There is no lack of bad advice from tax gurus with (a) no real experience, and (b) no real skin in the game. And one of their favorite "loopholes" is paying your kids to save thousands in taxes. Which sucks because it's given this strategy a stigma where a lot of taxpayers write it off as tax fraud without understanding how it can be done legitimately. Today we'll do just that. Here's the real way to pay your kids, how much tax it saves, and what to avoid. The exemption lives in the entity,...
12 days ago • 6 min read
Psych - that's crazy talk. I'm a CPA and went to a lake house with my family. No way I'm going to deduct any of that. But what are the rules here? How do people actually do this? Let's jam 👇 It comes down to a day count The IRS settles this with one question. Was the trip primarily business or primarily personal? Domestic travel is all or nothing on the flight. Primarily business, and the entire airfare is deductible even though you spent Saturday on a boat. Primarily personal, and the...
19 days ago • 5 min read
Years ago, one of the largest owners of real estate in Houston came to our firm with a new-fangled tax structure they were about a week away from executing. Looked great on paper and hit their pain points. But in reality it would have handed the IRS a gift tax bill in the millions, and nobody in the room had any idea. Here is what they were trying to do - something not uncommon: The parents were in their sixties. They owned all this commercial real estate, and for historical reasons it sat...
26 days ago • 4 min read
It's that time of the quarter: the check-in on whether your operating agreement will survive tax scrutiny. Today I want to show you the section I check first on every agreement. 👉 Liquidating Distributions 👈 What this section does When the partnership sells and winds down, this section decides who gets the money. Most read the same way: creditors first, then partner loans, then the partners. The middle can get nuanced. The ending can't. The final split has to match the real economics of the...
about 1 month ago • 4 min read
Calls with prospective clients often turn into "show me what you got" contests. But tax strategy doesn't work like that... It's a multi-phase process of decision making. Before we name a single strategy, we have to answer three questions about you. The answers decide which moves are on the table and which are noise. And this process compounds with time - as we learn your tendencies, goals, and risk appetite. And with our selling season picking up steam, I wanted to share how we think about...
about 1 month ago • 5 min read
I met with a young business owner this week - one of his questions is the most common ones I get asked all the time. "I took out $150,000 from my business, so I'm going to have to pay tax on that right?" The answer in his case was, "you already have." He stared blankly back at me and we ran through this concept 👇 When a Distribution is Taxable If you own a "pass-through" business (you get a K1, or are a sole proprietor) then you get taxed income of the business whether you take out a...
about 2 months ago • 4 min read
The best attorneys are specialists - ideally at keeping you out of trouble. This specialization mostly comes in the form of transaction structuring, risk identification, or legal procedures. A few of them have taken a wrong turn and wound up as tax attorneys. But of those few, even fewer have ever filed a tax return or allocated income and loss on K1s. Which is a shame because that's an experience that is sorely needed when drawing up operating agreements. I've been reviewing operating...
about 2 months ago • 5 min read
3 years. Now on to the memes. 👇 Only kidding. Obviously there's a lot of nuance to this question I get several times a year (albeit less often with the real estate market being where it is now). Let's look at the factors that impact to Cost Seg or not to Cost Seg: Covering the Obvious - Recapture The primary argument against cost segregation studies is "depreciation recapture." 😱 Most of my readers are likely real estate literate and understand the concept, but just quickly for those...
2 months ago • 4 min read
Most buyers treat accounting as the cost of keeping score. You close on a business or a property, you hand the books to a bookkeeper, and you check back at tax time. The accounting department becomes a compliance expense. A necessary evil. Overhead. That framing costs you real money. Done right, the accounting function in a newly acquired business or property is one of the highest-ROI investments you'll make in the first year of ownership. It finds revenue you're entitled to but never billed....
2 months ago • 7 min read