Posts by damon

• Talk About “Prime” Real Estate!

  Posted on 11/01/2017 in Taxes

  Former President Jimmy Carter once called our tax code “a disgrace to the human race,” and there’s really not a lot to like about it. There’s at least some consolation, though, in the fact that we’re all stuck with the same maddening rules. If you and your spouse file jointly, and your ordinary taxable income is $100,000, you’ll pay the same amount as any other joint filers reporting the same $100,000 in ordinary taxable income. That’s not always the case with state and local taxes, though. If you’re big enough, and you’re willing to flex a little muscle, you can find someplace willing to court you like royalty. Most cities are more than happy to trade away a bit of property tax on a corporate headquarters in exchange for the payroll taxes, income taxes, and sales taxes they can levy on the people who work there, along with the economic development that comes with new jobs. Other places are willing to offer flat-out bribes in the form of tax credits. And that brings us to this week’s story . . . Amazon.com started life in 1994 as an online bookseller. Since then, though, it’s grown to become the largest online…

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• For the Love of Art

  Posted on 10/24/2017 in Uncategorized

  In today’s new Gilded Age, Americans are constantly vying to one-up each other. You show up at your high-school reunion in a new Mercedes E-Class; then your classmate pulls up in a Maserati Quattroporte. (Some would call it a $50,000 car with a $50,000 hood ornament, but still, it’s a Maserati.) You show off a picture of your 42-foot sloop; your neighbor whips out his phone to show off his 62-foot schooner. You show up in Davos in your new GII; your business rival flies in on a GIV. When will it all end? The IRS isn’t generally interested in financing your conspicuous consumption. (Not unless you drive that Maserati to work, in which case, trust us, you’ll want to choose the “actual expense” method for calculating your deduction.) But there’s a new toy that some of capitalism’s winners are showing off, and this one comes with some beautiful tax breaks. We’re talking, of course, about a private art museum. Rich art collectors have always taken fat tax breaks for donating art. The Association of Art Museum Directors estimates that 90% of the collections held by major museums were gifted by individual donors. This is an especially good way to…

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• Tax Strategies for Trick or Treats

  Posted on 10/18/2017 in Taxes

  Halloween is almost here, and if it seems like things have changed since you were a kid, you’re right! Halloween has become big business, with the National Retail Federation predicting Americans will spend $9.1 billion on the festivities. That includes $3.4 billion on costumes, with top choices being superheroes, animals, princesses, witches, vampires, and zombies. And, “pets will not be left behind, with 10 percent of consumers dressing their pet as a pumpkin.” (If you’ve got a dachshund, of course, you have to dress it up as a hot dog. Rule of law.) Naturally, when the trick-or-treaters at the IRS hear the word “billions,” they reach out for a “fun sized” treat, too. (Why do they call those dinky little candy bars “fun sized,” anyway? What’s fun about a bite-sized Snickers or Milky Way when you can score a full-size bar in the rich kids’ neighborhoods?) Let’s take a quick look at how the IRS taxes our favorite Halloween dopplegangers: Superheroes who emigrate from other planets, like Superman (planet Krypton) and Thor (planet Asgard) are subject to U.S. tax on their domestic-source income. (“Resident alien” status doesn’t distinguish between aliens from other countries and aliens from other planets.) Superheroes who…

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• The Long and Short of It

  Posted on 10/10/2017 in Taxes

  Consumer surveys consistently show that CPAs are the most trusted financial advisors of all. But what happens in the rare instance when you can’t trust your CPA? Nothing good, that’s for sure! Back in 2001, John Baldwin helped engineer a deal to sell Louisiana’s Delta Downs racetrack for a $74 million profit. Baldwin took a $10 million fee for his work, along with some hefty interest payments on a $17 million loan his company had extended to finance it. But Baldwin didn’t want to share those hard-earned gains with the IRS. So he went to the “Big Four” global accounting firm of KPMG for ways to pay less tax. KPMG dug into their bag of tricks and pulled out a doozy — a “one-time fix” called SOS, or Short Options Strategy. Without getting too technical, here’s how this little sleight-of-hand worked. (If you’re thinking “sleight-of-hand” is an unfortunate term to use in the tax-planning context, you’re right.) First, Baldwin put up $1.5 million to buy $22 million worth of “long” options on Mexican and Brazilian currency, betting the value of the currency would go up. Simultaneously, he sold $22 million worth of “short” options on the same currencies, betting the…

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• How The Tax System Works

  Posted on 10/06/2017 in Planning, Taxes

  “The hardest thing in the world to understand is the income tax.” – Albert Einstein The bad news is, the tax code is so complicated Albert Einstein can’t understand it. The good news is you don’t have to be Einstein to cut your taxes. You just have to know how the system works for you – your job or business, your investments, and your family.  Here is an overview of how the tax system works: Add taxable income from all sources to figure total income. Subtract “adjustments to income” to determine “adjusted gross income” (AGI). Subtract standard or itemized deductions and personal exemptions to determine taxable income. Consult table of tax brackets to figure your tax. Subtract any available credits to figure your final bill. That’s really most of what you need to know. The real issue isn’t the numbers. It’s what you have to include in your income, what you get to deduct from that income, and where you invest to avoid reporting income at all. Having said that, there are three main strategies for cutting your tax: Earn as much nontaxable income as possible. You have more control over business and investment income than any other income you…

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• Trump’s Tax Plan Proposal: What’s In It For You?

  Posted on 10/05/2017 in Taxes

  On September 27, the Trump administration and congressional Republicans outlined a nine page “Unified Framework for Fixing Our Broken Tax Code.” What effect might this proposal have on the amount you pay? The plan appears to incorporate a conventionally Republican suite of changes: lower rates, unspecified new relief for families, and incentives to repatriate foreign earnings. At the same time, they’ve proposed to limit certain breaks and eliminate nearly all itemized deductions, including those for state and local taxes. Individual Taxes Cut brackets to three: 12-25-35% Double the standard deduction Eliminate the personal exemption Increase the Child Tax Credit by an unspecified amount Eliminate itemized deductions other than mortgage interest and charitable gifts Repeal Alternative Minimum Tax Transfer Taxes Repeal Gift & Estate Tax and Generation-Skipping Tax Corporate Taxes Cut top rate to 20% Cut top rate on pass-through income Cut top rate on income from S corps, partnerships, and proprietorships to 25% Limit deduction for net business interest paid by taxable corporations Allow immediate expensing for non-real estate capital assets Eliminate domestic production activity deduction Impose repatriation tax to bring back accumulated profits of foreign subsidiaries Move to “territorial system” (taxing companies on U.S. earnings only) to level the…

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• They Hate Him at the IRS, Too

  Posted on 10/03/2017 in Uncategorized

  We live in an unfortunate era of disunity. Cultural divides, racial divides, religious divides, and political divides are threatening to tear America apart. Every so often, though, someone comes along to unite us all in a great primal scream of rage. Remember “Pharma bro” Martin Shkreli, who bought the company that manufactures the prescription Daraprim, then jacked the price from $13.50 to $750 per pill? We really do need more people like him to unite us against a common enemy. Rick Smith probably never imagined his company would become one of those uniters. But up until last month, he was CEO of Equifax, the credit-reporting bureau that got hacked and waited six weeks to reveal it. By that time, intruders had made off with critically sensitive information on 143 million Americans. Was the hacker just some pimply Russian teenager living in his babushka’s basement? An international gang of cyber-thieves? We may never know. But that 143 million figure certainly includes thousands of our friends at the IRS, who may not look kindly on the millions of dollars Smith earned leading up to the leak. Smith’s abrupt resignation means he’ll walk away with only a pro-rated portion of his $1.45 million…

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• What Will Your Tax Bill Be In April?

  Posted on 09/28/2017 in Planning, Taxes

  It’s the end of September.  Now is the time to start thinking about your tax bill for April next year.  It’s September, why should I be thinking about something that isn’t due for another six and half months.  The answer is simple.  Now is the time that you have opportunity to affect your tax bill in April. Once December 31st has come and gone you have closed the year and there are very few things you can do to lower your tax bill in April. Estimating a tax bill is something that a good CPA should be able to do for you.  There is a bit of estimating involved in this process but at a high level this is what needs to be done to estimate your tax bill. Estimate your income for the year. Estimate your deductions for the year. Estimate your taxable income (income – deductions for the year. Once you have your estimated taxable income it is easy to estimate your tax. Compare your estimated tax with your tax payments. This process is a cooperative process.  You need to give your CPA information so that he/she can accurately do the calculations to estimate your taxes.  The CPA…

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• Putting On The Shareholder Hat

  Posted on 09/27/2017 in Business, Finance, Success

  As the owner of a business, it is inevitable that you will wear many different hats.  You will be the company decision maker, shareholder, HR manager, manager, technician, bookkeeper, business strategist, etc.  Too often the role of shareholder gets too little attention.  I am going to make the argument that is is one of the most important roles for you to give attention. Why does the role of shareholder get left behind?  Because the owner of the business is too busy wearing the other hats in their business.  In the day to day operations there are always more urgent items that are calling for your attention.  There is a breakdown in the workflow processes.  Payroll needs to be made.  An important customer needs something to be corrected.  Employees need training on how to improve their work.  There are always urgent items on the table.   Because the items are urgent they tend to be like a squeaky wheel shouting at us.  I need you to take care of me now. Urgent does not mean it is important.   There will always be more things to do each day than there is time to complete them.  The key to growth and success is…

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• Too Tasty for the IRS

  Posted on 09/26/2017 in Planning, Taxes

  Most of us like to eat, even if we choose to deny ourselves this pleasure from time to time. And those of us with an entrepreneurial bent often dream of opening a restaurant. Sometimes it’s a bustling cafe fronting a busy urban sidewalk. Sometimes it’s comfort food served on a rural byway. And when the dream works, it really is a dream. Just ask celebrity restaurateurs like Vanity Fair editor Graydon Carter, proprietor of Greenwich Village’s Waverly Inn, or Hollywood legend Clint Eastwood, whose Mission Ranch eatery draws diners and fans to Carmel, California. Unfortunately, opening a restaurant is one of those adventures that all too often ends in disaster. Sure, FEMA may monitor Waffle House closings as a measure of hurricane intensity. But restaurants are notoriously difficult businesses to run. CNBC reports that about 60% of new restaurants fail in the first year, and nearly 80% close before their fifth year, mostly due to being in the wrong location. So if you’re hoping to launch the next food empire, or just cash in on the next food craze (cupcake ATMs, anyone?) it behooves you to spend as carefully as you can — including serving the IRS as little in…

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