(soft music) – [Toby] Hey guys, this is Toby Mathis. – [Jeff] And Jeff Webb. – [Toby] And this is Tax Tuesdays. Hey, we’re bringing tax
knowledge to the masses, and today we got a really
jammed one, just can’t help it. Hey, there’s somebody doing
the Protect Wealth Cruise. Not gonna be on that, boo. Hey, we got a lot to go
over today, we got a ton, we got a ton. First off, you know you can ask questions via the little question and answer thing on the GoToWebinar and we do see it. We’re gonna try to keep
them relevant to what we’ve been going on. Somebody just already asked, I’ve been logging my real
estate professional hours, how do I explain it to my CPA? Well, you shouldn’t have to. They should understand
what tax professional is. If they don’t, you should
actually switch CPAs. You don’t want someone
learning on your dime. But anyway, let’s jump
off of that, yeah I know, there’s a few people that
are already ticked off. No, that’s just the truth, you
don’t want them to have to, you don’t wanna teach somebody
’cause there’s other things that they need to be able to do, and you don’t want them learning,
doing it wrong on yours, and then figuring it out. All right, we always
talk about that stuff. I’m trying to fast forward
this thing, here we go. All right, so let’s
jump into Tax Tuesdays. First off, I do put
these up on our podcast, I’ll show you where those are,
but there’s tons of videos, both at YouTube and Facebook. You can come in, you
can like us on Facebook, you’ll get a ton of content,
and then on our YouTube channel it’s just jam packed. I take every Tax Tuesday, I think we’re into the 90s at this point. – [Jeff] Yes, we are. – [Toby] We break out the questions, we take bits and pieces
of each one and make them into separate videos, so
you can just go in there and have a smorgasbord. There’s a good chance that
we’ve answered the questions that you’re thinking of. Here we go, Tax Tuesday rules. You ask live, we’re gonna
do our very best to answer before the end of the webinar. You can send your questions at any time, and I do say this at any time. We compile them during the weeks between, like we do these every other
week, the Tax Tuesdays, and doing that middle area, we compile the questions
that we’re going to answer on the next one, that’s why
they keep getting longer. If you need a detailed response
that’s very specific to you, like you want actual advice, you’re gonna need to be a
tax client or a Platinum and there’s ways to do
either one of those. Platinum’s probably our
number one service that we provide at Anderson,
which is you join Platinum and 35 bucks a month you
can ask any tax question, but you can also get on
the phone with lawyers and advisors, to help
answer your questions to noodle things out. Tax Tuesday is fast, fun, and educational and we like to get as much information out there as possible. Some accountants jump on, which is great. We do teach a lot of things
that are, a lot of our classes are already approved for
continuing education, so if you’re an accountant or an attorney and you’re on the call, I
don’t think these ones qualify, but there’s a number of
ones I could forward you that do qualify for your
hours and, of course, if you come to the Tax
and Asset Protection Class that we teach three days, gosh,
in some cases it’s 20 hours, it’s quite a bit, I have
to ask Valerie what the, depending on your state, but
most of them are approved. We have several of the
courses that are approved both for continuing
education for realtors, continuing education for accountants, continuing education for attorneys. So if you’re a professional
we can get it up. Boy, lots of questions already rolling in. Here’s an easy one. Is the once a year rollover
from an IRA to a Roth 12 months or does it have to be exactly 365 days? You’re actually mixing
a couple of ideas there. You can do a rollover
once every year, 365 days, which means I take money out of my IRA that would ordinarily be
taxable, but I put it back in within 60 days, so there’s
a lot of people that say, oh, you can take a 60 day loan. No, you can roll it over. As far as the converting
a traditional to a Roth, you can do that all over
and over and over again, and at the end of the
year you’re just saying, what did I take out and
convert over to the Roth and pay tax on. – [Jeff] Yeah, so that 365 day rule, or 12 month rule, means
that’s not trustee to trustee, that isn’t going from TD
Ameritrade directly to Fidelity. That’s, they’re issuing a check to you and then you’re putting
the money somewhere else. And that you can only do once a year, so if you do one on April
first, you can’t do another one till the April first
of the following year. But the trustee to
trustee you can do those. – [Toby] You can do that
over and over and over again. And at the end of the day,
what it really matters, is if I take a traditional taxable Roth, I mean a IRA, and convert it to a Roth, that just means I’m taking it
from my traditional account and putting it in my Roth account. I’m just gonna pay tax on that. What’s the form they give you? Is it a 1090? – [Jeff] No, there’s a 5498 or something. – [Toby] Oh, yeah, yeah,
yeah, 5498, so the pre-tax– – [Jeff] It tells what
the contribution is. – [Toby] Yep, yep, yep. So that’s a form that says
pre-tax or post-tax contribution into your Roth. Somebody says, trying to
start a real estate business, but I don’t know how
to have the LLC taxed, S corp or something else? That’s what we’re here for. So I’m gonna say this
to Susan or to Patty, I would grab Brianna’s information and get them to an advisor, because LLCs get to choose how their taxed and it really comes down
to your unique situation as to whether or not you want it taxed as a disregarded entity,
meaning the Federal Government ignores it and it’s taxed to the owner. So if the owner’s a C corp, taxes going through
under the C corp return. If it’s an individual, then that would be under
the individuals tax return. It’s a partnership, then the
partnership calls the returning it’s K-1’s to its owners. S corp, same thing. It passes the profits and
losses down to its owners. So you have choices. So the LLC is a state entity
and it’s a Swiss Army knife. But let’s jump into the opening question. So let’s see. See if I can actually do this. Fast forward, the thing
doesn’t like to work. Let’s see, there we go. How do I handle my
general contractor’s W-9 at the end of the job so I
don’t have to create a problem for my accountants? That’s so nice of you. – [Jeff] We appreciate that. – [Toby] I jointly own a
property, 50% with my cousin. Is it taxable then if he
quitclaims the property to me? I’ll answer that. What is the simplest way or software to maintain vehicle mileage logs? I have a great recommendation
for you on that one. In general, when is it
better to have your taxes flow through on your personal
return versus using an LLC being taxed as an S or a C corp? That’s the beautiful part. Well, get into that, that’s
kind of a fun issue there. Is buying a property to use
for Airbnb a profitable plan? Can you invest the money
earned through a 501(c)(3) to invest in dividends and stocks? Can you explain the
100% depreciation change in the new tax code? Oh, that’s depreciation. And how they can best be used. I started an LLC and have no employees. Is there income coming in? Married and filed jointly,
can I claim business expenses on my taxes? I’ll answer that one too. We have several SFH, I
think single family home properties that need to be put in LLCs so they each get their own LLC. We usually call them SFRs, by the way. If I move into one of my
rentals for a year and a half that’s in it’s own LLC, does
the LLC still depreciate and deduct repairs? So basically, if I move into
my rental and I live in it as a personal residence,
do I depreciate it? Which is the best entity
to use to pay yourself from a house flipping business? How do we structure our health
care through our corporation to be able to write-off,
things like gym memberships and doctor visits? It’s an interesting one. Can I deduct education training costs pertinent to the company
mission within an LLC framework if I file as a C corp? Am I retired… I am retired. (laughing) This is horrible. I am retired, drawing Social
Security and retirement. Do I need to pay myself a
salary from my corporation and all of the associated
withholding and federal and state taxes or would I be able to
simply pay myself a distribution of the profits, dividends perhaps? We will answer those. What happens if a real
estate property is gifted to an immediate family member
and the recipient sells the gifted property within two years? Does the tax liability fall on the donors or does the recipient just file it on the recipient’s return? Great question, we’re gonna answer that. And how do I start funding a Solo 401K and do Solo 401Ks have to pay UBIT or UDFI if they finance real estate? I will answer those as
well and you’ll understand what UBIT and UDFI are
by the time we’re done. Let’s jump into the first one. This is you being very
kind to your accountant. How do I handle my
general contractor’s W-9 at the end of the job so
I don’t create problems for my accountants? So, Jeff, why don’t you
explain what a W-9 is and kind of give them the lay of the land. – [Jeff] So a W-9 is a form
that you give to your vendors, every vendor you have
that you make payments to that identifies who they
are, who is a taxable, who reports the income. Now what’s key with these W-9s is, you want to have this
W-9 before you pay them a single penny. The problem is with a lot
of vendors is you pay them and then you request the
W-9, you’re not gonna get it. – [Toby] Yep. – [Jeff] They have no
reason to give it to you. – [Toby] I have that T-shirt. Years ago one of our
businesses was one of 50,000, what was it, a sampling. It was a random audit for payroll. See if I can get my words out today. Where what they did is
the IRS looked to see how big the problem was of employees being classified as contractors. And so they’d go into businesses, and I don’t know how they picked them, but they were all mid-sized businesses, so they were all between
a few million dollars and probably 50 million,
somewhere in that range. So they wanted to see some activity. It was about a week that
they sat in our office and they went through each
W-2, which means a W-4, when the employee’s filling
it out, and all the W-9s. The end of the day, there
were two contractors that we had paid over that period of time, I think is was a three-year audit, that we did not have the W-9s on. One was a magician for a Christmas party. And he was on America’s Got Talent. He was actually a name,
I won’t go over his name, but I could not get him. He like made his W-9 disappear
and I could not get him. – [Jeff] ‘Cause he was magician. – [Toby] I could not get
him for the life of me to actually sign that dang document. The IRS said, well, you can’t prove that he was a corporation respectively. When you 1099 somebody, you don’t have to 1099 a corporation. It was so annoying. And then we had a landscaping business that had gone out of business. And we couldn’t prove what they were because they were bankrupt. There wasn’t anybody to act
on behalf of the company or sign anything, so they made up pay the withholding on it, it was 28%. The total amount we ended
up writing them a check was 750 bucks, right around in there. I said, if I write the
check, do you go away? Yes. So I wrote them the check,
but it was one of those things where if you don’t keep track of this, it could be a real bear
for you because how do you 1099 them if you don’t have a W-9? You don’t know what their information is. And so if you ever get audited, that becomes your very best friend and so if you’re paying
somebody money, Jeff, you get that W-9 first, right? – [Jeff] You get the W-9 first. And I would even recommend,
especially in the case of contractors, construction
contractors that unless you’re sure they’re reputable,
I would get it from them as soon as I contract with them. – [Toby] Yep. And you only need to get
it once, that’s the thing. So what I do is I say, hey,
when they send the invoice over, just get in the habit,
before you write the check saying, hey, will sign this W-9? Because if you haven’t paid them yet, they’re pretty quick to sign it. And all it is it’s a one-page form. I should pull one up, but it’s literally, if you just Google W-9 IRS. – [Jeff] Yeah, you list your name, EIN or Social Security number, address. – [Toby] It’s literally
like three or four lines. It take two minutes to fill out. Then you don’t have to worry about it. Now you’re reporting that income to them, so you can take the deduction. Is there an amount annually
that you have to pay contractor-required W-9. Tony, if you’re paying somebody anything more than 600
bucks you need to 1099 them. In order to 1099 them, you need their W-9. I would say 600. Technically, it’s any dollar, right? – [Jeff] Yeah, the problem
comes if you pay them $500 this time and then you have to call them back later in the year for something else and it’s another $500. Well, now they’re over the
threshold for requiring a 1099. And if they’re a corporation, they still have to fill one out, they just mark a box that
says they’re a corporation, which means you don’t have to file a 1099. – [Toby] Yeah, which is great. Again, so like Jeff is saying,
if you’re a corporation, people don’t have to
1099 you, and vice versa. If you’re paying a corporation,
says inc and you get a W-9, they say they’re a corporation,
you don’t have to 1099 them. Makes life a lot easier,
unless you like sending lots and lots of 1099s out in January. And a 1099, by the way, you’re just saying here’s what I paid you
and that way the IRS knows that the contractor got
paid and they’re looking for the income on their return
and you get to write it off. If you don’t, then you’re gonna
have to prove that expense, show them a check, in which
case they have two choices. They could say, all right,
you get the write-off, but you should have done
withholding and you didn’t, so we’re gonna charge you that money. Or you get the W-9, you show
that you weren’t required to. Then you don’t have to worry about it. So you always get that W-9,
that’s your best friend. Get it before you pay them. Otherwise, good luck getting it from them. People will drag their heels on that one, especially if they’re not
reporting their income. All right, I jointly own a
property, 50% with my cousin. Is it taxable event if he
quitclaims the property? Jeff, what do you think? – [Jeff] This is a gift,
so it is a taxable event, but it is a taxable event to your cousin. If it’s more than $15,000, he
has to file a gift tax return. – [Toby] Yeah, what it is,
how big is our lifetime gift amount that we can– – [Jeff] 11 million. – [Toby] So for a $11 million
that I can give to somebody. I can give Jeff $11 million next week. He doesn’t have to pay tax on it, I don’t have to pay tax on it. So if you have, depending
on the property value and what your actual
amount is, you cousin, if he gives you the property, you’re gonna have to value that gift. If it’s pretty close to the purchase, I’d probably just use that
if it’s within a year. If you’ve owned it for awhile,
then it’s more than $15,000, by all means it’s a 760,
I forget the form number. – [Jeff] 709. – [Toby] 709, so Jeff’s a idiot savant. (laughing) Now you pulled that one out, 706, so you file a gift tax return
and you say here’s how much of my $11 million, or whatever it is, I’m using up right now. So you’re allowed to make gifts. What is a quitclaim? That is a transfer of
interest in a county record of whatever my interest is. Quitclaim is what you use
when you don’t really care whether you have a bunch of liabilities. It’s I’m giving you whatever. I’m quitting my claim
against this property is all I’m doing, so I’m
just giving you my right. If you’re doing a transfer where you want there to be some
representation on it, then you’re doing a warranty deed. So we always recommend warranty deeds. Title insurance require warranty. But if I just quitclaim it
over, like I’m joint tenants with right of survivorship
and somebody quitclaims over and extinguishes their rights, then you shouldn’t have a problem. If it’s tenants in
common where we each own and undivided 50%, then that quitclaim, just basically no warranties
are made with that. They’re just saying, hey,
whatever I have in this, I’m giving it to you. I’m not saying that I
have perfect ownership, so there might be something
out there on that title. – [Jeff] However, word of warning, a quitclaim does surrender your interest, but it does not relieve you
of any debt on that property if there is debt and you’re
maybe on the hook for it. – [Toby] Yeah, so you’re quitting
your interest, that’s it. So you’re not saying,
hey, there’s no deeds or no liens against it. It’s kind of fun. Don’s asking, hey, Don. Don is asking, is there no
limit per person per year on the gifting? No, so I have a lifetime
gift that I can make. 2019, it’s $11,400,000. But if I don’t wanna do a gift tax return, then my limit is $15,000 per person and that’s per spouse. So, if my cousin gifts me
their interest in the property and there property’s worth $100,000 and you have an $80,000 lien against it, then your cousin’s interest is worth 1/2 of that $20,000 or $10,000. If they give that to you, you don’t have to do a gift tax return. If there is no debt and they
give you $50,000 of interest, say you have $100,000 property
and they give you 50% of it, then you would do a gift
tax return for $50,000, which would mean that your
cousin, it is not just cash, it is anything of value
of $15,000 by the way. But he gives you that
interest in the property, then they would do a 709. – [Jeff] 709. – [Toby] And it would say
basically, hey, I’m using up $50,000 of my lifetime gift
exclusion of $11,400,000. – [Jeff] And that annual exclusion really confuses a lot people. They think that’s the
most that they can gift. – [Toby] No, you can gift a lot more, you just have to report it. It’s to say, hey, I
just gave Jeff $100,000. I can give him the $100,000,
I just have to say, ordinarily, the IRS wants
to tax transfers of wealth, so if I give Jeff a big chunk of money, they want to know about it
so that they calculate it because they don’t want,
for example, Bill Gates giving away billions of dollars to people that now is not taxable. They’d rather it be part of his estate so that they can tax it when he dies. When I say they, it’s
Congress that writes the laws, but it’s the Treasury that gets it. So, there we go. Somebody says, they go it. So what is the simplest
way or software to maintain vehicle mileage logs
with the least effort? So, on this one, now I have
a very personal view on this. It’s MileIQ is the app. MileIQ, but we wanna go
back to the very beginning of what these rules are. So, either the company owns
the car and you’re taxed on the personal use, or you own the car and you get reimbursed by the
company for the company’s use. And there’s two ways to do that. It can either reimburse
you the actual cost that you incur on that
vehicle and that percentage, so if I’m driving it 30% per business, then my actual cost of
owning that vehicle, the end of the year I
calculate all the gas, the repair bills and
everything else is $3,000, then the company would give
me 900 bucks, 30% of $3,000. If I do the mileage,
then it’s a flat rate. I forget what it is right
now, 58 cents per mile, and you reimburse the miles. Now in either case, I have
to keep a mileage log. If I own the vehicle personally, I just have to keep a
mileage log and it’s a pain. Used to be you have a physical little book that you write down, beginning
odometer, ending odometer on a business trip. Now you use MileIQ, it’s
real easy, and it GPS’s you. It says is this a business? I think you swipe left, I
could open it up and look. You swipe left or right depending
on whether it’s a business trip or a personal trip and
if you swipe business enough on a certain trip, it’s gonna
say, hey, do you want me to keep track of that one. For example, if I drive between offices, or my home office to
one of my offices here, it already knows that
that’s a business trip. It doesn’t even ask me anymore, it just automatically tracks
it and then I can use that. Somebody asked a question on the back one, on the last question we had. Do you have to do a gift
tax return if the gift is not cash, regardless of the amount? No. It’s only if the value exceeds $15,000. And by the way, husband and
wife, they each get $15,000 per recipient, so if they two kids, you can give $30.000 a
year to each one of them. – [Jeff] So Mom and Dad can
contribute to son and wife $15,000 to each, totally a $60,000 gift that does not get reported. – [Toby] Yep. So you get it. – [Jeff] Thank you. – [Toby] You know you got it. There’s people actually answering,
they’re also getting it. Hope you got it. How long you been a CPA? – [Jeff] Not quite 30 years yet. – [Toby] Geez, newbie. What’s the simplest way, is MileIQ, so I’m just gonna answer that one again. And if you need that
emailed to you or something, I’m sure we can get it out to you. – [Jeff] Yeah, because it doesn’t depend, it’s gonna work the same
way whether you own the car or the company owns the car. You need the same information. – [Toby] Yeah, a lot of accountants, they do this weird thing
where they buy that car in the company name, which
is no good in my world, just because nine times out of 10, the insurance alone makes it not worth it. Now you have commercial insurance. It gets kinda stinky, so
you don’t wanna do that. So personal is left, business is right when you’re on the MileIQ. It’ll literally tell you
how many miles you drove and how much that’s worth to you. So I’m looking at one
right now that’s 7.8 miles and it’s $4.52, there we
go, that’s a business. That’s a business, I
just love doing business. So I’m looking at them all
and it just track them. You just know you’re being tracked. What is the name of this
app to track mile again? MileIQ. Just go to the app store. – [Jeff] It’s very popular, MileIQ is. – [Toby] Yeah, so you’ll see it. You could also Google,
somebody just did MileIQ.com. Doug Schaumburg, thank you, bud. I’m trying to figure out how to do that. I’m gonna send this out
to everybody if I can. Paste, oh, no, this is crazy. I just did something weird. MileIQ, so it’s just M-I-L-E-I-Q. I’m just gonna respond
to Doug, MileIQ.com. But you just, send to all, there we go. I think I sent that all to everybody. Fantastic, let’s jump onto the next one. Somebody said type in MileIQ
in the Google play Store, it comes out on top. Thank you very much. So there you go, so that’s an easy one. It’s one of those weird things
were accountants go in there and they’ll have you buy
a car in your business because they can write it all off. They think, oh, I’m gonna
write off the whole call, but you are taxed on your personal use. And if it’s less than 50%,
the whole thing is taxed, you don’t get to write it all off. So these are accountants
are nuts that do it and unless you are using
that car for business more than half the time
and you plan on doing that for at least five years. Because if you go below 50%
during that depreciation period and you wrote it all off even in year one, it’s all recapturable as ordinary income plus your personal use on that, there’s a schedule they
release every year, the IRS releases it, that
says based on the value of your vehicle, here’s how
much you have to include in your tax return, depending on how much personal use you had. So there’s a tax hit
subject to withholding and I just say it’s not worth it. So, I get it over and over again. Brilliant accountants are going
out there and trying to do 100% use, telling you,
that’s an audit trigger. You’re gonna get wasted and it’s gonna be very painful for you. Most of my clients are investors, a lot of them are real estate folks, but they have personal use on that vehicle and they’re not capturable,
the accounts say 100%. That’s just not real. If you have a vehicle for
your construction business that has your name on the
side and you’re using it for business and it
stays at your location, you’re just using it for business only, you never drive it on the weekend, you’re not using it to go home, then that’s a different story. But that’s about it. If you’re using the 58
cents a mile method, is there any tax implication
using the vehicle 50% or more? No, Rick it doesn’t matter. If I use it 100% for personal
and I use it 100 miles for my business, it can still
reimburse me those miles, so it will give me 58 bucks. Somebody else says, what about a lease? That’s actually the valuation of the IRS. For leases every year, they
say if your car is worth 50,000 bucks, for example,
the lease value is $12,000 and if you used it for half,
you have to include $6,000 in your taxable income and
it’s like you got paid wages. So it stinks. So, somebody says I like KISS. I like them too, Gene Simmons. – [Jeff] I don’t think
that’s what they meant, but, okay, go ahead. – [Toby] Could we postpone
required minimum distribution to 72 years of age? 78 1/2. Can the company actually,
can reimburse actual expense for the auto-business use? Yeah, it can actually, but remember, it’s only the business portion. Let’s jump onto the next one. In general, when is it
better to have your taxes flow through on your personal income versus using an LLC being
taxed as a S or C corp? Jeff, what strikes you
as odd in that question? – [Jeff] When I read
this, I wasn’t really sure what they were doing. If it’s an S corporation,
it is gonna flow through to your personal income. – [Toby] Exactly. So remember, you can guys can
be really snotty about this because there’s actually
a law professor blog where all they do is make
fun of judges who call limited liability companies
limited liability corporations. And I’m not joking. They literally call them
out on every single opinion and make fun of them. But an LLC is a state taxable entity. It is not a tax type. Your LLC is ignored to the IRS. So you can have an LLC and
when you say S or C corp, an S flows through, a C corp doesn’t. Now, when is it better
to have the flow-through? In my world, it’s when you
can’t control the income. Is when I’m gonna have
unfettered income coming to me that I need to use to live off of. Then I’m probably gonna go with an S corp, but that does not mean that
I just have to have a S corp. I may have a management
company like a C corp and use both. I may say, hey, I’m gonna do
all my high-end management, for example, I may have
a C corp managing my LLC, being the manager of an LLC. I could have an LLC tax
as a C corp managing an LLC tax as an S corp,
or taxed as a partnership, doesn’t matter. But when it’s better
is usually when you’re living off the income. If I don’t need the money and
I already have enough income coming through, I have a spouse
that’s making W-2 income, that S corp tax bracket is
really attractive, it’s 21%. So let’s say Jeff is making
several hundred thousand dollars a year, has a spouse who’s making another several hundred thousand and says, really we don’t need the
money from second spouse, let’s keep it in a C corp. Well, that C corp does not
have to pay you a salary. It can just sit there and stockpile cash that has a use for it. In real estate, you
always have a use for it. So we can cut our tax
bracket significantly just by doing that, especially
if you’re in a state like California, New York,
Connecticut, Maryland, all these state-taxed
places, it’s so much better. So at the end of day,
there’s three rules to tax. I get a little cheeky with
it, but I’ll say this: the rule is calculate,
calculate, calculate. There’s three rules and
they’re all the same, which is just get your
pencil out and have somebody run a quick test. Now, I will say this, flow
through entities right now have something called QBI,
which is a 20% deduction on the income that flows through under certain circumstances. That was under the Tax Cut and Jobs Act, so we have to calculate that. So when you look at these
things, a lot of times our knee-jerk reaction is
to do the simplest approach. What you really have to
do is kind of sit down with somebody for 30 minutes,
be disciplined about it and say this is what I expect, and then they could run
different scenarios. Somebody asks, if you have
a C corp and an S corp, do both need to pay a salary? The answer is no. Realistically, neither
one has to pay a salary. There’s a misnomer about S
corps having to pay a salary. What the rule is, and you can actually, I just dealt with this somebody yesterday, the rule is that the amount
that you take as income, as wages, is only there
dependent on how much you actually take out of the corporation. So, it cannot exceed what you take out. Technically it can, but from
a forced taxation standpoint, it’s not gonna exceed what you take out. So if I take out $1,000 out of an S corp, there’s a good chance that
that’s all gonna be wages. If I take out zero from an S corp, I’m gonna have zero wages. Even if the corporation made $100,000, and this is gonna make some
of the accountants out there, it’s gonna make their eye twitch, but if you look at the rule,
you’ll see both in the code and in the IRS, they put out
a FAQ sheet and they have a, what was it? I think it was either
opinion, they give guidance and they said that in
the case of an S corp that distributes profit, there has to be a reasonable salary. Now let’s flip that around. In the case of an S corp that
does not distribute profits, it does not have to, and
that’s actually the rule. So it’s kinda cool. Somebody says, does
qualified business income apply to rental income from
properties held personally? The answer is yes. If it’s on your Schedule
E, it counts, Ross, even if it’s not in an entity. So I hope that that answers your question. And the only type of rental activity, and by the way, there’s a
lot of confusion on this because the IRS at first put
in their written response that you could not take
QBI against rental. – [Jeff] Yeah, they originally
said it wasn’t a trade or business, so it wasn’t qualified. – [Toby] Then they got blown up. Or I shouldn’t say blown up. That’s inciting, right? – [Jeff] So they came out
with an additional ruling saying for this QBI only, it can be considered a trade or business. – [Toby] Yes. And the only time, and you have
two types of rental activity by the way, you have
to keep them separate. Personal, residential, meaning
personal and residential versus commercial. And when you have commercial,
if you have triple net leases, that’s not trade or
business and stocks for QBI. So if you’re doing triple net leases on a commercial property, you’re not gonna get the
20% deduction of this. If you are renting single
family residences to people, you’re going to get it. And they gave us these weird 250 hours, some bizarre stuff, ignore all that. I think that if you are in the business of having rental properties,
you’re gonna be fine. The IRS is trying to scramble
eggs on us sometimes. They don’t like it,
but they get it anyway. So what’s the answer to, I
think we went around the world on that one. Yeah, what is better to have
your taxes flow through? Let’s say I’m a contractor
or I’m a dentist, a lawyer, consultant, whatever, and
I live off of my income, I’m probably gonna be an S corp. Then I may have a C
corp somewhere out there for other activities or for managing, but I’m probably gonna have
that be a flow through. If I have a spouse who
has a high W-2 income, I’m probably gonna be a C
corp and I’m gonna stockpile that money, so hope that
answers your question. Wish it was easy, Jeff. Actually, we’d be out of a job. – [Jeff] I was just gonna say that. – [Toby] So God bless them 20,000 pages. Is buying a property to use
for Airbnb a profitable plan? What do you think? You do returns all day long. – [Jeff] Yeah, but it depends on so much that doesn’t have anything to do with tax. (laughing) – [Toby] That’s why I threw
that the thing at you. I just it was like, somebody
asked like, what was it, a few months ago, what’s
a good, safe return that gives you 10% or something like that? I’m like, well, if I knew
that, I’d be retired right now. – [Jeff] I think this is
more of a case where you really have to do your work on
what you can actually collect in rents and how often you can rent it. So if you’ve got a place on a beach, you’re probably gonna be
able to collect a lot more. It’s gonna be a more profitable– – [Toby] We have a client
who’s getting almost $300,000 a year for the Airbnb on
his property on a beach. Has fantastic property,
but here’s the deal. The reason I threw this in here is because you’re calculation
needs to be accurate. And when you’re an Airbnb, that’s a hotel. If your average rental
is seven days or less, you are not a rental anymore. You have become an
active trade or business. You are now a hotel and you
lose the ability to depreciate, you lose installment sales,
you lose 1031 exchange, you lose a lot of stuff
and all that income, you can’t depreciate against it, so it’s all ordinary income
subject to self-employment tax. So you’re gonna get a
little extra tax on there. And there is a workaround. We have done videos on
this, so rather than, I’ll give you the 30 second
view, and then I’ll say we did a whole series on this. If you want it, email and I
will send it to you for free because we love you. But what it is, is you have an Airbnb, that is an active business and if I still want my depreciation,
here’s how you do it. You take your hosting and you
move it into a corporation. So the host is an entity
and the courts recognize it as another person. So basically me and
Jeff, Jeff is the host. Jeff is going to go out an
Airbnb and he’s gonna rent the property over and over and over again to lots of people. People are putting up their emails. Patty, you can go grab those. What we’ll do is we’ll send it out probably with a follow-up email too. Why don’t we do that, that
way you guys all get it. So here’s how it works. So Jeff is the corporation
and let’s say he’s a C corp, this is a good example. And Jeff goes out into the world and says I got this great property,
but Jeff doesn’t have access to the property, so he
rents it from me and says, Toby, I want to be able to
rent that property from you. And what he does is he rents
long on a monthly basis or an annual basis, he
rents the property from me. I’m Toby LLC that homes a rental property. Now I can depreciate, I can
treat it as an investment property for the amount
of rent that Jeff pays me. And then Jeff is only taxed
on the amount of income that he makes that is the
difference between the rent that he generates and
the rent that he pays. Hope that makes sense. You’re gonna get all of your depreciation. Poor Patty, you are just
getting slaughtered right now. There are literally pages
of emails coming in. I’m so bad. We’ll send that out so we’ll
make sure that you guys all get access to it. I probably just ticked off my
entire tech staff, sorry guys. I do this about once a month. I manage to tick ’em off
and take down the websites and do all sorts of fun stuff. There’s a lot of you guys out there. What is she doing. Poor Susan. She could probably send it
out on the chat feature too. You poor guys. Why cannot be Airbnb hotel,
why can they not depreciate? Because it is an active trade or business. Active trade or businesses
are not an investment and they cannot depreciate
their stuff, it’s inventory. So I cannot depreciate the inventory. If I have a Mini Mart and I buy Cheerios, I do not get to depreciate the Cheerios. That’s my inventory. If I’m on a car lot, I don’t
get to write-off the cars until I sell them, it’s cost to get sold. So I don’t get to depreciate it. But if I want both,
because we are pigs here, we want to get both, we
want to get our depreciation and we wanna get the benefits
of being an active trade or business, which that
active trade or business now, by the way, can do an accountable plan, it can reimburse my
administrative office in my home, it can give me cell phone,
it can give me health, it can reimburse 100% of my
medical, dental and vision, it can do all sorts of cool stuff that I would be able to do. – [Jeff] And the other thing
it does is it separates the real estate from the business. So if your Airbnb business gets sued, they can’t get to that property. – [Toby] And there are
cases of Airbnb businesses being sued for discrimination
or for misrepresentations, there’re all sorts of stuff. You’re keeping it separate
now from the property. Somebody falls down,
they’re suing everybody, falls down your stairs. But, we had fun. – [Jeff] Yeah. – [Toby] See, I find
this stuff fascinating, hope you guys do too. But there is a way to do it that’s right where you get the best of both worlds, it just takes a little elbow
grease and I’m telling ya, 99% of the accountants just don’t get it. So, there’s Carl Zelner,
one of our attorneys. He says, I’m planning to do
a new Airbnb video on 8:15. There has been some updates, fantastic. But we’ll make sure, anybody
who’s listening to this who sends this in, we
are gonna grab you all and we are also gonna
have Carl give you that. We’ll make sure that you get it. There’s lots of you guys
out there asking for it, so great, we hit a sore spot there. Can you invest the money
earned through a 501(c)(3) to invest in dividends and stocks? – [Jeff] Well, yeah, you
can and they commonly do put their excess cash in
different investments. – [Toby] Yeah! – [Jeff] The thing you
gotta remember, though, is the purpose of the 501(c)(3)
and what ultimately you’re doing with the funds in the 501(c)(3). So if you’re putting a lot
of money in the 501(c)(3), you’re not actually
accomplishing your mission because you’re investing
it all in stocks, bonds, and other investments. – [Toby] The California Teachers Union. – [Jeff] Yeah, you might
have a little issue there. – [Toby] So what it really
comes down to is when you’re in a 501(c)(3), that’s a
fancy way of saying a charity. That could be education,
religion, health, armature sports, there’s a bunch of stuff. There’s actually a ton of
different ways to qualify. But you’re a tax-exempt entity. So, you always have to be
worried in a tax-exempt entity as to whether you cross
over into something called unrelated business income tax. And so if you’re in an
active trade or business, so let’s say that the
501(c)(3) runs a McDonald’s, it’s taxable. It’s called unrelated business income tax, it’s gonna be taxable to
you at corporate rates. So that’s called UBIT. You’re gonna see that pop up
in one of the questions later, I saw UBIT in there. But there’s portfolio
income, rents, royalties, interest and dividends. Is capital gains part of portfolio? Capital gains, yeah. So rent is actually not
portfolio, it’s rent portfolio. – [Jeff] No, it’s passive. – [Toby] Passive, right, so rent… – [Jeff] And we’ll talk about that later. – [Toby] Royalties, interest,
dividends, capital gains, which is what you get from
stocks, all of those are passive and they are not UBIT. So 501(c)(3) can earn
it and not have to worry as long as it’s using it
toward its charitable purposes. – [Jeff] And I would even argue that you have a fiduciary
responsibility to the 501(c)(3) to invest that excess cash. – [Toby] But… – [Jeff] But… – [Toby] We are in a building right here in downtown Summerlin. We had to flee our rainbow location today because the AC went out
and it’s only 115 degrees or some ridiculous temperature. So we’re here in the
Howard Hughes Company’s downtown Summerlin,
Howard Hughes Corporation. Howard Hughes put all his money,
I forget what year it was, like ’50s, he transferred his
companies into a 501(c)(3) so the government could
not take it or control. It’s a horrible story, but then
he sat on it for five years and they said, ha, ha, ha, we got ya. You took a huge deduction for
a transfer for your company in there and it didn’t do anything. And all it’s been doing is paying you back a bunch of money on some loans
that you supposedly gave it. The IRS lost. You know that case? Five years they sat on it and did nothing. – [Jeff] And I’m not
giving you another dollar. (laughing) – [Toby] So it’s just
great, I love those cases. So it’s Howard Hughes, and
by the way, that is now, I think it’s the third-largest
charity on the planet. They do over $580 million
a year of medical research, but they didn’t do it while he was alive. He had to die and get out
of the way of it before they could make it do what he wanted. But it’s interesting. So when you have a 501(c)(3),
you don’t pay tax, it grows. You’re not paying tax on any
of the dividends and stocks, but the downside is that
if you need that money and it pays you a salary, it’s
all active ordinary income, you’re not getting capital gains, you’re not getting the
long-term capital gains that you get off of dividends. So, the 501(c)(3) doesn’t pay tax. If it’s going in there for
your charitable purpose, great thing, bless you for doing it. But it’s probably not gonna give you any huge personal benefits. Here’s just a quick food for thought just because the tax cutting job, that screwed up a lot of
your charitable giving. Charitable giving last year
was down for individuals because of this. But you have that standard
deduction that you have to exceed before you get the benefit
from your charitable giving so $14,000 if you’re
married, filing jointly. So if you’re gonna give money, if you’re give things to a charity, what I would probably do
is I’d be giving stocks. I’d be giving things that
are highly appreciated, so if I have stock that I paid $10 for and now it’s worth $30,
give them the stock so you don’t have to pay tax on it, you don’t have to sell it
and then give them the money. Give them the stock,
you get a $30 deduction. Let the charity sell
that, it pays zero tax. Anyway, so there’s another one. What is the tax on investment
added to the college endowment funds in the last tax law? Oh, you’re talking about if,
so there’s a tax that was added to, I think it hit six schools
or something like that. If you’re endowment fund was
greater than I think it was $180,000 per student, some dollar amount, then they charge you like
a 1% tax because schools like Harvard, they’re
exempt, they’re non-profits and they literally pay nothing in tax and their endowments are growing faster than their costs are, so
they just keep getting bigger and bigger and bigger and I think they have a ridiculous amount
per year per student that the endowment could pay for. I think it’s like $180,000 a year. They literally would
have to work really hard to start screwing up their finances. They don’t need to
charge people for school. Let’s go onto the next one. I know what we’re gonna do. We’re gonna say, hey, this
is a cool offer for you guys. It’s a Two for Tuesday offer. And what it is is you get
the Tax-Wise Workshop, which is coming up I think in
November, the live workshop which may be already sold out. You can get the live stream
plus recording for sure. You get the recordings of
all three 2019 workshops. We did one in June. We did one earlier in the year. Both of them were pretty awesome. But you get that. And we’re gonna give you the
Bulletproof Investor Series, which is two Tax and
Asset Protection Workshop. That’s a three-day workshop
where we go over all the different entities and
a bunch of tax strategies and how to create a legacy. You’re gonna get Clint’s book on real estate asset protection, or Tax and Asset Protection
for Real Estate Investors. We’re gonna give you a three-part, it’s about a three hour series, it’s probably closer to four hours because every one of them
run little over an hour. But it’s a three-part video
series on Tax and Asset Protection Estate Claim. And then a strategy session
with an advisor or an attorney to create a wealth
planning blueprint for you, both of those together. There one, we call it a
Two for Tuesday, $197. Guys, you do a little tax
planning and I mean this, it’s about the calculation,
we did it internally, is you get about $1,000
per hour return on tax, like spending time on this. You’d be shocked on how much we can lower. The average amount that we were
finding in extra deductions for folks, and I kid you
not, we ran 10 of them, 10 high-net worth folks and
it was over $100,000 a piece and then the average amongst
the firm is right around, I’m gonna give you a larger gap, it’s between $20,000 and $30,000. Is that a fair assessment, Jeff? – [Jeff] Yeah, it is. – [Toby] So, you can go
through and absolutely get a full on, like you’d
be shocked at how much you will learn if you got through this. There’s a three-part video series. It’s the Tax-Wise Workshop,
which is a two-day workshop. We go over 30 tax strategies. You get two tickets to
Tax and Asset Protection and you get the book and you get the Wealth Planning Blueprint. If you added those things up, just the Tax and Asset
Protection Workshop tickets. There’s companies that
sell that at $5,000, I say that with a little bit of a chuckle, but that was actually sold
for many, many, many years. It’s absolutely worth it by itself. The book is worth $29, but Clint thinks it’s worth a million. The three-part video series is worth a ton and the strategy session. And then there’s Tax Advisor Workshop, which one client last workshop came back and had a deduction of
$178,000 after that, just on one strategy and I
tell you to take three away, but we had a cost segregation
on a real estate professional for a doctor where they were
able to get $178,000 deduction that wasn’t there the year before. That leads us into something else. Can you explain the 100%
depreciation changes in the new tax code and how they can best be used? Jeff, you may wanna jump on this one because this is right in your wheelhouse. – [Jeff] This is talking about
bonus depreciation primarily. Bonus depreciation allows
you to deduct as an expense 100% of a cause of an asset. If it is a 15 year asset
or less, for example, computer are five years, furniture and pictures are seven years, land improvements are 15 years, so and so. All of those can be, you
can take 100% depreciation. Now in 2023 it starts dropping off. In 2023 it drops to 80% and then I believe by 2026 it drops down to 20%. – [Toby] The easiest way to
look at this is let’s say you took a car and the IRS
says your car’s gonna last five years, so you’re gonna divide it into five equal amounts. If you just went under what
they call Modified Accelerated Cost Recovery System, or MACRS,
if you just went off of that it’s five year property. Bonus depreciation says, hey,
whatever amount you wanna take up to 100% you take immediately. Now, there are some rules on cars, probably shouldn’t have used
that as the greatest example, but if you have a luxury
car or a passenger car, you’re gonna have some other limits. But if you have a piece
of equipment like a truck, you can write-off the
whole thing in year one if you want to. Or you could write-off
half, or you could pick whatever amount you wanna
pick as bonus depreciation up to 100%. – [Jeff] The Tesla SUV,
very expensive and you can write that whole sucker off. – [Toby] The Tesla X, what
Jeff said is absolutely true because it’s heavy and it’s fast. – [Jeff] Batteries weigh a lot. – [Toby] Yeah. Well, you could write that
whole thing off in year one. Now that would also, if it’s
not 100% used for business, you’re gonna get slapped
with a pretty heavy tax hit, so vehicles may not be the best example. Let’s say we used a copy
machine or some equipment for your business, maybe a bunch of tools. Or better yet, let’s use the
example I was just given, the $178,000 deduction. What you do is anything
that’s less than 20 years you can write off in one year. So with real estate, a
lot of folks don’t realize that when you go under MACRS,
which is 29 1/2 years for, 27 1/2, excuse me, 39
years for commercial, 27 1/2 years for residential. If you do that, that’s
treating it all like structure. But you could have an engineer go in there and say it’s not all structural, a lot of it is personal property, 1245 property is what they call it, which means the carpet
might be seven years. The paint, the fixtures on the walls, those might be five-year property. And they break it all down into, you can break it all
down into pieces so that at the end of the day, and
this is the average I’ve seen, is between 20% and 30%
of the improvement value ends up being personal property, you can take immediate. – [Jeff] Right. – [Toby] So let’s I buy
a single family residence worth a million dollars. Maybe it’s a duplex, fourplex, whatever. Or maybe it’s a single family
residence in California. (laughing) I think that’s funny. I actually just did one
of these this morning. It was $115,000 land,
$750,000 on the improvement. That $750,000 is gonna
generate somewhere between $200,000 in immediate
deduction because they did a cost segregation, because
you can bonus depreciate that big chunk of land. Like, guys, there’s a
tremendous amount of money if you do the cost segregation. And then the question is, can I use it? So I get a huge deduction,
but can I actually use it all? It’s passive activity, so
unless I’m a real estate professional, I’m gonna be
able to wipe out all of my other rents for a long time. If I wanna wipe out my other income, I have to be a real estate professional. We’ve answered that question
a million times here. It means that you’re 750 hours
and a material participant in your real estate activity. You do that, you can wipe out
your spouse’s other income, like again, the example
I gave, the $178,000, that was their bonus
depreciation on one property. If you own multiple poperies,
you could just pick on a year, do a cost seg, wipe it out. And then you could really
control your taxes. It really gets fun, guys. I’m talking about you’re
putting, for that one client it was about a little over $80,000 a year that they get to keep in their pocket. So the way I look at it is, it’s not me, but by making them aware,
they were able to buy an extra house a year. In my little world, that’s
pretty huge for a family if they do that for 10 years. That’s pretty significant. I think it’s cool for
something that was literally, they paid $197 I think for the class. I think that’s a pretty good
return on your investment. I missed the part about
the Airbnb in an S corp. Can you then depreciate it? Hey, all right, we’re gonna
give you the video on it. You don’t depreciate it in the S corp. The real estate’s held
in a separate entity and you’re the host, you
lease it to your S corp and the S corp is the host
for seven days or less. So, yes, you can depreciate
it, you’re gonna get the best of both worlds. I started and LLC and have no
employees or income coming in. I’m married and file jointly. Can I claim business expense on my taxes? What say you, Jeff? – [Jeff] I sometimes
have a problem with this because I sometimes see
expenses just being turned away and there’s nothing really
an effort to be profitable. So, yes, you can deduct the expenses, but the longer you do this
without any earning income, the more risky it becomes, because then you’re starting to look at the hobby loss rules. – [Toby] Hobby loss rules is section 183, which is only subject to sole proprietors, partnerships, S corps. And as an S corp, you can
lose money, the first year, I’m just gonna answer this real straight. As a sole proprietor,
partnership or S corp, yeah, the business expenses
are gonna be off setting, are gonna be a business
expenses that’s gonna offset your personal taxes. A C corp, you carry it forward. You have no employees,
no income coming in, but you just have loss, then in a C corp you just carry it forward,
everything else you’re either, if you’re as S corp and you do not basis, which I don’t know how you
incur a bunch of expenses without basis in a startup,
you’re gonna get to write that stuff off. What Jeff is saying is don’t
do it more than two years in a row because if you do it
more than two years in a row then they could say you’re
not really a business. But if you make money
three out of five years, then the presumption
is you are a business. You just have to make a
little money after that. If you’re gonna lose money, you
might just wanna be a C corp because they don’t ever
have to make money, hence we have Amazon. Somebody asked about the depreciation. Shouldn’t the CPA know
depreciation should be taken, or at least make the recommendation? The answer’s no, Frank. You actually have to have
a third party go in there and look at the property
and tell him with part is 1245 property versus 1250. I could not do it sitting here. I could give you the
average, which is the average on residentials between 20% and 30%, on commercial it’s about 30%
of the improvement values, what most engineers are
coming back and saying that’s the portion
that’s personal property. But again, Frank, unless you have somebody that’s in real estate,
like I’m in real estate. I have more than 100 properties. I have commercial, I have
buildings and warehouse, this is what we do. Unless you have people like
that, it’s really tough because these are nuances. Jeff, you’ve been doing
this for almost 30 years. – [Jeff] There are some CPAs
that may have that experience of being able to evaluate real estate, but it’s gonna be very
far and few between. – [Toby] Yeah, and it’s not
a knock on them, either. It’s just that if the
don’t do it personally, it’s probably, the way our memories work, and I’ll just give you a test. If start looking at a truck,
and let’s say you look at a Raptor. Raptors are pretty cool. That’s a kick butt Ford, right? Baja, like they go really, really fast. If you start thinking of
a Raptor and you start driving around, guess what
you’re gonna see everywhere? You’re gonna see Raptors
everywhere you turn, or if you play slug bug. You start seeing them everywhere. That’s the way our memory
works as a human being. It’s only relevant. There’s actually a medical term for it, somebody probably knows it. But most people, it’s not
relevant, so the don’t see it. So they could actually read
it and they won’t see it, it won’t sink in because
it’s not relevant to them. It’s like if I read an
article about something and another place of the
world that has nothing to do with me and it’s their
politics or something weird, I’m probably not gonna remember much of it because it’s not relevant to me. Whereas if I read something
in my town about my neighbors, I’m probably gonna remember it forever. That’s why when you’re
dealing with real estate, and I’m not gonna say don’t use your CPA. I’m never gonna say that. If you have a good CPA, you
give him hugs and kisses. What you do is you say if have somebody that doesn’t see these, you
probably either want to get them with us, have them take our
course, or just get them onto the Tax Tuesday asking
questions and get it done. Obviously we have a whole
bunch of those folks, but we are really, there we go. The reticular activating system. Joe you are a rock start
because that’s exactly what I was thinking. Your mind, I’m not gonna get into this. I spend way too much
time on crap like that. So the answer is yes, you could take it. Then somebody says,
what about the downside of depreciating personal property? If you recapture it, it’s
not the 25% recapture, it’s ordinary income. However, keep in mind
that personal property that gets depreciated, if
it has no fair market value, it’s not included in your gain, which means everything becomes
recapture or capital gains. You’re not going to recognize
that as ordinary income. If I have a commercial
building with a bunch of carpet in it, we just had this, was
$248,000 worth of carpet. Well, I retired that after five years. – [Jeff] How much? – [Toby] $248,000. – [Jeff] Oh, my gosh. – [Toby] Yeah, I literally sat down, went over a scenario with them. The engineer, they
didn’t do a change order, so they had it in there. It was like $40,000. I was like in your square footage, I don’t know how you
got carpet that cheap. So they went in and
there was a change order, so it was an extra 200
and some odd thousand. The accountant caught it, not me. And it was $248,000. Then they were gonna
go to sell the building and they were yelling at
the accountant saying, now I’m gonna have ordinary income. He said, no, ’cause that has no value. When you sell it, it’s a zero value, so you’re not gonna have to recapture it. So, again, this is why
you have accountants that know what they’re doing
because they will save you. They are worth their weight in gold. Good CPA, good EA, a good tax attorney, you just grab onto them and you hung them and you send them chocolates and stuff because they will save you so much money. I don’t say that just
because I need chocolate and because I’m a tax attorney. Are you familiar with
deferred sales trust concept? Yes, Rick, in fact I know
the firm in Kansas City. That really was paramount in that topic and one of my friends
was one of their lawyers who’s out here in Vegas now. I’m not gonna bore everybody on it, but it’s a way of selling
a high appreciated, like a business and in
spreading out the tax over a long term by selling
it under an installment note, often times with a SCIN,
self-canceling installment note, and stepping up the
basis and then selling it the following period of time, most people say six months later, and not paying tax on that. So you could have a $50
million sale that you pay zero tax on and you spread
it out over your lifetime. Yeah, Rick, they do work and there’s folks that are specialized in that. I don’t do them personally,
but I know the concept, I know the taxation of it and
that’s one of those things where I’d be referring
you to somebody else. – [Jeff] And it’s been to
court and back, it all works. – [Toby] Yep. But there’s a way to do it right. – [Jeff] And there’s a way to do it wrong. – [Toby] Yep. And so you wanna deal with
somebody who’s done it before. You don’t want your person learning on it, so I know enough to be very dangerous and know some folks that’ll do it. But it you’re selling,
yeah, it’s cracker jack for someone who’s exiting a business. Cognitive bias is also
seeing more of car you own. Don, you rock. Structuring an LLC serious for privacy, Wyoming holding LLC must be
formed before all others. Kind of. Wyoming doesn’t even
report anything anymore. We could actually do the whole
thing and be pretty safe. Let’s go onto this. We have several single
family resident properties that need to be put in LLCs, do they each get their own LLC? So I’m gonna do good, better, best. Good is making sure that
your properties are separated from you, so at least having one LLC. So a house burns down and people are hurt, they don’t garnish your
wages till you’re dead. If you don’t think that can happen, rest assured I garnished one gal. It was in Washington State
in 1997 and she trashed a friend’s of mine’s house on her way out. The gal’s son was dealing
drugs out of the property and she was very angry that this landlord said that her son was dealing
drugs out of the property. So she took a ball hammer
and busted a bunch of holes throughout the deal and
this guy was not super rich. He had worked his whole life
and he had rental properties as a retirement. So he was a friend of a friend. A lot of you guys know my story, but I took the case pro bono, which means you don’t get paid and you just go after these people. So it was an intentional act. You can’t bankrupt it, so
we sued, I did a lease hold. Trouble damages claim in Washington State, if you damage a lease hold, you could actually get trouble damages. The lawyer didn’t
understand it, judge did. Judge awarded, we ended up with a 50-some-odd thousand dollar verdict against this gal who immediately
went into bankruptcy, thought she could defeat it. And we pursued it in
bankruptcy and got it, avoided the bankruptcy
and we followed her around and garnished her. She worked for Boeing,
for many, many years, it took us 11 years to
collect that entire judgment. We collected every dollar,
plus interest, 12% interest. If you don’t want that happening to you, and this is like if you’re
doing something bad, then we’re not gonna help you. But if you’re just you have
a property and somebody says, hey, I have toxic mold
and you’ve got evil lawyer who takes it and tries to
sue you for a million bucks, that’s gonna keep you up at night. The LLC will protect that. Better is when you have multiple LLCs, where you have properties in various LLCs. So you might take four or
five and put them in an LLC, depending on the value of the properties. A lot of times what we talk
about is how much equity is available in most properties
and do I wanna cut it off? Let’s say you’re a doctor,
you’re making a lot of money and you go and you buy a property
in Indiana for 100 grand. You say, what’s the worse
that could happen to me? They could garnish your
medial wages till forever. So you put an LLC around it. Okay, what’s the worse that could happen? They take that property away. What if I have 10 properties? Let’s say I put five in one
LLC and five in another. Then I have a fire on one
of them, a huge liability, or I get sued for mold on one of them, then I’m gonna lose five. But it’s really the equity in those five. If I have a loan against them all, then I really don’t
have to worry about it. Best is one property in each LLC. But, again, you have to do cost benefit. Let’s say it’s apartment
buildings, it’s a no brainer. One LLC per apartment building. If it’s single family residences
and they’re $25,000 each, and it’s not much value
in it, it will cost more to foreclose on it, I’m
probably putting a few of those in an LLC. But if have a bunch of decent properties and they’re gonna keep appreciating, I’m just gonna start
right from the get-go, I’m just gonna do LLCs and if
I’m in a state like California where I have a franchise tax
on each LLC of 800 bucks, I’m gonna take that into consideration. I’m either gonna move
them out of the state and use trust, or I’m gonna
do something to make sure that I’m protected. Somebody said, I saw Clint
Coons on a YouTube video about holding property, a
loving trust to avoid probate. Yep. In other videos it’s always
own income property and LLCs, so please help me understand,
how do you own a property in an LLC and own a living trust? So, Casey, an LLC is
putting your shaving cream in a plastic bag in your
living trust in your luggage. So let’s say that I’m gonna
go on a trip somewhere and I’m gonna bring shaving cream, but I have really nice suits, maybe my wife has some
really nice clothing and I just put my shaving cream
just right into the suitcase and zip it up. Well, first off, the living
trust is just a convenient holding vehicle for all my clothing. And if I pass away, I
don’t have to distribute the clothing, I just say, hey, somebody, let’s say my trustee,
I say, could you please keep my clothes in this
suitcase and if my kids need it, give them what they need out of it. So that’s how a living trust works. But that shaving cream could still explode and destroy all my clothing. So the LLC concept is basically
to put it in a Ziploc. So if that shaving cream blows up, it stays inside the Ziploc bag. And if I open up my suitcase
and I see that my shaving cream has exploded, it’s gonna
be confined to that bag and I throw that bag away. That’s your LLC. So I may have a whole
bunch of shaving creams and I just put them in the suitcase. It’s not a big deal. That’s what your LLCs are. Somebody else says, would you
recommend a series of LLCs for multiple rentals? In the state where that has a statute, there’s 14 states that have
series LLC statues, I believe. If you’re like in Texas or
Wyoming or some of these places where they have pretty
decent statutes and I know that their judges aren’t
just gonna ignore them, then I would do it. So the liability on each
LLC is only for the equity? Yep. They get the good and the
bad, so if you have a piece of property that has a loan against it, toss it in an LLC. The most they could get
is the difference between the fair market value and that loan. That’s how we force settlements. 99.9% of the time, guys, we
just don’t see our clients ever go to trial. In fact I’ve seen 30 plus
million dollar disputes, I’ve seen 100 plus million
dollar disputes on two occasions involving our clients. None of them ever went to trial. They all get settled out
because there’s a cap on what they’re able to get
and you’re basically saying I’m gonna spend it down. That’s gonna be a better
way to force people to be able to do it. You had a second question. Is there some tax and legal
benefit to own the properties in an LLC versus a living trust? No. The LLC, we first do no harm with an LLC. We wanna get all the benefits
of holding real estate. The living trust is ignored,
so KC, that living trust, again, it’s just your luggage and you’re putting stuff in it. All your personal assets
and all your business assets are going in that luggage. It’s not there for anything
other than to make sure it’s easy for your family
to keep control of it, or those you care about, or
organizations you care about, and it does not have
to go through probate. Who can set up the living trust and actually understands this method? My state attorney I feel is behind this. Yeah, KC, call us up. We have folks, we can
help you anywhere you are. Is better to hold loans on the property that are owned by LLC or paid the… Is it better to hold
loans on the properties? I’m a big believer that when
you put property into an LLC, it’s great to have a loan against it, even if it’s your own company. We call that a friendly lien. Loan yourself the money to buy it, so you’re keeping your cash, I call it a virtual safe. I don’t wanna get too long winded on this because I’ve already gone
over, but the way I explain it is you’re walking down the street at night and you can see right into
people’s houses, right. Peeping Tom. – [Jeff] Maybe you can. – [Toby] You walk down
it and if they’re lit up, you can see right into their
houses and just imagine that their door was open
and they had a pile of cash right there by the front
door that you could see, wherever you walked. You don’t want people to see your cash and leave the door open. They’re just gonna go help themselves. Not you, obviously, because
you’re a good person, but there’s people on this planet that would just without even hesitation walk in there and take it. So you can close the door
and turn the lights out, but the cash is still sitting there. Somebody goes into your house, they still take your cash. You say, well, I could put it in a safe. We were talking to a guy
who actually had a safe stolen out of his house after
I had my windows replaced. About two weeks later,
somebody came back in and got my safe. So the safe can still be taken. So what do you do? You basically take it and
you bury it in the desert where nobody can see it or find it. Now nobody can take it. That’s a good place to put your cash, except you don’t wanna go out
in the desert and bury it. So you use Wyoming or
Nevada where they can’t see that you own it and it’s
basically a virtual safe. You’re putting your cash in
there and then you loan it to yourself and you lien your properties and if anybody ever comes after you, guess who gets paid first? Your virtual safe, and they
can never take that from you. In Nevada and in Wyoming, they
have charging owner statues, which means nobody can take your asset. The most they can do is slap a lien on it and it’s worth nothing. In fact, you can actually
usually scare them off because you say, hey, I’m gonna
hit you with the tax bill. There is one ruling on it
that’s favorable with that, so most people don’t mess with it. It’s enough to make them scared. Who knows, you may dig
up a body by mistake. Stop that, Robert. Yeah, we don’t put bodies in our safes. That’s just bad. But you put your cash in there. Could I do a friendly
lien on a property held in a self-directed IRA? Not from you or a
disregarded person, but yes, you could but you run into UBIT issues. So I wouldn’t use a self-directed IRA. This is actually getting
way ahead of us because we have a question on this at the end. You can have debt in a 401K, but you cannot have debt
in a self-directed IRA without incurring debt finance income. So, yes you can, but I don’t
work then get more information. Hey, Casey, if you like this stuff, do the Bulletproof Investor,
the Two for Tuesday. Maybe Susan or Patty
can send that link out. It’s really cool. I don’t even think I put a link out, but I just said you guys can get it. They’ll send you a link. It’ll be part of the follow-up email or they’ll send it while we’re talking. Maybe they already did. Let me look. That’s the eight part, oh, look at this, there it is, it’s in there. So do you wanna learn this stuff? It doesn’t take that long,
it’s actually really cool and it works like a charm. I’ve been doing this for 20 plus years, Jeff almost 30 years and I could tell you that when you do things
right, you don’t get sued, you don’t get harassed,
you don’t get audited. We see almost no audits. Jeff how may of our clients, we do over 5,000 returns a year, how many audits did we see last year? – [Jeff] One or two. – [Toby] Of our clients, right? – [Jeff] Of our clients, yes. – [Toby] We see lots from others. Can you explain the 100% depreciate link? I already answered that one. What am I doing? We did that already. If I move into one of my
rentals for a year and a half that’s in it’s own LLC, does
the LLC still depreciate it an deduct repairs? – [Jeff] And the answer’s no simply because it’s not
available to be rented. And it’s also become
your personal residence for the time being. So I might argue that you could
deduct any mortgage interest and taxes on your personal
return, but, yeah, the LLC, the rental
property’s not gonna be able to deduct anything during that time. – [Toby] Yeah, the beautiful answer is no, you can’t depreciate it
when it’s personal property. You don’t depreciate personal property. If it’s a rental, let’s say it’s a duplex, then you’re gonna write-off half. If it’s a single family resident where you just move into it, then
it’s personal property, but you stay in it for six more months, you can actually get the 121 exclusion, which for an individual is $125,000 against the capital gains or $250,000. Wait, it’s $250,000? – [Jeff] 250 single, 500 married. – [Toby] Yeah, 250 single,
500, I don’t know where I’m getting that 125. 250 single, $500,000, yeah,
that way you don’t have to pay tax on the capital gains so it’s huge. – [Jeff] Now, if I was
planning on returning this to a rental property
after a year and a half, I would probably capitalize
those repairs and start depreciating after I rented it. – [Toby] Yep, you’re gonna go grab it. – [Jeff] I’m gonna grab
those repairs and say they’re improvements or
whatever I need to do. – [Toby] Yep. Somebody says, if I’m a Platinum member, do I get to get in for free in November? America, that’s a great name,
that’s my daughter’s name, by the way. America Marie. I don’t see too many Americas. I don’t know, I think you do. I think that if you ask that,
we’ll get you in for free on just the live, but if
you want all the recordings and all the live stream
and all that other stuff, you have to do the little offer. But, yeah, we give you
tickets all the time to come and spend time with us. The Instruction Limitation Workshop, Tax and Asset Protection,
if you’re Platinum, we give you tickets. Can you use a Wyoming series
LLC properties in other states? Ha, ha, ha, ha. Yes, Coya, what you do
is you have a land trust in your local state and you
take the beneficial interest and you put it in each of the series. It’s kind of a mean trick, but it actually works like a charm. So there’s lots of ways to do it. Can I deduct educational
training cost pertinent to the company mission
with an LLC framework if I file as a C corp? This is my new favorite person. – [Jeff] And your answer is? – [Toby] Absolutely. That’s the beautiful part. If it’s gonna benefit the
employer, I can write it off. So anything that helps me
in my job with the C corp, which is the LLC tax as a C corp, so if I work for the C
corp I’m now a employee and if I am doing things,
they can reimburse me for those costs or pay for
them direct, absolutely. Anything you wanna add on that one? – [Jeff] No. – [Toby] I’ve been flapping
my gums so much that we’re way over, so I’m just gonna
skip through that one. How do we structure our health
care through our corporation to be able to write things
off like gym memberships and doctor visits? Can’t even help but laugh a
little bit when I see gym. – [Jeff] Yeah, a little
clarification on that. Doctor visits you can deduct, gym memberships are not deductible. They’re reimbursable, but
they’re not deductible to the corporation. And that goes also for any
over-the-counter medications or supplements and certain
other health benefits. But this would actually be
structured through a 105 plan. – [Toby] So if you’re
an S corp, it’s taxable and you can write off the
insurance, premiums only. If you’re a C corp, you
write the whole thing off. – [Jeff] Right. – [Toby] And the gym membership,
that’s gonna be a tough one unless you have a doctor’s restriction. – [Jeff] That you usually
comes under what they call a wellness program. – [Toby] You gotta get
your doctor friend to say you need a gym membership. Jeff, I’m gonna prescribe
you, I’m a doctor, I’m a JD. – [Jeff] A junior doctor? – [Toby] I used to tell my daughter that. I think I’m licensed
to do small procedures. – [Jeff] Juris doctorate. – [Toby] Yeah, juris doctorate. Somebody says, is the cost $35 a month to become a Platinum member? That’s what it costs once
you become a Platinum member. There’s a small initiation
fee unless you’re doing, like if you do an entity, chances are it’s not
gonna cost you anything. I would reach to somebody
here and see what it is. Exactly what am I doing
with my Alaska cruise? Write off my C corp for
financial education. If you’re going on a cruise,
now, here’s the deal, and this is for Sherry. When you go on a cruise, that’s travel. You can’t actually write off cruises. There’s a way to do it. It has to be a U.S. registered
vehicle, I mean vessel, and there’s only two of them,
I think they’re in Hawaii. But if it visits a foreign port, you do not get to deduct that. What you can do is write off cruise travel that’s going to a place. So if you’re on a cruise,
chances are you guys are getting off at another location and actually having a meeting. You can write off up to
twice the maximum federal per DM rate per day as
part of your cruise. And yep, we’re going the land, because I’m already validated,
yep, that’s how you do it. Probably the ex-IRS trial
attorney, if I’m not mistaken, Mr. Scott that’s probably teaching that. Let me see if I’m right. That would be Scott, yes. Surprising that an ex-IRS
trial attorney would be, yes, actually Scott’s a great guy. And yep, he knows what he’s
doing so he’s telling those guys how to do it right. And if you like doing cruises,
start using it as travel. So it’s about 800, 900 bucks a day, depending on what the
maximum federal amount is and you can use it to get places, so you don’t have to take a plane, you don’t have to take a boat, you don’t have to take a train. You could take a horse
if you really want to, but any of those, you get to write it off. The IRS doesn’t get to
tell you how to get there. You could drive a car. You could do whatever. If you want to take luxury
water travel, that’s the max. And then here’s a little trick. Make sure that if you
are using cruise travel that the meals are
included because then you don’t have to do the 50% meals. It’s included in the accommodations
and it’s all deductible. I am retired, drawing Social
Security and retirement. Do I need to pay myself a
salary from my corporation and all of the associated
withholding and federal and state taxes, or would I
be able to simply pay myself a distribution of the profits? I understand what you’re doing with Social Security and retirement. You do not want to give
yourself more income because it makes your
Social Security taxable. The answer is you don’t need
to pay yourself a salary, but if you do pay
yourself money out of it, a distribution, a
dividend or distribution, then you probably are gonna
have to pay yourself a salary. So you’re gonna wanna see
what’s the most efficient way to get the money out
and whether it’s better to be an S corp or a C corp. In your situation, it’s
probably gonna be a C corp and there’s so many ways to
get the money out tax-free. I’m gonna say that’s
gonna be your better bet. – [Jeff] And if you’ve
taken early Social Security and you’re not at full retirement age, I would strongly suggest
that you not take payroll because every dollar you earn in payroll reduces your Social Security benefits. – [Toby] Yeah. I don’t want payroll. Does the distribution have an S corp? – [Jeff] No, I don’t think it does because it’s not considered earned income. – [Toby] Yeah, passive
income is not gonna mess with your Social Security. So here’s the answer, it
goes back to something I said earlier which anything
in tax has three rules, that’s calculate, calculate, calculate. You really wanna sit
down with a tax person and run the numbers. And somebody says, I should also mention that the family member’s
retired and collecting Social Security, then you wanna make sure. Boy, some weird stuff, I have a C corp with accumulated $100,000 loss, close the corp and buy property in LLC. Oh, here’s the beautiful part. So, James, you just asked a question. So here’s what he says. I had a C corp with
accumulated $100,000 loss. If you’re married, filing
jointly, you can take that loss personally if you
dissolve the corporation. Assuming, we’re gonna assuming you made a 1244 stock election, which you do if it’s a small corporation. Chances are you already did that. – [Jeff] And it’s an inc, not an LLC. – [Toby] Yeah, has to be a corporation, a traditional C corp. But then you’d be able to
write off the $100,000. Somebody says, calculate,
calculate, calculate and depends. Options profit costs me
Social Security income. Johnny, you’re probably doing short-term. Did they make you a trader? – [Jeff] What they probably did was, because of his income and the options– – [Toby] Yeah, he wasn’t a trader. – [Jeff] It increases his Medicare cost. So the more you make, the more
they charge you for Medicare. – [Toby] Yeah. But he said Social Security. It costs me Social Security income. – [Jeff] Well, and then
the Medicare’s deducted from Social Security. – [Toby] All right, so that’s
what they got him on that. Boy, we have a whole bunch of questions. What’s the best business credit card, use as a startup for an LLC. I’d use American Express
because they don’t report to your personal. Somebody says, what is the
best way to pay a family member 10% of gross rents on a monthly basis for their compensation for loaning money? So that sounds like interest. Who has purchased home equity loan or be repaid by the property rents. LLC tax or manage the property, family members retiring,
collecting Social Security. I’d pay them, without any
doubt I’ll just tell you, the gross rent, what I would
do is I would make this a participating loan
that says 10% interest, capped at 10% of gross rents. So you’re making it kind of
contingent on the collection. And all it’s gonna do, it’s still interest and it won’t hurt your Social Security. See, easy answer to that one. All right, let’s keep going on. What happens if a real
estate property is gifted to an immediate family member
and the recipient sells the gifted property within two years? So first off, that two year period, I’m not aware of there
being anything with gifts. I am aware of a 1031
exchange that you sell to a related party, they have
to hold it for two years. But the question is does the
tax liability fall on the donor or does the recipient just file it on the recipient’s return? Are you aware of any two years? – [Jeff] You know what
this might be, it’s a 121. If I gifted you a property
and then you lived in it for two years. – [Toby] That could be. I’m trying to figure it out. Maybe it’s something
that I’m not aware of. I’ll look at this one a little
bit, but here’s the deal. Gifted property, you get their basis. So I’m thinking that what if I’m in a really high tax bracket
and I give the property to one of my kids and
they sell it immediately, is it attributed back to the giftor? – [Jeff] No, it’s like you
said, you get the basis of the giftor and you pay the tax on it. – [Toby] Yeah. – [Jeff] I don’t think
I’ve seen anything, though. – [Toby] I’ve never seen
anything about two years on gifted property, but I could just be, the only one I’m aware of is
the 1031 exchange two year, so we may have to look that one
and see if there’s anything. I don’t think there’s an
issue and I’ll just say the recipient would
file it on their return and they get the basis of
the party that gifted it. So if I bought it, let’s say
Grandma bought this property, depreciated the heck out of
it and it has $10,000 basis and it’s worth $300,000
and they gift it to you and then you sell it, you’re basis is Grandma’s
basis of $10,000. – [Jeff] Now one other thing
you need to be aware of is if you’re gifted
perhaps rented real estate and there’s passive losses on it, you don’t get those passive losses. They stay with the giftor, the grantor. And they don’t get to recognize
those passive losses either until you sell that property,
so it’s kind of a catch if there’s loss, suspended
losses on a rental property. – [Toby] Somebody said, are
there any other usual tax consequences or penalties? I’m not aware of any because
somebody’s gonna pay the tax. CPA said the IRS might see
it as a transfer of income. – [Jeff] That’s the only
thing I could think of is if you immediately sell it specifically to somebody
in a much lower tax bracket than you, like your kids. – [Toby] I’m going to say
let’s take a look at this. We’ll hold it over till the next time. This says, did depreciate
improvements as a period of time before the gift of the donor, no. James, again, I’m not married,
is there a way to recoup the loss of return. James, you get a $50,000
as a single person with that much of loss. I’m going to have to say that we’re going to have to postpone that one, I’m going to look at it. I’m not aware of a two-year
and I think that tax liability is just going to be yours. Remember the income goes to you. Now if you gift it back within two years, I bet you there’s a period where they say we’re going to undo the gift. So if I transfer it to
my kid, my kid sells it, pays a lot less tax then
gifts it back to me, then now I have an issue. There’s just going to look
through those transactions, a step transaction. That’s about… I don’t know off the top of my head. We’ll have to look at that one again. How do I start funding a Solo 401K? This is a great idea, by the way. So a Solo 401K has three buckets. It has the employee deferral bucket which this year I think is
19,500 if you’re under 50. Let me look. You know what it is off
the top of your head? – [Jeff] I want to say
18,500, but I could be wrong. – [Toby] No, excuse me, 2019 it’s 19,000. There’s a catch up of
$6,000 if you’re over 50. So if you’re 50 or over, I should say, by the end of the year. – [Jeff] And the catch up never changes. – [Toby] Catch up never changes. So you could put up to $25,000 deferred, which means the company pays you $25,000, but you don’t receive the $25,000, it goes right into your 401K. That’s deferral. So that’s bucket number one. Bucket number two, company can match 25% of whatever you receive and deduct it. So if I pay you $50,000 of salary, I could put another $12,500. So let’s just say I paid
Jeff 50 grand, he can defer. You’re over 50? – [Jeff] Yep. – [Toby] So Jeff can defer $25,000, plus the company could put another $12,500 for a total of $37,500 on
his salary of 50 grand. That’s a pretty good way
to get money in there. Last bucket is the Roth 401K bucket, which is again that
catch up and the 19,000. So if I don’t want to take
a deduction for my deferral, I could just stick it right into my Roth, in my Roth 401K. And by the way, I could
actually get up to my entire compensation in there if
I stick a bunch of money into the 401K, 401(a)’s bucket which is the employer match part. Then I could roll that all during the year into a Roth IRA. This is really twisted,
but the whole amount can go to the Roth IRA. I think it’s called an
in-company distribution, in-service distribution. And I can get the whole
amount into a Roth IRA. Did I hear the green sheet crumpling? Yes, you did, Al. See, that’s why we keep
around our cheat sheets and I love them. We got one more question
and we’re way over, but do Solo 401Ks have to
pay UBIT or UDFI if they finance real estate? So let’s go over what those concepts are. UBIT, you want to hit that, or
do you want me to knock that? – [Jeff] What’s the U stand for? – [Toby] Unrelated. – [Jeff] Unrelated business income tax. This is a tax that Solo
401K is 501(c)(3)’s and certain other exempt organizations. – [Toby] IRAs, Roth IRA. – [Jeff] Any kind of exempt
organization or entities. They pay this tax on
trade or business income. So the important thing is how
trade or business is defined. Interest dividends, capital gains, that’s all portfolio income
that is not trade or business. – [Toby] So the example– – [Jeff] Real estate rentals
is not trade or business. – [Toby] Right, so it has to
be an active trade or business. So if I am doing business
that was competitive to an active business, there
a few exceptions by the way. If you have a thrift store
that’s part of your church, they’re going to let you do it. But if I open up a McDonald’s
owned by my church, that McDonald’s is paying
tax, even if it’s owned by your church. It’s unrelated business income tax. It’s unrelated to the
charitable, the exempt purpose. And you pay UBIT on any
exempt entity period. There’s no way to get around UBIT. Just because I’m doing an act of business in my exempt organization. Now, UDFI is when you do
unrelated debt financing. So if you’re doing real
estate, that’s not UBIT. Real estate is passive. If you borrow money on real estate. A 401K is not subject to UDFI. An IRA is, and the way
you look at is if I borrow $50,000 to buy $100,000 piece of property. My IRA puts in 50 and I borrow 50 and that property generates
$10,000 during the year, $5,000 of it, or half, is
unrelated debt financing and I have to pay tax on that $5,000. I do not have to do that
if it’s a Solo 401K. That’s a huge difference. For those of you who do syndications, that Solo 401K is what you should be using to do a syndication. You should not use an
IRA to do syndications because that IRA is subject
to the unrelated debt financing company. If you do a syndication, chances are they’re using leverage. For example, let’s just
use a common situation. I raise $2 million and
I get a $5 million loan on an apartment complex to fix it up and get it operating. I have so much unrelated
debt financing coming now. And you think, oh, this is
great, I got it in my IRA. No, you’re supposed to pay tax on it. In fact, 2/7 of it, whatever
that equals, is taxable. No, 5/7 of it is taxable. So that’s a big chunk, more than half is going to be subject to
that tax if it’s in an IRA. So make sure it’s going through a 401K. Somebody said, I did not get
the answer to the question about the $100,000 loss in the C corp. I answered it, but I’ll just
tell you that $100,000 loss, you can take personally if
you close that corporation if you’re married, filing jointly. If you’re single, then it’s $50,000. So your accountant is probably saying, let’s kill the corporation,
take that loss personally and then invest in real estate
through a different entity. And I agree with him. Depending on what your income
is, let’s say you’re making 100 grand, you’re going
to wipe our your tax law. You’re going to have zero tax this year. Somebody says, can I set up a Solo 401K if my income is 1099-INT
and K-1 from real estate, the state syndications? The answer is yes, depending
on what type of income you’re getting from the K-1. The 1099-INT, what is that interest? – [Jeff] That’s interest. – [Toby] Then you can’t. Yeah, so it has to be active income that’s going into the 401K. What you can do is you could have, again, you’d have a C corp managing,
LLC holding those pieces of income and you’d pay
the C corp and the C corp could fund your retirement. So you can actually do that. You have to shift it a little bit. What do they say? The juice has to be worth the squeeze, so it’s gotta be worth it. You do your calcinations,
it’s gotta be worth it. All right, guys, last little piece here, I’m just gonna give you
guys a few little things. Don’t forget Two for Tuesday. Take advantage of this if you want. Some of you guys have
probably already done the Tax-Wise Workshop and
I know there’s already a couple questions. Here’s the gift. If you did that Tax-Wise Workshop, this is going to tick off my people, I would just include the Bulletproof. I still think it’s
absolutely a fantastic value and I’m not going to punish
you if you bought early on the Tax-Wise Workshop
because we had that for $197, so I would say you get both. We’ll grandfather you in because, again, because we care about you,
we want you to be successful. So we want you to get all
the assets that you can and we’re not one of those companies that sits there and worries
about nickels and dimes when there’s dollars out there that you guys could be making. iTunes, go onto our podcast,
you can listen to this stuff while you’re working out,
that’s what I usually do. Driving around, again, what I usually do. I’m getting used to doing
my podcasts as opposed to listening to the radio. And the workshop, this was, basically you get everything there. We just throw it on in there. Let’s see, are there times when an S corp can be referable to a C corp, for instance in wholesaling? Absolutely, so it depends on
whether you’re going to use that money or whether
you’re just stock piling it, or what your tax bracket is. So, again, we have to calculate. How do we get the Bulletproof
if we already have the 1097 Tax-Wise live stream? Email us and we will annoy the
heck out of Patty and Susan. That’s what our job is. – [Jeff] They’re not going to talk to you for the rest of the week. – [Toby] No, they know
we talked about this and I don’t remember what the answer is, so I’m just going with give it away. Somebody says, can I pay
my daughter out of the LLC as a contractor? Yes. So she can cover expenses
while she is attending college. Yes, that’s what we teach, America, you’re absolutely perfect. I will have to fill out the W-9, can I deduct it as a business expense? Yes. You’re nailing it. She’s getting it. You’re already all over it. It’s better to have it in her tax bracket. You’re going to count the
number, it depends we said, me and Sherry. Have a good time on your Titanic. (laughing) We hope you make it back. So the Google Play podcast. Take that to Don for me,
by the way, he cracks me up and Scott and all those guys. Google Play, that’s the same thing, you get the free podcast. If you need the replays of all these, again, we have tons and tons of them, I think we’re into the 90s now, you can go in the Platinum portal, you can get access to them. And then of course make
sure that you’re going onto Anderson Advisors/Facebook and
/YouTube if you want to keep learning this stuff, you
can find a lot of answers to your questions just by going in there and subscribing, it makes us happy. Questions, you can always send them in. [email protected] or visit us on AndersonAdvisors.com. If there’s nothing else I’m
going to say thank you, guys. There were a lot of really
good questions tonight. We always enjoy doing this. I can speak for myself, it’s a lot of fun and you guys are a really
great group to work with, so it’s a lot of fun. So you guys have a great
night and we’ll see you again in about two weeks. – [Jeff] Two weeks, we’ll see ya. – [Toby] Thank you, Jeff. By the way, you did a great job. – [Jeff] Thank you. (upbeat music)