http://www.tomwheelwright.com/ by Tom Wheelwright, Founder and CEO of ProVision en Copyright 2012 Sat, 04 Feb 2012 14:36:29 -0700 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss This question comes from Mel. Q: My mother added my name to her home with a quick claim deed. Are there any tax implications for me or her? A: Possibly. This would probably be considered a gift under the gift tax rules. Also, if you are making the payments, then of course you may be able to take the interest and tax deductions. You may want to consult with a tax advisor on this. If you would like help finding a tax advisor, please feel free to call our office at 866.467.5809 and ask for Siggy. http://www.tomwheelwright.com/2012/02/quick_claim_deeds.html http://www.tomwheelwright.com/2012/02/quick_claim_deeds.html School of Tax Strategy Sat, 04 Feb 2012 14:36:29 -0700 This question comes from Darren. Q: Does your company offer C.P.A. for our power team? A: Yes. Please call our office at 866.467.5809 and ask for Siggy. We would be happy to help you. http://www.tomwheelwright.com/2012/02/cpa_power_team.html http://www.tomwheelwright.com/2012/02/cpa_power_team.html Tax Fri, 03 Feb 2012 14:31:19 -0700 Q: Tom, you mentioned that the IRS allows us to chose how an LLC is treated for tax purposes. What is the best choice for a RE investor? A: Typically a real estate investor investing in buy and hold properties will want to be taxed as a sole proprietor or a partnership. This makes it easier to move money and properties in and out of the entities. Warmest regards, Tom http://www.tomwheelwright.com/2012/02/real_estate_investor.html http://www.tomwheelwright.com/2012/02/real_estate_investor.html Tax Wed, 01 Feb 2012 16:58:36 -0700 Q: I have recently purchased a single family home with the intention to live there and rent additional rooms to some friends. What are my options for depreciating the value of this property? A: You can depreciate the portion of the property that you rent out. You can either do this on a square footage basis or on a number of rooms basis. See our course on Home Office deductions for more details. The concepts are the same. You can find our course at www.wealthstrategyuproducts.com. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/depreciation_of_your_home.html http://www.tomwheelwright.com/2012/01/depreciation_of_your_home.html Tax Tue, 31 Jan 2012 16:57:13 -0700 Q: Can you address the specifics of using Quickbooks and the setup a chart of accounts that encompasses multiple entities possibly under a holding company or management company. And what about receivables and payables between these companies? A: There is a lot to discuss in your questions. I would definitely use Classes in Quickbooks to handle the multiple entities under a holding company or multiple properties under a management company. Intercompany receivables and payables need to be well documented and tracked. Not too difficult once you get used to it. For more on this, I suggest you consider working with one of our tax professionals at ProVision. You can reach us at 866.467.5809. Just ask for Siggy. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/setting_up_quickbooks.html http://www.tomwheelwright.com/2012/01/setting_up_quickbooks.html School of Tax Strategy Mon, 30 Jan 2012 16:56:04 -0700 Like everyone, I have been paying close attention to the campaign for the Republican nomination. I wanted to share some insights on the tax policy debate. I think everyone is missing the point of the debate over U.S. tax policy for a number of reasons. The candidate who actually understood U.S. policy and the good and bad of current and proposed U.S. policy would have a definite advantage in this campaign. So here goes my little tutorial on U.S. tax policy. First let’s start with the misunderstanding of Mr. Romney’s tax rate. It is not 15%. It is at least 50%. Here’s why. When a corporation earns income, the corporation pays tax at 35% on all of the income. What’s left over after taxes can then be distributed to shareholders. This is in the form of dividends which are taxed at 15%. This doesn’t count state income tax. So while the shareholder may only be paying 15% directly, he is really paying 15% plus the 35% paid by the corporation. Now let’s turn to what’s wrong with U.S. tax policy. It’s not the benefits to business owners and investors. That’s all good and works well. The tax law, as I have heard you say before, is a very efficient mechanism for promoting economic policy and even for stimulating the economy. What’s wrong is the corporate income tax structure. Our corporate tax structure is one of the primary causes of our trade deficit. A U.S. business pays 35%+ tax on all of its income, regardless of where it is earned. So, if it earns the income by shipping products to France, it still pays corporate income tax on the money. In addition, France charges a 20% VAT on imports. In contrast, when a French company exports to the U.S., it is NOT required to pay U.S. income tax AND it receives an exemption from the VAT for the value of the exports. Effectively, the U.S. company is paying a 55% tax rate on its goods exported to France while the French company is only paying the smaller French income tax on its exports to the U.S. There might be some reason why none of the candidates want to address this. I just think it’s a shame and the candidate that addressed it aggressively and in simple language could get some mileage from it. http://www.tomwheelwright.com/2012/01/debate_over_us_tax_policy.html http://www.tomwheelwright.com/2012/01/debate_over_us_tax_policy.html Tax Mon, 30 Jan 2012 13:52:38 -0700 Q: You told Harold (the farmer) that he and his wife should buy houses separately because they would be able to buy more. If they have the same pile of funds to draw upon to purchase the houses, how would they get to buy more if they did it separately and not jointly. A: Most loans for small properties, such as single family homes and duplexes, are done through Fannie Mae or Freddie Mac. Fannie and Freddie have limits on how many loans can be done through them. Let’s say you can only have 4 loans through Fannie and Freddie. If you purchase the homes as a couple, then you only get 4 loans, as each loan counts against each person. However, if Harold were to purchase properties in his own name and his wife were to purchase them in her name, in total they could get 8 loans. I was not addressing the amount of cash they have for purchasing homes, only the number of loans they would be able to get through Fannie and Freddie. http://www.tomwheelwright.com/2012/01/buying_homes.html http://www.tomwheelwright.com/2012/01/buying_homes.html Wealth Sun, 29 Jan 2012 16:54:49 -0700 Q: Speaking of deductions, is visiting our daughter out of state at the college she is attending deductable? Is it deductable as a college expense? A: No. This is a personal expense. College expenses are not deductible. There are certain credits available, though your travel to visit your daughter would not qualify for this either. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/college_expenses.html http://www.tomwheelwright.com/2012/01/college_expenses.html Tax Sat, 28 Jan 2012 16:44:13 -0700 Q: Hi Tom, Can I deduct my $8,000 Provision fee under investment expenses on my tax return? Thanks, Richard A: Yes, you can. However, there might be a better place for you to deduct this. If you have a business or rental real estate, you may get a better deduction by including it as an expense under one of these categories. Your ProVision tax strategist can certainly guide you in the right direction as he/she knows your situation much better than I do. http://www.tomwheelwright.com/2012/01/provision_expenses.html http://www.tomwheelwright.com/2012/01/provision_expenses.html Tax Fri, 27 Jan 2012 16:42:58 -0700 Q: We are embarking on our Wealth Vision, using your service. Our first call is coming up next week. We are ~40 years old and really don't have any "dreams" for down the road, beyond raising our kids. I think we have been too preoccupied to dream for ourselves. What suggestions do you have for us to get us dreaming? A: Great question. I come across this quite a bit actually. I had a student at the 3-day seminar Robert K. and I did in Sydney last fall who was 75 years old and had never done any dreaming in his life. I taught him a simple technique for dreaming. Here you go. Close your eyes. Picture that place/location where you would most want to be if time and money were not an issue. Then, think about who you are with when you are there. And what you are doing. Then, open your eyes and write this down. Most people when they do this get a very clear picture of their dream. Don’t be shy about your dream, Mark. Dreams are meant to be big and “unrealistic” in “adult” terms. Three year olds do the best dreaming. I heard of a mother who asked her daughter what she wanted to be when she grew up. Her daughter answered, “a tiger.” Now that’s dreaming. Unfortunately school and parents have a tendency to beat the dreaming out of us. The pattern for dreaming is simple, though. Start with a wish. Then, make it real in your mind. Put it down on paper. Then, determine what goals need to be achieved in order to reach the dream. Have fun with your dreams. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/our_wealth_vision.html http://www.tomwheelwright.com/2012/01/our_wealth_vision.html Wealth Thu, 26 Jan 2012 16:50:40 -0700 Q: Hi Tom, I am about 3/4 of the way through your School of Wealth Strategy course and have developed my wealth vision and determined I would like to invest in real estate. However, I am currently stationed overseas with the US military and do not wish to invest in foreign real estate. It will be about two years before I am back in the US and ready to actively invest. What can I do until then to advance my dream line and make me more prepared before I start actively investing? Should I start creating a wealth team including paying for a wealth coach and legal entity before I have any investment income? What are some typical shortfalls you see in clients who are seeking wealth coaching for the first time? A: Congratulations on your decision and commitment to building your wealth. I definitely suggest you build your wealth team as soon as possible. The reality is that you don’t have to be in the U.S. to invest here. You just need a good team in place along with the internal controls, agreements and systems you put into place. I strongly recommend speaking to my team at ProVision for a good wealth coach. You can contact them at cs@provisionwealth.com. The biggest mistakes I see with clients are not getting their team in place and thinking that they need to do everything themselves. Wealth building is all about leverage and the most important leverage is using other people’s time and talents. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/what_can_i_do_to_advance_my_dr.html http://www.tomwheelwright.com/2012/01/what_can_i_do_to_advance_my_dr.html School of Wealth Strategy Wed, 25 Jan 2012 16:48:20 -0700 Brian sent in a question asking whether business start up expenses can be deducted. The answer is yes. The question is when. This year, up to $5,000 can be written off in the year you begin business with the remainder amortized (deducted) over the next 15 years. For more on this topic, go to www.wealthstrategyuproducts.com and sign up for our start up expense module under our Tax Products. Warmest regards, Tom http://www.tomwheelwright.com/2012/01/start_up_expenses_1.html http://www.tomwheelwright.com/2012/01/start_up_expenses_1.html Business Strategy Tue, 24 Jan 2012 16:52:41 -0700 Q: Hi Tom, My husband Josh and I are students of Robert Kiyosaki's Real Estate Investment coaching program and just finished our Wealth and Tax Coaching program with ProVision. We have found the tax coaching portion quite enlightening and had a few questions for you. Question 1: We are in the process of setting up our holding LLC with Garrett Sutton's office. Our wealth coach recommended that we set up subsidiary LLCs in the states that we acquire real estate. Do you recommend that we set up the subsidiary LLCs ourselves, use an attorney, or go through any other intermediary? Thanks for your help! A: I would suggest you use Garrett’s office for everything. That way you make sure that you have all of the details taken care of properly and your LLC’s function legally the way you want them to. Question 2: We plan to primarily use seller financing to acquire multi-family real estate and transfer the property into a subsidiary LLC under the holding LLC. These acquisitions typically have a balloon payment built into the financing agreement. Would we run into any issues refinancing the property under the LLC with an institutional lender? A: Yes you would. So the answer is that before you do the refinancing, you retitle the property to your personal name, do the refi, and then transfer the properties back into your LLC’s. http://www.tomwheelwright.com/2012/01/llc_set_ups.html http://www.tomwheelwright.com/2012/01/llc_set_ups.html Business Strategy Tue, 24 Jan 2012 16:35:50 -0700 One of the great aspects of limited liability companies (LLC’s) is that we get to choose how they should be taxed. So, we can get all of the great asset protection from an LLC and still choose to be taxed as a sole proprietorship, partnership, S corporation or C corporation. Paula just had her LLC’s set up and is now asking this question: Q: Tom we created 2 LLC's. One in the state of Fl and the other in WY. The WY LLC is the Manager of the Fl. LLC and my husband and I are the managing members of this WY LLC. Garret structured both entities for asset protection purposes thus I want to ask you, the tax expert: How does these entities should be taxed? FYI, the Fl LLC is for investing and holding RE (for passive income purposes) and is the pass through entity. The WY LLC is for distribution when the time comes (Fl. LLC provides a little over a thousand in cashflow and is owing us the properties and initial expenses in cash and personal credit). Should we tax them both as a S corp.? A: I don’t know. I’m a little confused about how you are using the LLC’s and what your plans are for future investing. My suggestion would be to develop a tax strategy with a qualified tax strategist (CPA) as soon as possible. A tax strategist will ask you many questions about your business, your goals and your personal situation to determine the best use of these entities. As a general rule, I prefer to have ProVision clients do their tax strategy before they do their asset protection strategy. The reason is that we may recommended different entities or changes to the entities that will require additional work from your attorney. You can avoid this additional legal expense by doing the tax side of your tax and asset protection strategy first. That said, it’s not to late for Paula. She simple needs to sit down with a qualified CPA and develop her tax strategy. This strategy will allow her to reduce her taxes for decades to come. If you would like help finding a good tax strategist (CPA), please feel free to contact our office at cs@provisionwealth.com and we would be happy to refer you to someone. Warmest regards, Tom http://www.tomwheelwright.com/2011/12/how_should_entities_be_taxed.html http://www.tomwheelwright.com/2011/12/how_should_entities_be_taxed.html Tax Fri, 16 Dec 2011 11:01:01 -0700 One of the biggest challenges for those starting out in real estate is financing their real estate purchases. Banks prefer to lend to individuals, not entities. And they want to see as much income as possible so they can be assured their loan will be repaid. From the investor side, the investor wants to maximize the number of properties he/she can purchase with cheap bank financing. In our last Ask Tom Live call, I mentioned to Harold that he and his wife should purchase their properties separately instead of jointly. June wants to know why. Q: You told Harold (the farmer) that he and his wife should buy houses separately because they would be able to buy more. If they have the same pile of funds to draw upon to purchase the houses, how would they get to buy more if they did it separately and not jointly. A: Most banks want to qualify their loans under the FHA rules. FHA guidelines restrict the number of loans held by any one borrower. If you purchase the homes jointly, you are both charged with the loans. So, you can effectively double the number of homes you can buy using cheap bank financing simply by purchasing them in the name of a single spouse. Of course, you still have to meet the income requirements of the bank, but for many couples this is a fairly easy test to meet for each spouse. So we suggest you always purchase the properties in the name of one of the spouses to maximize the use of cheap bank financing. Warmest regards, Tom http://www.tomwheelwright.com/2011/12/buying_single_family_homes_as.html http://www.tomwheelwright.com/2011/12/buying_single_family_homes_as.html School of Wealth Strategy Thu, 15 Dec 2011 10:56:39 -0700