You've decided to enter the wonderful world of private business and/or real estate investing. You send your CPA an email, being the proactive client you are, and let him know the wire is going out. But before you send the money, are there any tax-related things to be aware of? The CPAs response? "Nope - you're a passive investor, so not really much to do on your side." Or maybe you get ignored - 50/50 shot from what I hear. 🤷♂️ But the right answer isn't actually that simple. It's just that...
7 days ago • 4 min read
Next week I'm flying out west to talk about Operating Agreements to a bunch of real estate GPs and investors at Reconvene. I could not be more excited to jam for even 45 minutes on a topic so near and dear to my heart. 🫶 Every year I read dozens of new operating agreements - and I see a handful of errors or tax misses that I'm going to share with that audience. But I didn't want to leave you guys out - so I have something exciting to share here. I've found a treasure trove of publicly...
14 days ago • 4 min read
Real estate is special. Every time a new tax law comes out meant to raise federal revenue, real estate somehow gets a way out. We see it in the passive loss exceptions, the reduced rate on depreciation recapture, like-kind exchanges, the at-risk limitation, interest limitation carve-outs, and the carried interest exception. All real revenue raisers - just not from real estate pros. 👷♂️ The government has a special place in its heart for developers and investors - for good reason. Capital...
21 days ago • 4 min read
Every year I talk to dozens of business owners who want to change CPAs. Their current guy isn't future-oriented enough for them - doesn't bring them ideas or strategies. I share our strategies page on our website and then ask them about their 3 year forecast for their business. Guess how many have one. I can't think about your business future more than you do. 🔮 I can't bring you strategies that don't belong in your tax plan. So the right place to start in strategic tax planning is getting...
28 days ago • 6 min read
Modeling how much cash you'll keep AFTER paying taxes is wildly underrated. You assume it's 20% on real estate but what if it's not. And when you're doing math on multiple millions, a 3.8% tax can move the needle quickly. On a $5,000,000 exit, that's $190,000 of extra tax burn. Today, we're talking about a favorite topic of mine - how to avoid the net investment income tax (NIIT). ⤵️ What is NIIT Essentially it's a 3.8% tax on passive income. It was rolled out to help fund the Affordable Care...
about 1 month ago • 4 min read
I spend a lot of time thinking about tax strategy for small business and real estate. So much so we've devoted an entire page on our website to "how we think about strategy" - a free tool anyone can use to see what they may be missing. That tool, while a great staring point, is incomplete if you're trying to get tax-smart. Someone still needs to run point on implementation, point out the hidden traps, and reassess. One of the most important steps to implementation is setting priorities....
about 1 month ago • 7 min read
Basis is expensive. So one of the ways to reduce that expense is to use that basis to reduce your income tax drag on other income. And for those that invest in or own real estate, you can accelerate the tax benefits of a lot of smaller components of that basis using a cost segregation study. But the cost seg is just one part of a larger strategy to actually be able to use that benefit to it's fullest potential. 👈 Today, we're jamming on a few of the ways I've seen people get disappointed in...
about 2 months ago • 5 min read
We just finished a group of returns for a new client we onboarded last year and all-in got about $400k of tax back in his pocket with a few changes we identified. It's a big win 🏁 for him and us - so wanted to share what we did. The Meeting and Review All of our new clients get their prior returns reviewed as a part of onboarding - and even prior to that to confirm scope. But after a chat with this client, we determined he was a good fit for a deeper dive - a tax gameplan we do where we look...
about 2 months ago • 4 min read
Two hockey players for the Minnesota North Stars ran their NHL contracts through their own corporations and beat the IRS in the 1980s. A financial advisor did the same thing in the 2010s with his commissions and got assessed $41,563 in self-employment tax. Same structure, same idea, opposite outcomes. The difference had nothing to do with the entity type, the election, or the bookkeeping. It came down to whose name was on the contract with the people writing the checks. This is a terrifying...
2 months ago • 5 min read