Archives for December 2018

Welcome to Straight Talk.  Straight Talk is just that. I don’t mince words. I tell it like it is.

I have reached an age where the nonsense, the B.S. and the snake oil salesman who don’t know what they are talking about just won’t do. I have over 35 years of experience in my industry, advanced degrees and countless hours coming alongside business owners to build rock-solid foundations and use the most advanced business, legal and tax ideas and strategies to save tens of thousands to hundreds and yes even millions of dollars, protect what you have and increase your lifetime net worth.

I appreciate your enjoyment of our insights on growing your business by design, changing your wealth and increasing your choices.

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One of the smartest things a business owner can do is to take advantage of the mileage allowance.  If you’re self-employed, you will want to take a business deduction for the business use of your personal car.

They say nothing is free…

I think there may be one exception to this rule.  That is the mileage allowance. The IRS gives you this one, free.  In 2018, the allowance is 54.5 cents per mile when you use your car and drive for business.  

In fact, you get a choice.

You get to compare the actual cost of driving the car plus depreciation on the car against the standard mileage rate.  Whichever is better is the one you get to select.

Whatever selection you make, however, you are locked into that selection and you can’t change it.  

Here is a simple example.  

If you drive 20,000 miles for business you get to take a deduction of 10,450 dollars on your tax return.  If you are in the 30% tax bracket this will save you a little over $3,000 in taxes. Free.

By comparison, if your total out of pocket gasoline, tires, repairs, and insurance costs plus some depreciation total $8,000 during the year, then the standard mileage rate will be a better choice.

The IRS does require one item of proof should you be examined.  

You can use a mileage log, diary or some type of account book.  The mileage log is a record of where you went, when you went, how many miles you drove and the purpose for the trip.  Otherwise, there is no proof that you actually drove the number of miles claimed or the reason for the trip.

The lack of proof is why the IRS will disallow the deduction.  So keep a mileage log.

Our vision is to enhance the way people think and talk about wealth not only in money but in values, beliefs, and traditions.  Our mission is guiding people in Mastering the 5 Stages of Wealth. Survival to make ends meet; Security for themselves and their family; Affluence by enjoying the benefits of the wealth created; Influencing others through one’s own clarity of purpose and vision; and Legacy of the impact and difference you can make in the world and how you will be remembered.

Thank you for being a part of our Straight Talk community.

Our goal is to educate, transform and inspire business owners and families in enhancing the way they think and talk about wealth in money, values, beliefs, and traditions.  

What is your Legendary Future?  We welcome you to share your ideas and thoughts.

Welcome to Straight Talk.  Straight Talk is just that. I don’t mince words. I tell it like it is.

I have reached an age where the nonsense, the B.S. and the snake oil salesman who don’t know what they are talking about just won’t do. I have over 35 years of experience in my industry, advanced degrees and countless hours coming alongside business owners to build rock-solid foundations and use the most advanced business, legal and tax ideas and strategies to save tens of thousands to hundreds and yes even millions of dollars, protect what you have and increase your lifetime net worth.

I appreciate your enjoyment of our insights on growing your business by design, changing your wealth and increasing your choices.

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Have you ever wondered why you get a tax deduction for contributions to charity?  

Tax policy and social policy.  If the government can get the private sector to make donations to those that are less fortunate those are expenses that the government does not have to incur and they can use the tax revenue for other social purposes.

Contributions to charity have long been a part of the tax code.  There are two types of primary charities.

First is the kind most people are familiar with which are the 501(c)(3) organizations.  These include Red Cross, Churches, Temples, Salvation Army and so forth. The second type of charities are private foundations like the Gates Foundation, or the Kroc Foundation or Scripps Foundation.  

There are also social clubs like Rotary and Kiwanis.  Depending on the type of charity, the deductions are different and the deductions are different based on the type of property donated to the charity.  Here are some of the rules.

1. If a person contributes to the familiar charity the amount of the contribution can be 60% of the adjusted gross income that is shown on your tax return.  

Adjusted gross income is the total income that you make less a few deductions such as moving expenses, one-half of the self-employment tax and a few others.  If you make $100,000 you could contribute up to $60,000 to a charity.

2. If a person makes a contribution to a private foundation the amount of the deduction is only 30% of a person’s adjusted gross income.

I often get asked:  what is the difference between a contribution to a familiar charity versus a contribution to a private foundation?

Part of the answer I give is that if the private foundation is formed for your own family.  A private family foundation is a strategy used in the tax law allowing a family to create their own charitable foundation to which they can contribute, get the charitable deduction and then use that foundation for charitable purposes in the community.  

Having your own family foundation gives you more control as to the vision and purpose for the foundation, the programs that the foundation will run and who will be employed.  Control over funds stays within the family.

The type of property you contribute to a charity makes a difference.  

Cash is simple.  You receive the tax deduction described above.  Property is another story.

There are two types of property:

• Personal property like artwork.  
• Real estate.  

Simply, when there is a contribution of property, whether personal or real property,  the tax deduction is the fair market value of the property unless the fair market value is less than what you paid for it in which case what you paid for it will be the amount of the deduction.  

The deduction can take is limited if your property hasn’t been held for more than 1 year i.e. the gain is short-term capital gain.

Contributions of real estate to private foundations are further limited to the price you paid for the property.  

If there is appreciation in that real property it is treated as if you sold the property first, paid the tax on any gain and then made the contribution.  For what may seem like obvious reasons, this rule was intended to prevent abuse by families forming their own foundations and then contributing their own appreciated real estate and receiving the tax deduction.  

You might be wondering what’s the real difference if a taxpayer simply made the contribution of the real estate to a regular charity?

No such limit in the charitable deduction would be imposed.  

It seems this is an arbitrary judgment that family foundations are somehow less charitably minded or are being used for abuse.  I would rather presume the charitable purpose is valid and then show the abuse. Isn’t that like innocent until proven guilty rather than guilty and pay the tax.

Our vision is to enhance the way people think and talk about wealth not only in money but in values, beliefs, and traditions.  

Our mission is guiding people in Mastering the 5 Stages of Wealth.  Survival to make ends meet; Security for themselves and their family; Affluence by enjoying the benefits of the wealth created; Influencing others through one’s own clarity of purpose and vision; and Legacy of the impact and difference you can make in the world and how you will be remembered.

Thank you for being a part of our Straight Talk community.

Our goal is to educate, transform and inspire business owners and families in enhancing the way they think and talk about wealth in money, values, beliefs, and traditions.  

What is your Legendary Future?  We welcome you to share your ideas and thoughts.

Welcome to Straight Talk.  Straight Talk is just that. I don’t mince words. I tell it like it is.

I have reached an age where the nonsense, the B.S. and the snake oil salesman who don’t know what they are talking about just won’t do. I have over 35 years of experience in my industry, advanced degrees and countless hours coming alongside business owners to build rock-solid foundations and use the most advanced business, legal and tax ideas and strategies to save tens of thousands to hundreds and yes even millions of dollars, protect what you have and increase your lifetime net worth.

I appreciate your enjoyment of our insights on growing your business by design, changing your wealth and increasing your choices.

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Everything we do is risky.  Crossing the street, going into business, flying on airplanes, making decisions about how to protect our money.  

One of the ways to protect our money is to keep it from the IRS.  Tax professionals since time began have been using the rules, regulations and case law, to find words, ideas, strategies and tactics to get around paying money to the IRS.

As attorneys, what is our role?  

Our role is to advise people on our understanding and opinion of the law based on our training and experience.  

Our training is hours and hours of questioning, testing, interpreting and learning how to read, understand and make determinations about the rules, the regulations, how the courts think about those rules and regulations and to advise as to what can and can’t be done.  Of course what can and can’t be done can be subject to black, white and a lot of gray.

Tax attorneys do the same thing except with a specialized knowledge of tax law.  

We are the cream of the crop.  There are no professionals who have specialized knowledge and training greater than the tax attorney.  

The role of the client is to make one decision.  Either agree or disagree with the advice. This is all based on the level of risk a client is willing to take.  

Here is how the story unfolds…

Client wants to do something and they come to us to ask our advice in advance of doing the transaction or to provide our thoughts about the consequences of the transaction already engaged.

For example, a client wants to start a business and they want to know the boundaries of what they can do to take deductions that might create losses to lower taxes.  

Seems simple enough…Then the discussion starts.  

Well, are you working full time in another business?  How much time will you be spending on this other “business”? What will you be doing?  Where are you going to run the business? Where will your clients come from? How much money will you make?  I think you start to get the idea. Because, if the IRS wants you, guess what? They will start asking these same questions.

What happens here is that the client wants to find ways to create tax deductions for expenses that are on the surface for a business when there is no real business because the client made no money, operated the so called business from home, wasn’t really working many hours didn’t have clients and so forth.

Now the client is unhappy…Why?

I thought we were doing what we were trained to do.  Well, the client is unhappy because there are other people who are not trained tax attorneys giving the client the advice that they can do these things and take the deductions.  Risk.

For us tax attorneys, this is called putting the license to practice law in jeopardy and as the old saying goes in the movie “A few good men”, it’s not what I know but what I can prove.  Our job as tax attorneys is to know and prove in Court that what the client is doing and saying is consistent and in accordance with the law. Otherwise, it’s called fraud and some fraud lands you in jail.  It also results in penalties and interest.

I for one am not willing to risk my license for a client’s risk.  

Here is what makes our job even tougher….The client asks our advice and we give it.

Then the IRS examines the tax return.  Like anyone, the IRS has an agenda so they may only look at one aspect of the return.  That’s good. The problem is that if the client was doing the risky stuff on a different part of the return, the attitude that comes out is well the IRS didn’t think there was a problem with this part of the return so it must have been correct.  

That is false and misleading.  

The other part of the return may have been completely incorrect but the IRS wasn’t looking to get into that part of the return because of their agenda.  The client now thinks the return is valid because the IRS didn’t investigate all of the return, and we the tax attorneys have to somehow explain to the client that fate doesn’t mean the advice was incorrect or that the actions and the risk was correct.  

Of course to the client, they wonder what advice they were getting as it related to the incorrect conduct only because they weren’t caught?  

The answer is the client was getting the exactly correct advice.

But I am just a tax attorney.  What do I Know?

Our vision is to enhance the way people think and talk about wealth not only in money, but in values, beliefs and traditions.  

Our mission is guiding people in Mastering the 5 Stages of Wealth.  Survival to make ends meet; Security for themselves and their family; Affluence by enjoying the benefits of the wealth created; Influencing others through one’s own clarity of purpose and vision; and Legacy of the impact and difference you can make in the world and how you will be remembered.

Thank you for being a part of our Straight Talk community.

Our goal is to educate, transform and inspire business owners and families in enhancing the way they think and talk about wealth in money, values, beliefs and traditions.  

What is your Legendary Future?  We welcome you to share your ideas and thoughts.