Tom's Blog

Some of you know that a couple of years ago I lost a serious amount of weight. I went from 212 lbs to 172 lbs. It's never an easy task to lose 40 pounds, but especially not when you are in your late 40's. Yes, it took a lot of will and determination, but it took one more thing - Accountability. I had to be accountable to someone. I chose my son, who was also trying to lose some weight.

At the time, I vowed that I would never gain the weight back and would continue to work on this until I reached my ideal weight according to my doctor - 165 lbs. Well, I stopped being accountable to my son and here I am two years later with what can best be described as "weight creep." My weight is creeping back up. I'm at 177 lbs. as of this morning. But I am determined not to let this get out of hand. So, I am going to be accountable to someone.

This time I am going to be accountable to you, my readers. It's a very scary thing to be accountable. You don't know for sure whether you will be successful. And failing in a public forum such as this blog could be disastrous. But when you really want to be successful. When it's more important to you than any possible embarrassment. That's when you want to be truly accountable.

So, I'm going to be accountable to you. I will share my progress every Monday morning. Of course, I will be measuring my weight on a daily basis. And I don't expect it will go down every day. There are variations such as water retention and muscle growth that can make it go up. But I do expect weekly weight loss.

Along with accounting for my weight to you and measuring it, I need a goal to go along with it. You might think that a specific weight, 165 lbs, might be the goal. But I have found that I need a goal that is more rewarding than just this one number. In this case, I have two goals beyond the weight that require the weight loss to accomplish. The first is a size 32 waist. I have always wanted to fit into a size 32 since I first started putting on weight.

The second goal is to complete an olympic length triathlon in less than 2 1/2 hours. I did my first olympic triathlon this past October and completed it just under 3 hours. So, I have a 1/2 hour to trim off. Since my run was horrible, most of this will come from a reduction of my running time and the rest will have to come from my bike time. My swim time was pretty good and realistically I can probably only shave off a few minutes on my swim time.

I am counting on you, my readers, to hold me to these now very public goals. Let me know what you think and hold me accountable for my results.

You may be wondering what all of this has to do with business and wealth. After all, this is a business and wealth blog, not a health and fitness blog. Stay tuned tomorrow for more. For now, ask yourself this question - ARE YOU ACCOUNTABLE?

Warmest regards,

Tom

Yesterday, I opened myself up to the world and committed to being accountable for my weight to you. Today, I answer the question of what being accountable for my weight has to do with you and your wealth.

The answer is quite simple. In order to achieve ANY goal, you must be accountable. The question is - to whom? Are you going to be accountable to your spouse? To your children? To a friend? Ultimately, of course, we need to be accountable to ourself and to God. Unfortunately, these two are the people we lie to most easily. We lie to ourselves every time we spend money on some doodad that we don't really need or even want that much. And we lie to God constantly - whenever we do something we know isn't right.

When it comes to wealth, may I suggest you be accountable to your wealth coach? And who better for a wealth coach than someone who actually knows something about being accountable for wealth - your accountant? What? Be accountable to my accountant? At once, this seems odd and obvious at the same time.

After all, your accountant is the expert at accountability. The problem for most people is that we spend lots of money on our accountant at tax time and we never use the information our accountant produces for anything productive. That's right - tax returns are not productive. Of course, with the right accountant, properly prepared tax returns can reduce your chance of being audited by the IRS and can even reduce your tax bill. But the fact of preparing a tax return is not productive in and of itself.

But the information that goes into the tax return is valuable information and with the right reporting, you could use this information to measure the results of your income and wealth creation and to be accountable for your financial actions.

Stay tuned for more on how to measure your financial activity and how to use your accountant as a wealth coach so you can be accountable and, as a result, successful in achieving your wealth and income goals.

Warmest regards,

Tom

P.S. - Someone asked me yesterday for the target date of my weight loss. My goal is to be 165 lbs on May 3, 2008, the date of my next triathlon.

This month, our School of Tax Strategy is focused on S corporations. An S corporation can be a terrific entity for an operating business. It is a "flow-through" entity, so there is only a single tax on the income - at the shareholder level. And there can be significant payroll tax savings to using an S corporation. One of the questions I received this month about S corporations is the following:

"If my S corporation owes me money, should I take cash out as a loan repayment first and wait to take a salary & distributions until it is fully repaid?"

This question comes up in many start up companies. When you are first starting out, it is likely that you had to put in some money to pay expenses until the business became profitable. When the business starts to be profitable, you have money that you would like to take out.

At first glance, the answer to this question seems to be "Yes." After all, a loan repayment is not subject to social security taxes like salary. If the money that's available came solely from the profits of the business, you are probably safe taking it out as a loan repayment.

However, there could be an adverse tax consequence to the loan repayment. Let's say, for example, that you had losses in your first two years of operation. These losses were funded by your loans to the company. Let's say that in year 3, you obtain a bank loan. You are still operating at a loss or break even, but the bank has decided to loan money to the company and you want to take it out to pay some personal bills.

Your first inclination may be to pay back your loan to the company. The only problem is that if you do this, you will likely pay tax on the loan repayment. Why? Because in an S corporation you do not receive tax basis for loans to the company from outside parties. So, you received basis for your loan to the company. Then, you took losses on your tax return the first two years and reduced your basis in your company. At least some of that basis came from your loans to the company. Now, your loan basis is less than the face amount of your loans. As a result, when you pay back these loans, you could have capital gains from the repayment.

If this seems a little complicated and confusing, IT IS! The answer is to talk to your CPA prior to taking out the money. Have them run through the calculation to determine the best way to classify the money you take out for tax purposes. Otherwise, you could have a surprise tax bill come April 15th on the capital gains from the loan repayment.

So be sure to stay in contact with your CPA throughout the year and be sure you learn the rules for taking money out of your S corporation.

Warmest regards,

Tom