Recent Blog Posts

  • What Being Dragged Off a United can Flight Teach Us about Contract Law?
    Unless you’ve been in a coma for the past week or so, you’ve probably seen the cell phone camera footage of airport police dragging a kicking and screaming Dr. David Dao off a United Airlines flight at Chicago’s O’Hare Airport last week. At this point, the story is well known.  United needed to get four additional flight crew employees on Dr. Dao’s flight, so they asked paying customers to give up their seats voluntarily, for increasing levels of compensation.  When there were no takers, United selected four passengers “at random” for involuntary removal from the flight.  Dr. Dao was one of the “lucky” four selected.  However, when the time came to make the walk of shame down the aisle and off the plane, Dr. Dao refused to get up.  That’s when airport security was called in to physically remove him and cell phone cameras started to roll. This fiasco, and ... Read more
  • Self-Directed IRA Valuations: Why Does My Self-Directed IRA Custodian Ask for a Valuation Update Every Year?
    If you have a self-directed IRA with non-publicly traded assets like real estate, private stock, or an LLC interest, you’ve definitely been asked for an annual fair market valuation for the assets in your account. Why does your IRA custodian ask for this every year? Because they have to. An IRA must report its fair market value to the IRS annually. Fair market value is reported to the IRS by your IRA custodian via IRS Form 5498. For standard IRAs holding stocks or mutual funds, those account values are automatically determined as they simply take the stock or fund price as of the close of the market on December 31st each year and they use these amounts to set the year-end account fair market value. For self-directed accounts, such fair market values are not readily available and it becomes the IRA account owner’s responsibility to obtain their self-directed investment values ... Read more
  • The Power of the Health Savings Account (HSA)
    So many of us are sick and tired of hearing news reporters talk about the problems with today’s health care, and even worse is the political commentary on what should and shouldn’t be fixed. In fact, with all of the confusing sound bites, arguing and rhetoric in the media today, it’s hard to believe there are any real solutions that could positively impact our personal lives. However, I believe there are strategies that can work! Your personal plan does not have to be a mess…there are options! The Health Savings Account is one of the most powerful pieces of a well designed health care strategy.  It includes saving money, saving taxes, building a tax-free ‘bucket’ for health care and most importantly taking control of your own health care strategy. You save money because in order to have an HSA, you have to have a ‘high deductible health care plan’.  Well, ... Read more
  • What Do I Need to Know About Title Insurance
    We all know that title insurance is a necessity when purchasing real estate, but many do not have a sufficient understanding of what title insurance is really for and steps we can take to deal with title insurance companies to prevent being embroiled in a title dispute. Litigating title disputes can often be long, expensive, and often difficult to predict the outcome with any certainty. For that reason, having a solid grasp of what title insurance can do and cannot do is important for any would be purchaser of real estate. The condition of title is one of the most important due diligence items for a buyer of real estate.   Purchasers usually want title to real estate to be clean, or as lawyers describe it to be “marketable.” Marketable title does not mean title that is completely free from any liens or claims, but merely title that is sufficiently free ... Read more
  • Business Succession: When Corporate Governance and Estate Planning Converge: Are You Setup Properly?
    You may have heard in the news recently that there’s been some fighting among the ownership team of the Los Angeles Lakers. When Dr. Jerry Buss, the majority owner, died in 2012, his ownership passed to his six children via a trust, with each child receiving an equal vote/share. His succession plan had his daughter Jeanie take over his position as the Lakers’ governor as well as its team representative at NBA Board of Governors meetings. This last month, there’s been a fight between her and certain of her brothers that has become a power struggle filled with plenty of contention and legal fees. They appear to have settled this particular dispute but there were a lot of moving parts to their particular situation especially because of NBA rules, etc., so in that sense, what happened with the Buss family is unique. However, what is not unique is that every business ... Read more
  • IRA Contribution Deadlines: Two Out of Three IRA Types Can’t be Extended
    You have until April 18th, 2017 to make 2016 IRA contributions for Roth and Traditional IRAs. If you’re self-employed and are using a SEP, your deadline is determined by your company’s tax filing deadline (e.g. s-corp, partnership, or sole prop). So, if you were an s-corp or partnership in 2016, then your filing deadline was March 15th, 2017. II you are a sole prop, then the deadline is April 18th, 2017. If you extended your company return, that extension will also apply to your SEP IRA contributions. The table below breaks down the deadlines and extension options for Traditional, Roth and SEP IRAs. Type of IRA Contribution Type Deadline Details Traditional IRA Traditional, Deductible April 18th, 2017: Due Date for Individual Tax Return Filing (not including extensions). IRC § 219(f)(3); You can file your return claiming a contribution before the contribution is actually made.  Rev. Rul. 84-18. Roth IRA Roth, Not ... Read more
  • What to do if you Can’t Pay Your Upcoming Tax Liability
    First and most importantly, don’t let your inability to pay your tax liability in full keep you from filing your tax return properly and on time. If you don’t file your tax return, it only makes things worse. If you can, include as much of a partial payment as you can, and consider borrowing the funds for payment. As discussed below, just filing without full payment can save you substantial amounts in filing penalties. More importantly, procedures exist for payment extension and installment payment arrangements which will keep IRS from instituting its collection process (liens, property seizures, etc.). Overview of the most common penalties. There are several penalties you should be aware of before you try and postpone payment.  These can quickly add up and make things inevitably worse as you try to deal with the problem. “Failure to file” penalty accrues at the rate of 5% per month ... Read more
  • Eight Spring Cleaning Ideas for Your Business
    Don’t ask me why, but my seven year-old daughter is obsessed with the cheesy early 1990’s goodness that is Full House.  Nick at Nite has scheduled a two-hour block of Danny Tanner, Uncle Jesse, Joey and the Tanner girls from 7-9 p.m. most weeknights, and my daughter begs to watch at least one episode every night before she goes to bed. Because there are much worse things she could be asking to watch, we typically oblige.  As such, over the past year or two I’ve endured more than my fair share of Full House catchphrases (think: “Have mercy!” “How rude!” and “You got it dude!”).  Let’s just say that when Nick at Nite (or my daughter) moves on from Full House I won’t exactly be sad.  Anyway, in a recent episode that I’m sure probably originally aired in March 1990, the notoriously tidy and meticulously organized Danny Tanner exclaims: “I ... Read more
  • Alternatives for Securing Your Loans or Investments
    We often advise clients who want to loan money or participate in an investment to “get adequate security” for their investment. The purpose of getting additional security for your loan is so that you have something else that you can go after if the loan goes south. Ordinarily, if your loan is “unsecured,” it generally means that if the investment tanks, then your only remedy would be to sue the debtor and go through the potentially expensive process of litigation in hopes that you can get a judgment against the debtor, and perhaps most importantly, that the debtor will then have assets from which you can collect. In our experience, if a debtor has defaulted on your investment, they are likely experiencing financial issues as a whole, and will unlikely have assets for you to recover from even if you prevail in your lawsuit. Moreover, a debtor having financial issues ... Read more
  • Quitclaim Deed Versus Warranty Deed, What to Use?
    When it comes to transferring property, such as rental properties into LLCs or your personal residence into a Trust, it can be confusing understanding whether you should use a quitclaim deed or a warranty deed. Here is a brief description of each type of deed and when they should be used. Warranty Deed – A warranty deed transfers ownership and explicitly promises the buyer that the transferor has clear title to the property, meaning it is free of liens or claims of ownership. The terms of a warranty deed should state that the transferor “warrants” and conveys the property.  The warranty deed may make other promises as well, to address particular problems with the transaction. But generally, the use of the word “warrant” means that seller/transferor guarantees the new owner as to clear title. Because the seller “warrants” clear title under a warranty deed, it is a preferred method of title ... Read more
  • Score some Points and Pay Your Taxes by Credit Card
    How many of you build, track and utilize credit card points for personal benefit?  It’s a great tax strategy (credit card point redemption benefits are currently tax free), AND it’s an added bonus when you have to pay one of the most dreaded bills of the year. No matter how you file your income tax return—by mailing a paper copy or electronically—you can pay your taxes using a major credit card or a debit card online. Individuals can make these payments 24 hours a day, seven days a week, using certain cards as long as they follow the proper procedure. There are actually several advantages when turning to a credit card to pay your tax bill: Delay paying the actual cash for your taxes Hopefully get a lower interest rate than the IRS would give you if you were on a payment plan Avoid any penalties if you don’t have ... Read more
  • 10 Reasons why buying your parent’s home and renting it back to them may be a wise move
    There are several ways to handle a parent’s home depending on their particular health or financial situation. At a bare minimum, your parents should have a Revocable Living Trust to ensure the orderly and effectively transfer of the home to the family and avoid probate in states where the expense is significant.   However, some of you may have alternative goals and purchasing the home to rent back to your parents could be a wise strategy.  With a simple transaction, your parents could gain immediate access to their home equity, stay in the home, and you’d pick up some generous new tax deductions.  Here is a summary of a few other hidden benefits: Access to Cash.  A Sale/Leaseback puts instant cash in your parent’s pockets without considering a reverse mortgage.  Oftentimes, a reverse mortgage doesn’t allow for a death benefit and upon mom and/or dad’s passing, the family discovers that the ... Read more
  • Emergency Preparedness for your Business
    Natural disasters are all around us.  It is absolutely astonishing how the weather patterns are changing and the impact they are having with storms and even the likelihood of fires. Right now it is flooding, but what could it be next. With that said, if we bring up the topic of being “prepared” for such a disaster, many of us immediately think of our personal or family situation, but not the for emergency preparedness in regards to our business. We often forget that these same disasters affect business owners and can create even greater hurdles for families to get back on their feet. Personally, I have been a Scoutmaster off and on for years, and not only do I try to teach my boys to live the Scout Moto: “Be Prepared”, but even I oftentimes forget the little things.  There was a particular trip on a campout that I forgot ... Read more
  • New 990-T Filing Rule for Self-Directed IRAs
    The IRS recently released updated the extension rules for 990-T tax returns that are required for certain self-directed IRAs. Form 990-T is a tax return that must be filed by an IRA when it receives what is known as unrelated business taxable income (“UBTI”). For a description on UBTI and 990-T returns in general, see my prior article here. The new rules allow an IRA to receive a automatic 6 month extension of time to file by filing IRS Form 8868. Previously, IRAs required to file a 990-T, were only allowed an automatic 3 month extension. The new extension procedures were released in January 2017 and apply to 2016 990-T returns. To claim the extension, the IRA must take the following steps. Obtain a Tax ID/EIN for the IRA. Generally, IRAs do not have their own Tax ID/EIN and they should not obtain one, except when a 990-T return needs to be ... Read more
  • How to become a Real Estate Professional for Tax Purposes
    Once you start buying rental real estate, one of the top strategies we recommend to our clients is to consider the benefits of qualifying as a Real Estate Professional.  As many real estate investors quickly discover, rental real estate has the amazing power to potentially provide tax losses/deductions with tax free cash flow, on top of building. In fact, I encourage all of you to ‘at least’ consider buying one rental this year (in or outside of your retirement account) and determine if it is a good fit for you. Now I realize rental property is not a perfect fit for everyone.  There are a lot of variables…your financial strength, credit worthiness, your temperament and time you have to manage property, and of course, it also depends on the season of your life. However, although buying real estate is something every investor should consider, being a “real estate professional” ISN’T ... Read more