergency binder will help them and go a long way to keeping them from having a complete meltdown in the event something happens to you.

Think of all the people you’d be leaving behind, and you just want to reduce that stress during that period of time. Get that emergency binder. Patty, put that link in there. Absolutely free. Yes, we love stuff like that.

Eliot, thank you, sir, for handling all the heavy lifting. I hope your knees don’t hurt, and your back is keeping it straight. I didn’t see you bend over when you were doing the heavy lifting, so you get a big star.

Eliot: Thank you. Don’t do a lot of lifting.

Toby: I’m going to go walk on the beach.

Eliot: All right. Have a good one. See you guys in two weeks.