http://www.tomwheelwright.com/ by Tom Wheelwright, Founder and CEO of ProVision Wealth Strategies en Copyright 2010 Tue, 09 Mar 2010 05:43:18 -0700 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss http://www.wealthstrategyuproducts.com/Tax.html. Warmest regards, Tom ]]> http://www.tomwheelwright.com/2010/03/tax_results_of_converting_a_co_1.html http://www.tomwheelwright.com/2010/03/tax_results_of_converting_a_co_1.html School of Tax Strategy car depreciation Tue, 09 Mar 2010 05:43:18 -0700 Mike from Canada, is interested in investing in the U.S. and asks a very good question. Q: Apart from seller financing, are there other sources of financing available to foreign investors? Thanks A: There are several sources of financing available to foreign investors in the U.S. I will admit, the easiest is seller financing. Other financing includes corporate financing. This requires you to own a business in the U.S. that establishes U.S. credit and can borrow using that credit. Another is private financing. This means going to private investors. My friend, Darren Weeks of Fast Track to Cash Flow in Edmonton, Alberta does this type of financing. Depending on the type of investing, you may also be able to get nonrecourse financing. This is financing that does not depend on the credit of the buyer but rather depends on the benefits of the real estate deal. Warmest regards, Tom http://www.tomwheelwright.com/2010/02/financing_alternatives_for_for.html http://www.tomwheelwright.com/2010/02/financing_alternatives_for_for.html Vision Corporate Financing Foreign Investors Real Estate Fri, 12 Feb 2010 08:17:01 -0700 One of our School of Tax Strategy students from Canada asks the following question about investing in real estate in the U.S. Q: Is it possible to engineer a rental property investment so that it has positive cash flow and zero taxable income? A: Most definitely. In fact, if you are leveraging properly (as much leverage as possible with a rate lower than your cap rate), then you should never have taxable income from an investment in U.S. real estate even if you have positive cash flow. The reason is the high depreciation deduction (capital cost allowance) that you receive on real estate. The best thing you can do to ensure no taxable income is to do a cost segregation on the property. A cost segregation breaks down the property into four categories - 1) land 2) building 3) land improvements and 4) building contents. You need a CPA (U.S. equivalent of a CA) or an engineer to do the cost segregation. If you are thinking of investing in real estate in the U.S., be sure to contact us at 866.467.5809 and we will be happy to share with you some thoughts about how to structure your investment and get the most tax benefits available. Warmest regards, Tom http://www.tomwheelwright.com/2010/02/positive_cash_flow_with_zero_t.html http://www.tomwheelwright.com/2010/02/positive_cash_flow_with_zero_t.html Wealth cash flow real estate tax strategy Taxable Income Thu, 11 Feb 2010 07:36:13 -0700 http://blogs.usatoday.com/oped/2010/02/column-we-need-two-school-systems-.html#uslPageReturn. In his blog post, Robert suggests two school systems, one for entrepreneurs and one for those who wish to be employees. The number of comments already to this post is astounding. Clearly a reflection that the public sees challenges with the current school system. Personally, I like the idea of a parallel school system for those who want to be entrepreneurs. I, for one, would have loved going to a school for entrepreneurs. My earliest memories are of business ventures my friends and I started. For the record, I always did well in school. For the most part, an "A" student. I liked school. I'm one of those who found reading enjoyable and didn't mind listening to the teachers. I took the very traditional route of going to school, then going to college and then getting a masters degree. My family was not wealthy. I paid for my own education, including graduate school. Still, I would have loved attending a school for entrepreneurs. I am an entrepreneur, having successfully started and run two businesses in my lifetime - a CPA firm and a financial education company. I can't say that I learned anything about building or running a company in school. I had to learn it the hard way - trial and error. And I had lots of help from good friends and mentors along the way who were encouraging and supportive and willing to take the time to teach me with no expectation of payment or reward. One of the things I like most about Robert's idea is that the instructors would work for free. I would like to be on that faculty. Heck, I was an adjunct professor at Arizona State University for fourteen years and it was practically for free, the pay was so low. I didn't do it for the pay. In fact, I don't know of any adjunct professors who do it for the money. (Adjuncts get paid less than janitors.) We do it because we love to teach and want to share our knowledge with the students. I, for one, applaud Robert's idea of creating a second school system. This is creative thinking and we definitely need an alternative to the current public school system. It would be ideal to overhaul the current system, but given the power of the AEA, I don't see it happening any time soon. Let me know what you think about a school for entrepreneurs. Warmest regards, Tom]]> http://www.tomwheelwright.com/2010/02/robert_kiyosaki_we_need_two_sc.html http://www.tomwheelwright.com/2010/02/robert_kiyosaki_we_need_two_sc.html Wealth education entrepreneurs schools Wed, 10 Feb 2010 08:12:29 -0700 Scott just joined our School of Tax Strategy and has a couple of questions. Q: Tom, new to your program, came from the Rich Dad training. going through info overload but have some initial tax questions. I have an S-corp with deferred income ($90,000) from an installment agreement when I sold the assets. I also took an equity position in the purchasing company (LLC), ($184,000) the company is effectively out of business and am wondering if the loss on the 184K will offset the $90,000 deferred income, I wont see any of the income in the future either. Second issue, I received a letter from the IRS stating I have a dependent that was claimed on another return. I dont know for sure, but it could be true, My daughter got married last October and she probably claimed herself on her and her husbands 2008 return. question, can a dependent be split between 2 returns? what is the definition of a dependent? she is 23 graduated ASU as a full time student in spring of 2008 and started working full time in aug 2008 but still lived at home through September. A: Your first question is a little complicated to answer on a blog. In order to answer this question, I would need a lot more information. I suggest you speak to your tax advisor for this first question. If you want to know more about our personal tax advisory services, please call our office at 866.467.5809 and ask for Wendy. Your second question is a little easier. You can’t really split a dependency exemption. Once your daughter is married and files a joint return with her husband, you can’t claim her as a dependent. If she files separately from her husband, and you provided more than half her support, you could have claimed her as a dependent. My guess is she filed that joint return with her husband so you are probably stuck. Warmest regards, Tom http://www.tomwheelwright.com/2010/01/what_happens_when_to_the_depen.html http://www.tomwheelwright.com/2010/01/what_happens_when_to_the_depen.html Tax Dependency Exemption Joint Return Married Return Tax Fri, 29 Jan 2010 14:46:45 -0700 An IRS audit may be the single biggest fear of any American taxpayer. The truth is, they can be pretty easy to handle. It’s just a matter of being prepared. Our friend, Terry, asks the following questions about preparing for an IRS audit. Q: I have 2 question involving and IRS audit: 1. What documents, and forms should I have ready to go prior to the audit? 2. Who should I take to the Audit with me, Tax Attorney, Tax Preparer, both or some one else entirely. I am not in the process of getting audited but should it happen I would want to be fore armed. I remember you said the less work they auditor has to do the easier on you they are. A: The two most important documents you should have ready for an IRS audit are a really good, clean and accurate set of bookkeeping records and a complete corporate book. For more about preparing for an IRS audit, go to www.provisionwealth.com/products and click on our Tax Strategy Prodcuts box. Then, go to our product called, “Managing Your Corporate Formalities” and our other product called, “Preparing for an Audit.” As for who to take with you to the audit. NOBODY. Not even yourself. You should never go to an audit. Instead, send your tax advisor. Let him handle your audit for you. It will reduce your stress and he should be able to get a much better result than you do. For many of ProVision’s clients, we even offer an Audit Defense Plan so you don’t have to pay us for handling the audit. We only do this for clients for whom we prepared the tax return. For more information about our Audit Defense Plan, call us toll free at 866.467.5809. Warmest regards, Tom http://www.tomwheelwright.com/2010/01/how_to_prepare_for_an_irs_audi_1.html http://www.tomwheelwright.com/2010/01/how_to_prepare_for_an_irs_audi_1.html School of Tax Strategy IRS IRS audit preparer Tax Tax Advisor Thu, 28 Jan 2010 08:13:15 -0700 Tanya asks a really good question about using multiple companies: Q: I "own" an S corp but also own a business providing bookkeeping, etc. to other businesses. Would having the support company provide the services I would normally provide to the S corp be beneficial in any way? A: Definitely – in the right circumstance. Remember that all tax planning depends on the facts and circumstances (i.e., what’s going on). Let’s say that your net income from your S corporation is substantial so that you are in a 35% tax bracket. Let’s say your net income from your bookkeeping service is only about $25,000. You could put your bookkeeping service into a C corporation and get some serious tax benefits. C corporations normally are taxed at 15% on the first $50,000 of net income. So in this case, you would save $10,000 by using a C corporation for your bookkeeping business if you could get $50,000 of income into the company. Since you only have $25,000 of outside income, charging your S corporation for bookkeeping services would increase the tax savings in your C corporation. One little caveat. Personal service corporations don’t get a 15% tax bracket. Personal service includes accounting. It’s an interesting question whether bookkeeping and accounting are the same thing. If you don’t want to take this risk, you might look at some other services that you could provide to your S corporation to take advantage of the 15% bracket in your C corporation. For more on how to use C corporations, go to www.provisionwealth.com/products and click on our Tax Strategy Products box. Then, go to our product called, “Making the Most of Your C Corporation.” Warmest regards, Tom http://www.tomwheelwright.com/2010/01/should_i_use_multiple_companie.html http://www.tomwheelwright.com/2010/01/should_i_use_multiple_companie.html Business Strategy bookkeeping business C corporation income savings strategy Wed, 27 Jan 2010 14:10:01 -0700 In yesterday’s blog, I answered Sam’s question about whether to use an LLC or an S corporation for his operating company. Sam has a couple of more questions about setting up his company. The answers could prove useful to many of our readers. Q: I am beginning training in Robert Kiyosaki's Rich Dad courses in Wholesale Buying in real estate, Lease Options, and Short Sales. What would be the purpose I should put onto the Corporation Application? Would the purpose be simply "To Conduct Real Estate Services for Profit"? A: The purpose you are suggesting is fine. Or, you might simply say, “Real Estate.” The state asks for the purpose of the business because they will publish that purpose to the world. What do you want the world to think? You want it to be broad enough to cover whatever you might do or you might want to narrow it if your LLC is only going to be used for a very specific purpose. Q: What do you charge for performing the paperwork for my application for an LLC or an S Corporation? I am a resident of Ohio. A: While we are happy to do the paperwork to make your S corporation election (the form 2553), I suggest you use an attorney for the LLC or go to www.llc.com. This is a great website with terrific customer service. If you have more than one owner, I strongly suggest you use an attorney to create an operating agreement for your LLC. Q: Is there a website where I can check to determine whether a particular corporation name is available? A: Your state website is the logical choice for finding out whether the name you have chosen is available. I would also suggest you go to www.godaddy.com or another URL reservation website to make sure the URL is available if you are planning to have a website for your business. You can call our office toll free at 866.467.5809 if you would like more information about the price and extent of our services. Warmest regards, Tom http://www.tomwheelwright.com/2010/01/how_do_i_set_up_my_company.html http://www.tomwheelwright.com/2010/01/how_do_i_set_up_my_company.html Business Strategy business Corporation LLC Real estate strategy Tue, 26 Jan 2010 15:17:37 -0700 Sam asks the following question: Q: I live in Ohio and would like to know whether I should set up an LLC or an S Corporation. I am beginning to take courses sponsored by Robert Kiyosaki's Rich Dad in real estate. My first courses will be Wholesale Buying in real estate and Lease Options. Later, I would like to take courses in Short Sales and Creative Financing. It appears that an LLC would be better for me than an S Corporation for better asset protection and might be better for other reasons. Since I am an Ohio resident, would you recommend that I incorporate with an LLC? Thanks. A: I need a little more information before I can answer this question. What are you going to do with the real estate when you buy it? Are you going to resell it or hold it for investment? If you are going to hold it for investment, you definitely DO NOT want to use an S corporation. If, as I suspect, you are going to immediately resell the property, then you want to be formed as an LLC TAXED as an S corporation. LLC’s have the asset protection advantage of a charging order. For more on charging orders and asset protection, go to our ProVision products page at www.provisionwealth/products, click on Tax Strategy Products, and go to our product entitled, “What You Really Need to Know About Asset Protection.” You have a choice how to tax your LLC. You can tax it as a sole proprietorship, a partnership (if there are two or more owners) or a corporation. So, you can elect to tax your LLC as an S corporation. Make this election by filing form 2553 with the IRS. S corporations are particularly good for operating companies that only have a few owners. For more about what company to use in your business, go to www.provisionwealth/products, click on Tax Strategy Prodcuts, and go to our product entitled, “Entity Fundamentals.” Warmest regards, Tom http://www.tomwheelwright.com/2010/01/whats_better_for_my_business_a.html http://www.tomwheelwright.com/2010/01/whats_better_for_my_business_a.html Business Strategy assets business Corporation LLC real estate strategy tax Mon, 25 Jan 2010 09:07:03 -0700 http://www.provisionwealth.com/products. Warmest regards, Tom ]]> http://www.tomwheelwright.com/2010/01/student_loan_interest_and_the.html http://www.tomwheelwright.com/2010/01/student_loan_interest_and_the.html School of Tax Strategy education expense interest deduction student loan Thu, 21 Jan 2010 08:07:08 -0700 My friend, Corey, recently asked me the following question: Q: Tom, I was wondering if there is a formula or rule of thumb that you use in order to figure out how much of a down payment should be applied when buying rental property? A: Corey, I'm a big believer in cash flow. So, I only want to buy real estate rentals that will produce positive cash flow. Of course, you can always produce positive cash flow from any real estate if you put enough down of your own money. I have a client whose retirement is from several condos that they own outright (no bank loan). Of course, this doesn't produce the highest overall returns. In order to produce the highest returns, you want the most leverage. So here is what I do. I look at what would my downpayment have to be in order to create some positive cash flow. Then, I calculate what my overall return will be, including cash flow and appreciation (and tax benefits, of course). If that return matches the criteria I have set up in my wealth strategy, then I buy the property. If not, I pass on the property. So once again, it's all about your wealth strategy. For more about creating your personal wealth strategy, call us toll-free at 866.467.5809 or send an email to cs@provisionwealth.com. Warmest regards, Tom http://www.tomwheelwright.com/2010/01/how_much_should_i_put_down_on.html http://www.tomwheelwright.com/2010/01/how_much_should_i_put_down_on.html School of Wealth Strategy cash flow downpayment real estate Mon, 18 Jan 2010 07:31:15 -0700 This is the question on a lot of high-income earners minds this year. Because this is the year that you can convert your regular IRA to a Roth IRA regardless of your income. And there is no penalty for converting. You just have to pay the tax as if you had taken a normal distribution of the IRA (no early distribution penalty tax). Corey, one of our School of Tax Strategy students, has been very patiently waiting for an answer to the following questions about Roth IRA conversions: Q: We have traditional IRA's(after tax contributions) that we are planning on converting to Roth IRA's this year. My Wife has a current Simple IRA from her work. Does she need to include the amount of the Simple IRA in the "total of all IRA's" for the pro-rata basis to figure the taxable amount of the conversion. Thanks A: You only have to include the IRA's that you are converting. If you have a Simple IRA at work, you will have to ask your employer if there is a way to convert this to a Roth separately. Q: For high income earners, I wanted to know if you thought it better to used saved money to contribute to a traditional IRA (with thoughts of conversion to a Roth IRA in 2010 and beyond) or to use the money for a down payment on real estate to use as a rental. Thank you. Corey A: The answer to this question really depends on your wealth strategy. Everyone needs to create their own personal wealth strategy. This strategy should focus on a particular type of investing so you can become an expert in that type of investing. You could be focusing on real estate, paper assets (e.g., the stock market), commodities or business. Your focus will determine the answer to this question. If you decide to invest in real estate, then definitely stay out of the IRA, Roth or otherwise, as it will diminish your ability to leverage your real estate and you will lose all of the tax benefits that real estate has to offer. If you decide to invest in business, then stay out of the IRA since business income is taxed to IRA's just as if you had earned it outside of the IRA. If you decide to invest in paper assets, using a Roth IRA can be very beneficial, as the income and gain will never be taxed. Commodities, such as oil and gas and gold and silver, can be good or bad in an IRA. Oil and gas has tremendous tax benefits right now, so I would not use an IRA for this investment. But a Roth IRA can be a great place to invest in gold and silver, since you will never be taxed on the gains. So start by determining your wealth strategy. If you would like help with this, please contact our office at 866.467.5809 and ask for Wendy, or email us at cs@provisionwealth.com. Warmest regards, Tom http://www.tomwheelwright.com/2010/01/how_do_i_convert_my_ira_to_a_r.html http://www.tomwheelwright.com/2010/01/how_do_i_convert_my_ira_to_a_r.html School of Tax Strategy Tax Roth IRA Mon, 18 Jan 2010 07:13:10 -0700 Last week in our School of Tax Strategy call on Business Start Up expenses, we got to talking about education expenses. The IRS appears to be challenging a lot of education expenses, particularly those relating to public seminars on real estate and other investments. So, I promised I would give my opinion as to how to get the best tax benefits from your seminar education expenses. Most people know about the Lifetime Learning and Hope Credits and other benefits for higher education though an accredited school. I'm not going to discuss those here. Rather, I'll focus solely on seminar expenses relating to some type of business or investing. The general rule is that continuing education is not deductible if it qualifies you for a new profession. The genesis of this rule is in people going back to school for a law degree or some other professional designation. Congress decided that becoming qualified for a new profession should not be deductible. So what about seminars for real estate and other businesses? If you are taking a class to become a real estate agent, that is clearly not deductible as it qualifies you for a new profession. On the other hand, if you are thinking about starting a new business, say real estate, then the seminars should qualify as investigative or other start up costs for the new business. These are generally amortized over 180 months once the business starts in earnest. Let me give you an example. Suppose you spent $40,000 on educational courses and another $14,000 with attorneys and accountants and others to get the business set up. Once you begin business, you can start taking a deduction of $300/month for the next 180 months (15 years). ($54,000/180 = $300). If your total start up costs are less than $50,000, then you can take a $5,000 deduction in the first year you do business and then amortize the remaining amount over 180 months. The key here is to be able to show that the courses don't qualify you for a new profession, but rather are part of your investigative costs for your new business. I highly recommend you sit down with a qualified CPA who specializes in real estate to document your seminar expenses properly. Also, your CPA should know how to make the proper start up cost elections and how to properly report your expenses on your tax return. If you would like a recommendation for a qualified CPA, please feel free to call us at 866.467.5809 and ask for Wendy. Warmest regards, Tom http://www.tomwheelwright.com/2009/12/when_is_education_expense_dedu.html http://www.tomwheelwright.com/2009/12/when_is_education_expense_dedu.html School of Tax Strategy education seminar start up costs Mon, 21 Dec 2009 10:20:28 -0700 http://www.wealthstrategyuproducts.com. Let me know if you find bookkeeping software that has the good features of Quickbooks and that you like better than Quickbooks. Especially if you find a good software that is online instead of having to load it on your computer. Warmest regards, Tom]]> http://www.tomwheelwright.com/2009/12/quickbooks_vs_other_accounting.html http://www.tomwheelwright.com/2009/12/quickbooks_vs_other_accounting.html School of Wealth Strategy bookkeeping Quickbooks reporting Thu, 10 Dec 2009 08:10:21 -0700 Ada asks the following question about the tax effects of loans between an owner and their business: Q: Could you tell me is a loan payback payment a deduction for a C-Corp so it will be excluded from the total income? A: No, a loan repayment from a corporation to a shareholder is not a deduction. The reason is that when you loaned the money to the corporation, the corporation did not have to pay tax on it. So, when it is repaid, there is no deduction. The good news is that it is not income to you either. Warmest regards, Tom http://www.tomwheelwright.com/2009/12/tax_effects_of_loans_bt_a_c_co.html http://www.tomwheelwright.com/2009/12/tax_effects_of_loans_bt_a_c_co.html School of Tax Strategy loan repayment shareholder loan Sat, 05 Dec 2009 08:34:37 -0700