Episode No. 8

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Episode No. 8

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Are you looking to save money this year, invest for the future, and stay ahead of the IRS?


In this episode of Share The Wealth Show, tax strategist Larry D. West III discusses ways to save on taxes, specifically with regard to the tax code. We also dive deep into estate planning, trusts, and entity structures. Listen in and increase your tax efficiency now!


Larry D. West III is a managing partner of Precision Business Strategies where he leverages 8+ years of experience in the public accounting sector to help business owners maximize profits, minimize taxes, and build personal wealth. His specialized knowledge comes from his niched experience working as a tax and business strategist across different industries and platforms.



[00:01 – 02:05] Who is Larry D. West III? 

  • Helping clients with creative tax strategies


[02:06 – 14:07] Tax Optimization Strategies

  • Taking advantage of the Tax Code using a business
  • Opportunities for deductions
  • Strategically spending money
  • Tax strategies for business owners with W-2s
  • Consider your vehicle and mileage
  • Your refund should come from a refundable tax credit
  • Understand how to accurately and appropriately fill out tax forms
  • You should be close to a breakeven
  • Looking at what the government is incentivizing
  • What drives the Tax Code?
  • Contribute to a retirement account
  • Which presents the most tax-efficient opportunity?
  • Market real estate
  • Cryptocurrency


[14:07 – 29:42] Passing Down Property, Inheritance Tax, and Estate Tax

  • Knowing the entity structure
  • When you pass away, your heirs receive a step-up in basis
  • What are lifetime exemptions?
  • Planning ahead of time and shifting things in the estate
  • You should be below the exemption
  • The four basic parts of an estate plan
  • Using an ILIT
  • How to move things in and out of the trust


[29:43 – 36:28] S-Corps vs C-Corps Explained

  • Double taxation and C-Corps
  • S-Corps are not necessarily tax-efficient for real estate
  • Documentation is important


[36:29 – 41:52] Closing Segment

  • Do you want to build wealth for yourself and your family? You need THE LAUNCHPAD. Click here to learn more!   
  • The final 2 questions
  • Larry on diversification: Don’t spread yourself too thin
  • Connect with Larry!


Key Quotes 


“If you think about the value of our business, the value of our retirement accounts, the value of our life insurance, the value of our real estate that could easily reach that number pretty quickly.” – Larry D. West III


“One of the things that you can do while you’re still here, especially with these limits being so high, is that you can start to give things from yourself to your next generation. You can give your property to them and move it out from your estate. So that you can use that exemption while you’re here, instead of losing it in the event that you pass away.” – Larry D. West III


Connect with Larry D. West lll! Visit pb-strategies.com and schedule a discovery call with his team. Follow them on LinkedIn, Facebook, and Instagram.


Let’s get connected! 

You can find Nicole on LinkedIn, Instagram, or Facebook. Visit her website https://noirvestholdings.com 


 00:00:00,000 –> 00:00: 31,600

I love talking to state strategy and planning. A lot of us tend to believe that this is only for the wealthy, the super wealthy, the ultra-rich, and things like that. These are gonna be real world problems that are gonna hit a lot of especially middle-income Americans as they continue to build

in an accumulate wealth, because as we just demonstrated, if that exemption slides back to five or six million, and you accumulate enough wealth to be packed to go past that, which is very possible, just based on properties and insurance and businesses and things like that, you could face in the state tax problem.


00:00:31,600 –> 00:01: 05,960

– Welcome to the Share the Well Show, where minority professionals can learn to escape the racial wealth gap and catapult themselves into abundance. Your host, Nicole Tendergrass, who her network from being negative to multiple six figures, join her on her investigative mission to expose secret strategies of the wealthy, so we can all have the tools needed to build the life and legacy we were created to possess. Now it’s time for the show.


00:01:10,000 –> 00:02: 14,360

Welcome everyone to another episode of the Share the Well Show. Today we have with us Larry D. West, a county tech strategist extraordinaire, so Larry is a managing partner of precision business strategies, where he leverages eight plus years of experience in the public counting sector to help business owners maximize their profits, minimize taxes, and build personal wealth. His specialized knowledge comes from a niche experience working as a tax and business strategist across different industries and platforms. He strongly believes that the foundational understanding of entity structure, financial metrics, and tax strategy are critical to any organization’s success. Together with precision business strategy team, Larry focuses on advancing creative strategies and providing that to his clients. So Larry, how are you today? Thank you for joining us.


00:02:14,360 –> 00:03: 10,600

I am doing well. I’m thank you for having me. I certainly appreciate it. Yeah, no problem. OK, so let’s start right in because I know I’ve had sessions with you with other groups and masterminds. And there’s just so much information that it was like a five or six-week session. So I don’t know how. There’s no way at first to cover all of that in a 20, a 30-minute episode. But we’re going to try. I know you’re going to drop some gems in some nuggets. So first question to start off in your journey. I know you’ve been exposed to a lot of strategies. You have a lot of knowledge. But what vehicles have you seen really change someone’s either mindset or well-building trajectory when they implement a certain strategy that maybe they didn’t know before or they had misleading beliefs because they had inaccurate information, maybe.


00:03:10,600 –> 00:04: 09,880

Yeah, you know, that’s a really good question. And short answer is a bunch of them, right? But one of the drive-in factors, especially when we talk about the tax plan inside and the efficiency side, the primary vehicle is going to be the business and how you use it, right? So when you look at the tax code, how it’s written, where the advantages are, it really comes down to sides of the coin. Investors benefit and business owners benefit. And when you’re both, it’s kind of like double benefit there. But having a business is going to drive a lot of opportunity when it comes to tax savings. And effectively using that business to one, grow it, right? Because that’s how you’re going to build well, but also using it for opportunities for tax deductions. And strategically spending money in places that advance the business, but also reduce your tax to the income. That’s where you start to win quite a bit.


00:04:09,880 –> 00:04:58,040

Now, can you give an example of something just within that sphere of using a business, especially when you’re a W2 worker? Because this is how you have a full-time job. And I don’t have time to create a business. How difficult does that need to be? I mean, I mean, I know when you start a business, you really want to run it like a full-fledged business. You don’t want to just dabble. But what’s a simple, something that someone could implement, like maybe they open an LLC and they have a business, maybe it’s consulting or sharing information, or something of that sort, where it’s not going to be so bird as one top of a W2 job, but you have, you know, I’m trying to see, like, how can you balance that? So you can still take advantage of tax strategies for business owners.


00:04:58,040 –> 00:06: 43,640

Yeah, absolutely. So it certainly depends on the kind of business you have. But so we really quick things that one can consider is vehicle. When you have your W2 job, you drive the or at least pre-COVID. We were driving back and forth and forth, right? But you drive back and forth to the office. That’s not a tax deduction. That’s just a cost of doing business, right? That’s the cost of being an employee. But now that you have this business, whatever it may be, t-shirt business, Amazon, fulfillment business, you know, social media marketing, whatever it is, you have this business now that now places that you go have business application, you can record those miles and take them as a deduction. Just in 2021 alone, mileage was 56 cents per mile, here in 2022, mileage is 57 cents per mile. That basically means if you drive 10,000 miles, that’s a $5,700 deduction. That’s just waiting on you simply because now you have a business and those miles now have business application. The same could be said for home office. When you work from home, now in the post COVID error, you don’t get a deduction for office use. Now, there’s some companies who may reimburse you for use of your home, but that’s very rare. And you don’t get to write it off on your taxes. Well, now that you have a business, regardless of what that business is, and you have a dedicated space in your home that you use that for business purposes, all of a sudden, a portion of your rent or your mortgage interest, or your property tax, or your utilities, water, sewer, trash, maintenance, all of that becomes a potential tax deduction simply because now you have that business to facilitate that kind of usage. So those are areas that don’t require you to spend any additional money. You spend the money in these spaces already, but now you get a tax deduction for it.





00:06:43,640 –> 00:07: 22,160

Is the IRS going to consider increasing that mileage as gas is so high? I sure hope so. It needs to be like 80 cents per mile. Oh, man, they should. I mean, even if they did, it is so slow to implement those changes. But anyway. Yeah. So yeah. So OK, saving money on taxes is, you know, everyone thinks about that. They’re trying to get the most either pay the lease amount of taxes or get the most refund back. What’s your mindset or the thought process that you see people have about the amount of their refund and how much that is, and why is that important to them?


00:07:22,160 –> 00:08:57,520

Yeah, that’s a really, really good question. So the way I look at it is, if you get a refund, and that refund is not the result of a refundable tax credit, then you did something wrong. What you basically did was give the government the IRS alone and interest free loan at that for 365 days or a little bit longer. So what folks really want to understand is, when you’re filling out your W4s on the W2 side of things, fill them out accurately and appropriately, so that they’re not withholding more than what they should, nor they withholding less than what they should, you should be fairly close to a break even. If you’re getting super large refunds, that means you’re given away too much money throughout the year, and that money could be repurposed or invested in other areas to earn you more money as opposed to letting it sit with the government for all that time. Now, there’s some people out there that are going to say, I don’t like the IRS, I don’t care how much they take. I rather than have too much, so they not come in after me for a little bit extra. And I get it, but what I would say there is, hit it with a little bit of caution. The IRS is not this kind of, you know, a vulnerable scary machine of something that’s going to come and take everything away from you. Right? We hear the board stories, but there are things that happen to lead to those things. So, you know, it’s okay to adjust your withholdings, pay only what you should be paying, hold on to more of your money throughout the year and give them what’s owed to them at the end. Or again, you should be close to a to a break even.


00:08:57,520 –> 00:10: 58,680

Okay, so I think I have the same mindset. I use the low of tax refunds. And it’s like, oh, I can’t go on vacation. I can’t schedule this. I can’t do anything. So I give my tax, I got away from my tax refund to come. Right? That was my previous mindset. And now, when I found out that, I think I heard, I don’t want to put it on blast, but I’ll say, I heard my mom say it, that she had her W4 dependence. She still had them really high during the year. And then just at tax time, she would put, you know, the correct amount. And then she’d end up owing and blah, blah, blah. But she was like, she wanted her, and she wanted more money now today. Like, she didn’t want to wait until tax season to get it. And I’m like, oh, you can put a different amount on your W4. As long as I mean, you ultimately file with the right, you know, quantity. So yeah, I started doing that. I was putting like three or four on mine. And I had no kids at the time. And I know, like, I mean, I don’t know if that the legality of that, but when I file my taxes, I put the right amount. So technically, they still get, you know what I mean? What they’re supposed to get. But I think the other thing I’ll say is that strategy is great. If you’re going to take that extra savings that you or saving having that money upfront, so you can actually do something with it during the year and invest it because the time value of money is so important. And you have that compounding that you could be getting. And I know it just depends on how much you get saved up and the opportunity when that comes. But I think for me, I’ll say personally that I’m not perfect. And I don’t even know what that exact difference is between when I’m putting two versus putting four, like how much is that difference in my take home pay and how much should I actually be investing and maybe I’m buying stocks or something that’s easy access, you know, just for the time being. I don’t know. So I don’t do it perfectly, but at least I have the right mindset.



00:10:00,680 –> 00:12: 13,320

Okay. Yeah. But yeah. So okay. Enough about my tax experience. But so what else? What other tax strategies or any other type of shares? So I know you have a method of information and insights that maybe you have seen have the most the biggest effect on some of your clients when they implement or they change how they think about certain strategies, whether it’s how they grow their investment income through investing in real estate or other businesses like where can people get? Because I guess the whole thing about taxes is that stealing from your potential well because it’s taking that principle that you could be investing and growing. If you don’t optimize your taxes and take the right off that you are legally allowed to take, but you have to take advantage of the tax code and do what the tax code is. Is encouraging you to do? So I don’t know if you have any other, because I don’t even know what to ask or what I don’t know because they’re so the tax, who reads the whole tax code? I mean you probably have or most of it. But I don’t know what I don’t know about what’s in there.


00:12:13,320 –> 00:15:28,120

Yeah, so no one actually voluntarily, few people voluntarily actually read that entire code. We read this section that are applicable given the events

that are happening, but it is most boring read of all. And I’m really a lot of different things. Nothing beats this stuff. But there’s a few things to keep in mind. You have to look at what the government is trying to incentivize. That’s what drives the tax code. So on one end, government wants to incentivize folks for saving for retirement. That’s why you get a tax break. We’re contributing to your pre-tax retirement accounts. Like your IRAs and different things like that. So for a lot of folks, usually the first place to start, whether you’re W2 or business owner or what have you, retirement accounts, low hanging fruit to get some tax savings. That’s your 401(k) that’s your IRA simple steps. All those different things can be really good retirement strategies to build long-term, planning, and wealth, but also take a tax deduction today. Now, there are going to be some people who have something to say about whether you do post tax or pre-tax and all that. And we can get into those nuances. But the broad point is contributing to a retirement account because it’s full worth thinking and future planning. The second side of that then gets into, well, what the tax dollars that you’re saving, or even the money that you’re earning, where can you place it in order to grow more? Obviously, things are the market. Real estate is becoming, or not becoming has been, continues to be very popular, folks are doing crypto, and all these other things. So, you kind of got a number of different places to place your money to invest. Well, out of all of those options, which ones present the most tax-efficient opportunity? I’d argue it’s real estate. That doesn’t mean it’s the absolute best, but the tax efficiency makes it one of the best, if not top two, but not two kind of a thing. So when you invest in something like real estate,

you get your rental income throughout the year, if your properties occupy,

but because of the power of depreciation, you essentially pay taxes on little to none of the money that you receive. So I’m earning money. I take that money invested in the property. This property produces income, income that I’m taxed on at a very low rate, or not taxed on at all. That’s a win right there. Plus, I now have an asset that I can leverage. We’ve heard of cash out revised. That is an opportunity to build equity in the property,

take out a ton of money and pay no taxes on any of it. We’ve heard of a real estate being able to be passed out throughout generations. You continue to hold that property or you exchange it for bigger properties, newer properties throughout your lifetime. You can then transition that property from yourself down to your ears in a very tax-efficient way. And they don’t have to pay taxes if and when they decide to get it into a refi, or they decide to get it in selling, because they have what’s called a step-up in basis. So that’s where, again, when you think about where you’re putting your dollars, market is great, but where is the efficiency or tax efficiency in those investments? And that’s another way to think about how you build wealth.


00:15:28,120 –> 00:16: 04,280

  1. So going off of what you just said, when it comes to passing on property

to your heirs, how let’s get a little granular there. How does that work with either the step-up in basis, what entities or vehicles should you have? real estate or property in to be more? Because there is inheritance tax. I don’t know the stipulations. If you go over that, like once they are like the capital amounts, you can transfer without taxes or any of that, when it comes to passing on property.


00:16:04,280 –> 00:17: 05,960

Yeah, that’s really, really good. So a couple of places to start there.

First is, I’m going to start with entity structure. That basically means when you buy real estate, do you buy it inside an LLC, a corporation, a partnership, something of the like? Here’s what you don’t do. You don’t buy real estate inside of a corporation. Anything else outside of that? Let’s open a door and have a conversation that’s even works. But if you’re thinking about buying personal property that you’re going to hold on to and pass down for generations, it likely doesn’t very, very few circumstances. But it likely doesn’t belong inside of an S-core or C-core. It likely belongs inside of an LLC, taxes of partnership or something other like. So that’s going to be step one. And that’s more of a conversation with the attorney to make sure the legal side is buttoned up. And then you merge that with your CPA to make sure the tax side is buttoned up as well.

But again, kind of heat that warning, it usually does not belong inside of a corporation if you’re holding the property.


00:17:05,960 –> 00:19: 00,520

Now the second step to that is, well, how do you pass it to the next generation and what is this whole step up in basis? Well, when you buy a property, what you pay for that property, that’s your initial basis. And then you’re going to depreciate that property over the years and that reduces your basis. So simple math, you buy a $500,000 property. You throughout your lifetime, you depreciate 200,000 at the time that you pass away in something happens to you. Your basis in that property is 300,000.

Okay? So that means if you sold it before you passed away, the difference between 300,000 and the sales price, that’s what you would pay taxes off. But you didn’t sell it. It stayed in the family and it passed down to the next generation. The next generation receives a step up in basis. That basically means at the time that you pass away whatever the fair market value of that property is that is now the new generation’s basis. So remember, you bought it at 500.You depreciated it down to three. You passed away. It was now worth 700 next generation(laughing)But so people was new family. In fact, the generation’s steps into that property in its worth 700,000. That basically means they could probably go and do a refinance and pull out a whole bunch of cash, difference between the equity and what that property is worth. That comes to them tax-free. They could sell the property if they’d like. And let’s say they sold it for 700.Well, it was worth 700 when they got it. They sold it for 700.They paid no capital gains tax on it. Or they could continue to hold on to it and then pass it to the next generation thereafter. And that’s what makes real estate a really powerful asset. So I’m gonna pause there for a second before we jump into those estate limits and things like that. But that’s a good kind of generational span of how you waste use of property.


00:19:00,520 –> 00:19: 20,920

Okay. All right, that sounds good. We can go to the next one. I do have a question though now on the whole S-Corp C-Corp thing, but I don’t know if we should tangent off or we should stay on course with a state. Well, you could tell us about the state limits and the state taxes and that inheritance tax and that will circle back.


00:19:20,920 –> 00:21: 07,080

Yeah, absolutely. So we have what are called lifetime exemptions. That basically means throughout your lifetime, you can give away up to this amount of money before you have to pay in a state tax. Okay? So right now, that number is extraordinarily high. It’s 12 million for a lot of us. We won’t see 12 million out of the assets in our lifetime, but for some of us we’ll actually reach it and Marry filling joint, now you’re up to 25 million

knowledge because those two come together. That’s actually due to sunset over the next couple of years. That number is gonna easily slide back from 12down to five or six million somewhere in that range. That’s a huge difference. For a lot of us, we will actually see five to six million knowledge worth the assets in our lifetime. If you think about the value of our business, the value of our retirement accounts, the value of our life insurance, the value of our real estate, that could easily reach that number pretty quickly. So when you go past that number, the difference between that number and whatever is above it can be taxed to the tune of 40%. And if you look at the state that has a state tax, that number goes even higher. So that’s why it’s important to do some of this planning. A head of time and shifting things in and out of your estate while you’re still alive. But in the example of this property, if you pass away in your below that exemption, there’s no estate tax. There’s no debt tax. There’s no tax that’s paid on that property when it transitions to the next generation. Now if you’re above that number, totally different, we got to do some more planning. But if you’re below it, which a lot of folks are gonna be, you just inherited a $700,000 property with no tax implications to go and do a lot of cool stuff with.


00:21:07,080 –> 00:21: 40,480

Okay, so that I got it. Sorry, I knew it was the circuit ride around to the C-Corp S-Corp, but I need to ask.  So I know that people who are above that five limit, I mean, I know that’s not an official limit yet. If they slide that back.  But people who are above that, they’re already planning at ways to get around that. So what’s that plan? Let us know. So what we got to do, we got to be over five, six. We need a trust like what we need.


00:21:40,480 –> 00:22: 59,760

Yeah, absolutely. The four basic parts of it in a state plan, that everyone should consider and or have, one, poverty, turn it, two, medical, directive, three, make sure you have a will. And the last one is a trust. And the trust, that actually deserves its own episode, own its own. A lot of confusion about trust and how they work. But the initial goal, and again, this is before we get to a very advanced planning is so that your assets can bypass the court system. They bypass what’s called probate. There’s no challenges. It can go to the next generation and everything runs smooth. And then you can put provisions inside that trust to say, they, you know, my, this property, this money, this whatever is in this trust is not intended for my kids. It’s intended for my grandkids. Or my kids can’t touch this money until they do x, y, and z, you know, graduate from Harvard and Yale with a 3.9 GPA, from 1.00. You can do all those kind of stipulations. But the trust is not the primary vehicle, at least not yet until we get to the advanced side to bypass that estate tax. It’s really to give you the protection to pass your assets without getting tied up and probate or court.


00:22:59,760 –> 00:24: 00,880

Now, once that’s said, step two is, well, how do you structure your trust in your state in a way that’s very tax efficient? By default, what most people do is they fall back and they say, hey, I know I’m gonna be over the limit based on my projections. My estate will be worth x, y, and z. That number times 40%. I need to get a life insurance policy that I can cover that number. That’s great. But I think you can do more, right? And so one of the things that you can do while you’re still here, especially with these exemptions and these limits being so high, is that you can start to give things from yourself to whoever it is, your next generation, whether that’s a kid’s grandkids or what have you, you can give that stuff to them now, and that can now be moved out of your estate. So you use that exemption while you’re here instead of losing it in the event that you pass away.


00:24:00,880 –> 00:25: 58,000

The second thing to consider, especially with respect to life insurance,

and if we’re talking larger, values larger policies and things like that,

is using what’s called an eyelid and irrevocable life insurance trust.

Now, absent in eyelid, the value of your life insurance, while it’s not taxable, meaning if you pass away, the death benefit is not taxable income to your beneficiaries. It is included as a part of your taxable estate. So it’s included in that number to determine whether or not you’re over that $12 million limit, right? But then we just talked about which is soon to be five or six. So if you got $5 million worth of property in a $2 million life insurance policy, you’ve got a $7 million estate, you’re over the limit.  If you use an irrevocable life insurance trust, that $2 million is now no longer a part of your taxable estate. Your estate is now $5 million, and if you’re below the limit, that’s great if you’re a little bit above, you can still use those proceeds to pay whatever the tax is, but now that tax is going to be $2 million now, it’s short because the life insurance policies no longer are part of that estate. Now, those are just some of the basic steps. We can keep continuing to go further to some other things, but those are some things to kind of get people thinking of what moves can you make now. And the thing I also say about this too, I love talking to state strategy and planning.  A lot of us tend to believe that this is only for the wealthy the super wealthy, the ultra-rich, and things like that, these are going to be real world problems that are going to hit a lot of,  especially middle-income Americans, as they continue to build an accumulate wealth, because as we just demonstrated, if that exemption slides back to $5 or $6 million, and you accumulate enough wealth to go past that, which is very possible, just based on properties and insurance, and businesses and things like that, you could face in the state tax problem.


00:25:58,000 –> 00:27: 03,120

Okay, just to reiterate what you said, normal life insurance will be considered as part of your taxable estate once you pass, but the eyelid will not. That’s right. Okay, yeah, we need a whole another episode on just trust. So there was another, I had was besides the S-Corp and C-Corp, there was something in between, oh, passing to get property or whatever assets outside of your estate, and you give it to, you gifted to your children, whoever, before you pass, so that it starts bringing down the level of your estate. What if you don’t trust your kids yet? What if you had plans for them to have certain stipulations they had to meet in order to have access to your assets? Because you don’t want it to be kind of squandered generationally, which from what I’ve heard, like two or three generations down the road and all your stuff’s gone, because people didn’t know like your ears didn’t know how to handle it, but now you’re just given it to them way ahead of time.


00:27:03,120 –> 00:28: 42,120

You don’t necessarily have to give it to them ahead of time, but you can give it into a vehicle like a trust that did take, and have parameters in place that dictate if and when and how they can have access to it. So when you set up these trusts, you were just considered the grant or the one who created the trust and the one that’s put in the stuff into it. You have what’s called a trustee. This is the person that you are instilling all of the responsibility to carry out your wishes. So if we’re talking about creating a trust for your kids, don’t give it to the uncle that is brief loan with the kids and then I’m just giving anything and won’t whatever you want. You want to give it to the person that you know that in my absence, I know you’re gonna carry out exactly how I set this thing up. And that’s their responsibility, their fiduciary. They have to carry out things in the best interest of the trust and in the manner that the trust was set up. So you assign that trustee to do just that. And then as you put these assets inside of the trust, it’s usually for something that we’re talking about and again, not to get too deep into the weeds. When you’re giving up control, moving it out of your state, it’s usually gonna be in some type of irrevocable trust.

Meaning you’re seeding control to it and turning all that over to the trustee who’s gonna carry out the wishes in the way that you see fit. And then you’ll just pick who the beneficiaries are. Spouses, kids, grandkids, friends, sisters’ cousins, whoever you want to benefit from that trust can be listed as beneficiaries. But that’s essentially how you can control it.


00:28:42,120 –> 00:29: 41,560

Okay. There are a lot of people are gonna talk about all these different provisions like spend third provisions and all that stuff. And that’s true, but depends on the goals. All right, provisions, see this is why. Okay, twist my arm. We’re gonna have to have you back to talk about just trust. A whole trust episode spent, the rift, I’m gonna making notes. Okay, look, so I understand putting it into an irrevocable trust if you’re trying to play around your assets and different trusts and your kids are beneficiary to that trust. But then I feel like I’m just giving up control forever.You know, what about if the market’s crazy like now and I wanna sell it and I could get, but you know, I don’t know what’s gonna happen in the future and the asset may lose value. I wanna sell it and capture that equity and I can still keep that in a trust, but now is irrevocable and I can’t do anything.


00:29: 41,560 –> 00:31: 03,640

Good point, and this is why the planning side is important because you wanna make sure that you’re able, one, you wanna make sure that you are certain your wishes and what you wanna do. And this is also why a lot of folks wait until they get older and kind of closer to that age to start doing some of these things so they wanna enjoy the fruits of that labor right now. So while you’re trying to enjoy that stuff now, asset protection is the best thing you can do. That’s your entity structure and all those other things. Then as you start to sunset, you can now look at if and when and how you move the stuff inside of the trust. For, as you accumulate assets, there may be certain things that you’re like, okay, this goes in, this stays out and at some point in the future, I’ll go ahead and put this in. Now, when we’re talking about trust, in order to move things out freely in and out of it, that is usually better suited what’s called a revocable living trust, hence the word revocable. You can make revocations while you’re still here. But it didn’t take it out, it’s nothing more than a pass through, but those irrevocable trusts are fairly permanent. You can make changes, it’s an expensive proposition to make a change, but you can make changes to it. So what you just wanna be certain that you’re wishing, what you intend to happen is set up the right way from the beginning, because it’s pretty hard and pretty expensive to undo.


00:31:03,640 –> 00:31:28,400

Okay, so I would be able to, let’s say, I getting that to that limit and I’m doing some planning and I wanna take some of the assets out of my other trust and put it into a trust for the kids, but I don’t want it to be irrevocable. Can it be revocable so that I still have access to make changes as needed and then upon my death, it switches into irrevocable, like what’s that?





00:31:03,640 –> 00:32: 30,040

A little bit of yes and no. So by default, when you have a revocable trust

at the moment that you pass away, it becomes irrevocable at that point, because you’re no longer there, and so it automatically switches and changes character, you wanna do stuff before that happens, because at the time of death, it is not in there, then it’s not in there. It’s a part of your estate. And if it’s revocable then, that’s kind of included in that side of things. So everything, and we don’t know our expiration date, right? It’s hard to tell that. So that’s why planning is super important. You don’t have to wait until the sunset years. You can start looking at structure and setting these things up now, and then progressively, putting things in there over time, and then the whole idea of losing control over it. There are certain parameters provisions or strategies that you could have in place to where you necessarily own it, but you still control it, whether directly you’re in directly.


00:32:30,040 –> 00:33: 24,200

Okay, all right. So I guess it’s time to circle back to this court. This is the court. And we have to–No, no, no, no, no, keep talking about these trusts. We get the court(laughing)What does it do this quickly?’ Cause I do, we might have to have you come back. Oh, I’ll see what other questions people may have about, you know, the kind of trust and how to set that up,

and maybe we can get more in the weeds on that, because I think that will be very helpful for people. But yeah, so with the S-Corp and C-Corp one, why do you not want real estate in there? And two, why is it, there’s such like a dichotomy on people either really fore putting everything, like operating out of the S-Corp or C-Corp, and then some people who just don’t like it at all, because of the whole double taxation. So when does double taxation make sense, and when does it not?


00:33:24,200 –> 00:35: 36,840

It almost never makes sense(laughing)So here’s what happens. Now there’s a place for all of this, and I’m not against it, and we have clients that we have C-Corp’s part of their structure. We don’t have real estate in them, but we have C-Corp’s part of their structure for specific reasons. We have S-Corp’s for reasons, and we have LLC’s, taxes, partnerships, and all that stuff. So how we pull this together just depends on, find themselves. But from a tax perspective, when we look at a C-Corporation, the reason it’s not usually built for most businesses is because of that double taxation feature. Well, what does that mean? That means as the business earns money,

if it’s tax as a C-Corporation, it earns money, it has expenses, there’s a net profit at the end. That net profit as it stands right now, is taxed at 21%. It’s a flat tax, doesn’t matter if you make a dollar, or 21 million, it’s 21% on that number. Well, as a shareholder, when I wanna pull money out of that corporation, I either have to take it as a wage, which basically means I’m paying social security and Medicare tax, or I have to take it as a dividend, which basically means I’m gonna pay 15 or 20%depending on what my bracket is. If I take it as a dividend, dividends are not a deduction.

So my company paid 21% tax on that number, then when I took it out at the 15% tax, we’re at 36% pretty quickly. That’s usually not favorable and advantageous to folks who are growing a business. A C-Corp is our valuable if you’re planning to go public, if you’re trying to achieve certain asset protection, or if you’re spending down enough money to where the corporation is not extraordinarily profitable. So for some of us, we’re in a 3035, 37% bracket. That 21% looks kind of attractive. So we can have the corporation to facilitate some of those earnings, but we wanna spend down enough to where it’s not a huge amount that we’re paying 21% tax on, and if and when we take it out, it sets some future date and for a very specific reason, or we can facilitate asset purchases through that corporation, so that we don’t have to take the money out. That’s where the C-Corp becomes advantageous, a little bit.


00:35:36,840 –> 00:36: 45,560

Now, the S-Corp, that tends to be most of our best friends, because as we’re growing a service based or product business, the S-Corp allows us to get rid of employment tax to an extent, employment tax is another way to say social security or Medicare tax. That’s why people love the S-Corp operation. Well, in the event of real estate, that’s passive income. It’s not subject to employment tax anyway, so it doesn’t necessarily need to be inside of an S-Corp in order for you to be tax efficient. The second thing is, whenever an asset is inside of a corporation and you wanna pull it out and move it, that’s considered a distribution at fair market value. That’s taxable to you. So when you think about dating properties in and out of LLCs, if you need a property out of an S-Corp operation, technically that’s a distribution and that’s taxable. If you move a property from your S-Corp to your trust, technically that’s a distribution and that’s taxable, amongst the number of other things, there are problems with the excessive losses and basis, and a bunch of nerdy stuff that we can get into, that just doesn’t make corporations that tax efficient when we’re talking real estate specifically.


00:36:45,560 –> 00:37: 50,840

Okay, you kept saying, technically, explain. It’s probably more of a careful phrasing, right? Because we don’t want people to take a lot of what we say

for too much face value and try to implement these things on their own and come back and say, “Hey, I heard this guy named Larry use a tax write “as just tell me to do this and now it’s wrong. “I don’t want to sue him.”(laughing) Okay. So it’s more of a careful word in terms of how things work. Okay, so I guess with the S-Corp, I’m so on the S-Corp and C-Corp with the double taxation. So you did say unless your C-Corp is not that profitable, I know I’ve heard of people using that as a business because they make sure their corporation is structured in a way that it pays for all of their living expenses as the CEO or whatever your title is, as a head of the corporation. That is allowable, like how do people do that?


00:37:50,840 –> 00:39: 51,680

Allowable, yes, but we have to be careful in terms of how we do it. So companies are allowed to set up what are called accountable plans. A lot of us know these as reimbursement plans cause we’re a part of businesses or at some employees, we go pay for something the company reimburses. That’s considered an accountable plan. And companies also have fringe benefits for one case, health insurance, company cars, all those things. So yes, your company can do those things and they can do them for you as the CEO of the company. Where you have to be careful is that a lot of that stuff crosses the line and becomes taxable income to you as the employee of that company. So I have a C-Corp, I go buy a company vehicle. I use that company vehicle personally as the employee. That’s considered taxable. Whatever the value of my use is, which we have to calculate, that’s considered taxable income to me, it should be reported on my W2. So although people talk about it, not a lot of people actually track it appropriately

and it could lead some folks to get into some trouble. Now the accountable plan side is more of the reimbursement strategy. That’s where you have certain things that have business application business use and your company reimbursement you for some in that expense. That could be everything from purchasing desk for your home office, purchasing a computer for you to do your work, reimbursement for mileage, reimbursement for other expenses. The same way we do expense reports for our jobs, we can do those for our company. And that’s how you can pull money out of the company, right? Without the company gets a deduction and it’s not taxable income to yourself. So a lot of different ways to slice it, a lot of ways to do it, it just needs to be done appropriately and not necessarily following the latest IG strategy(laughs)


00:39:51,680 –> 00:40: 35,600

Yeah, because people will just promote all you get the C-Corp, you live for free, pay yourself a small salary and none of that. And then just put it out there without the appropriate detail and people just think you can just do this thing. I have a new how that worked. I’m like, it just seems complicated. Yeah, documentation is the most important thing and that’s the part that fails a lot of people. So a lot of folks will talk about it, not a lot of folks documented appropriately, but that’s the CYA when an auditor shows up. And you’ve got this company vehicle that you’ve been flexing with and they say, they, show me that as business use or when you use it personally, show me that you actually tax yourself on it.


00:40:35,600 –> 00:41: 46,080

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00:41:46,080 –> 00:42: 19,320

Wow, oh, final question. So we’re going to be asking all of our guests same last couple of wrap up questions. The first one is, Warren Buffett,he is known to have said, diversification is the protection against ignorance. Basically, if you are diversifying, it’s because you don’t really know what you’re doing. You’re not like expert in anyone area. So diversified, hedge your losses. What are your thoughts on that?


00:42:19,320 –> 00:43: 47,800

I think he’s right. It’s hard to say Warren Buffett is wrong. Look at the man’s track for a friend. If I say Warren Buffett is wrong, they might look deep. That guy’s very pretty. He’s very pretty. Yeah. He’s right. But he’s also right with good reason. Because it’s hard for us.  It’s that idea. Jack of all trades, master of none, absent the rest of it. But if you try to spread yourself to a band and become an expert in every single thing you invest in, you risk having some gaps. And those could be costly mistakes. And so you kind of diversify across these spectrums to hedge against all these different areas. If the real estate market goes down, hopefully the equities market, the stock market is doing well. Hopefully crypto is doing OK after that. And maybe you’ve got some other private investments. So you kind of spread your money on a different place to make sure you don’t get crushed in even that something like that happens. Now that’s said, on the other side of it, a whole lot of value and specializing.  There’s a whole lot of folks that are just very, very in tune with the market. And they don’t lose money. There’s a lot of folks who are very in tune with a real estate.2008 happened. They did not lose money. And so if you can niche down and really learn a particular space and that’s fine. And the absence of that spread it out. Hey, do you bet? You know, they’ll kind of even themselves out over time.


00:43:47,800 –> 00:44: 54,680

Nice. I like that. Good job. So last question, you play monopoly before. Yes. I’m sure. I mean, I can’t assume with everybody. So boardwalk or Baltic Avenue. What’s your first buy and why? Taking boardwalk. Baltic Avenue.  That’s the first. It’s like the first, the two, like, you brown or purple, depending on which you have. Yeah. So all right. If I go in on boardwalk, I’m looking at it like look, I don’t know how or when the probability of this dice, I’m going to roll, but I know people got to go past here. And I know at some point in time somebody going to land and I’m with those a couple of hotels on there. You don’t get it. So that’s kind of my strategy, which probably is at the right one. Now, I like Baltic too because again, you pass in that one. It’s a cheap one that you can kind of get a little bit of cash low on, but I’m going big. And I’m going big sooner. Go big or go home. I like it.


00:44:54,680 –> 00:46: 05,520

All right. Thank you so much, Larry. So how can people tell listeners how they can get a hold of you?  If they want to ask you question, if they want to be a client, how they look at your services, you know, absolutely. Thanks for that opportunity as well. The best place to start is our website, which is pb-strategy.com, pb like peanut butter. So pb-strategy.com. There’s a button. As soon as you get to the website called schedule of discovery call, you book that discovery call. We sit down and we talk, learn a little bit about you, share more about us to see if it’s a good fit for us to work together.  And then we’re doing more and more on social. So that’s linked in on Instagram, on Twitter and Facebook as well. We’re putting out more and more content. Much like the conversation that we’re having today to get people insights on some of the things they can do to be very tax efficient. So definitely follow us on those social channels as well. OK, perfect. Yeah, we’ll have all the links to those in the show knows below. And to everyone, you know, reach out if you have any questions that you want to get connected with, Larry. Thank you again, Larry, so much for joining in with us today. This is certainly appreciated.


00:46:05,520 –> 00:46: 30,960

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