Episode Transcript
[00:00:00] Speaker A: You're listening to the Preferred Way, a.
[00:00:02] Speaker B: Retirement podcast brought to you by Preferred Trust Company, the preferred custodian for all alternative investments.
[00:00:10] Speaker A: Hello, and welcome to the Preferred Way.
I love when we have CPAs on. You know why?
Because I'm not licensed to talk about it, but Larry is.
Welcome, Larry, to the show. Why don't you introduce yourself, where you're from and who do you work for?
[00:00:29] Speaker B: Thank you. Thank you. Larry Pendleton, the investor, cpa, based out of Norfolk, Virginia.
We have our tax consulting firm, PC Financial Services, as well as our real estate company, CP Realty, that we run and operate.
[00:00:45] Speaker A: How long you been in business?
[00:00:47] Speaker B: We were running the tax business for nearly two decades and the real estate business for close to a decade now.
Wow.
[00:00:56] Speaker A: Long time, huh?
[00:00:57] Speaker B: Yeah, yeah, A lot of scene. A lot of scene those days.
[00:01:02] Speaker A: Well, today we're gonna. We're gonna talk about a variety of different things, if you're okay with it.
[00:01:07] Speaker B: Oh, man. We're ready to roll. You're good.
[00:01:09] Speaker A: You're good. All right, well, really wanted to focus a little bit on our younger generation. It's been something that Preferred Trust has really been focused on.
I don't know what your. Your population of your demographic are of your clients, but are you starting to see more younger and younger generation needing your services or wanting your services?
[00:01:32] Speaker B: Seeing more? I guess. I guess if you're talking about in, like, in the 2020 age, like, yeah, they're.
[00:01:39] Speaker A: They're.
[00:01:39] Speaker B: They're kind of like, poking around and seeing, like, hey, what they need to kind of get set up.
A lot of them are just kind of just hustling in the grind, trying to. Trying to learn what they can and get there. But they're. They all started to kind of ask questions about, like, when do I need retirement accounts or what type of investment that I need to be really be focusing on going forward. So it's starting to kind of see more of that this past.
I probably say past two, three years.
[00:02:03] Speaker A: Yeah, we've seen a lot more of it, too. I think the younger generation is making more money than they have ever made in the past, whether that be in alternative investments or.
I know, I know here there have been a lot of younger individuals investing with their Roth IRAs and digital currency.
As I see them turn in millions. And it's like, wow, like, these younger generation, you know what. What they're willing to do that maybe you and I weren't at the time. I'm like, holy cow. They're willing to take a little bit more risk. And sometimes that's because you know, they're not buying, you know, they're not buying homes. They're, you know, they're, they're renting and they're, they're utilizing their funds for other things. Adventures a lot more in investing.
Really surprised when you see the statistics that are out there and just, it's just kind of interesting. So I wasn't sure how much of the younger generation was, was really needing or wanting your services.
[00:03:00] Speaker B: I mean I started more of them like, kind of seeing like hey yeah, this whole Social Security thing may or may not be around whatever the retirement age is once they get to that point in that aspect of like hey, like working for, for someone for 40 plus years just to get a goal.
[00:03:17] Speaker A: Yeah.
[00:03:17] Speaker B: That's not an appeal.
And then like they just, I mean some, they kind of question the stock market or just, just want to have.
[00:03:24] Speaker A: Yeah.
[00:03:25] Speaker B: Troll. Especially after they kind of seen what's been happening over the past few years.
[00:03:30] Speaker A: Yeah. And, and that's what kind of leads them into these alternatives and starting their own business. Like they don't want to, you know, they may not want to work for anybody else, which is phenomenal. Right.
You know, to come off of, you know, either out of college or right out of high school and they're starting their own businesses. And so I could see where your services become more and more relevant to them because of the unknown, because of the, the taxes, because of the opportunity to write things off with this, this younger generation. And so I think, you know, as the years continue to progress, I think you and I will see that more and more in the industries that we're working in. I know that we are seeing a younger generation starting to Open up. Roth IRAs, you know, we, we're kind of on the tail end of the generations where traditional IRAs were the only option.
And you know, when, when the whole Roth IRA thing got brought into perspective, I think as they become educated about it, they become more interested in like wait, I don't have to pay tax on that. Especially when they, they start filing their first decent sized tax returns and, and paying on that. I'm sure you're helping them though, you know, pay as legally possible.
Probably one of your, your mindsets and your goals in all of this.
You know, because before we go into the whole self directed IRA and I ask you a bunch of questions, you know, there's obviously been a very recent interaction that has occurred. Two of them really. Right. The one big beautiful bill and just going to say it and you know, just the other day. You know, President Trump signed an executive order to allow 401k investors to access alternative assets.
Two very big components that affect both my world and yours. So I'm going to ask you just a little bit on the, the, the big beautiful bill, how has that, how will will that benefit from a tax perspective? I know there was some really kind of interesting things that may come of that.
Anything that you know, maybe the younger generation should consider or look at?
[00:05:49] Speaker B: No, it definitely has a, a lot of tax benefits when used appropriately. It's almost a extension of, of the, the Tax Cuts and Jobs act back in 2017. So you see a lot of extensions of those that were, that were set to phase out this year.
Next year in 2027, like prime example is the 100% bones appreciation. So you'll see a lot of people now a lot of people kind of move towards to the short term rentals and working that loophole strategy.
[00:06:21] Speaker A: Yeah.
[00:06:21] Speaker B: Younger generation where they're not, they don't have a full time job per se. You can still qualify for a real estate professional and not worry about the, the, the peaks and valleys of the seasons when it comes to short term rentals and still invest in long term rentals and benefit from it from there as well. So that, that's, that was a huge extension there as well as the, the salt tax and that state and local tax going from 10,000 to 40,000. Especially in those states.
[00:06:50] Speaker A: Yeah.
[00:06:51] Speaker B: Where it was already difficult.
It was difficult seeing that 10,000 cap if you're having a lot of, of property taxes and then kind of leveraging like you may not have to do the whole pass through entity strategy with that and just, and just, just rely on that 40,000 to be able to maximize your itemized deductions there for society as a whole. People really don't realize that some of those like just, just the individual tax brackets were about to go up 4% depending on which bracket that you, that you kind of average out into. So it kind of compress and couple out of the tax brackets kind of where they are.
[00:07:29] Speaker A: Yeah.
[00:07:30] Speaker B: So like I said there's, there were some huge benefits. Obviously they try to do the, the $10,000 but the car interest notes and, and give a shot in the arm in the American car industry. So so I get a lot of people deflate when I say it has to be American assembled. So so like hey, and it's all like personal, it's only for personal vehicles. So it's like, like hey, you may just want to still stick with a business vehicle because you get still there. So like they try to address different areas of like business owners and non business owners, especially with the 25000 and no tax and no tips and then overtime and the 6,000 senior deduction to help come back with the Social Security.
So like there's a lot of different tax benefits as a whole for.
[00:08:19] Speaker A: Yeah.
[00:08:21] Speaker B: The younger generation as well.
[00:08:23] Speaker A: Yeah, it's, it's been pretty crazy I'm sure on the tax front. It's like, I mean there was some significant wins in there.
I'm sure for your clients that you'll be able to pass, pass on the good news to them. Let's just say here the next next couple months.
[00:08:42] Speaker B: So in the world tour now. And it says doing a lot of just consultation with clients now, especially those who have been kind of sealed in the sideline like waiting to buy stuff. And I typically tell them don't let the tax tail wag the dog. But they do find that opportunity to go ahead and buy something. Just want to make a good investment before you jump out there because the tax benefits.
[00:09:04] Speaker A: Yep. Well, it certainly doesn't hurt the economy when there are some tax benefits out there.
And you know, there's, you never know. You never know when's a good time and you know, we change presidents and then it swings a different direction. Right. So take advantage of it while it lasts. You know, who knows if it will go into the foreseeable future or not. But hey, you know what, while it's there, take advantage of it for sure.
It kind of leads us into the, the next discussion which is really putting these alternatives into 401k plans and the impacts of that.
And you know, I think something that's kind of important to consider is, you know, this is an order to really investigate it before it's like put into place.
I also read a report that Empower is going to be offering alternative investments in their 401k plans. And I know here with our employees, we actually just recently moved over to Empower with our, with our 401k plan. And we tried to get them to incorporate the alternative assets, but they told us our firm didn't have enough total assets to participate. So I'm sure there's going to be some, you know, there's going to be some thresholds there, especially as some of these big boxes, financial institutions start dipping their toe into the alternative side of things and realize how much damn work it is.
I'm just gonna be honest, it's a lot of work.
But you know what I definitely think it's something that should be available to everybody. But I think it's important for people to realize it's available now.
It's not that it's going to be available. It's available right now. And you know, there are firms like Preferred Trust that offers the ability for any age to participate in alternative assets as well as you know, there's a lot of investment sponsors out there that are probably laughing a little bit at this, going, well I have young investors right now. I have all kinds of investors right now. They don't have to be accredited, they don't have to use a 401k plan and you know, to be able to participate as an investment sponsor of an alternative asset and a 401k plan, well that's going to be interesting too because they're only going to accept the elite of the elite and that's going to leave out the 99 of the others.
So it is going to be very interesting to see how it all plays out. But definitely exciting times because anytime there is positive change in opening up options for people to, to invest that have some tax benefit associated with it, you know, it's definitely going to be talked about for sure.
[00:11:46] Speaker B: Yeah, I think the thing was really hopeful. A lot of clarity is okay, what control does the employee have in that case? Because I said a lot of my clients who are just capital raises for their own deals, they're working with people who like say have their own self direct IRAs or they have their own separate business, they have a solo 401k self directing as well. Whereas okay, if you're working with an employee who has an employer sponsor, they just can't take the money and self direct debt.
So it's curious to see if like if that's going to be part of it. Does it empower the employee at all to control their own retirement account and invest in other stuff or is it all going to be going through, through the custodians as a whole and like what's presented to that custodian that is then presented to the company. So there's a lot more understanding and research is about to be done to see where they want to put this at.
[00:12:40] Speaker A: One thing is for sure, no custodian is going to hold the liability of offering an investment.
Right. Because then they have to get the employer to sign off on the fact that they're holding a liability to offer it to their employees. And then you have to get the employee to sign off on the fact that they're taking an additional risk than they would have otherwise by somebody who is managing these, you know, suite of mutual funds that are being offered in these 20, 40, 2050 plans. So there's definitely a lot of work.
You know, you, you can sign an order, but there's a lot of work that's going to have to go into it not only from a legislative perspective, but a large corporate perspective, down to the employer perspective and then onto the employee. So this is a long way from being, you know, let's just turn on the faucet for sure.
Yeah, it's going to take.
[00:13:40] Speaker B: Yeah, it's going to take even longer because everyone at that point.
[00:13:46] Speaker A: Absolutely, absolutely. And something that's really important from a self directed custodian standpoint is, you know, right now we don't take on any fiduciary responsibility. It's a self directed IRA for a reason. It allows people the option to, to choose what they want to invest in. Right. It gives them the ability to do their own due diligence without somebody else saying, here's the suite of products you have to choose from.
And that's the whole point behind a self directed IRA is you, you go find something that you are passionate about, that you've researched, that you've done the due diligence. You know, maybe it's, you know, somebody friend's family are investing in it and they've been successful in doing so.
That particular investment isn't just going to be available in your 401k plan, right. You're going to snap your fingers and be able to use it.
And if you are, then you're going to have to move some funds out of your 401k plan to another custodian, which puts you in the same boat of a self directed custod. So this is going to be really interesting to see how it all plays out. But I'm here for the ride, right? I mean, same thing with the big beautiful bill. You're like, what tax benefits are we going to be able to offer?
[00:14:53] Speaker B: Exactly. Exactly the right way.
[00:14:56] Speaker A: Yeah. All right, well, let's get into a couple of questions maybe on the self directed side. And then I'm going to go, I'm going to go the other direction, Anya, just to tap into your expertise. But why do you think it's important for this next generation to understand the self directed IRA perspective or IRAs in general? Like, you know, when you have a younger client and they have the option of, you know, paying Uncle Sam or maybe reducing their income down and contributing to an IRA like What, what, what is important for this next generation to know as they kind of lean into their careers and maybe alternative investments.
[00:15:36] Speaker B: I mean one being that you're, you're in your, your high income earning phase now at some point down the road. You don't want to have to be in the grind all the time of being a high income earner if you're just, they say if it's all based on your intellectual knowledge or physical.
[00:15:55] Speaker A: Yeah.
[00:15:56] Speaker B: Capabilities. Whereas okay, that's where you having that nest egg on the back end comes from. But the self directing, that's what just the IRA in particular, retiring comes particular. But with the self directing part, it's like it's taking control of like hey, like I, I, I, I, I want to kind of invest my money elsewhere outside of just stocks and bonds. Nothing wrong with stocks and bonds. I still want to have some money there, but I do want to have money elsewhere. Like I want to get more into crypto. I do want to have myself direct IRA on a, on, on some real estate as well or invest in someone startup that I truly want to support from a, from a passive standpoint there. So it's just standing there like, hey, at some point you're gonna need that nest egg down the road. And while you're at it, why not let it let other avenues grow it where it doesn't really actively involve you, but you, but you know, like, and trust the, the operator and.
[00:16:55] Speaker A: Yeah.
[00:16:55] Speaker B: Who's bringing it to you.
[00:16:57] Speaker A: Yeah, absolutely.
And it really kind of plays into their long term financial strategy too.
So you know, I don't know if, if you do this or not. So I'm gonna ask the question, maybe this is a loaded one for the younger generation. Do you suggest traditional or Roth? And why.
[00:17:18] Speaker B: You always give me the depends question?
[00:17:20] Speaker A: I know, because I'm, you know, curious.
[00:17:24] Speaker B: Yeah, because the aspect of like IRAs in general, we know $7,000amax. So if you had the highest tax bracket, that $7,000, that's only going to give you about 2, 2 $3,000 of actual tax savings. So like, okay, you, you get something there. But as you know with most tax strategies is you will have three or four machetes and a ton of steak knives, but you're going to stockpile all of them to actually make some big cuts along the way. So it's like, hey, well if your income is under a certain, especially if, if you, if you're, if you're under the threshold that will allow you to invest into a Roth, why not, why not? Jump it in there unless you really need the tax savings and then we can, we will still have the option of moving it or, or doing the, the, the, the traditional as well. So it really kind of based on like where they are from the income perspective. Yeah, that, that 160. If they're single, like the 161, 000, they get the full, full contribution. And if you don't need the tax, the tax deductions, let's just go ahead and dump it into a Roth and not have to worry about that because if it's in traditional, we're gonna have to plan on getting that move into eventually. But we have to find a year where your income is low or you may have a loss because some investments there. So it's really having that deep discussion with them in order to get understanding of where they are now and really kind of help drive them. So like it. I hate to say it depends but like that's part. I just want to kind of give them. Does how that, how that conversations go from my perspective.
[00:19:03] Speaker A: Well, I'm telling you what, I'm using Machetes and steak knives as a quote. So thank you for that one.
That's something I will be using.
Wow.
[00:19:18] Speaker B: Give me no credit. Just take it all for yourself.
[00:19:20] Speaker A: No, no, no, no, no, no, no. I can assure you that will be on social media later.
Machetes and steak knives as you're determining whether you contribute to a traditional or a Roth. Ira.
Definitely. I mean, and you're right. I mean it just. And they could do both too. You know, that's one huge misconception. We talked about that the last time we talked is that, you know, it is $7,000. That's correct. But it could be $7,000 for a traditional and it could be $7000 for a Roth.
[00:19:50] Speaker B: Yeah.
[00:19:50] Speaker A: Now, now, you know, now you're talking decent numbers. And if you're make. If you're a young, if you're a younger generation and you're making decent money, you know, there's, there's a few things that we could do without the, let's just say the luxury items that we could do without because what, what those small contributions can mean over an extended period of time is insane.
And I don't know if I told you this story, Larry, but when my son graduated from high school, he worked his senior year.
I know some people are like, oh, he probably didn't need to whatever. No, that damn kid worked because it was important for me as a graduation gift to him to put $7,000 into a Roth IRA.
But the only way I could do that is if he had earned income.
And so he had to work. So that kid had to work. And that was my gift to him. He didn't know it at the time, right. He had to work either way, but that was my gift to him. And a calculated spreadsheet of what that $7,000 will look like by the time he's 60 years old in a Roth IRA and what that meant to him over that period of time investing in, you know, even if you just left in an S P, I don't care 10% year over year.
I mean you're, you're talking a million dollars from one contribution.
So for the younger generation to think that that isn't a possibility, I'm here to tell you it is a, it is a tried and true possibility.
And it's one of the greatest gifts that, that you can give to yourself in the as a younger person to set yourself up for success. Now, a million dollars when you're 65A be enough, it's just not. And so imagine if you made that contribution every year and it seems like such a small amount, but that compounding factor is crazy, crazy and, and stuff that we should be teaching to the younger generation.
Anybody who's in this industry, you, me, all of us, we should all be talking about it.
But let's talk about some of the pitfalls because you know, as, as we're starting off into our investment journey in life and retirement journey in life.
What are some of the common mistakes that you have seen some of the younger generation make when using, you know, a self directed IRA or you know, make it tax related. Like what are they missing? What are the things that they just commonly miss that you're like, oh, I wish I could teach that to the younger generation.
[00:22:27] Speaker B: Just understanding that you, you, you can't get into the self dealing at that point. Like that's, that's really the common. There's like you are truly you, like you cannot personally benefit from an income standpoint or, or from a direct tax standpoint where like your, your tax benefit is if it's traditional the contribution, you got tax free growth. But that all stays into the account itself. Even if you acquire a rental property within your retirement account, like all that in there, and they're just, and you can't manage the property, you gotta get someone else and the retirement account is paying all that. So it's really just kind of helping them understand like you got to have your kind of have your system and structure in place of how you're going to operate your assets or how you're going to manage your assets assets from afar because you can, you can definitely put the risk of, of having your, your IRA just completely blown up and tapping in there, if not, if not done correctly or if you, if you are self dealing there. So that, that's kind of the, the one biggest pitfall.
[00:23:37] Speaker A: Yeah.
[00:23:37] Speaker B: I've seen with, with it as well as just kind of getting trapped into running businesses within the retirement, getting hit with the, with the Yuba tax there. Whereas okay, like that's like, like you, you, you can't, you, you can loan to someone else's business, but you can't sit there and run a flipping business out of, out of your, your own flipping business out of your retirement account because you will be subject to additional taxes that, that you was not really expecting because you thought it was just all going to be tax free at that point. And it's not when it comes to those type of activities.
[00:24:16] Speaker A: Yeah, so true.
And you're, and you're right. I think, I think as we look at like the fix and flip, that's probably the biggest hurdle and issue that we have. Because when you're talking about self dealing, just so everybody understands, like you can't be your own real estate agent and profit from it. You can't be your own plumber because you're profiting from your rents. You can't be, you know, so it's those, those little things where you're like, I'll just go over there and paint the wall. I'll just go over there and fix the toilet and, and you can't do that.
And it's kind of an interesting struggle because it's like, well then Larry, should I even be, should I even put my fix and flip in my IRA or should I just keep it out? Are there better tax consequences or tax benefits? Keeping it out.
[00:25:05] Speaker B: Yeah, the benefit is keeping it out your fix and flip. Because I said that that Uber tax is actually a lot higher than you just reporting it. And you can have additional tax strategies going within there to, to, to reduce your taxes from a personal standpoint, especially structures and all that as well. So it's best to keep your fix, your fix and flip business, your wholesale business, your real estate agent, you see businesses outside of your, your S Corp and then just really fund it by investing to somebody else's business and, and kind of, or just hold your, your passive assets in there.
[00:25:41] Speaker A: Yeah.
And there are some investments that are you know, benefit to have it in a self directed ira and there's some that I firmly agree are a benefit to have out.
And you know, I definitely know both sides of that fence myself. Just from, you know, passively investing.
What do you think is the, maybe the number one asset you would say keep it out of an IRA because there's such tremendous tax benefits outside a self directed ira.
[00:26:11] Speaker B: Rental real estate, whether short term, midterm, long term. Like if you really are trying to like leverage the tax loss, especially as we talked about the, the OBB beer 100 bones appreciation.
[00:26:23] Speaker A: Yeah.
[00:26:24] Speaker B: If you can able to qualify as a real estate professional or get the short term rental loophole underneath your belt, it's best to keep those, those, those long term holding assets outside because you'll have some huge losses to help also your taxable income.
[00:26:40] Speaker A: Yeah, absolutely. What about oil and gas? What about energy?
[00:26:45] Speaker B: Kind of same thing where you have that, that, that, that working interest that allows you to use the losses to, to offset other income. So like if your goal is to like hey, I just, I'm not trying to be a landlord. I just trying.
And I found the, found the very few trusted operators out there in the oil and gas space. That's, that's just, just that, that, that's raising funds. I put 50, 000 there. Like okay, we can then use those losses once again similar to the rental real estate to offset your other income. So like those are kind of like the two big ones there was like yeah, we can leave those out if, if, if you have like say if you don't have any other, any other realm of like creating any tax losses to reduce your tax liability.
[00:27:33] Speaker A: Yeah, okay, that's helpful. Those are probably the two, the two bigger ones.
Depends on how you use them both. I can, I can see both sides of that too because you know, if you're, I don't want to say I'll use it joint venturing with somebody else and you know, there's four of you and you're starting to buy rental properties and you have a property manager and you want to keep it in your ira. Maybe that works for you, you know, because now you're splitting it 25, 25, 25. And there's not a whole lot of loss on that. Maybe, I don't know. Guess it depends on how many you have, right Larry? Yeah.
[00:28:06] Speaker B: And also I think outside from the tax perspective is also like where you are in life person. I always like to take a holistic view where it's like okay, yeah, are you Are you using the cash flow from that investment to. Let's just say you want to get into mortgage notes. All right. You're not going to get a lot of losses of it, but you may be using one to pay a cell phone bill. Just throwing out an example. Yeah, yeah, it was okay. Yeah. We want to leave that outside of the retirement account because you want to be able to benefit that income to pay that bill because you're, you're trying to leverage your passive, your passive to pay off, pay off your bills. So you may be building your passive income to replace two income. So I say outside the mortgage notes, for example, is more tax advantageous than having W2 income, but it's just, you're just kind of building it along the way. You may few in your retirement account to build that as well, but you may be still building cash flow for yourself personally.
[00:29:06] Speaker A: Yeah, and I like, I like your perspective of like, where are you at in life, right? What do you need? Do you need immediate passive income? Is this something you can wait for, for 20 years? Like, where are you at?
Because all, you know, all those different perspectives need to be taken into consideration.
So talk to me a little bit about will kind of run into that. Like, where do you see or how do you see retirement as like a potential legacy opportunity?
Like, what should you prepare for when you're younger? I'll give you an example.
Let's say I'm 30 years old. I have two children now.
Probably need all the passive income I could get at that point. Right.
This is our reality. We go through life changes. Right.
But let's say you're 30 years old at the time, but you're making decent money.
Maybe, maybe both income producers are, are doing well.
Two children.
How do you prepare for the future?
Maybe beyond you? Do you start doing that at 30? Do you do it at 20? Do you start it at 40, 50, 60? Like, at what point do your retirement accounts become a legacy now? Do you create it?
[00:30:19] Speaker B: Yeah, especially now as. Because the IUL has started to become very popular for, for a lot of people it's like, so they're balancing that with retirement accounts. But it's like, hey, well, why not start now? Like I say, especially if you're, if you're generating income that you can like put into those different buckets. Yeah. Okay. It's not so much as a age aspect for me. It's like, once again, okay, what, what bad debt needs to be paid off. Okay. When you start getting that stuff wiped out, I don't care what Age. You are in the way. Way the country is now. A lot of people just in different. Different forms of debt, especially student loan debt. It was like, okay, let's just start getting that stuff paid off along the way. And then let's kind of take a look at, okay, what access is there once bills and the basics of. Of life are covered. And then, okay, then we got some money to put into the retirement accounts there. So, like, it doesn't have to have to max out the 7,000 every year. It's just. Just.
[00:31:20] Speaker A: Yeah.
[00:31:20] Speaker B: Kind of like slowly. Once again, state. Nice. Kind of slowly kind of just chip at it and. And then have those years. Okay, cool. We got. Got a little bit more. So now you actually have like a. Your. Your. Your budget in place that. What you've been paying for. You've been tracking your expenses. We know where the income is coming in because I think a lot of people just don't know where the money's coming in from if it's especially too. I mean, how much of it's going out, especially subscriptions and stuff.
So, okay, we gotta get a handle on that stuff. And then we can get the. Get the debt out the way.
Finding investments. But then also, okay, we could put money towards the future as well.
[00:31:58] Speaker A: Yeah, sounds like a little therapy session there.
Let's break down where your debt's at first, because you can't. It's tough to give advice professionally, professional advice, if you really don't know the full scope of the. The picture of what's going on with the client. Where do you start with your clients? Like, you know, if I were to call you today, Carrie Cook picks up the phone and calls and says, you know what? I need a new tax professional. And can you help me out?
Where do you take that conversation with Carrie?
[00:32:29] Speaker B: Yeah, it's. It's my job as the professional to really get an understanding of where you are in the sense of, hey, not just like, we'll get to where you trying to go. Like, everyone's calling me. I know you want to save on taxes.
That's obvious. Like, that's a given. Yeah, but like, like, okay, where, like, where are the kids at? And like, okay, how. How's okay, are they in the college projections?
Are they even going to college? And then are you.
[00:33:00] Speaker A: Yeah.
[00:33:01] Speaker B: Is there a 529 plan in place? If it is, There isn't. I'm not really making any judgments. It's just really getting to understand of the holistic view of it, because I could just sit here and just shoot out tax strategies to you for an hour and forever.
If you're not mentally in position to to do the work that's needed to comply for that tax strategy, you're not going to do it or you're not going to qualify. And then where, then you're at risk of if you are audited, all that stuff is going to get wiped out and you're getting penalties and interest. So like what are you like where, where are you at? Where, where are you capable of doing Even from like a fun. Because I tell people like tax strategy is going to. It's going to cost you time and money.
[00:33:47] Speaker A: Yes ever.
[00:33:48] Speaker B: Wherever anyone try to sell to you, it's going to cost you time and money. And you got to make sure that the tax savings out worth outweigh or outweigh outweigh the, the, the, the financial costs and the time cost that's going to, that's going to create for you.
[00:34:03] Speaker A: Absolutely.
[00:34:04] Speaker B: People. That was like buying all these like G wagons when bonus and first came out and combined that with section 179. It was like okay, well now your, your business property taxes have gone up on, on this thing and the repairs and maintenance on this thing is, is still.
[00:34:24] Speaker A: Was it worth it? Yeah.
[00:34:26] Speaker B: But you got this year one deduction.
[00:34:29] Speaker A: Yeah.
[00:34:30] Speaker B: You gotta keep it business use or just trash the thing because you can't, you can't resell it because you gotta pay all that back. So like is it really worth it? Like is your business even profitable enough to even buy that stuff? Do you around that much? Do you even need it to show it off? And who, who cares what you're even driving? That's just. I'm not really a car person, so.
[00:34:52] Speaker A: Yeah, that's okay.
[00:34:54] Speaker B: Who you flexing on at that point? Yeah, you could just get this one year tax benefit but then have to deal with this financial headache year after year after year after year.
[00:35:03] Speaker A: Yeah. How many years do you have to hold on to that?
How many years you hold on to the G wagon?
[00:35:09] Speaker B: Well, you got the five years. So it's like you try to get to that point but then it's like hey, you really want to avoid like how you're disposing. You got to be cautious of how you're disposing of it because you may have to deal with the recapture.
[00:35:22] Speaker A: Yeah.
[00:35:22] Speaker B: You are selling at any given point because your base is basically zero. So like that that callback is going to get you.
So then it's like hey, are you then just, just keeping it around and possibly buying something new or you just, or I know some clients, it just happens to like break down and it's never again.
[00:35:46] Speaker A: They machete it? Is that what you're saying?
[00:35:49] Speaker B: Okay.
[00:35:52] Speaker A: You know, you're throwing knives at it. Like, no. Five years, five more times. They're like, no, throw in the machete. How do I get rid of this thing? But you're 100, correct? I mean, we see the shiny penny, right? We're like year one. We get this huge tax write off.
Okay. But you got to ride it out. You absolutely have to ride that out.
That's wild. And we run into those things often.
And, you know, especially with the younger generation, even any generation for that matter. I know I'm trying to focus on the younger, but it's hard.
Thank you for watching the Preferred Way.
Next week we're going to continue our conversation with Larry about how the younger generation can continue to use self directed IRAs.
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Thanks for joining us for another episode.
[00:36:45] Speaker B: Where retirement savers meet alternative investments.
[00:36:49] Speaker A: Can't wait for the next episode. To learn more, visit our website at preferredtrustcompany. Com.
