Ken Wheeler Jr.'s
experience
includes 15 years as a commercial contractor constructing
buildings and agriculture business facilities in the
Midwest. 25 years was as a business broker and financial
advisor including 37 years as a real estate broker involved in assisting business and property owners
to sell, merge or acquire (mergers and acquisitions) and
fund (investment banking). Consistently had challenges to
transfer ownership and maintain wealth. The end goal
challenge generally included an efficient tax and estate
plan. Not a CPA, but work with CPAs and tax attorneys for
asset plan. A CPA and attorney are much like a doctor.
Unless one can tell them where it hurts many can volunteer little. What CPAs,
tax advisors and attorneys tell us is within the scope of their practice that
generally does not work extensively with property transfer tax code.
Experience here is with transferring property and keeping our money,
i.e. saving tax money within the tax code. A CPA/tax advisor
generally knows their client’s tax details best. We can be an assistant to
tax advisors, real estate professionals and a client to minimize taxes when it is a goal.
We do not market
annuities, insurance or list real estate or businesses. We may, with client
request or
permission, refer to those who
do.
Step up Basis at Death - The
Ultimate Death Tax Exclusion Real estate and most
property of value advantage the step up basis
transferring to beneficiaries at current value at death
of owner. In many situations beneficiaries can sell and
owe no tax. Note: Annuities, qualified plans (as IRA,
401k, SEP) and non-qualified (annuities) plans are not
included.
CPA recommended.
****Internal
Revenue Code (IRC) §199Aalso known as the “Pass Thru Deduction”
for QSI (Qualified Business Income).There is Now a Deduction for up to 20 Percent of the
Qualified Business Income of Pass Through Entities.
The Act establishes a new deduction for owners of pass
through entities that may enable those owners to deduct up to 20 percent
of their qualified business income. This deduction is effective for
taxable years beginning after December 31, 2017, but expires in taxable
years beginning after December 31, 2025.
IRS Safe Harbor rule (Revenue
Procedure 2019-38 PDF ), CPA recommended.Avoid the
Stealth Tax
See more at
1LessTax or go
HERE
**IRC §121Residence Gain Tax Exclusion
allows two year plus owner
occupancy of residence a $250,000 gain exclusion. If
married spouse can add another $250,000 exclusion
for maximum $500,000 gain exclusion. Over
the $250k/$500k gain exclusion may consider the Energy
Rehab Acquisition or Exchange as an IRC
§1031 replacement property
to tax defer balance of gain.
CPA recommended.
IRC §1031
Tax Deferred Exchange Updated as of
2018, relinquished real property (real estate) only. IRC§1245 (personal property) now not exchanged. Exchange
Accommodator/Intermediary is necessary. Guided by time
limit, replacement property & other significant rules.
CPA recommended.Avoid the
Stealth Taxwww.1031FEC.com
IRC§1033 Tax Deferred Exchange
is for Government
acquisition of real estate by eminent domain. Exchange
Accommodator/Intermediary is not necessary. Guided by
two year time limit and other significant rules. CPA is recommended.
www.1031FEC.com
IRC§721 Tax Deferred Exchange also known as the UPREIT. For
an Real Estate Investment Trust acquisition, one
§1031 exchanges into a qualified replacement property
owned by a REIT then into the REIT in an unspecified time. The transfer
into the REIT converts to REIT shares that may be sold
in partial with deferred tax due.
CPA recommended.
IRC §1045
Qualified Business Stock Exchange(aka business
§1031 but better)Qualified Business
is key. Exchange
stock or into qualified business stock. Business
must qualify, is not publicly traded, is not a finance,
real estate, bank, hotel, restaurant, medical with
doctors, attorney or insurance company. Can be an
affiliated service business. Manufacturers,
distributors, retail and service companies are popular
candidates when owned over six months from date business or part of
business acquired. Specialized Attorney and CPA
recommended. Bloomberg
Article
American
Bar Association 1202 Article
IRC §179
has been amended to include types of building
improvements.
Ceiling
was increased to $1,000,000 for tax years beginning
after 2017, with the phase-out beginning at $2,500,000
of qualifying assets placed in service. Avoid the Stealth Tax.CPA recommended.
See more
at 1LessTax
*IRC
§1245 & §179
new or rehab special
building acquisition Generally Agriculture,horticulture and other
single purpose buildings. (advantageous tax code opportunity for any
property including ordinary income) IRC §179 (§168)
new/used equipmentPotential 100% immediate
deduction of any proceeds. CPA recommended.
www.PayNoTax.biz
IRC§469
Managed Passive
Investment Tax Exclusion - Energy Rehab Acquisition
(an advantageous tax code for
including ordinary and all incomes). 100% deduction for deferral. Potential 90% immediate deduction of any
proceeds. Potential IRC §1031
sale tax deferred to qualified replacement property. CPA recommended.Avoid the Stealth Tax.www.PayNoTax.biz
IRC§453
Installment Contract Sale(for some property one can delay paying capital gains,
not always depreciation recapture tax) over a period
of time (deferral). Any amount acceptable as efficient to parties. Attorney and CPA
recommended.
IRC§453TDCO contract for most
property and businessses; reinvest in all assets or keep proceeds.
Depreciation recapture is a
challenge. $1M+ minimum gain or acceptable proceeds to
owner. Tax Deferred,
Cash Out. Energy rehab for potential recapture tax
deferral. Specialized Tax
Attorney & CPA recommended.
IRC
§1202 QSBS Qualified Business Stock Sale Creating Small Business
Jobs Act of 2010 (improving 1993 Act) increased the gain exclusion to 100% of
the total gain for all QSBS issued after September 27,
2010. Each investor $10M or 10 times the aggregate adjusted QSBS
limit. Two million corporations. Some qualify. Combine
with QOZ? Trusts? Estate Plan? Specialized Attorney & CPA
recommended. American
Bar Association 1202 Article
Bloomberg
Article
ABA 1202
Sales Proceeds
Trust SPT Monetized IRC
§453
Contract Sale requires
third party trustee-for most property. Must reinvest in
business investment (the goal is to place proceeds into
insurance securities products continuing inflexibility). Depreciation recapture
is a challenge. $1M+ or acceptable to
owner. Specialized Tax Attorney & CPA recommended.
KW does not
recommend.
Deferred Sales
Trust (Legacy Plan Contract)
DSTSimilar to above.Proceeds to a
managed trust paid out over time. Included in estate.
Avoid probate for all property-assets. Prevent
beneficiary conflict or heirs challenged at handling
money. Specialized Tax Attorney & CPA recommended.
KW does not
recommendunless insured as
Legacy Plan Contract.
See
www.LegacyChange.com
Health Savings Account (HSA)
Better than an IRA? Medical, dental, vision care are
deductible before taxation.
Maximum
contribution is up $50 to $3,550 for individuals and
$100 to $7,100 for families. Maximum catch-up
contributions for people over age 55 remain at $1,000. Health
account options: HSA (Health
Savings Account); FSA (Flexible Spending
Account/Arrangement); HRA (Health Reimbursement
Arrangement).
HSAsare
tied to high-deductible health plans (HDHP). HDHPs are
defined as those plans that have a minimum deductible of
$1,350 for individuals or $2,700 for a family.
Avoid the
Stealth Tax. www.PayNoTax.biz
&
www.LegacyChange.com
Individual Retirement Account (IRA-ROTH IRA,
SEP, Individual (Solo) 401k-ROTH 401k,
Solo or full Defined
Benefit & more) Move Qualified Retirement
Plan into real and personal property.
Learn
how to enhance most highly taxed and popular supposedly tax deferred
and conservative savings products with tax reduction.
(Energy
rehab deferral and §1031 tax deferral has death
step-up valuation and estate asset advantages). Stretch
IRA gone. Misses the death tax
exclusion.CPA recommended.
Avoid Stealth Taxwww.PayNoTax.biz
&
www.LegacyChange.com
Non-Qualified
Retirement Accounts
Includes
various
annuities and variable annuities for tax deferral
ranging from low risk to extremely high risk tax
deferred plans. Highly taxed at any
transfer including death.
Misses the death tax
exclusion.Avoid Stealth TaxWe do not market insurance
or annuities. CPA recommended.
www.PayNoTax.biz
&
www.LegacyChange.com
LegacyChangeIRC§453
+ More IRS Code for Immediate Tax Deduction.
AKA
Grace Income Plans for insured Income
shifting.
Insured guaranteed
income LegacyChange Plan. Immediate tax
deduction relief with insured income stream. Change illiquid assets as land to income.
Partial gifts to your favorite causes.
Avoid probate for all property-assets. Prevent
beneficiary conflict or heirs challenged at handling
money. Replacement as an economical,
simplified Charitable Trust
or Deferred Sales Trust
but with insured guaranteed
income. Generally for property-asset holders $100k-$20M+/-.
LegacyChange Plan Basics
Grace
or charitable
bargain sale with installment contract (reinsured).
LegacyChange Plan acquires asset (by option contract)
LegacyChange Plan divests (sells)
with
non-profit tax advantages.
LegacyChange Plan pays seller with an insured income
installment contract.
Split
interest transaction (multiple interest beneficiaries
for non-profit)
Tax Deed*** with
IRS
Gifting Code Tax
deed at
auction can legally
transfer ownership to the buyer of a property that has been sold due to
delinquent taxes. In a tax
deed sale,
the property itself is sold. Unwanted property can be
valuated and gifted for tax deduction.
CPA recommended.
Avoid the
Stealth Tax.
See more at
1LessTax
Opportunity Zones
QOZ
New program allow one to
defer, reduce and eliminate capital gains taxes. Invests
in areas where locations are deemed challenged for
business growth. May be in a fund. 10 years to maximize
deferral. Combine with 1202? Estate plans? Trusts? CPA recommended.
Revocable Trust
with Pour Over Will 2/3 of us have no will or plan.
Financial Power of Attorney, Health or Living Will
verses will or no will. With will. you, probate and
government jave estate control, or out of control time and
expense. Testamentary trust inside of will? Stirpes
verses per capita? POA, Living Will? LLC, C Corp,
S Corp, Life estate, land trust advantages, popular
titling errors. Attorney & CPA
recommended. PPL-LS?
Combine with?....
Irrevocable
Pure Grantor Trust as a
revocable living trust, you are the creator (grantor)
and the person in control of the property (trustee). One
is a lifetime beneficiary to income only or living in a
trust property. Other people one names, are lifetime
beneficiaries of the assets plus are usually death
beneficiaries.
Anything one transfers
into the trust is immediately protected from creditors
and predators. After five years,
trust assets are invisible to Medicaid.
Assets at your death are included in your
estate. Your beneficiaries receive stepped-up cost
basis.
Estate attorney recommended.
Life Insurance
Irrevocable Trust Bypass estate tax limits tax
free to fund estate tax owed
over Federal
or state limits or other goal. Experienced Attorney and
CPA recommended. www.LegacyChange.com
Eternal or Perpetual Trust, Self-insurance,
Real Estate Easement Plans with
Advanced Tax-Estate Planning.
Irrevocable. For Affluent, Married $23.16M,
Individual $11.58M or as acceptable to owner. Specialized Estate/Tax Attorney
& CPA
recommended.
www.EternalLegacyTrust.com
Avoid the
Stealth Tax!
Have proper Tiltling!
Be aware of Death Tax Exclusion
*Note: An IRC
§1245 "storage facility" differs from a
non-Section
§1245 building in that the latter may contain a work area in
addition to its storage function and may reasonably be adapted to other
uses. Qualifying
§1245 structures cannot contain work areas
except as necessary to care for the livestock, plants or their produce
or to maintain the structure and equipment. For example, having a cash
register inside a greenhouse for handling sales to the public would
disqualify the structure as a
§1245 single purpose structure.
**Note: IRC
§121
$250k/$500k gain exclusion may choose to use the Energy
rehab exchange or acquisition for the balance of the gain.
By the end of 2019, over $15 trillion worth
of inheritance will pass through the probate courts in America. The #1
asset sold first is the real estate. We inform and can assist for
efficient transfer of asset ownership.
Currently
three trillion $
in annuities in USA. 95% are left to heirs. Gain is taxed ordinary
income (now 37% top bracket) plus any state/city tax. Spouse is not
excluded so is taxed at one's death or transfer. Consider energy rehab acquisition.
Your personal
and business CPA/Tax Adviser is always
recommended for your primary tax consultant.
Recommend an
experienced tax and legal advisor who can know you and your
specific situation, local to your property area and
jurisdiction. If one does not have a personal business legal
adviser we can recommend attorneys in all 50 States.
Other common business considerations
could include inexpensive comprehensive liability insurance umbrella and
other life and disability protection.
Senior Delights
2020 rules push retirees into
higher tax brackets, resulting in many having 85% of their
Social Security benefits taxed as well as many being
penalized by tax for higher Medicare premiums.
Deduction of Medicare Premiums for the Self-Employed;
Folks who continue to run their own
businesses after qualifying for Medicare can deduct the
premiums they pay for Medicare Part B and Part D, plus the
cost of supplemental Medicare (medigap) policies or the cost
of a Medicare Advantage plan.
This deduction is available whether or not you itemize and
is not subject to the 10% of AGI test that applies to
itemized medical expenses. One caveat: You can't claim this
deduction for premiums paid for any month that you were
eligible to be covered under an employer-subsidized health
plan offered by either your employer (if you have a job as
well as your business) or your spouse's employer (if he or
she has a job that offers family medical coverage).
A College Credit for Those Long Out of College;
College credits aren't just for
youngsters, nor are they limited to just the first four
years of college. The Lifetime Learning credit can be
claimed for any number of years and can be used to offset
the cost of higher education for yourself or your spouse . .
. not just for your children.
The credit is worth up to $2,000 a year, based on
20% of up to $10,000 you spend for post-high-school courses
that lead to new or improved job skills. Classes you take
even in retirement at a vocational school or community
college can count. If you brushed up on skills in 2019, this
credit can help pay the bills. The right to claim this
tax-saver phases out as income rises from $58,000 to $68,000
on an individual return and from $116,000 to $136,000 for
couples filing jointly.
Social Security Tax; if you're self-employed and
have to pay the full 15.3% tax yourself (instead of
splitting it 50-50 with an employer), you do get to write
off half of what you pay. Plus, you don't have to itemize to
take advantage of this deduction.
General Business
Operating Procedure
When someone asks for personal information of any kind
please keep in mind you can ask the same of the person or
entity who is asking you, and should do so. Why would one do
business with an unknown?
Have you had people ask for your financial statement?
Ask for their current financial statement.
Especially when anyone is asking for your funds or any
business transaction that could affect your funds, this
should be a common response by you along plus ask for
references from past business clients and associates. Then
one checks the references that have a known legitimate
presence.
Otherwise, it is as purchasing anything without proof of
title or proven position from an unknown person or entity.
After business people are proven legitimate and doing
business in a proper and legal manner, then there is the
normal risk of doing business.
If anyone does not wish to prove their qualifying business
existence that is the first big flag to move on.
Recommend one purchase a subscription to a background
checking service. There are many online.
For one who qualifies with real property real estate we have
replacement properties for 1031 tax deferral. Some are rehab
commercial property. Some are new 15-20-year absolute leased
high-end income properties leased to tenants with positive inflation
and recession resistance. This is accomplished by location and type
of business.
Rehab
(rehabilitated, improved or reworked properties generally have the
option or plan to divest within two-three years rolling into another
wealth building property. They may or may not have an option for
deferred income.
The energy
rehab properties are with known management and rework operators. As
with any venture recommend new associates have references for
experience and integrity. For energy rehab my choice is a CPA firm
that has a business end with consulting and actual rehab projects
they manage. Former Deloitte CPAs, they have decades experience in
oil & gas operations and taxation. This can be the resource for
clients and CPAs to advantage the most prolific tax advantages in
the US tax code. Their experience includes years of alternatives to
be tax efficient.
The energy
rehab property minimum entry income properties are $100k and more. The property
is producing oil & gas. The goal is to buy low, improve the production
and income rolling into another or 1031 out to different qualified
property. One receives recorded ownership document allowing
divesture when desired with a two-three divest year goal. There can
be sheltered income options. Each associate has their personal tax
plan and goals. One can build with one’s own tax protected annuity
with periodical tax-deductible contributions. Up to $5M or more of
acquiring an energy rehab property one potentially deducts 100% of
any income, gain, depreciation recapture, investment or ordinary,
personal, real estate or business asset proceeds with a 15 year loss
carry forward.
We include a
non-disclosure confidentiality document for doing business. We are
searching for long term integrity associates with common goals.
Look forward to knowing you and your goals.
1LessTax.com – Ken Wheeler Jr. Sample Tax Scenario
Avoid
the Stealth Tax.
Funding of property or
asset (BASIS): $200,000.00
Divest or sell
for: $300,000.00
Gain or
Profit $100,000.00
TAXABLE
$100,000.00
For an
energy rehab $100,000.00 is the prime amount to deduct so is the
first amount to consider to transfer to the energy rehab property.
One does
not have to transfer the complete amount as in a 1031 qualified
exchange or other defer/deduct methods.
The
energy rehab property is real property so when one divests one can
choose any other business property to defer tax with the 1031 rule
or refund into another energy rehab property with or without basis,
deducting all.
With the
right people one can have as an energy property annuity to receive
and deduct most income and proceeds from any transaction.
Income for which services have been performed. This includes
wages, tips, salaries, commissions, and income from
businesses in which there is material participation.
Passive Income
Most types of passive income are derived from real
estate/property, while other types of passive income are
derived from royalties from patents or license agreements.
An income stream falling into this category is one where
money is received usually on a regular basis, where no
additional effort has taken place. Most passive income
streams require great effort to start with.
Some examples: Interest Income paid from bank deposits,
rental income from real estate/property., royalties from
writing a book, dividends from shares holding.
Another example of passive income come from network
marketing.’
Passive income flows to you or your family whether you are
sick, or vacationing, or dead. Passive income streams allow
you to make money without having to be there.
Note:
§469 only exception below.
Portfolio Income
Portfolio income is income from investments, including
dividends, interest, royalties, and capital gains. I would
say that portfolio income is a subset of passive income.
Many owners wish to sell from management intensive
property to fully managed and less risk foundation income property that is
held for the step up basis allowing beneficiaries to sell with no tax.
Note to owners of real estate in different states may
have estate and /or income tax
for property in a state other than the state of residence
that may have no estate (inheritance) tax or state income tax. DST
investments owned by an out of state owner hopefully are located in states
without estate tax and gain tax capture or owner in for a surprise.
The U.S. states that collect an inheritance tax as of 2020 are Iowa, Kentucky, Maryland, Nebraska, New
Jersey,
and Pennsylvania.
Each has its own laws dictating who is exempt from the tax, who will have to
pay it, and how much they'll have to pay.
****IRC Section
§199A aka the “Pass Thru Deduction”
There is Now a Deduction for up to 20 Percent of the
Qualified Business Income of Pass Through Entities
The Act establishes a new deduction for owners of pass
through entities that may enable those owners to deduct up to 20 percent
of their qualified business income. This deduction is effective for
taxable years beginning after December 31, 2017, but expires in taxable
years beginning after December 31, 2025.
The special Code Sec.
§199A deduction is available not
only for individuals but also for trusts and estates. In combination
with the reduction in individual income tax rates, taxpayers eligible to
claim the full 20 percent deduction will face an effective maximum
marginal federal income tax rate of 29.6 percent (plus, the Medicare tax
on unearned income, to the extent applicable) on their eligible pass
through entity income.
In calculating qualified business income, capital gain
income is excluded. As a result, no material deduction would be
available to a taxpayer owning rental real estate if there is little or
no net income generated over the property’s holding period and the only
material income is the gain recognized on the disposition of the
property.
IRC (Code Section)
§179 was amended to make the following types of building
improvements
These building improvements are
not normally within the definition of qualified
improvement property because they are a structural
component of a building — eligible for Code
§179
expensing: (i) roofs, (ii) heating, ventilation, and
air-conditioning systems, (iii) fire protection and
alarm systems, and (iv) security systems. The Code
§179 ceiling was increased to $1,000,000 for tax
years beginning after 2017, with the phase-out
beginning at $2,500,000 of qualifying assets placed
in service.
It is always time to remember important year-end planning.
One has to take action before year-end if one wishes the "de minimis safe
harbor election" (one probably wants it)
in place for 2020 to "expense" assets costing $2,500
or less.
The following are four benefits of this safe harbor:
1.Safe harbor expensing is superior to
§179 expensing because you don’t have "recapture"
(i.e. - the need to "pay back" the expense if you
stop using the asset).
2.Safe harbor expensing takes depreciation out
of the equation.
3.Safe harbor expensing simplifies your tax and
business records because you don’t have the assets
cluttering your books.
4.The safe harbor does not reduce your overall
ceiling on Section 179 expensing.
Safe harbor example: One has a
small business that elects the $2,500 ceiling for
safe harbor expensing and purchases two desks costing
$2,100 each. The invoice states the quantity
“two” at the total cost of $4,200, plus sales tax
of $378 and a $200 delivery and setup charge,
totaling $4,778.
Before this safe harbor, one would have capitalized
each desk at $2,389 ($4,778 ÷ 2) and then either
Section 179 expensed or depreciated it. You would
have maintained the desks in the depreciation schedules
until disposed.
With the safe harbor, one expenses the
desks as office supplies. This makes the tax event easier.
To benefit from the safe harbor, one and tax
preparer do a two-step process as this:
Step 1.
For safe harbor protection, one must have in place
an accounting policy—at the beginning of the tax
year—that requires expensing of an amount of your
choosing, up to the $2,500 or $5,000 limit.
Step 2.
When preparing your tax return, one chooses the
election on your tax return to use safe harbor
expensing. This requires attaching the election
statement to your federal tax return filing the tax return by the due date (including extensions).
If one wishes to use this safe harbor for next year,
Step 1
needs to be completed in the current year.
***Tax Deed Purchase
Can Have Tax Advantage When Property Owned Deemed Unwanted
A tax
deed can legally
transfer ownership to the buyer of a property that has been sold due to
delinquent taxes.
... In a tax
deed sale,
the property itself is sold. The sale which
occurs through an auction has a minimum bid of the amount of back taxes owed
plus interest, as well as costs associated with selling the property.
The highest bidder now has the right to collect the liens, plus
interest, from the homeowner. If the homeowner can't pay the liens, the
new lien owner can foreclose on the property. In a tax
deed sale,
a property with unpaid taxes is
sold in its entirety, at auction.
When you
buy a tax lien
certificate, you're buying the
right to receive a debt payment, not the deed to the house.
The homeowner is still the legal owner of the home. If he does not pay the tax debt,
then you
can foreclose.
But you cannot buy a tax lien,
turn around and foreclose on the property the
next day.
Tax Liens do not eliminate the mortgage(s)
attached to the property.
Tax Sales do not remove Assessment
or IRS Liens (government liens), if they are attached to the property.
Investors buy
the liens in
an auction, paying the amount of taxes owed
in return for the right to collect back that money plus an interest
payment from the property owner. ... Ownership of the property rarely happens: The taxes are
generally paid before the redemption date. The interest rates make tax
liens an
attractive investment.
When tax deed purchase lead to clear deed ownership, property can have
development advantages. Environmental situations are to be considered if
only land or land with improvements.
If one wishes to have a professional valuation of an owned deed from a
tax sale, the valuation could be valuable if one contributes the deed to
a charity, government or entity who will accept title. The valuation could be much
more than the purchase and valuation expense allowing a tax deduction for the
contributed valuation.
An installment sale is a sale of eligible property where one
receives at least one payment after the close of the taxable
year in which the sale occurs.
If
one has a profit on an installment sale, one reports part of
your profit when one receives each payment.
One
documents the buyer’s obligation to make future payments, with a
deed of trust, note, land contract, mortgage, or other evidence
of the buyer’s
debt. One should secure the debt.
Although one can’t use the installment method to report a loss,
one can choose to report all of your gain in the year of sale.
Installment
Sale Advantages
An
installment sale offers a number of advantages for you as a
seller, as well as for your buyer:
1.
One can negotiate the sale without the need for the buyer
to pay the full sale price when one finalizes the sale.
2.
One can finalize the sale agreement without waiting for the
buyer to qualify for third-party financing.
3.
One can tailor the terms of the sale to meet needs without
having to get approval from a third-party lender.
4.
One can defer taxes on gain, and potentially pay a lower
tax rate in a later year.
5.
The buyer receives full basis in the property.
How
Is an Installment Sale Reported?
Payments
that received from an installment sale consist of three parts:
1.
Interest
2.
Taxable part (gain or profit)
3.
Non-taxable part (return of basis)
Each
year one receives a payment, one pays taxes on the interest and
taxable part. The part of the payment allocated to your basis is
ot taxable.
Basis
is the amount of your investment in the property for installment
sale purposes.
After
one determines how much of each payment to treat as interest,
one next determines the taxable portion of the remaining
payment.
No Installment Sale in These Instances
There
are certain types of property and transactions for which the
installment method cannot be used, such as:
The sale of inventory consisting of personal property. But this
rule does not apply to property used or produced in farming.
The sale of real property held for sale to customers in the
ordinary course of a trade or business.
Dealers of timeshares & residential lots can treat certain
sales as installment sales & report under the installment method
if they elect to pay a special interest charge.
·The
sale of stock or securities traded on an established securities
market.
·The
sale of depreciable property to a related buyer, unless you can
show to the satisfaction of the IRS that the sale was not made
for tax avoidance.
Tax Reduction To Enhance Annuity, IRA and 401k Ownership
For IRA, 401k, annuity
and other retirement plan owners.
Most plan owners do not
realize retirement plan and annuity ownership transfer is subject to the highest
Federal and state tax rates. Annuity taxation is immediate
unless in qualified plans. Learn
how to enhance most highly taxed and popular supposedly tax
deferred and conservative savings products with IRS tax codes for
tax reduction.
Maintain the tax deferral plus add tax deductibility, as a LegacyChange plan and other
available tax advantages
to this conservative savings instrument.
We do not market or sell
annuities or insurance products. Our goal is to assist to
significantly reduce the massive
taxation of these assets.
Contact us
Avoid the Stealth Tax
ANNUITIES
How Long Will Payments Last?
A major consideration is
if one wishes risking losing a
significant portion of your investment to the annuity company if you
die before receiving enough payments to justify the annuity
purchase. There are options.
These options include:
Single Life/Life Only
Lifetime of payments but no survivor benefit.
Life Annuity with Period Certain (Fixed Period/Guaranteed
Term)
Minimum period of payments - even after death of buyer -
with remaining payments to beneficiary.
Joint and Survivor Annuity
Payments last life of both spouses.
Lump-Sum Payment
Entire annuity paid at once with heavy tax burden.
Systematic Annuity Withdrawal
Amount and frequency of payments customizable.
Early Withdrawal
Withdraw before 59 1/2, pay 10 percent in taxes. 72T
IRA Withdrawal
Rules have minimum required distributions after 72 with
a10 year disbursement requirement for beneficiaries receive
all.
Limitations
Some annuities limit choices.
Single Life/Life Only
Also known as a straight-life annuity, this choice allows you to
receive payments your entire life. Unlike some other options that
allow for beneficiaries or spouses, this annuity is limited to the
lifetime of the annuitant with no survivor benefit. The risk is you
will die before getting all or most of your money back. You can
limit the possible loss here by choosing a life annuity with period
certain.
Life Annuity with Period Certain (Fixed Period/Guaranteed Term)
Period certain annuities are the same as a straight-life annuity,
but it includes a minimum period the payments will last – say 10 or
20 years – even if the annuitant dies. If the annuity holder dies
before the end of the period, the payments for the rest of that time
will go a beneficiary or
the annuitant’s estate. Adding the period certain will cost you,
lowering the amount of your monthly payments.
Joint and Survivor Annuity
Also known as a joint-life annuity, a joint and survivor annuity
guarantees payments will last the lives of both the annuitant and
another person, typically a spouse. This choice reduces the amount
of each payment you receive with a life annuity or a life annuity
with period certain. You can also elect to include a period certain
with a beneficiary receiving payments if both you and your spouse
die before the end of the period.
Lump-Sum Payment
This option allows the annuitant to receive the entire worth of the
annuity at one time. This can increase the tax burden substantially
by requiring taxes all be paid in that year.
Systematic Annuity Withdrawal
In this method, you choose the amount of the payments and how many
payments you want to receive. This option does not include a
guarantee it will last your entire life. It is entirely dependent on
the amount of money in your annuity account.
Early Withdrawal
If you elect to withdraw money from your annuity before you reach
the age of 59 ½, you will have to pay a penalty of 10 percent to the
government, in addition to whatever taxes
you owe on the money. If that withdrawal is within five to seven
years of purchasing the annuity, you may also owe the annuity
provider a surrender charge of as much as 20 percent, depending on
how much time has passed since the purchase.
Death Benefit
Your annuity contract may include a provision for a death benefit
for a beneficiary you designate. Usually, the payout for the
beneficiary will be the contract value or the amount of the premiums
that have been paid.
TIP
If
you are the non-spouse beneficiary or spouse beneficiary of an annuitant who has died,
you have a few different options to receive payment from a
nonqualified, deferred annuity unless the annuitant has arranged
otherwise.
Five Year Rule
One involves invoking a requirement that all the money in the
annuity must be distributed within five years of the annuitant’s
death.
Beneficiary Life Expectancy
The beneficiary may also choose to have the money distributed
according to his or her life expectancy. The life expectancy is used
to calculate the minimum amount the beneficiary must withdraw each
year.
Survivor Annuitization
And finally, the beneficiary may choose to annuitize the funds. This
means the annuity becomes a guaranteed stream of income for the
beneficiary. This can use the single-life or term-certain options
described above.
Do Annuities Have Declared Dividends?
Annuities are different than stocks and do not have the same
structure. With stocks, you have public corporations with boards of
directors that decide to declare a dividend for payments to
shareholders from company profits. Annuity payments are either fixed
ahead of time or tied to the performance of an index or stock
portfolio.
We do not market or sell
annuities or insurance products.
Significantly reduce the massive taxation of these assets.
Avoid the
Stealth Tax.
About Life Insurance Settlement
Contracts
Minimum policy benefit
$500,000 (preferably $1M+) No maximum policy
benefit 60 Years of age + with
impairments 70 Years of age + without impairments
All types of policies Less than
12 Years life expectancy The amount paid into
the policy (the tax basis)
is tax-free.
Proceeds greater than the tax basis,
but less than the cash surrender value, are taxed at
ordinary income rates. Any remaining amount is subject
to capital gains tax. CPA & tax
attorney recommended!
We do not market
annuities, insurance or list real estate or businesses.
We may, with client
request or
permission, refer to those who
do.
What is a 529 Plan?
A 529 Plan is a savings vehicle designed
specifically for higher education expenses. The name “529” comes
from Section 529 of the federal tax code, which authorizes
states to offer the plans. There are two types of 529 Plans –
Prepaid and Savings, and both Prepaid Plans and Savings Plans
are authorized 529 college savings plans. Earnings in 529 Plans
are tax-free when they are used for Qualified
Higher Education Expenses. In general,
qualified expenses include tuition, fees, room and board, and
the cost of books, supplies and equipment required for the
enrollment or attendance at an Eligible
Educational Institution, including
undergraduate, graduate, and vocational/technical schools.
What is the difference between a Prepaid Plan and
a Savings Plan?
A Prepaid Plan is basically a prepackaged college
savings plan covering specified college costs in the future.
Prepaid Plans simplify saving for future college costs. You do
not have to worry about how much to save, when to save or how to
invest with a Prepaid Plan. Simply pick a plan, make your
payments, and when your student is ready for college, the plan
pays for the costs covered by the plan. The Prepaid Plans
offered by the Florida Prepaid College Board are guaranteed by
the State of Florida, so you can never lose what you’ve paid
toward the plan.
A Savings Plan allows you to develop your own
plan to save for college. You decide how much you want to save
and when you want to save. You also get to choose how you want
to invest your savings using the investment options offered by
the plan. When it comes time for college, you use your savings
to pay for actual college costs at that time. Savings Plans are
not guaranteed, so the value of your investment is subject to
market fluctuations.
Can I enroll in both a Prepaid Plan and a Savings
Plan?
Yes. Prepaid and Savings Plans work well
together. For example, you could use a Prepaid Plan to cover up
to four years of tuition and fees and a Savings Plan to pay for
books, a computer, room and board. If you don’t want to use a
Prepaid Plan to save for all four years of tuition and fees, you
could purchase a 2-Year Florida College Plan or one or more
1-Year University Plans and also open a Savings Plan.
When deciding how to save, focus on your
investment preferences. For example, do you prefer guaranteed
investments (Prepaid) or investment control (Savings)?
Also, consider what you can afford. You may want
to, but you don’t have to save for everything. Parent surveys
suggest that most parents anticipate paying 40% of their child’s
higher education expenses.
How does a 529 Plan compare to other college
savings vehicles?
Savings vehicles like 529 Plans offer distinct
advantages over traditional checking or savings accounts, namely
the opportunity for tax-free earnings. Here is how 529 Plans
compare to other college savings vehicles.
529 Plans
Coverdell Education Savings Accounts
Qualifying U.S. Savings Bonds
UGMA/UTMA
Federal Income Tax
Contributions made with after-tax funds;
earnings excluded from income for federal tax
purposes when used for qualified college
expenses
Contributions made with after-tax funds;
earnings excluded from income for federal tax
purposes when used for qualified college and
K-12 expenses
Certain “EE” and “I” bonds may be redeemed
tax-free for college expenses
First $1,050 is tax-exempt; unearned income over
$2,100 for certain children under age 24 is
taxed at parent rate
Federal Gift Tax Treatment
Contributions treated as gifts; annual and 5-yr…
federal exclusions apply
Contributions treated as gifts; annual federal
exclusions apply
Not considered a gift
Contributions treated as gifts; annual federal
exclusions apply
Federal Estate Tax Treatment
Value excluded from contributor’s estate;
included for death during 5-yr.. election period
Value excluded from contributor’s estate
Value included in owner’s estate
Value excluded from contributor’s estate
Maximum Investment
$418,000 per Beneficiary in Florida
$2,000 per Beneficiary per year (all sources)
$10,000 face value per year, per owner, per type
of bond
No limit
Qualified Expenses
Tuition, fees, books, computers and related
equipment, supplies, special needs; room and
board for minimum half-time students
Tuition, fees, books, supplies, equipment,
special needs; room and board for minimum
half-time students; additional categories of
K-12 expenses
Tuition and fees
No restrictions
Change Beneficiary
Yes
(member of family)
Yes
(member of family)
Not applicable
Prohibited
Time/Age Restrictions
Prepaid: Enroll before 11th grade, 10-yr..
benefit period
Savings: None
Contributions before Beneficiary reaches age 18;
use of account by age 30
Bond purchaser must be at least 24 years old at
time of bond issuance
Custodianship terminates when minor becomes
adult
Income Restrictions
None
Contributions limited for incomes approx. $100K
and above
Interest exclusion for incomes approx. $77K and
below
None
Federal Financial Aid
Asset of parent if owner is parent or dependent
student
Asset of parent if owner is parent or dependent
student
Counted as asset of bond owner
Counted as asset of the student
Use for Non-Qualifying Expenses
Withdrawn earnings subject to federal tax and
10% penalty
Withdrawn earnings subject to federal tax and
10% penalty
No penalty; interest on redeemed bonds included
as income
For specific information about your situation and options,
please consult an investment adviser or certified public
accountant.
2020
The
estate tax exemption amount is $11,580,000 per person.
Summary outline of six tax methods to
increase efficient affluent client activity
1.IRC
§1202, modified
§1202 and other IRS code
methods to reduce, exclude or defer taxes for ordinary income or
divesting of assets; No Fee until owner has proceeds for tax
success:
1.Tax exclusion & tax deferral entities, $1M+ gain
3.Property owner's CPA
opportunity to be educated and trained in IRS
code for tax reduction, tax exclusion & tax deferral.
IRC
§1202 and Tax Deferred
Cash Out tax exclusion or tax deferral methods considered.
No fee.
4.Property
owner and CPA consider to employ tax attorney service to guide a
transaction to preferred tax reduction goal. No fee.
5.Property
owner and CPA employ tax attorney service to view Letter of Intent or and contract before
parties sign. No fee.
6.Tax
attorney service engaged, have successful closing with tax goals,
owner receives proceeds. Success fee
2.Irrevocable
Trust Management by trust attorney group with approximately 100
billionaires, 300 centimillionaires + many more:
Perpetual
trust
Tax
reduction, no state tax and other tax advantages
Asset legal
protection by trust
Best trust
managers and management policy
Private bank
trust available
Work
fee-based verses valued % fee
No probate
3.Combination
of an Irrevocable Grantor Trust and a Revocable Trust with pour over
will:
1.For anyone owning assets
2.Protect assets from creditors
3.
Control and manage all assets
4.Simpler trust self-management
5.No probate
4.IRC §179
has been amended to include types of equipment
plus building
improvements.
Ceiling
increased to $1,000,000 for tax years beginning
after 2017, with the phase-out beginning at $2,500,000
of qualifying assets placed in service.
Replace IRC §1031.Use
assignment in some cases. CPA recommended.
5.
Legacy plans for economic asset management with guaranteed
income in most states:
Immediate tax deduction-reduction.
Deductions can have five year carry forward
Guaranteed insured income through non-taxable 20 plus year Christian
charity
Simplified, little to no management, defer income or receive monthly
or quarterly income
Your Legacy. Dispense Legacy funds in to the future. Can adjust some terms in future
Little or no attorney expense,
numbers prepared to assist client’s CPA
Eliminates family conflict and executor mismanagement
Ideal
for beneficiaries without money management abilities
No probate - by passes will or
trust
Choose your charity
6. All asset owners;
Immediate tax deduction + asset management + high
income
For 2020 returns, the 0% rate for long-term gains and qualified
dividends applies for taxpayers with taxable income under $40,000 on
single returns and $80,000 on joint returns.
Do you have an entity? This can provide some protection from
liability related to claims against the business.
Have you filed your annual reports?
If you have a corporation, have you had annual meetings of
the shareholders and directors?
Do you have a shareholder agreement/operating agreement
governing the relationship between the owners? This could
address, for example, how, when, and to whom owners can
transfer their ownership interests; how distributions of
cash are made to the owners; and whose approval is required
for certain actions.
Do you have a succession plan for your business? This may tie in
with your estate plan.
Do you know what intellectual property (“IP”) your business has?
This could relate to your name; logo; domain name; website,
social media, or other written content; photographs; or your
product itself.
Have you registered/maintained important IP?
Are you enforcing your trademarks? This can include your
business and product names, logos, and taglines. Trademark
rights may be eroded if these rights are not enforced
against infringers.
Are you maintaining the secrecy of your trade secrets? Do
you have confidentiality agreements with your
employees/contractors?
Do you have an agreement stating that you own IP created by your
employees/contractors?
Do you own your domain name? Sometimes an employee or contractor
may register in their name rather than the business’s.
Does your website have terms of use and a privacy policy?
Are you complying with the Digital Millennium Copyright Act?
This can provide protection if someone posts content on your
website (for example, through a chat room or comment) that
infringes a third party’s copyright.
Are you protecting and securing electronic data that contains
personal information (including information you may collect
through your website)?
Are you using third-party content/likenesses on your website? If
so, you should confirm these are used properly.
The SECURE Act is Tax Heavy Rule Changes for IRA Owners
“The SECURE Act changed a lot of what we believe about
inherited IRAs,” said Rochelle Schultz, an estate planning
lawyer at Weinstock Manion in Los Angeles. “Everyone,” she
added, “needs to bring it up to their estate attorneys or
financial advisors to make sure beneficiaries understand
what’s going to happen.”
The 10-year rule hits retirement accounts inherited from
people who pass away on or after January 1, 2020. Wealth
advisors call the curb the death of the “stretch IRA,”
because an heir can no longer “stretch out” withdrawals from
the account over her lifetime. The change reflected the
Biden administration’s desire to expand retirement options
for Americans while curbing the tax benefits of passing
tax-deferred wealth to heirs.
Five years
IRS rules that pre-date the SECURE Act say that if a
taxpayer dies before beginning required minimum
distributions, typically at age 72, and hasn’t specified who
will inherit their IRA or 401(k), then the account goes into
the deceased’s estate. The estate’s heir or heirs then have
five years to drain the account. The five-year
rule also applies to inherited Roth IRAs in
existence for less than five years. And it applies to some
beneficiaries who inherit a retirement plan through a
so-called beneficiary account, like a trust.
Under prior IRS rules, the beneficiary of a broad type of
estate planning vehicle known as a “see-through” trust is
treated as if she directly inherits the trust’s assets, even
as the vehicle is technically the beneficiary. The IRS
“looks through” the trust to see that an actual human being
— the trust’s beneficiary — is there. Before the 2019 law,
those people could stretch out withdrawals over their
lifetime. Now, depending on whether the trust is properly
set up, the 10-year deadline could be five years.
That's in part because IRS rules for see-through trusts are
strict. Along with record-keeping requirements, the tax
agency requires that the vehicles be irrevocable, valid and
legal in the state where they’re set up and clear about the
identity of its beneficiaries. If a trust doesn't meet those
requirements, beneficiaries can be required to drain them in
five years.
The issue is that the SECURE Act doesn’t spell out whether
its 10-year rule applies to see-through trusts. Nor has the
IRS offered guidance on the issue. If the rule doesn’t
apply, then some beneficiaries of those trusts might have to
empty out an IRA within five years as before — an outflow
that can spike an heir’s income and tax rate.
“There is still ambiguity as to how the rules surrounding
‘see-through’ trusts will apply post-SECURE Act,” wrote Fidelity
Investments earlier this year.
GOLD
verses STOCKS
REAL ESTATE (Business Income)
Residential properties have an average annual return of 10.6
percent, commercial properties have a 9.5 percent average return,
and REITs have an 11.8 percent average return.
Knowing the national average return on an investment property is
extremely useful for comparing your return on investment properties.
The 70% rule helps
home flippers determine the maximum price they should pay for an
investment property.
Basically, they should spend no more than 70% of the home's
after-repair value minus the costs of renovating the property.
The 1% rule of real estate investing measures
the price of the investment property against the gross income it
will generate.
For a potential investment to pass the 1% rule, its monthly rent
must be equal to or no less than 1% of the purchase price
TDCO
QSBS
Rules
