SaveGainsTax

Alternative Minimum Tax Facts

2011-03-08T16:21:00.000-08:00

Six Facts the IRS Wants You to Know about the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2010.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2010, Congress raised the AMT exemption amounts to the following levels:

• $72,450 for a married couple filing a joint return and qualifying widows and widowers;

• $47,450 for singles and heads of household;

• $36,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,700 for 2010.

Use the IRS AMT Assistant to determine whether you may be subject to the AMT. Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Posting Some Humorous Sayings I Came Across

2011-02-09T15:22:00.000-08:00

These are just some fun sayings for a quick smile. Sometimes we just need that!

○ Do not argue with an idiot. He will drag you down to his level and beat you with experience.

○ Going to church doesn't make you a Christian any more than standing in a garage makes you a car.

○ "Knowledge" is knowing a tomato is a fruit - whereas "Wisdom" is not putting it in a fruit salad.

○ Evening news is where they begin with "Good Evening" - and then proceed to tell you why it isn't.

○ To steal ideas from one person is plagiarism. To steal from many is research.

○ A bus station is where a bus stops. A train station is where a train stops. My desk is a work station.

○ How is it one careless match can start a forest fire, but it takes a whole box to start a campfire?

○ Dolphins are so smart, that within a few weeks of captivity they can train people to stand on the edge of the pool and throw them fish.

○ I thought I wanted a career; turns out I just wanted a paycheck.

○ I saw a well endowed woman wearing a sweat shirt with the word "Guess" printed on it. So I said "implants?"

○ Why is it that someone will believe you when you say there are four billion stars in the sky - but must touch the wall when you say the paint is wet?

○ Behind every successful man is his woman. Behind the fall of a successful man is usually another woman.

○ You do not need a parachute to sky dive. You only need a parachute to sky dive again.

○ A clear conscience is usually the sign of a bad memory.

○ Some people cause happiness wherever they go - while others cause happiness whenever they go.

○ I always take life with a grain of salt . . . plus a slice of lemon and a shot of tequila.

○ A bus is a vehicle that seems to move twice as fast when you are trying to catch it - than when you are actually riding in it.

New 2011 Estate Tax Law Summary

2010-12-22T12:00:00.000-08:00

Here's a good summary of the new laws concerning the estate tax and planning opportunities over the next couple of years.

By Julius Giarmarco December 21, 2010

On December 17, 2010, President Obama signed into law H.R. 4853, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This two-year tax extenders bill makes significant changes to the gift, estate and generation skipping transfer tax (GST).

Exemption and rate

For 2011 and 2012, H.R. 4853 sets the gift, estate and GST exemption at $5 million per person and $10 million per couple, with a tax rate of 35 percent. Thus, the estate, gift and GST exemptions are unified again for two years. The $5 million exemption amount is indexed for inflation beginning in 2012. But remember that these changes are for only two years. On January 1, 2013, unless Congress acts again, the gift, estate and GST tax exemption will be $1 million (adjusted for inflation) with a top tax rate of 55 percent.

Optional retroactivity for 2010 decedents

Estates of persons who died in 2010 will have the option of electing no estate tax with a modified carryover basis — i.e., a limited step-up in basis of $1.3 million, plus $3 million for property passing to a spouse — or a $5 million exemption with a complete step-up in basis. Any election would be revocable only with the consent of the IRS.

Gifts and generation skipping transfers

For 2010, the gift tax exemption remains at $1 million with a tax rate of 35 percent, and the GST exemption is $5 million with a 0 percent GST tax rate. For 2011 and 2012, the gift and GST tax exemption is $5 million per person and $10 million per couple, with a top rate of 35 percent. Since it's possible that in 2013, the estate, gift and GST exemptions might drop to $1 million (as adjusted for inflation) with a top rate of 55 percent, persons with large estates should consider using their $5 million gift and GST tax exemptions in 2011 or 2012.

H.R. 4853 clarifies that direct skips to trusts for grandchildren in 2010 will not result in the GST tax applying when distributions are made from the trust to the grandchild in later years. Therefore, it is possible (before year end) for a grandparent to transfer significant funds in trust for grandchildren, pay only a 35 percent gift tax and defer any estate tax until the grandchild's death. In any other year, the grandparent would have to pay GST tax of 35 percent in addition to the 35 percent gift tax. On the gift tax return reporting the 2010 transfer, the grandparent must opt out of the automatic GST allocation rules.

1) the deceased spouse's unused exemption is not indexed for inflation;
2) the unused exemption from the first deceased spouse will be lost if the surviving spouse remarries and survives his/her next spouse;
3) the growth in the assets in the credit shelter trust are removed from the surviving spouse's estate;
4) there is no portability of the GST exemption; and
5) the credit shelter trust allows the deceased spouse to make certain that the assets in the credit shelter trust are managed and distributed according to his/her wishes (and not those of the surviving spouse).

Portability of estate tax exemptions between spouses

For persons dying in 2011 or 2012, the executor of the estate may transfer any unused estate tax exemption to a surviving spouse — on a timely filed estate tax return. However, to prohibit "serial" marriages, only the most recent deceased spouse's unused exemption may be transferred by the surviving spouse.

Despite the relative simplicity of portability, there are several reasons for still using credit shelter trusts at the first spouse's death, including:

1) the deceased spouse's unused exemption is not indexed for inflation;
2) the unused exemption from the first deceased spouse will be lost if the surviving spouse remarries and survives his/her next spouse;
3) the growth in the assets in the credit shelter trust are removed from the surviving spouse's estate;
4) there is no portability of the GST exemption; and
5) the credit shelter trust allows the deceased spouse to make certain that the assets in the credit shelter trust are managed and distributed according to his/her wishes (and not those of the surviving spouse).

Planning opportunities

The ability to gift $5 million — $10 million for a married couple — without having to pay a gift tax will allow high-net-worth individuals to put a huge dent in their estate tax bill. For example, a gift of $10 million by a married grantor to an intentionally defective irrevocable trust (IDIT) will permit a sale of $90 million dollars of assets to the IDIT at current historically low interest rates. Further estate tax reduction occurs because the grantor is now paying income taxes on the income generated by the entire $100 million in the IDIT.

Moreover, if the assets gifted and sold to the IDIT can be discounted — for lack of control and lack of marketability — the value that can be transferred via the IDIT is further expanded. Finally, further leverage of the gift and GST tax exemption can be accomplished by having the IDIT use a portion of its cash flow to purchase life insurance on the life of the grantor or the joint lives of the grantor and his/her spouse.

With every new tax law comes challenges and opportunities. The 2010 Tax Act offers plenty of both.

Paula Straub

Looks Like We Are Getting A Reprieve

2010-12-07T14:29:00.000-08:00

Looks like we will get a reprieve from capital gains tax increases for the next couple of years.

Why this couldn't have been decided months ago I have no idea. Makes no sense to raise taxes until we get this economy back on track.

Here are some of the highlights- but nothing has been passed just yet. I believe it will happen very soon.

Individual tax rates: The agreement would extend the Bush-era tax rates for two years for all taxpayers. Current rates would remain in place, with a top rate of 35%.

Capital gains: Current rates would be extended, and the top rate on long-term capital gains would remain at its historic low of 15% for two years. The rate applies to gains on assets held longer than a year.

Dividends: Current rates would be extended, and the top rate for qualified dividends—those on most stocks held longer than two months—would remain 15% for two years.
Payroll tax: The agreement calls for a two-percentage-point cut in the employee's portion of payroll (FICA) taxes, just for 2011. The change would make the tax 4.2% instead of 6.2% on the first $106,800 of wages per worker, according to the nonpartisan Tax Policy Center. No phase-in or phase-out or other limit was specified by the White House document, so the maximum a working couple could pocket is $4,272—$2,136 per individual wage-earner.

Alternative minimum tax: A two-year "patch," for 2010 and 2011, would keep the AMT exemption at or near current levels. Without the patch, 21 million additional taxpayers would owe AMT for 2010.

Estate and gift tax: No language on the estate or gift tax appeared in the document released by the White House, but a source familiar with the framework said it includes an estate-tax provision for 2011 and 2012 that has a top rate of 35% and an exemption of $5 million per individual.

Stay tuned for more info over the next week or two.

Paula Straub
760-917-0858
savegainstax@gmail.com

Still Waiting for Capital Gains Changes for 2011

2010-11-30T13:30:00.000-08:00

Well, it's almost December and we still are waiting to find out what is going to happen to the capital gains tax rates and Estate Tax rate for next year.

I really thought earlier in the year we would get notification that the estate tax rates reverted back to 2009 but no such luck.

It's great if you are rich and die with cash type assets to pass on estate tax free to your heirs in 2010 but you have a whole other ball of wax to deal with if you are rich in stocks and real estate which have capital gains tax consequences.

I have been lax in posting because Congress is waiting until the last possible minute to inform us of what to expect in the New Year.

I am rooting for the Bush tax cuts to be extended for at least two years to let things with this economy settle down and give us the ability to plan accordingly.

I do believe in the next 30 days we will find some common ground so until then, I wait with everyone else with fingers crossed.

The good news is that I am seeing some capital freeing up for business purchases. I hope this is a trend that will continue for real estate because it's been a long time coming!

Paula Straub
760-917-0858
savegainstax@gmail.com

Nightmares for Heirs of Descedents from 2010

2010-09-22T10:27:00.000-07:00

This year's estate planning rules are really messing a lot of family's up. There is still the question if the unusual rules for 2010 only will remain in effect or if legislators will do something before the end of the year and make it retroactive to Jan 1, 2010. This is causing a lot of lawyers to freeze estates of those who have passed away this year because they don't want to do something that can't be reversed. The following is an exerpt from a Financial Advisor article that shows that even the IRS has not issued the forms required to file an estate tax return. You would think someone whould have been all over this by now but it is just one more way our government is dropping the ball. They should be ashamed.

"The prospect of a retroactive estate tax also plays into how quickly people are collecting on bequests. The worry is that lawmakers could levy such a tax, going back to the start of the year. In that case, a beneficiary who had already taken an inheritance tax-free might owe tax after all.

This possibility grows slimmer each day, but worries about it carry enough weight to have prompted some advisers to freeze wills until the end of the year.

Lauren Y. Detzel, chairman of the estate and succession-planning department at Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth in Orlando, Fla., said a big concern are new income-tax rules to figure the value of inherited items. The task is to find the cost basis of an item for tax purposes, used to figure capital gains once the item is ultimately sold.

Under usual rules, the basis for heirs is what the asset was worth when the person died. For items inherited this year, though, heirs must "carry over" the basis, valuing the asset at its original cost.

When the estate tax lapsed, a new requirement was made for estates with non-cash assets over $1.3 million to notify the Internal Revenue Service of basis adjustments. The statute lists information that must be contained in the report but also refers to IRS regulations that haven't yet been issued.

Duncan E. Osborne, a partner at Osborne, Helman, Knebel & Deleery, said the newly required tax return hasn't even been issued yet. With the possibility the law may change and no clear knowledge of what tax filings need to be done, it is very difficult for attorneys to close an estate, he said. "

The Deferred Sales TrustTM may solve some of these issues. If you have a large amount of property in your estate you wish to pass to heirs on a tax preferred basis go to Deferred Sales TrustTM Info and find out what you need to do to prepare.

Reminder about 2010 Estate Tax/Capital Gains Tax Rule Changes

2010-09-07T16:48:00.000-07:00

As you probably know, there is no estate tax due for people who die in 2010. All year, we have been expecting the estate tax laws to be updated (and possibly imposed retroactively to January 1, 2010) but that has not happened. Further, it now appears that there will be no changes for 2010 and that people who die this year will not owe any estate taxes (or more accurately, their estate won't owe any estate taxes.)

However, that doesn't mean that large estates get a "free pass" this year. Things might even be more complicated. That is because a "carryover basis" rule is in effect this year. In previous years, people inheriting property enjoyed a "step up" in basis. That is, the basis of the property they inherited was generally the value of the property when the previous owner died. In 2010 however, people inheriting property also inherit the decedent's tax basis. This means that if you are inheriting property this year, you have to hope the decedent kept very detailed records.

The executor administering the estate can, however, increase the basis of the assets by $1.3M plus any expiring loss carryforwards and the amount by which any asset is worth less than its original cost. The practical implication of this $1.3M is that any estate with untaxed appreciation of up to $1.3M will escape tax free. However, the executor is responsible for designating those assets that will receive the $1.3M. If he or she doesn't pick the assets you inherited, you could find yourself owing taxes upon the sale of the inherited property. However, the good news is that the gains will be taxed at capital gains tax rates.

It is important to note that assets that pass to a surviving spouse are entitled to another $3M in untaxed apprection so it is still possible to shelter as much as $4.3M in appreciation. If you are the executor of an estate for someone who died in 2010, be sure to seek the assistance of a CPA because the rules can be very complicated and you don't want to make a costly error. And if you inherit assets from someone who died in 2010 be sure you know the basis of the asset and if you might owe capital gains taxes be careful to time the sale to minimize any taxes.

The Deferred Sales Trust can really help in this planning process. Go to http://www.mydstplan.com/savegainstax for more info

Five Great Ways To Lose Money When Selling Assets

2010-08-24T10:45:00.000-07:00

Here are some great ways to lose money on the sale of your appreciated asset.

1. Forget exploring options and pay all taxes due at once from proceeds of sale.

Most sellers get an offer, sell their asset and don’t or even know about all the tax consequences until their tax return is due. Then it’s too late to do anything but pay the piper, and the bill is usually much larger than anticipated.

2. Borrow money against the asset during ownership or prior to sale so that you owe more than your adjusted cost basis.

This is called mortgage over basis and is a problem for a lot of owners. It is a common misconception that taxes are only owed on equity in the asset (what’s left after paying all the creditors). Imagine the surprise when you might have to dig into savings or take out a loan to cover the tax bill!

3. Become the banker for the buyer.

It may sound appealing to make out your own installment agreement with the buyer, where they pay you over time with interest and you get to defer your taxes. That is, until the buyer defaults, is slow to pay or you have to go through the foreclosure process and get the asset back in worse shape than you left it. If this is retirement income you may not be able to afford missed payments, court costs or pulling money from savings to get the foreclosed asset back up to par.

4. When you hold the installment note, the sellers refinances and you get the tax bill.

Another downfall of being the bank is that if the buyer refinances the loan and pays you back all at once, your tax deferral ends there. That nice long income stream is gone and you get to pay the remainder of tax due.

5. Opt to do a 1031 property exchange to save on taxes and have the exchange fall through.

This is a fairly common occurrence if not enough properties were identified for exchange, the sellers pulls out, or any of the other IRS deadlines are missed during the process. Now all taxes are due and you no longer have any options.

If only someone had warned you of what might happen before it was too late…

The good news is that there are options to consider that can avoid all of the above mistakes if you know how to find them.

The Deferred Sales Trust™ is a very effective and tax compliant tool which can help you maximize your proceeds and minimize your tax consequences. Developed in 2002 and available exclusively through members of the Estate Planning Team, the DST allows for safe tax deferral and effective financial planning which can facilitate a secure retirement. For more information and an illustration of the Deferred Sales Trust™, go to http://www.mydstplan.com/savegainstax

Paula Straub, a capital gains tax saving strategist and owner of Save Gains Tax LLC in San Marcos, CA is able to compare and contrast a number of tax strategies and help sellers across the United States maximize their sale proceeds. Paula can be reached directly at (760)917-0858, savegainstax@gmail.com, or at http://www.savegainstax.com .

Collecting more taxes than is absolutely necessary is legalized robbery. ~Calvin Coolidge

The avoidance of taxes is the only intellectual pursuit that carries any reward.
-- John Maynard Keynes

Now Offering Deferred Sales Trusts to Minimize Capital Gains Tax Savings

2010-07-30T13:30:00.001-07:00

This news just in. I am now offering Deferred Sales Trusts to Minimize Capital Gains Tax Savings. Just one more great tool in the belt.

I will be posting more on this option, but one of the strengths is that Private Letter Rulings have been favorably issued on this strategy. This is always a comfort for those who wonder if the IRS will challenge in later years.

You can get an illustration for your situation on my special web page which is

http://www.mydstplan.com/savegainstax

Paula Straub
http://www.savegains.com
(760)917-0858

News on Future Capital Gains Tax Possibilities

2010-07-08T16:31:00.000-07:00

Found this on the Washington Wire Today. Who knows exactly what is coming down the pike!

By John D. McKinnon
Treasury Secretary Tim Geithner offered a glimmer of hope to investors who are facing huge tax increases on capital gains and dividends next January.

In a CNBC interview late Wednesday, Geithner said the Obama administration still hopes to hold the top tax rate on both capital gains and dividends to 20% next year – the level the White House has been proposing since taking office.

Of course, a 20% rate would represent a big increase over the current 15%. But it’s a lot better than the 39.6% top rate for dividends that congressional Democrats have signaled they were planning next year for higher earners.

“This is good news for people who worry about dividends, because it reinforces the administration’s commitment to 20%,” said Clint Stretch of Deloitte Tax LLP.
The tax changes are happening as the Bush-era tax cuts expire at the end of this year.

Congress currently is planning to extend most of the Bush breaks – particularly those for middle-income earners – for some period, perhaps only a year or two. But budget rules that lawmakers passed earlier this year anticipated the Bush-era breaks for higher income earners would expire immediately. That would mean the tax on dividends for higher earners would return to the pre-Bush ordinary income rate. That rate is expected to rise to 39.6% next year.

However, there are growing worries among Democrats that their plans to allow taxes to rise substantially for higher earners will create drag on the recovery, and particularly on financial markets. That appears to be opening the possibility that some of their severest tax increases will be put off, at least for a bit longer.
“There’s…real concern about what would happen in the markets” if dividend rates went as high as 39.6%,” Stretch said. Given the fragile state of the economy, lawmakers “are not in the mood to experiment with the markets.”

Ironically, another factor working in favor of higher earners is the growing public concern over deficits. That’s leading Democrats to consider the short-term extension of the Bush-era breaks for the middle class, instead of the permanent extension that everyone was discussing a year ago. If the middle-class breaks are extended for only a year or two, that could make room for higher earners to catch a few breaks, too.

Fear of Death is Now Not Biggest Fear

2010-07-08T16:23:00.000-07:00

For older Americans surveyed by Allianz Life Insurance Co., death is not such a big deal. Not, that is, when it compares to the spectre of a dwindling bank account. In a poll of people between the ages of 44 and 75, 61% said that running out money was their biggest fear. The remaining 39% thought death was scarier.

With a couple of banking crises under our belts, we've become almost entirely focused on the monetary aspect of advanced age. The context is important. The poll of 3,257 people, released last month, found that a whopping 92% of respondents agreed that "the United States is facing a crisis in its retirement system," the AARP wrote about the report.

It's so well-known that the U.S. won't have enough to fund Social Security in the next several decades that most younger people are throwing up their hands in disgust and counting, instead, on their own ability to save, as well as family and community support. The younger cohort among the old folks, who may after all be farther from retirement than they'd like, have really nail-biting fears: 56% are concerned they won't be able to cover their basic living expenses once they reach retirement age.

A movement known as the "Radical Homemakers" argues that building a community safety net is so important, many of us would be better off quitting our jobs and focusing on creating a grassroots old-age support system -- building up assets of family, friendship and community ties instead of a 401(k). In addition, they advise that people build the skills to live on less -- the sorts of skills probably keenly honed in the parents of the 44- to 75-year olds that Allianz surveyed. After all, more than half of those surveyed said their net worth has tanked since the economic crisis began and many of them have already been forced to cut back.

So why is the financial crisis, and our greatly diminishing faith in financial institutions, such a big deal? Even in the golden age of lifetime employment and secure pension funds, we never placed so much of our hopes and dreams in corporations and the. Instead, we found our emotional security through religion or family or both. We might be wise to return to such comforts. While our banks may be "too big to fail," they surely do fail us, all the time; and our Social Security system's most commonly-used descriptor is "imploding." Little associations fail us too, but their impacts are more personal and don't require a deficit-doubling government bailout.

It's hard to face retirement in an age where even taxes seem uncertain and death is the only constant. It's assured, so why be afraid? Far more terrifying is the stuff leading up to it. Perhaps we would do better to spend more time focusing on our intangible assets; without a dollar-value market to go bust, they're a lot less stressful.

Reviewing CRTs and other Charitable Options

2010-07-01T12:32:00.000-07:00

It's been quite a while since my last post and I've promised myself to do better from here on in. With all the "social media" sometimes the tasks get a bit overwhelming.

I want to do a series of posts on Charitable Remainder Trusts. This first installment is why one might decide to set one up. The second, why one might choose to sell their interest, and the third how that sale might be possible.

Why People Create CRTs

There are four main reasons
1. to diversify a highly appreciated asset, while deferring tax on the sale into the future
2. to generate a stream of income for life (or for a set term)
3. to generate an up-front income tax deduction
4. to benefit charity in the future, usually upon the death of the last grantor

Reasons 1 and 2 are closely related, because almost everyone who creates a CRT does so because they expect that the value of the resulting cash flow or income stream will be greater than the amount they could have realized from the sale of the asset. This may or may not be the case after the CRT is set up and is influenced by investment returns, tax rates, and life spans.

Reason 3 is also important. A person receives a tax deduction in the year they fund the CRT. Even if they subsequently sell their income interest, they keep the original tax deduction.

Reason 4 is actually usually quite low on the list. People who generally have high charitable motivation will often opt for a more direct means of donation and support. They may donate the entire asset to a charity and avoid tax on the sale of the asset and not require cash flow. These are people who have more than enough to live on and just want to help a particular cause. Think Bill Gates and Warren Buffet.

Whatever the reason the CRT is created, it may later turn out to be lacking on some level and the grantor may want to sell their remainder interests. The next post will give examples of what may motivate someone to sell.

Paula Straub
760-917-0858

Tax Time Again, Bah humbug

2010-04-12T17:01:00.000-07:00

It's that time of year again and I don't mind saying I hate it!

I've spent the last few days buried in paperwork to get my taxes filed on time. I tend to wait till the last moment because I really hate the work involved each year.

We need a simplified tax code!

Congress still has not changed the new policy for estate taxes this year and many of my clients are sweating that most of their assets are in real estate and stocks and if they were to pass away thier families would be subject to estate tax because of the non-step up in basis currently in force.

Not to mention I got my new health care rates and they went up by 16% and the benefites are decreased! These insurance companies are out of control and it seems they can run rampant until at least 2014 when the new law takes effect.

If I sound a little cranky it's because I am. This too shall pass.

Paula Straub

Is Your Power of Attorney Powerless or Powerful?

2010-04-01T15:50:00.000-07:00

I can't stress enough, how everyone no matter what age, should have a power of attorney in place.

This should be a durable power of attorney that covers not only your health decisions but also your financial decisions should you not be able to make them for yourself.

This can happen from a stroke, an accident, dementia, or a debilitating medical condition. Sure, it happens more often among the elderly, but can happen at any age without notice.

Many people think that as soon as you sign one you turn over decisions to someone else, but unless it is an immediate power of attorney this is not the case.

You don't need an attorney to create one, but it doesn't hurt if your situation is at all complicated. Since this is an important document, you want it to be state compliant and not have any "got-yas" you may not be aware of.

Many generated even by attorneys may have language that will come back and haunt you. It may limit what your agent can do by too much and tie their hands. Each situation is unique and should be well thought out.

It should be your wishes carried out and not those of a judge who has never met or spoken with you. This is the only choice when a power of attorney is not in place before a situation occurs when you are not able to speak for yourself.

I'm not an attorney, but I can review your documents and look for common language that may not be in your best interest. Then an attorney can modify the document to work for you and not against you.

Whether you are 20 or 90 this is one of the most important documents you will ever need.

Paula Straub
760-917-0858

Capital Gains Tips from the IRS

2010-03-04T10:49:00.001-08:00

It's that time of year again so here are some capital gains tips right from the IRS.

A tax tip from IRS.gov

Have you heard of capital gains and losses? If not, you may want to read up on them because they might have an impact on your tax return. The IRS wants you to know these ten facts about gains and losses and how they could affect your tax situation.

1) Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2) When you sell a capital asset, the difference between the amount you sell it for and your basis -- which is usually what you paid for it -- is a capital gain or a capital loss.

3) You must report all capital gains.

4) You may deduct capital losses only on investment property, not on property held for personal use.

5) Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

6) If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7) The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8) If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9) If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10) Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Web Hosting Disaster- Severe Data Loss Occured

2010-01-13T11:38:00.000-08:00

The words I never wanted to hear were "your web accounts were hacked by terrorists and all of your data is lost forever". The web host company is Direct Horizon and I seriously recommend never to use them. Hackers were able to penetrate their shared servers and delete entire accounts, email databases and the backups that went with them. They have no record of any of my 5 web sites or my entire database of email customers. It's like I never existed as their customer.

I do have backups of my websites which will be a pain to get back up and running on a new web host, but I was never told I needed to back up my autoresponder with my email list of 20,000 names which I have cultivated and nurtured for over 6 years. This was ARP3 autoresponder and I mistakenly assumed it was kept separate and secure like my Aweber account is. Had I known it could be easily deleted of course I would have kept my own backups. It seems to me in these days of technology and assurances of security by web hosting companies things this devastating should not occur.

Direct Horizon bought out the original hosting company named Fat Jack and I stayed with them because they migrated my ARP3 list with my accounts and it was going to be a pain to find another host which supported ART3. Big mistake.

Direct Horizon blames me for not having a backup and takes no responsibility for being hacked and losing client accounts. Their response was I should have had my own dedicated server for a lot more money each month and then this would not have happened. They wanted to know if I wanted to set that up now. Are you kidding me?????

I now am forced to start over from scratch. I have a limited amount of people who have emailed me that I can contact gradually and let them know what happened. Unfortunately the majority will probably wonder why they have stopped getting updates and I will never know who they are to explain.

If you are reading this post and were on my list, please email me and I will get you set up on my new list just as soon as I get things going again.

Let my tragedy be a lesson to anyone with websites or ARP3 autoresponders. Back up everything you have on your web hosting account because it might not be there tomorrow.

Luckily, my blog and main website www.savegainstax.com were not affected because they are hosted by reliable companies. I will be moving my other websites to these hosts soon.

Believe me, I will be backing up everything I possibly can from now on.

Paula Straub
savegainstax@gmail.com
760-917-0858

Happy Holidays!

2009-12-22T16:18:00.000-08:00

No matter what faith you observe, I just want to take a minute and wish you a Happy Holiday season.

It's almost impossible to do much business at this time of year, and most emails are answered with "out of office" messages. Who doesn't crave some hard earned time off?

It is my wish for everyone that 2010 ushers in a new era of hope and begins a turnaround for ailing businesses and unemployed individuals who just want to get back to work and support their families.

I'd like to think decent health care will be available to all, but I'm not as encouraged by what I am seeing evolve as new legislation. If only our elected members of both houses would work together in the best interest of the people in this great country instead of pursuing their own selfish ends we might actually create a system that works.

Hope you all have great times with family and friends and that 2010 brings health, wealth and happiness to all those who deserve it.

If you want to help your favorite charity or non-profit provide for their cause, pass them to this link and have them contact me. I'd like to help. Help Your Charity Now

Paula Straub
760-917-0858
savegainstax@gmail.com

Tax Nightmares on the Horizon for 2010

2009-12-18T16:31:00.001-08:00

With the government bodies embroiled in the health care debate and trying to get something passed by year’s end, they have failed to enact the proper laws to deal with estate tax issues for 2010.

Several options have been brought up for vote, but none have passed both Houses.

So, this leaves us at least for now with there being no estate tax in 2010- which might be good for the families of a few very wealthy individuals who pass away. However, if this happens, thousands of less wealthy families may pay much more in capital gains tax, as the step up in basis for inherited property goes out the window. Not a good trade off for the average middle class.

Several options have been passed around, such as extending the current rule for another year until they have time to give this more attention, increasing the estate tax exclusion and making it permanent, changing the rates at which it is taxed, etc.

Odds are very good something will be enacted sometime next year and be made retroactive to January 1. This opens up all types of lawsuits for people who pass away before the law is passed and would have benefitted from the ruling in place at the time.

One thing I’m fairly certain of is that this will not end particularly well. I swear we elect some really inept people into government who mess up more than they ever fix. Stay tuned for future updates.

Paula Straub
www.savegainstax.com
760-917-0858

Learn how to help your favorite non-profit by checking out this link:
www.savegainstax.com/legacy.html

You or Your Family Member Needs Assisted Care- Now How Do You Pay For It?

2009-12-10T16:31:00.000-08:00

I was asked to write an article for a local publication so I thought I'd pass on the info here as well.

More often than not we prefer not to think of the time we or our family member s will need the assistance of another person or place to help with our physical or mental needs. In our minds it happens to other people but not to us.

However, it does happen and we are rarely prepared. It might be a sudden stroke, the onset of dementia, complications after surgery or a fall, macular degeneration or simply just getting more frail as we naturally age.

Now we have to pay someone to come to our homes, move in with family, move to assisted living or even to a 24 hour care facility. Costs can run from an average of $20/hr for homecare to 3 to 7 thousand or more per month.

A lifetime of savings can disappear in months and a spouse may become impoverished if the other spouse requires extended care. Medicare does not cover many costs of this type and the state welfare program, Medical , only kicks in once your savings are gone- and then your choices are limited home care or a nursing facility of their choice.

So, what are some options to pay for care? Limited space cannot afford much detail, but here are some choices:

· Long Term Care Policies, purchased prior to need, can be worth their weight in gold and well worth the premiums paid. They come in all shapes and sizes and should be geared to your personal situation and budget

· There are now both life insurance policies and annuities that have long term care riders which allow for financial benefits should long term care be needed in the future.

· There are companies that may offer lump sum payments for such things as no longer needed life policies, annuities in payout, and even interests in established CRTs. These don’t apply to everyone, but it pays to know about them in case they do.

· There are some benefits for veterans and surviving spouses under the VA non service connected Improved Pension Benefit with aid and attendance add on.

· If you need to sell assets such as appreciated real estate, there are tax saving strategies that will allow you to keep more of the value of your asset and minimize your tax obligations. These need to be put in place prior to the sale.

· There may be some foundations, churches and charities that provide support services.
· Family members may be able to chip in or you might share some services with a neighbor.

It really helps to do some checking into facilities and home care companies prior to needing them. Scrambling for information when the need is a reality might lead to bad experiences and loss of precious savings. Also, be sure you have a power of attorney document for both medical and financial decisions. Let your preferences be known to those you trust so the decision for your care is not left up to the courts and strangers.

For more information on any of the above, call Paula Straub at 760-917-0858 or email Paula at savegainstax@gmail.com

How A New Fundraising Strategy Can Help Your Charity

2009-12-03T13:16:00.000-08:00

In speaking with a number of charities recently, I notice a big difference between those who have workers that are in it for the cause and those who just subsist in order to collect a paycheck. A bit like politicians, I think, who should be in politics to serve the public but often just serve themselves.

Anyway, in order to find a way to help those who really do want to see their mission succeed, I put up a web page that can provide an overview of the benefits of a new charitable fund raising strategy, watch a recent interview with the developer of it and then contact me if more details are desired.

Here is the link:

http://www.savegainstax.com/legacy.html

Feel free to forward this to any charity you believe can benefit from additional funds. This is not a magic bullet or a cure all for every non-profit, but when it works it works extremely well and everybody wins.

Paula Straub
http://www.savegainstax.com/
760-917-0858

Do You Support A Worthwhile Cause?

2009-11-06T13:03:00.000-08:00

There are so many good Charities and Non-Profits who are really hurting these days because donations are down just when money is most needed.

I have an important favor to ask of you and it won’t cost you a dime.

I want you to email me, fax me or call me with the name of your favorite charity and the contact information for the person who is responsible for fund raising. That’s it.

It can be a school, church, research foundation, animal charity or any legitimate non profit you feel is doing good work and in need of additional donations.

I will invite them personally to a webinar introducing a brand new way to raise significant immediate donations that has no cost to the organization and no net out of pocket cost to the supporter. There are no risky financial tools used.

In all my years of financial planning, I haven’t seen a better win-win situation for both parties when the fit is right.

This will be by invitation only and only open to non-profits. It will take 45 minutes of their time from the comfort of their home or office and they can decide if they want to find out more after attending.

I personally guarantee they have not seen this method before and their time will be well spent.

So, help me help your favorite charity. Feel free to forward this post to anyone who supports a good cause. You can make a difference.

Paula Straub
savegainstax@gmail.com
760-917-0858 phone
866-401-0424 fax

Do You Know If You Are Paying Too Much In Taxes?

2009-10-07T16:35:00.000-07:00

"It’s not how much you make, but how much you keep." How true.

I specialize in capital gains tax savings but also talk with my clients about how else taxes may be impacting their bottom line. I know they do mine.

Not everyone has a CPA do their taxes. You might do your own, use a software program like Turbo Tax, or take your data to a local tax preparer like H&R Block.

CPAs can be pricey to employ and you may not think you have enough issues to hire one to prepare your returns. However, you may also be missing something that may be costing you money that could be still in your bank account.

I have worked out a deal with a CPA firm I do some work with that you can take advantage of.
For $30.00, a CPA from Gradient Tax Services will do a thorough review of your last year’s tax return. I get no compensation from this offer. It goes directly to them for the review.

They will let you know if you are not taking advantage of any tax breaks you are entitled to, or if there might be a way to reduce future taxes. You may be eligible to amend your return and get money back from last year.

With this economy, we need to keep every penny we’re entitled to.

If you would like to have Gradient review your return, email me your name and telephone contact number and I will tell you the procedure to complete the review.

$30.00 is a minimal amount for a Certified Public Accountant to see if they can save you a heck of a lot more.

Paula Straub
Savegainstax@gmail.com
760-917-0858

More Are Seeing the Light

2009-09-30T15:23:00.001-07:00

Thank you for all the emails I received following my last email titled “Lump Sums vs. Income Streams”. It tells me that mindsets are truly beginning to change, mostly due to personal experiences and recent losses.

Just a few situations presented were people getting hit with a large tax bill after the installment sale note they were carrying was terminated due to the buyer selling the property part way into the note term, a person falling prey to a Ponzi scheme and losing a large sum of money, several people who opted for a lump sum after taxes to reinvest and seeing their proceeds further diminish, a person losing most of his life savings after trusting an advisor his attorney recommended, several more who were promised double digit returns and who now have much less than they started with.

It will be difficult to overcome these unfortunate losses.

There is something to be said for a protected and fixed income stream which at least covers your basic expenses. This is the principle pensions and social security benefits were based on.

As you are approaching or are in retirement stages this should be your first priority. This means no matter what else happens, you have money to live on and money you cannot outlive. You need a reasonable (5-7%) annual return (not found in CDs) but this is not money you gamble with. This means not investing in anything that can go down or is subject to changing market conditions.

Once you have the basics covered, you can consider more risky investments if you need a little excitement. Excitement is not all it is cracked up to be when you run out of money!

This is not a new concept, it’s just that we have strayed from the basic rules of protecting ourselves from the very disasters many of us are facing now and in the foreseeable future.

So, if you are selling your appreciated assets, it is prudent to minimize your taxes, protect your principle and provide yourself with a steady income. I am here to help guide you to the best plan for you and your family. Call or email me.

Paula Straub
(760)917-0858
savegainstax@gmail.com
www.savegainstax.com

Lump Sum vs. Income Stream

2009-09-15T15:24:00.000-07:00

Peter decided to take a lump sum of approximately 500K, pay his capital gains and depreciation recapture of close to 150K and invest the 350K he had left over after the sale of his investment property. Peter was 64.

Peter paid off credit cards and bought some purchases he had been putting off such as a new car and gave some money to his kids and put the remainder into some investments his financial advisor recommended. That was two years ago.

Peter is now out of work and has been selling stocks and mutual funds at a loss to cover his bills. He lost a good deal in value on his investments over the last year. He has about 120K left of that 350K and it is dropping fast.

If Peter had taken a 20 year income stream from a self directed installment sale, he would be receiving about $3500.00 per month or 42K per year for another 18 years. After paying his taxes on this it would still be about $2450. per month he could count on coming in.

If he had simply used this income to pay off his credit cards over the last couple of years he would be out of debt. He may not have the new car or his kids may not have gotten the monetary gifts but he would have an ongoing source of income when he lost his job and would have a means of support going forward if he is unable to find another.

His investments would not have lost value and over the 20 year period he would have received about 110K more using the compounded earning power of the money that went immediately to taxes when he took the lump sum.

Which would you rather have, the lump sum or the income stream?

Paula Straub
760-917-0858
savegainstax@gmail.com
www.savegainstax.com

Is There Any Way Out of a CRT or Other Charitable Trust?

2009-09-02T13:49:00.000-07:00

A couple of times of year I get a call from someone who is unhappy with a CRT or other Charitable Trust they are receiving payments from.

Either they no longer like the charity it was set up with, someone (the trustee) has mismanaged funds, they need a lump sum rather than the monthly payments they are receiving or the trust has lost money and they are afraid it will run out short of making the payments due.

Up until now, there haven’t been many options to make any significant changes, but recently I have met with a couple of companies that may have a viable solution. It is definitely worth exploring.

Upon review of your trust, you may be eligible for a cash offer of a lump sum payment in exchange for your future rights to payments from the trust. This lump sum may be taxed at capital gains tax rates versus ordinary income that you have been paying for your monthly check.

Currently, this option was only available to large corporations and investment firms, but now individual cases are being considered.

This can solve an immediate need for long term care expenses, a way to pass more money to heirs, and a way to disengage from a less than desirable situation with the charity.

You may even have an option to spread out the lump sum over a number of years to minimize the taxes if you wish.

If you or someone you know finds themselves in a similar situation, please give me a call to go over your options.

Paula Straub
Savegainstax@gmail.com
760-917-0858 or 888-338-3036 toll free
www.savegainstax.com

When Does A Structured Sale Make Sense?

2009-08-25T12:08:00.000-07:00

This is the last of the most common capital gains tax saving strategies. In the last several emails I have covered the SDIS, the Charitable Choices and the 1031 Exchange.

I am going to go out on a limb and make a bold statement about the Structured Sale. I do not see a benefit at all of doing this strategy over the Self Directed Installment Sale.

The SDIS actually is more flexible, returns a higher interest rate and saves much more in tax deferral over time. There is also less resistance from the buyer with the SDIS as they take title and do not have to assign the obligation to make their payments to the seller to an Assignment Company.

About the only plus is a lower initial set up cost and this in no way offsets the lost savings over time. Since the money goes into an immediate fixed annuity which is annuitized to make the installment payments, there are fixed annuities that give guaranteed returns that still return more to the seller over time.

I believe this is why these have not really caught on and other insurance companies have not jumped on the bandwagon to offer their own versions.

If anyone is convinced this is the best option for you, I’d love to hear your reasoning and we can still do a direct comparison. As long as you know the differences, no reason we can’t set one up.

If these reasons closely resemble your desires for the proceeds, or one of the previous options are more to your liking and you have a current sale pending, fill out the Confidential Questionnaire at www.savegainstax.com and I will contact you to discuss further.

Paula Straub
760-917-0858
savegainstax@gmail.com

When Does a 1031 Exchange or a 1031 Tenant in Common Exchange Make Sense?

2009-08-19T15:49:00.000-07:00

Now we have covered the SDIS, the Charitable Choices, and now when does doing a 1031 exchange make sense as a capital gains tax saving option?

* You must have investment real estate or a business that you want to sell and buy another of the same investment type. No primary residences, second or vacation homes, common stock, etc

* You must know the exchange rules and follow them to the letter or know your exchange will be invalid and all taxes due

* You must still have the desire to own new property and manage it

* You know you must carry all of your debt and all of your equity to the new property or the difference is immediately taxable

* You must know you can get new financing in the allotted time if you are transferring debt. Not so easy these days.

* You should be comfortable with the fact that your new investment can gain or lose value over time.

* You have real estate that you wish to leave to your heirs with the least amount of taxes due at your death. Please note here that tax laws may change and this may not be the case when your time comes. Also, even though capital gains tax may not be due, there may still be estate tax issues. I have an awful feeling we will see higher estate taxes or lower caps in the not too distant future to offset some of the US debt we are taking on.

* You may wish to still own real estate and benefit from an income stream but not actively manage it. Here a tenant in common exchange is worth looking into. It goes without saying you need to be aware of all the pros and cons before making a commitment here.

If these reasons closely resemble your desires for the proceeds, and you have a current sale pending, fill out the Confidential Questionnaire at www.savegainstax.com and I will contact you to discuss further.

Paula Straub
760-917-0858
savegainstax@gmail.com

When Does a Charitable Remainder Trust, Charitable Gift Annuity, CRUT, CRAT, CLT, etc. Make Sense?

2009-08-11T12:38:00.000-07:00

I’ve talked about the Self Directed Installment Sale and the Charitable Installment Bargain Sale, so now I’ll characterize when the other charitable options may make sense as capital gains tax saving strategies

* You have a charity that you want to support by giving away a good portion of your proceeds from an asset sale either now or after your death

* You need a large tax deduction to offset ordinary income

* Your heirs have been taken care of by the fact they will inherit other assets or you have adequate life insurance from which they will receive the proceeds

* You would rather see the charity receive the proceeds rather than the IRS via taxes due on sale

* You have highly appreciated assets with very low cost basis which gives you a larger tax deduction upfront and you have a large income from other sources or sales

* Your income from other sources does not depend on the sales proceeds to fund your retirement

* You feel an income stream is more beneficial to a family member than gifting them with the asset or lump sum, as they may spend the bulk and run out of money prematurely.

If these reasons closely resemble your desires for the proceeds, and you have a current sale pending, fill out the Confidential Questionnaire at www.savegainstax.com and I will contact you to discuss further.

Paula Straub
760-917-0858
savegainstax@gmail.com

This Blog on WE Magazine List of Women Bloggers to Watch in 2009

2009-08-03T11:44:00.000-07:00

I was really thrilled to be notified that I am on WE Magazines "Women Bloggers to Watch in 2009" list.

I've been doing this blog since 2005 to educate on capital gains tax savings and it's nice to be noticed as a quality website.

Here's a link to the article

http://wemagazineforwomen.com/100-more-women-bloggers-to-watch-for-2009/

Thanks WE magazine!

Paula Straub

Beginner's Teleclass Now Available On Demand

2009-07-31T15:01:00.000-07:00

I am no longer doing regular live telecalls to educate on the ABCs of Capital Gains Tax Saving Strategies.

The good news is, that I have just made an immediate download available so that you can listen through your computer speakers whenever it's convenient.

You can sign up for access (it's free) and you will be able to download the cheatsheet, listen in on the call and make an appointment to have all your questions answered if you wish afterwards.

Isn't technology great?

Go right now to www.savegainstax.com and get these crucial fundamentals.

Paula Straub
savegainstax@gmail.com
760-917-0858

When Does a Charitable Installment Bargain Sale Make Sense?

2009-07-31T14:59:00.000-07:00

The last email discussed the SDIS and when it is a strategy to consider. Now I’ll list a few characteristics of the CIBS or Charitable Installment Bargain Sale and when it may be applicable for your situation.

* You have a charity that you want to contribute a portion of your sale proceeds to in order to support their cause. This is the single most important reason as it is with all the charitable strategies

* Your charity is willing and able to take on the responsibility and the obligation of handling the asset sale and setting up their own administration for making the installment payments to you over the time agreed

* Your charity is well established and a valid and well funded 501(C)3 in good standing
Your charity will protect your portion of the proceeds preferably separate from their general accounts in an investment that has principle protection to avoid future loss

* You have need of a large tax deduction to offset ordinary income and you realize the limitations of the IRS for annual maximum deductions

* You want to control the amount going to charity and be assured of the amount being returned over time

* You want to be able to spread out the repayment of the remainder of the taxes due over time and create an income stream for yourself.

If these reasons closely resemble your desires for the proceeds, and you have a current sale pending, fill out the Confidential Questionnaire at http://www.savegainstax.com/ and I will contact you to discuss further.

Paula Straub
760-917-0858
savegainstax@gmail.com

When Does a Self Directed Installment Sale Make Sense?

2009-07-28T18:03:00.000-07:00

How do you know which capital gains tax saving strategy to choose when you don’t know much about any of them?

The next couple of emails will talk about when a particular strategy might make sense. You may or may not recognize your own situation because there is never one size fits all but I’m hoping getting down to basics might shine a little light on the subject.

Here are some reasons to consider a Self Directed Installment Sale

* Your desire is to maximize the amount of return over time to you and your family and a 1031 exchange is not a good or possible option for you

* You desire the maximum amount of flexibility in setting up how you receive an income stream

* You are looking for safety of return, a decent interest rate and a dependable income for a fixed amount of time

* You want the possibility of being able to cancel the income and take a remaining lump sum without major consequences in the future in case of unforeseen circumstances or emergency need

* You have no major wish to give a portion of your proceeds to charity- your family and heirs are most important

* You may have reason to defer taking any income for up to 10 years and wish to maximize future income for when you do retire and defer paying the bulk of the capital gain until a later date

* You don’t need a tax deduction to offset higher ordinary income tax rates in the year of sale

If some of the above reflect your needs, and you have a current sale pending, fill out the Confidential Questionnaire at www.savegainstax.com and I will contact you to discuss further.

Paula Straub
760-917-0858
savegainstax@gmail.com

Is The Capital Gains Tax Rate Going UP?

2009-07-09T17:31:00.000-07:00

For years now, CPAs, financial advisors, realtors, etc. have been telling their clients to sell their assets now because capital gains tax is at the lowest it has been in years.

This is true, and in some cases a wise move. However, these advisors usually have some personal interest in having you sell your assets such as a sales commission, another place to put the funds to make them money or simply because they don’t know there may be another way that would save you money.

Typically, if the asset is valued under 100K I tend to agree. Especially if you live in a state with no capital gains tax or are in a very low income bracket.

Will capital gains tax rates be going up? Probably, and probably in the not too distant future. We Americans will have to pay for all this money our government is doling out to the big companies and banks, etc. Not that they are sharing it or helping the average Joe as they promised, but don’t get me started down that road….

However, there is an argument to be made for deferring tax or spreading out the payment of tax even if the tax rates rise. Here are the main reasons why.

1. If you can earn interest on money you would have had to pay all at once up front you usually still make out even if tax rates rise.

2. If tax rates go up, interest rates usually go up as well

3. Tax rates go up and tax rates come down over long periods of time. You pay them as you receive them, so you will pay higher rates in some years and lower rates in others, but you are only paying on a portion of each installment.

4. When you pay in a lump sum and invest the remainder, it takes a very long time just to get back to where you started and in most cases you still have to deal with taxes on interest or dividends which is taxed at an even higher rate.

5. People in general tend to manage money better when it comes as an income stream and not as a lump sum. Just look at lottery winners and sports stars.

Don’t just look at one factor, such as the current capital gains tax rate to make your decision when selling an asset. You need to look at your entire financial picture, your present and future needs, and plan for the overall best outcome.

Also, don’t rely only on the person who stands to gain from your selling and paying upfront. If the rates go up, their advice will be the same, though probably with a different rationale. That is how they make their living.

Paula Straub
www.savegainstax.com
760-917-0858
savegainstax@gmail.com

Who Can You Trust With Your Money?

2009-07-03T12:27:00.000-07:00

Even during good times it is hard to trust another person or company with your hard earned money. What if you get taken?

This past year has only added to the fear with crooks like Madoff, Stanford and numerous other con men and women literally stealing the life savings of innocent people, charities and pension funds.

Yes, you can stuff your cash in a mattress or personal safe to physically guard it, but let’s face it, there’s got to be a better way. It’s a bit like identity theft. There are standard and common sense precautions to take that work 99% of the time and there is always that 1% that is unavoidable and unpredictable but necessary for us to prosper.

I’ve put together some basic rules that it makes sense to follow.

*Know what it is you own. Whether it is a CD, a stock, an annuity, real property, a mutual fund, etc. you should have a document of purchase and it should be traceable.

* Beware of writing a check to an individual who is investing your money. This is how many crooks take advantage. They cash the check because it is made out to them personally and never invest it where they said they would.

* Don’t invest in something you don’t understand.

* Most investments should be in vehicles that are regulated by the state and or federal government. Stocks, mutual funds, annuities, real estate are all examples.Be cautious of giving money to a person or company that tells you they will give you unusually high returns on an investment you can’t track the value of or that is unsecured by some sort of collateral.

* Be aware if your investment is in anything except some insurance products, annuities and CDs with guarantees you can and often will lose value as well as receive gains.

The moral of this story is not to be afraid, but to be cautiously optimistic and educated on where you put your hard earned gains and savings. If we learn nothing else from this rotten economy, it should be that prudence should outweigh greed.

Paula Straub
760-917-0858
savegainstax@gmail.com
http://www.savegainstax.com/

Attention Seniors With Diabetes, Arthritis and/or Mobility Issues

2009-06-09T16:18:00.001-07:00

If you are over age 65, and have Medicare Parts A and B, and are not currently part of an HMO, you may be eligible for free medical supplies.

Examples are a diabetic testing meter that does not require pricking your finger, elastic support braces, electric scooters and a hot/cold compression wrap to reduce swelling.

Go to the following link to see the options available, and if you feel you can benefit send me an email to savegainstax@gmail.com with your name and phone number. If you qualify, the devices are delivered to you at no charge.

http://www.savegainstax.com/ProductsAvailable.pdf

Be patient for the file to appear, as it takes a bit of time to load on your screen.

Please feel free to pass this email to someone you know if you feel they can use any of these products.

My Mom loves her new testing meter.

In this economy, every little bit of savings count!

Paula Straub
(760)917-0858

Another Potential Hidden Source of Income

2009-06-03T16:44:00.000-07:00

There may be some “green shoots” of hope forming in parts of the economy but we are still subject to a long period of uncertainty. I am always looking for ways to pass on little known options for the right situation where someone might benefit.

I’ve talked about life settlements and veteran’s pension benefits and today want to mention annuity purchases. Here are a couple of examples.

1. You bought an annuity years ago and are now receiving payments from this annuity over a number of years, let’s say 20. You set this up for a guaranteed income stream to get you through retirement. Now it is year 5 and you are faced with a serious life crisis. For whatever reason, you need a lump sum of money but don’t have other resources. It is possible that a company who purchases annuity payments can look over your policy and make a cash offer in exchange for your future payments. This may be also possible on a partial amount. If this makes sense for you, it opens a new window to solve a pressing problem.

2. You had an accident or perhaps a medical claim that was settled in the past and you chose payments over a specific number of years versus a lump sum payout. At the time this seemed the prudent thing to do, but again, life interferes and you need access to a larger sum of funds. There may be a company who will make an offer as in example one that will allow you access to funds that you did not have before.

I have access to these companies, so if you are in a similar situation, or know someone else who is, please give me a call at (760)917-0858 or (888)338-3036.

It helps to know as many options as possible, because we are all having to be creative financially in this volatile times and knowing where to turn for help is the first important step.

In the next email, I’m going to explain how certain people can get access to free medical supplies such as new diabetic testers, braces for arthritis, and electric scooters.

Paula Straub
savegainstax@gmail.com
www.savegainstax.com

The Document Everyone Should Have on File

2009-05-15T14:23:00.000-07:00

While waiting for the credit markets to loosen up so my clients can actually sell their real estate and businesses, I have been spending a lot of time with veterans, widows and their families.

As I have mentioned before, many who are now in need of daily medical and personal assistance can qualify for the Veterans Improved Pension benefit with Aid and Attendance Add-on. It is a life saver for those whose savings are being eaten up by care bills and also those adult children caregivers who perhaps have quit a job to care for Mom or Dad and now find themselves in a financial bind.

Perhaps one of the major road blocks I have consistently seen is an elderly person with dementia or Alzheimer disease, or perhaps now disabled from a stroke who did not sign over durable power of attorney to someone prior to becoming physically or medically disabled. Now it is too late and a family member must go to court to get custodianship and ask permission from the court before making financial or medical decisions on their behalf.

This can be very time consuming and expensive and is easily avoidable.

It does not matter if you are 30 or 80, you need to put a plan in action to give a chosen person power of attorney in the event of your physical or mental incapacity. Name contingent designees in case a spouse might precede you in death. The power of attorney should be for both financial and medical decisions.

Just having this document notarized and on file where someone can access it in time of need can mean the difference of being taken care of the way you want and having everyone hands tied so they can not help get your affairs in order when necessary.

An attorney is not necessary to implement this document. Templates can be downloaded online and you can write in your exact wishes and when the document becomes in effect.

Please take a moment and do this now. Tell your family and friends to do the same. Take it from those who wish this had been done and whose hands are now tied because they can’t access the funds of the incapacitated individual or make the medical decisions necessary for their care and well being without a court ruling.

Paula Straub
760-917-0858 M-F 8am to 5pm Pacific
www.savegainstax.com
www.gbausa.org/pstraub (More info on VA benefits)

Answers to Most Common Questions from VA Benefit Post

2009-04-13T18:09:00.001-07:00

I’ve been receiving many questions from my last post, so I am going to attempt to answer the most common questions. If you have others, please contact me directly.

Q: What exactly is this pension and who qualifies?

A: Here are the mandatory qualifications for what is known as the Veterans Improved Pension Benefit. This is a non-service connected pension benefit with additional add-ons of “housebound” and “aid and attendance” benefits available to a veteran or their widow(er) who requires the assistance of another person in order to avoid the hazards of his or her daily environment. This is not to be confused with a service related disability pension which falls under a different program. The veteran must also have:
a. 90 days of consecutive active duty service, one of which was during wartime.
b. Any discharge other then a dishonorable discharge
c. Be 100% disabled or at least age 65
d. There are income and asset limitations which can be discussed individually

Q: How do I know if I qualify?

A: Go to http://www.gbausa.org/pstraub and fill out the qualification form. It comes directly to me and no one else and I can contact you to discuss your qualification.

Q: I already applied and was turned down. What can I do now?

A: Once you have submitted the application, and if it was done incorrectly or lacking the proper documentation, it is pretty difficult to overturn the decision. This is why it is crucial to do everything right before the initial submittal.

Q: I have a Veteran’s Service Officer helping me. Do they perform the same service you are providing?

A: The Veteran’s Service Officer at the local VFW or American Legion is trained to fill out the paperwork for submittal. They are not trained or able to offer suggestions of what options you have to be in a position to qualify at a later date, and may tell you that you do not currently qualify and to come back once your income or assets have been depleted. It makes their job easier if everything is in order so they can review the application prior to submittal and make sure everything is in order for processing. Since you only get one first shot at success, it pays to have all your ducks in a row so you are approved on the first go around. Since neither myself nor the VA Service officer charge for this service, why not cover all your bases for optimum success? We both want you to qualify to receive the benefit you have earned.

Q: How long does it take to qualify and begin receiving the benefit?

A: The VA can take 4-6 months to approve the benefit, just due to backlog and understaffing. However, the benefit is retroactive to the 1st of the month following application receipt, so the sooner the better as far as applying. If assets need to be transferred, this may take additional time depending on the individual situation.

Q: Do you have to be “poor” to qualify?

A: No. To get only the basic pension without any need of medical assistance, such as driving, taking medication, walking, bathing, etc, you do have to have a very low income and this may not be the right time to apply. Once you start needing ongoing care, the medical bills can be substantial, and this is when the program can really help defray the costs of home care, assisted living, or nursing care. This is the true value of this benefit.

Q: Is this applicable to the spouse of a veteran?

A: Although the aid and attendance benefit is for the veteran or the widow(er) of the veteran, it still may assist the couple when either needs care. This is because both the husband and wife’s income counts towards qualification, so do the medical costs of both the husband and wife count towards qualification.

Q: If a widow(er) of a veteran remarries, do they still qualify for the benefit?

A: No. The VA only counts the most recent marriage for the widow(er).

Q: Does care provided in the home count for qualification?

A: Yes, see me for details.

Q: What if a child is caring for the veteran at home?

A: The care does not have to be provided by a licensed care giver as in long term care policies. See me for details.

Q: Can a veteran get both a service related pension benefit and a non-service related benefit?

A: Not both at the same time. Whichever pays the higher amount would be the one to go with.

Q: Does this amount stay the same year after year?

A: The amounts are increased annually. You must also re-qualify each year, which is pretty straight forward unless you receive additional income or no longer need assistance.

The bottom line is if you know of someone who may qualify, it is worth it to check it out. With the rising cost of health care, the increase in life expectancy and the risk of outliving income and savings, every penny counts and this benefit is free of dreaded TAXES!

Paula Straub
www.savegainstax.com
http://gbausa.org/pstraub
888-338-3036 toll free
savegainstax@gmail.com

Important Info for Veterans Over 65 Using Assisted Living Services

2009-04-07T16:51:00.001-07:00

In doing research for my own family member, I came across extremely valuable information for US Veterans that might make a huge financial difference in their lives and the lives of their spouses and children.

If you are, or know of, a Veteran or Widow(er) of a Veteran over age 65 in need of medical assistance for daily living, whether at home, in an Assisted Living Facility or in a Nursing Facility, you need to know if you (or they) qualify for the Veterans NSC Improved Pension Benefit.

http://www.gbausa.org/pstraub

This assistance is a little known benefit of tax free pension income from our Government to Veterans who served during any period of war, even if they did not go into battle and it can truly be a life saver.

I recently went through a training program to educate people on this benefit and have set up a web page with additional information and resources. I also have a toll free phone line for questions and contact.

http://www.gbausa.org/pstraub

It doesn’t matter which state you reside in. I will let you know if I can help, or I will try and direct you to a person in your area.

There is no charge for this service and I urge you to use it. Even if you think you or your family member or friend will not qualify, this may not be the case. The maximum benefit for 2009 is $23,396.00 per year and is TAX Free!

Go to this web link and find out more.

http://www.gbausa.org/pstraub

Paula Straub
http://www.savegainstax.com/
760-917-0858

Good Intentions, Bad Tax Consequences

2009-03-31T14:32:00.000-07:00

As we step in to take care of aging friends, parents and grandparents, we can make choices which seem like a good idea at the time, but turn out to be not so desirable when it comes time to sell.

I’ve gotten several questions lately about the tax consequences after selling a home that was either gifted or sold for a very low price prior to death, typically to a child of a sick or ailing relative.

The idea was that the owner was either too sick or unable to take care of their residence and a child stepped into getting control of the assets so they could make the financial decisions to care for the seller.

Since they didn’t want to pay the seller out of pocket, the property was gifted with a quit claim or grant deed or sold on paper for $1. or other low amount. No taxes were due, and now the responsible party was in control. Note: this doesn’t work for planning for state or federal aid unless done at least 5 years prior to need or request.

Then, once the parent or seller is taken care of or has passed on the property is sold for market value. It is at this time that the real consequences surface.

To make a long story short, the new seller now has a large tax bill with capital gains tax levied on the amount over cost basis for the sale. The cost basis is either the $1 paid or the previous owner’s cost basis if gifted. This can be a huge amount depending on value.

If the original owner had retained title, the house could have been sold and the personal exclusion for primary residence applied if they still satisfied the ownership and residence tests, or would have passed to the beneficiary at market value as of date of death.

The child could have gotten legal power of attorney and handled this for the original owner if incapacitated.

Before making any major decisions, be sure to meet with a good attorney who will explain all the pros and cons.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Simply Wealth On Hiatus

2009-03-24T12:57:00.000-07:00

I’ve really enjoyed being the host of Simply Wealth on WebTalkRadio over the past 15 months, and wanted to let you know I’m taking a break to concentrate on exciting new ventures.

Anyone who has hosted a weekly radio show will appreciate the amount of time and effort that goes into preparing, taping, editing, uploading, etc. I developed a regular following of about 30K listeners on a weekly basis and appreciate all who faithfully tuned in.

I will keep my radio email open for any general questions on financial matters and try to keep up with replying as time allows. This address is SimplyWealthShow@gmail.com . You can also listen to my archived shows at www.savegains.com by clicking on the link to “Listen to My Radio Show Simply Wealth”.

You can also follow me on Twitter. My name there is @savegainstax . This is a whole new concept for me which allows short updates of new developments and interesting tidbits.

While waiting for the credit markets to unfreeze, stay tuned for info on some local seminars I will be offering which will really benefit certain deserving individuals. More info to follow.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Safety Has Once Again Risen To the Forefront- Thank Goodness!

2009-03-18T16:08:00.001-07:00

It was less than a year ago that clients were willing to forsake safety and a steady return for the chance to “make it big” with gas and oil, REITs, real estate and other volatile investments.

They decided to pay all their capital gains tax and depreciation recapture up front so they could invest their hard earned proceeds – often with the help of money managers- to not only get back where they started from before taxes, but to soar ahead of a measly 6% return and tax deferral.

Why put money into principle protected products that don’t lose in bad markets and gain only a portion of the growth that stock indexes make in good times? How boring!

Do you know anyone who has lost a LOT of money in the market this year, in gas and oil, in real estate, in a business? I do. I have taken a beating in my own retirement plans.

The people I know who are the happiest are the ones that opted for the boring equity indexed annuity and who have experienced zero loss and an income stream that pays the monthly expenses. When the market does come back, and it will eventually, they will start where they left off and not have to dig out of any holes going forward.

It takes a crisis like the one we are in to appreciate slow and steady versus quick and uncertain. Now when I get calls, the first thing I’m asked is how will they be assured their principle is protected?

If I look back to my parent’s generation, who worked and saved rather than borrowed and spent, we have come full circle. I think it’s a much better way to go.

How about you?

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

A Sad, But All Too Common Story

2009-03-12T10:33:00.000-07:00

In past years, the most common situation was people nearing retirement often came to a decision to sell real estate or businesses which had appreciated in value, had a low cost basis and little debt. This left a big gain and a huge tax bill.

There are still many great choices for deferring or spreading out taxes over long periods of time and setting up a solid income stream for retirement if this is the case.

With this crazy economy, more and more upside down situations are becoming all too common place. Here is one scenario which has many variations, but the same dire consequences.

Phil bought a commercial property 16 years ago for 500K. As it appreciated in value, he took out equity to make other investments, pay bills and buy a few luxuries. His debt increased to 800 as the property value reached 1 million.

Then the market came tumbling down and the property is now worth 750K and he wants to sell. He will only clear about 700K after normal costs of sale. He called to ask how he can minimize his taxes.

Phil is in a world of hurt with no good way out. Not only would he have to come up with 100K out of pocket to pay off the loan to the lender, he is on the hook to the IRS for 400K in capital gains and depreciation recapture, which will work out to about 120K in taxes due.

So, to sell now, he will owe approximately 220K out of pocket to the bank and the IRS and he will have zero proceeds from the sale. Phil was hoping I would have a solution for him to defer paying his taxes. Bankruptcy came to mind.

The thing Phil was oblivious to was that he had had use of 300K equity for many years, but had not reinvested it into his property, and spent it elsewhere. He had assumed the property value would continue to increase and never go down. Now he’s pretty much up a creek without a paddle.

Since Phil does not have the money he needs, he may not be able to sell at current market value. The lender would have to ok a short sale, and then he would have to declare the 100K as income because it is forgiveness of debt and there is no break for investment property. He would still owe the 120K to the IRS. There is no way he can pay all his tax and mortgage obligations, as he has no savings.

The bottom line is, Phil is in trouble and if he can’t hold onto the property he will have to look into bankruptcy or insolvency. There are currently many in the same boat and there is no good way out. I hope Phil can hang on until the market rebounds at least enough to cover his taxes because I hate to see anyone lose everything they’ve worked for.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

How Bill Saved $240,981 Using a Self Directed Installment Sale

2009-03-03T17:32:00.000-08:00

Bill owned an investment property that had appreciated a lot in value. He had depreciated it completely over the years.

Bill’s adjusted cost basis was $0. His straight line depreciation was 200K. The selling price after closing costs was 1.2 million. His gain is 1.2 million and of that 200K is taxed at depreciation recapture rates, and 1 million is taxed as capital gain.

Bill is 62 years old and lives in Utah where capital gains are taxed at 5%.

Bill did not want to do a 1031 exchange and wanted the maximum amount of proceeds to be kept in his family. A Self Directed Installment Sale was his vehicle of choice.

If Bill had sold and paid all taxes upfront, he would have owed about 264K in taxes.

By structuring the sale correctly, Bill chose a 25 year payout so it would most likely last him the rest of his life. He is single and has one son who is financially sound.

By spreading out the repayment of capital gains and depreciation recapture over 25 years, Bill was able to recognize a savings of approximately 241K .

Assuming Bill paid his taxes, invested the proceeds at 6% interest and took withdrawals to live on over a 25 year period, his annual income would be approximately $73,056.00 per year.

By deferring and spreading out the tax repayment over 25 years and assuming that the proceeds are also invested at 6% during the payout phase, his annual income is $93,661.00 per year.

In these crazy times, can you use the extra income, or do you prefer to give it to the IRS?
Paula Straub

www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

How Painful Has This Year Been For You?

2009-02-24T17:14:00.000-08:00

I don’t know about you, but this past year has been a real “bear” in more ways than one!

Not long ago, the calls and emails I received were primarily from relatively happy individuals who had found a buyer for their appreciated real estate, businesses, etc. and were looking to minimize their capital gains taxes.

Fast forward to today. More and more calls and emails are from people who
have been trying to sell their assets for a very long time, and few are having any success. Here are the most common dilemmas:

They are getting low-balled on the offers that do come in and are determined to wait for the values to go back up

They are getting close to losing the properties because tenants have pulled out, they are behind on mortgage payments, or buyers offers are dependent on the sale of another property

The most common is that buyers, even though they are supposedly prequalified for loans, are unable to get the loans, and this is happening right up to the day of close.

The saddest calls of all are from investors who have had to go through short sales on investment properties they bought at the top of the market and now are finding out that they owe income tax on the amount of debt forgiven by the lender. In some cases, this amounts to tens or hundreds of thousands of dollars which the person does not have, and they face possible bankruptcy or insolvency.

As much as I’d like to help with these things, when you aren’t able to sell at a profit, I have no tax strategy to help save on your tax bill. I sure wish I did, because I’d be the most popular person around. Until credit frees up, real estate prices stabilize and confidence is restored we are all pretty much at a standstill and it stinks.

Just realize, if any of the situations above are similar to yours, you are in very good company. Let’s hope all these stimulus packages using our tax dollars have the desired effect. Personally, I can’t wait for the day to get happy calls again!

If you do have a cash buyer that makes even close to a reasonable offer, think real hard before turning them away. They are far and few between and it will be a good while before it is once again a sellers market.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Tips For Getting Through Tough Times #2

2009-02-10T12:25:00.000-08:00

The last email talked about the possibility of getting a cash offer for a life insurance contract that was no longer needed, expiring, and/or affordable.

Here is another potential source of lump sum value for an annuity contract in the payout phase. Potential individuals who may benefit are those
Whose payments are not providing enough to live on
Who are receiving payments tied to an extremely low interest rate
Whose health has changed and the need for additional money is great
Who have inherited an annuity and are forced to take the balance as a payment stream when a lump sum is more valuable to them.

If you or anyone you know is in this situation please email me or give me a call. I can let you know if a company is willing to make an offer for consideration.

Not all policies will qualify, but if yours does it may mean that you have the ability to access money you did not think you had and cover whatever expenses are at hand. There is no obligation to accept any offer made.

If you have any questions don’t hesitate to call or pass this email to someone who might benefit.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
M-F 8am-5pm PST
760-917-0858

Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Tips to Getting Through Tough Times #1

2009-02-04T16:45:00.000-08:00

I don’t have to tell you that our current economic turmoil is affecting our lives in ways it didn’t seem possible even one year ago.

Many of the emails and questionnaires I receive on a regular basis are relating to people selling assets at fire sale prices, being foreclosed on, and being stuck in perpetual hold mode due to the lack of credit available to potential buyers.

Worse yet, property values continue to decline, as do assets in stocks, IRAs, variable annuities, life contracts, etc.

The next series of emails will be focused on finding potential sources of income from assets you may own but may be unaware they have additional value.

Even if these options do not apply to you, you may know of someone who can benefit and share this information with them. We are all in this situation together.

First is potential value in a life insurance policy that could provide a substantial lump sum payment in times of need.

If you or someone you know over age 65 is considering dropping or surrendering a life insurance policy because it is no longer needed or if the payments have become too much of a burden to maintain, please have them contact me.

Even if the policy is a term policy with no cash value, there may be value to an investment company who may make a substantial cash offer on a policy that would have been dropped anyway. These companies buy policies and package them in large groups which are resold to investors. There is no single owner with a vested interest in the seller passing on early so this makes it more palpable to the seller.

This is especially valuable to seniors who are afraid they don’t have enough savings to last through their retirement, those who have an unexpected medical or financial setback or those who have no heirs that need the death benefit. It is also a way for their children to have enough resources to take care of them should they need long term care and have no insurance for that. In some cases, additional life insurance can still be purchased with the proceeds.

The policy owner has complete control on whether or not to accept the offer. Not all policies qualify, but I can let you know if yours does when I get some basic information. It never hurts to cover all the bases.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858 M-F 8am to 5pm PST
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/

TIC Properties in Today's Real Estate Market

2009-01-12T15:06:00.000-08:00

We all know that real estate goes up and down in value. Just like stocks, more years are up than down but occasionally we get a market such as the one we are in where it seems all investments are taking a big hit.

So, what is the state of the tenant in common market today? It depends.

It depends on what type of property you own, where it is located, and when you purchased it. Here are some of the factors involved.

Some of the most common types of tenant in common properties consist of shopping centers, office buildings, medical buildings, senior and assisted living and apartments. Most are at least 95% rented when originally purchased.

For years, when real estate values were climbing and the economy going strong, most properties met their expectations and paid out the proceeds as planned.

Now look at what is happening nationwide. Retail businesses are closing and leases are being broken. Large and small service businesses are also shutting down due to the economy. Some parts of the country are worse than others but we see job losses occurring every day. This is not the buildings or managements fault. It is part of being an owner of real estate. It wouldn’t matter if you owned the whole building or a part of it. This will disrupt your profits and income.

Many apartments are doing very well. People losing homes have to live somewhere and often fill up rentals. On the other hand, if your apartment complex is mostly filled with workers from a particular company and if that company is laying off in droves this could affect vacancy rates.

Most senior living and medical buildings are faring well. There is no shortage of aging seniors or people needing medical care. Of course more and more people are losing medical insurance so we may see this have an effect as time goes on unless we get some sort of universal health care open to all.

Commercial property is starting to slide in value and there are more and better deals to be had. The hardest part now for TIC Sponsors is getting the financing to make the purchase and allow exchangers financing in place. It is also difficult to refinance the initial loans that are resetting if the property was purchased 5-10 years ago. Again, this is true for anyone owning real estate and simply part of the risk involved.

The bottom line is that some TICs are underperforming, and some are doing well. There are great opportunities coming along when credit begins to free up. Things will get better, but some values may fall due to unforeseen events beyond our control. Owning real estate means owning the ups and downs of fluctuating markets. Just like any investment, never put all your eggs in one basket and be prepared to weather the storm. This too shall pass.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Happy New Year 2009

2008-12-31T13:06:00.000-08:00

Well, another year down and what a year it was! Unfortunately, for many not such a good year financially.

Retirement accounts, savings, home values are pretty much down across the board. Layoffs are compounding and unless we can get people back to work, more will lose their homes, savings and most likely benefits such as health insurance coverage. None of this is good news and will start 2009 on a down note.

On the upside, we have a new president coming into office, and he has hopefully engaged the right brain power to begin to turn things around over the coming months.

On the upside, if you have a steady job and good credit, opportunities abound with the ability to refinance at a low rate and buy stocks and property at sale prices. If only the majority of people fit into this bracket!

So, my wishes for the coming year are job creations, a consumer confidence rebound, health care reform and not an excessive amount of tax increases. Also, less war worldwide would be a very welcome change.

So all the best for a happy, healthy, and prosperous year ahead.

Paula Straub

What Will Obama Do With Capital Gains Taxes?

2008-12-17T15:43:00.000-08:00

Dow Jones Newswire reports that President-elect Obama's plans include:

Exempting seniors earning less than $50,000 from income tax.

Increase the top two marginal tax rates from their current levels of 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. Based on 2009 income thresholds, that would result in a tax increase on singles making $171,550 or more and married couples making $208,850 or more.

Taxpayers in those brackets also face increased taxes because President-elect Obama plans to restore phase-outs of personal exemptions and itemized deductions. This means that high-earners would not only face higher tax rates, but they would also lose some or all of their personal exemptions and itemized deductions.

Obama has also proposed raising the tax rate on capital gains income from 15 percent to 20 percent for single taxpayers making more than $200,000 and for married couples earning more than $250,000 annually.

Of course, nothing is set in stone yet and some of these issues may not be addressed until well into his term, depending on the economy.

We can be sure, however, that at some point the government will have to be paid back for all the billions or trillions of dollars it is spending to stabilize our financial infrastructure.

This will most likely be done through tax increases, so minimizing taxes becomes more important than ever. I’m glad my practice will benefit throughout the foreseeable future!

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858

Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/

If It Sound Too Good To Be True...

2008-12-12T18:28:00.000-08:00

If it sounds too good to be true… yep, it usually is.

You’ve heard this saying time and time again, but it is not always easy to know when you are simply following existing guidelines to save money and grow your profits, or when you are tempted to “go for the bleachers” and fall prey to a party who promises you the moon but delivers nothing but heartache. I always go by the motto that it is better to under promise and over deliver than vice versa.

Even wealthy investors are easily misled when dealing with the mask of seemingly successful individuals whose motives often come down to personal greed and arrogance but initially appear to offer a brass ring.

I’m not sure any of us saw the downfall coming of major banks, investment firms and large corporations. It seems even their leadership was mislead into believing some of these complicated investment vehicles were safe and prudent.

However, there are many red flags to look out for that have held true for years. Here are just a few at the top of my list.

* Don’t get fooled by someone wearing a 4K suit and driving a Rolls Royce. Give me a guy like Warren Buffet any day. Even though he’s one of the wealthiest men in the world, he lives in the same house he bought 27 years ago and drives a modest car. I find many people who flaunt wealth come into it at the expense of others they have taken advantage of. They are the only ones that get richer until they get caught doing something illegal or immoral.

* If history shows the average investment return in a vehicle such as stocks or mutual funds is 7 or 8 percent on average over time and someone tells you they consistently get 12 or 15 or 20 percent annually even through bad times, make sure they are able to explain exactly how this is being done. It may be possible, but chances are they are luring you in with empty promises and you only find out once you have lost money that these claims were untrue or exaggerated.

*If someone tells you they are letting you in on an investment typically only available to a very select group – beware. I have seen even an educated man fall victim to this sort of desire to “play with the big boys”. There is often a cloak of secrecy surrounding the details that can’t be disclosed due to “protecting the sources” who deal only with the well healed. It’s usually a scam.

* Legitimate companies value transparency and disclosure. They have nothing to hide and are willing to “show you where the money is” at all times. I don’t like companies that tell you their investments or structures are all proprietary and unique only to them so they aren’t able to disclose the details unless you give them money first.

* Know that any unregulated investments are just that. They can set their own rules and are buyer-beware. This is why hedge funds and the like take huge risks and can either sky rocket or go belly up in a very short time.

In this world where governors try to sell Senate seats, former NASDAQ chairmen run Ponzi schemes, company execs pay themselves huge salaries while their companies and stock holders go broke, and politicians fall to scandal, it makes sense to stick to the basics.

This doesn’t mean burying your money in the backyard or not doing everything you can to maximize what you do have, but don’t jump at a chance to gamble on hitting a home run when taking one base hit at a time will usually win the game and allow you to sleep at night.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858

Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Year End Tax Planning

2008-12-02T16:54:00.000-08:00

December always brings its share of stresses along with the enjoyment of the holiday season. This year has not been a banner year for many families so the holidays may not be as much fun as in previous years.

Year end also deserves a close look for tax planning. Even though taxes are due in April, whatever balancing doesn’t get done in December sets the tax consequences for the previous year.

Here are just a few things to consider:

If you had gains should you look to sell assets at a loss to minimize the taxes? If it is stocks, you can always buy the loser shares back after 30 days if you feel they will go up in value again soon.
If you had losses, should you look to sell something you’ve been putting off at a gain? This year watch for exceptions to withdrawal from retirement accounts that may pass Congress at the last minute.
If you had gains, can you add extra to existing retirement accounts or open new ones to reduce your income?
If you are planning to gift children or grandchildren make sure you take advantage of the 12K yearly exemption per person to the gift tax limits.
Be aware if you own mutual funds outside of a retirement account that you may get a distribution which is taxable even if you still own the funds. Be sure you have the extra money to pay the tax bill.
If you are a business owner with extra income consider purchasing equipment which can be depreciated at an accelerated rate.
If you are self employed, consider deferring income into the next tax year if possible.
High income earners, watch out for the AMT tax trap. Have a tax professional do a quick computation to see if this will catch you before it’s too late to do something about it.

I know this may not be at the top of your list for fun things to do, but it’s better to spend some time now than be surprised in April when it’s too late.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Thanksgiving Wishes

2008-11-26T14:32:00.000-08:00

Happy Thanksgiving! Just wanted to send a quick note to let you know how thankful I am for all my subscribers. In turbulent times such as these, I know I have to stop and count my blessings for the things I do have.

I have been a little remiss on sending updates on capital gains tax issues and on what may be changing in the next year or soon after. A lot is still up in the air as the feds try and stabilize the economy and the credit markets but I’ll keep you informed.

The best spot to keep abreast is to listen to my weekly radio program Simply Wealth on www.webtalkradio.net. I spend a lot of time putting together each program to reflect what is happening week by week and provide information and education that you can use. All you need is 30 minutes and a computer with speakers to listen any time of the day or night.

I’m also always looking for topics which are important to you, so send me an email if you have something you’d like me to discuss or even a guest you’d like to hear interviewed.

Have a terrific holiday and I’ll be in touch again soon.

Paula Straub
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Making the Tax Bill More Bearable When Selling A Business - Option 2

2008-07-07T16:38:00.000-07:00

So, you’re selling your business and have received the shock from your CPA of how much of the proceeds will be passing directly to Uncle Sam if you don’t implement a tax saving strategy prior to sale.

Depending on the type of business you are selling and where it is located, this amount could be between 15-50% and is usually on the higher end of that range.

In the last article, the Self Directed Installment Sale was outlined and now another option will be presented. There are so many variables involved with each sale, there is never any one size fits all “best” option. It is important to work with someone familiar with all options available, so each can be compared and considered for your unique circumstance.

If you have the need for an immediate tax deduction, perhaps to offset other gains or simply in exchange for contributing to a non-profit close to your heart, consider a Charitable Installment Bargain Sale (CIBS). Don’t confuse this with a Charitable Remainder Trust (CRT) because you are not pledging the asset to charity on your death.

In essence, you notify a participating non-profit 501(c)3 corporation that you will do a CIBS and find a buyer for your business. You negotiate the sales price using a fair market value. You donate a percentage of the FMV to the charity and they buy the asset from you at a discount and sell to your buyer in a simultaneous close for the agreed upon price.

You receive a tax deduction for the amount donated and partial tax forgiveness on the allocated tax percentage for that donation. The remainder of the proceeds is returned to you over time with interest via an installment contract between you and the non-profit.

You have the advantage of paying the taxes as you receive the payments and have the compounded tax benefit of the money that would have gone directly to pay taxes earning interest for you over many years. You determine when the payments start and how long they will last.

There is a non-profit corporation set up to handle this for you, and the program is flexible enough to be offered through any established 501(c)3 that would like to become involved and receive the donation. There is a bonded and insured independent 3rd party administrator tasked to make the payments, invest the funds and send out the necessary tax documents so the non-profit does not have to have a department set up in house.

As with the Self Directed Installment Sale, if you pass away before receiving all the agreed payments, the remainder passes to your designated beneficiaries. The costs to set up the CIBS are very reasonable, as the non-profit absorbs the legal fees for the bargain sale.

To summarize, the benefits are tax deduction, partial tax forgiveness, tax deferral and the ability to transfer some of those tax dollars to a very worth cause.

For more information and to see if this is the right option for you, contact Paula Straub of Save Gains Tax LLC at 760-917-0858 (8am to 5pm PST) or email Paula at savegainstax@gmail.com to set up a complimentary consultation.

Making the Tax Bill More Bearable When Selling a Business - Option 1

2008-07-02T12:06:00.000-07:00

Hopefully, before selling a business, you meet with a CPA or tax accountant and get an estimate on how much of your proceeds will be going directly to Uncle Sam if you pay them in a lump sum at time of sale. You don’t want to save this surprise for after all is said and done, because not only will it most likely be a shock, but you will have given up your chance to do anything about it.

Planning is everything. For this article I will assume you are not doing a 1031 business exchange, that is selling your business and buying another similar business taking into consideration all the IRS guidelines and timelines. It’s pretty rare to see this, but it can defer all of your capital gains tax if done correctly.

Depending on how the business is sold, the gains may be taxed as long term capital gain, short term capital gain, ordinary income, etc. and if you are selling an asset in a C-Corp you may face double taxation. So, the idea is to minimize your tax bill and maximize your proceeds no matter what situation you are in.

One option is with a Self Directed Installment Sale. The structure must be in place before the buy/sell agreement is signed. The gist is to receive the sale proceeds in installments and only pay capital gains tax as you receive the income. This has the effect of allowing the majority of money you would have paid immediately in taxes to continue earning compounded interest for you for many years, thus increasing your bottom line by a significant amount.

The details are a bit too complex to fully outline in a short article, but both an LLC and a Trust are created for you and set up meet IRS criteria for favorable taxation of installment sales. Your asset gets transferred to the LLC prior to sale, and your buyer purchases from your LLC. The trust buys the shares of your LLC from you via an installment agreement and you pay taxes on your gain only as you receive the payments.

You, the seller, are able to control when the payments begin and how long they will be spread out. This allows for maximum flexibility to control your income, and plan for future tax savings as well. Since your buyer paid cash in exchange for your property, you are not dependent on them to make the installment payments and you have transferred the risk of refinance or default. This is done by using an independent third party administrator and your money is safely invested in a principle protected insurance product to be used solely for the purpose of paying the installments.

If you pass on before receiving all of the payments due, the remainder of the installment payments pass to the beneficiaries of your choice.

Seeing an example of a taxed sale vs. a Self Directed Installment Sale side by side will show you how much of a difference in overall return this strategy will provide. This can make the process of the sale more palatable and provide a dependable income stream for retirement.

For more information and to see if this is the right option for you, contact Paula Straub of Save Gains Tax LLC at 760-917-0858 (8am to 5pm PST) or email Paula at savegainstax@gmail.com to set up a complimentary consultation.

How To Get the Greatest Return on the Sale of Your Business

2008-06-26T15:05:00.000-07:00

If you are thinking about selling, or already have your business up for sale, you don’t want to make any crucial mistakes that will cost you big time.

Most business owners only sell one business in their lifetime. The results of this sale have a major impact on the financial future of the family. You may be an expert in business development, but totally in the dark about most aspects of the best way to sell.

A colleague of mine, Dave Kauppi makes his living helping business owners get the maximum return from their business sales. He has extensive knowledge of the mistakes made by owners attempting to handle the sales process without professional help and can make sure your business is not a victim of unintended financial disaster.

Dave publishes the Exit Strategist Newsletter. It contains a wealth of useful advice to help guide you through your business sale. The subscription is complimentary and I urge you to sign up on his website.

Go to www.midmarkcap.com/exit and start learning how to reduce taxes, put together creative deal structures, perform valuations, employ buyer negotiation tactics and much more.

You owe it to yourself to learn how to structure your business sale to your own advantage and have a place to turn when you need some help. Wouldn’t you rather learn from the mistakes of other business sellers instead of being the one to suffer the consequences?

You can also reach Dave directly by calling 630-325-0123 or emailing him at davekauppi@midmarkcap.com .

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Selling Your Second or Vacation Home

2008-06-04T09:28:00.000-07:00

Almost everyone is affected by something happening within the economy today.

Housing prices have taken a dive. Staples such as food and gas are significantly more expensive and still rising. Jobs are being cut throughout many sectors such as construction, education, retail, restaurant, manufacturing, etc. So, the first thing we find ourselves doing is looking to see what we can do without.

I’ve been receiving a lot of calls and emails regarding the sale of second or vacation homes. Once a nice luxury and place to retreat, they are more and more becoming a financial strain, or at least an unnecessary part of life for many.

When selling a vacation or second home, you can’t enjoy the personal exclusion given to primary residences, nor can you qualify for a 1031 exchange available for investment property. Thus, saving on taxes becomes an even more important issue.

If you need to maximize your income, a Self Directed Installment Sale could be an excellent choice. It will basically allow you to receive a steady income stream over the number of years you choose. It also allows for the capital gains tax to be paid back over many years, and compounds the amount of return using the tax amount that would have been paid upfront to earn interest for you going forward.

So, by selling your vacation home and deferring taxes, you have immediate relief from the ongoing expenses of a second property, and additional monthly income to cover the rising costs of life.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

Exciting New Concept in Capital Gains Tax Planning

2008-05-14T18:51:00.000-07:00

I'm very excited about a project I have been working on for quite a while that is coming to fruition. I hope to have it available by the beginning of June.

It is a twist on the Charitable Installment Bargain Sale and I hope having this option will be appealing to a lot of people who want to make the world a better place for a deserving group of people.

I've been listening to clients over the last year and one half tell me what they liked and didn't like about the current foundation offering this product.

The three most common hesitations were dealing with a new and untested foundation, not being able to choose to send a part of the donation to their favorite charity, and wondering if the large tax deduction would hold up under IRS scrutiny.

Well, the new program I am helping to launch addresses all of those concerns and will help a cause almost every American will want to contribute to if it fits their overall objectives in selling their asset.

I know this is a tease, but I am very proud of what this will mean to a lot of deserving people.

Stay tuned for upcoming announcements.

Paula Straub
760-917-0858
Save Gains Tax

Tax Time is Over - It's Not Too Late To Plan for Next Year

2008-04-28T16:48:00.000-07:00

The last few weeks before taxes are due I field a lot of calls from desperate tax payers who sold an asset in the past tax year and now are faced with writing a huge lump sum check to the IRS.

Most knew it was coming, but were not prepared for the amount their accountant just presented them with. It is often double or triple what they expected to pay. Some have no idea where the money will come from because they either spent the proceeds or re-invested into another asset.

The worst news is that it is too late to do anything about it. The event took place in a previous tax calendar year, the proceeds were dispersed and no tax strategy was in place prior to their sale or at least prior to December 31.

This same scenario takes place each and every year and the outcome doesn’t change. The time to start searching for ways to pay less in taxes is before the sale and not months after it has been completed. Human nature is to put things off until the absolute last minute of a deadline and then scramble around in panic to try and salvage a disaster in the making.

The other trend is to find out what options are available and then not take action because it takes too much effort to understand the process and the benefits. It is similar to hiring a Financial Planner to outline a series of steps to start investing for your retirement and then ignoring the plan completely because it’s easier to just spend your whole paycheck rather than putting money aside for your future benefit.

The big picture is often the hardest to comprehend. You may have to feel you are sacrificing a bit now (spreading out the receipt of your gain) versus collecting it all in a lump sum immediately. Instead, you need to see it as achieving a greater amount overall at the end of say 15-20 years.

If you contributed for 30 years to a pension plan at work so you could retire at age 65 would you withdraw 100% of that money the day you retired and pay taxes on all of it at once? Most likely it would never cross your mind. That money is what you will live on during your retirement years.

So why would you want to pay taxes all at once on the sale of your asset and then have to turn around and re-invest what was left over in the same type of safe vehicle that it would be going into anyway with a tax strategy only missing 15-30% of what you would have started with?

As with any investment, it’s not what you make, it’s what you get to keep.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net

The Risk of Owning Securities

2008-04-10T16:39:00.000-07:00

Anyone that has been through a stock market downturn is familiar with the risks of owning stocks, mutual funds, unit investment trusts, Real Estate Investment Trusts, etc.

When values are rising, we pat ourselves or our advisors on the back and congratulate ourselves for making a wise pick. We may even buy more.

The true test of an investor comes when the market heads downwards. Then we second guess ourselves and/or our advisor and wonder if we made a big mistake.

Sometimes, some event out of our control happens and that company we thought was as solid as a rock crumbles out of the blue (Think Bear Stearns, Enron, WorldCom, Tyco, etc.)

Maybe we panic and sell at a loss. Then we curse ourselves for not acting sooner. Hindsight is indeed 20/20.

Any seasoned investor knows that the stock markets go through cycles just like real estate and bonds. One should be in it for the long haul or be prepared to ride a roller coaster.

You might think bonds can never lose value. This is not true.

It depends on the type of bond you own. Some need to be kept through the entire length of the maturity period in order to get what was promised.

Others trade on the open market and can trade at a premium or a discount from face value. Some are backed by more risky collateral and can lose their entire value.

Saving accounts, checking accounts, CDs are safer from loss, but here the lower interest rates also pose the risk of not keeping up with inflation and being worth less in the future than they are today.

Risk is not all bad. Huge profits can be made to those who invest wisely and consistently. Buy stocks when the market is down. They are on sale (assuming the company is still viable of course).

Most of all, remain diversified enough that when the stock market is down, real estate is up, or bonds are trading strong.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The Risk of Owning Annuities

2008-03-19T18:12:00.000-07:00

I’m not sure what you know about annuities, but I will tell you that a lot of insurance agents and registered representatives don’t know as much about the products they sell as they should.

You might wonder how that can be, but if you truly knew the number of annuity products currently being offered by hundreds of companies it wouldn’t be hard to fathom.

The other thing that makes annuities rather intimidating is that since each company’s products have different features and crediting methods they can rarely be compared side by side with much consistency.

The popularity of one over another can actually be the strength of the company offering it and how effectively they market it. Some companies set themselves apart by being truly innovative and others simply get a product out there to have something to offer along with other products.

Some agents are very knowledgeable and know their products inside out. They keep up on changes and take advantage of training seminars and company experts.

Others learn just enough to be dangerous and tell clients what they want to hear and leave out the potential downside.

This has lead to improper products being sold to unknowing prospects, especially in the senior marketplace.

Typically, the main issue has been tying up the funds of the elderly for excessive periods of time when they may need to access this money for issues such as health care or long term care in the short run.

Since bad news gets a lot more press than the products purchased by clients for the right reasons, annuities in general have taken a bad rap and that is a real shame.

There are a lot of good products out there that offer low fees, principle protection, tax deferred growth, good long term interest growth, guaranteed payouts and death benefits.

They make good vehicles for trust investments and for installment sale payments, as they are backed by strong insurance companies who must keep enough cash reserves to guarantee required payouts.

Any trustee or charity that is obligated to make payments to a contracted party needs to invest this money prudently as opposed to trying to hit a home run with an unrealistic return expectation and shouldn’t be subjecting the funds to risky or illiquid assets.

Bottom Line: Annuities for the right purpose are very appropriate and effective. Always make sure you understand what you are investing in and don’t be swayed by headlines- whether positive or negative.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The Risk of Owning Real Estate

2008-03-19T16:20:00.000-07:00

Real Estate is an important part of anyone’s investment portfolio.

Whether it is the house you reside in, a rental property, vacant land, or a commercial building, a good piece of real estate will almost always increase in value over time.

That said, a number of factors can happen which can affect how much your property increases in value.

Any time you buy a property that is less than desirable, you can lose money. Structural issues you may not be aware of, property in a declining neighborhood, land in a flood zone, natural disasters such as fire, flood, hurricane, earthquake, zoning issues, tax issues, insurance issues, all play a part in the value and profitability of the property.

Economic issues can also have a great effect and are much harder to predict and knowingly avoid.

In 2008 times are tough. People are losing homes and jobs, property values are dropping, companies are going out of business or are seeing major declines in revenue, and a property may not sell as quickly as you’d like.

Even a solid commercial property can have a tenant break a lease and leave the owners temporarily in a negative cash flow position.

Just as I’ve seen my home triple in value in about 5 years, I’ve also seen it decrease by about 20% in 2 years.

This could have gone the other way if I purchased at a different time. It could have gone down significantly in the first couple of years and then rebounded in the next 5.

Real Estate is still a good investment. It is still up to every purchaser to do their due diligence and know what they are buying. It is not a liquid asset, and is almost always more profitably over a 7-10 year period of time.

Those who buy properties to resell at a profit in a short period of time will make a lot of money in some cycles and lose a lot of money in others. It’s the nature of the business.

The moral of the story is, just because real estate can go down as well as up don’t count it out as a good long term investment.

I had a client that did great with a few properties in Florida during the boom there. He sold and immediately bought several more thinking he’d make another huge profit and keep repeating the cycle. Now he is pouring money into empty rentals which aren’t selling and quickly losing his original profits.

Unfortunately, all his eggs are in one basket and he is forced to learn a difficult lesson.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

No Such Thing as No Risk

2008-03-19T16:13:00.000-07:00

We all would like guarantees that any investment we make will never lose money or value. The reality is that every investment has a certain amount of risk.

Whether you are purchasing real estate, stocks, bonds, mutual funds, annuities, gold, or even certificates of deposit there is risk.

The best you can do is evaluate what it is you are purchasing, be aware of the specific risks and potential rewards that asset has associated with it, know what if any recourse is available should something unexpected arise, and do not put all your eggs in the same basket.

We all know the stock market goes up more than it goes down over extended periods of time. Buying good quality stocks of a diversified nature and holding them through both down and up cycles will almost always show long term profit.

Real Estate has similar cycles. If you purchase a good quality property in good condition in a good area it will most likely increase in value over time.

The comparative safety of a certificate of deposit has the risk of locking into a low interest rate for an extended period of time and having your savings not keep up with the rate of inflation.

The next couple of articles will address some of the normal things to expect which can put a crimp in any investors plan. In other words “Stuff Happens” and there is a chance it could happen to you.

It doesn’t mean you should never take risk, just that some risks will pay off right away, and others may encounter some challenges along the way. It is often forces beyond our control that make it hard to predict.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Life Settlements and Capital Gains

2008-03-05T12:22:00.000-08:00

Do you meet the following criteria?

*Age 65 or older
*Have a Life Insurance Policy with a face amount of 250K or more
*There has been a change in insurability since the policy was issued
*Life expectancy of 15 years or less

If so, a life settlement may be something to consider. A life settlement is the sale of a life insurance policy for more than the surrender value while living.

Here are some circumstances that may lend themselves to a life settlement.

*You have a policy that is underperforming and you can no longer afford the premiums to keep it in force.
*You had the policy to protect a spouse who has passed away.
*You have a key employee life policy and that employee no longer is in your employ.
*You have the ability to replace this policy for a policy with the same death benefit and lower premiums.
*The policy was to cover estate tax which is no longer an issue.
*You are considering surrendering the policy or letting a convertible term policy lapse for any reason.

Before you let a policy lapse or surrender it, let over 50 companies compete to offer you significant cash for your policy. Here are a couple of examples of real policy sales.

Male, Age 79, Universal Life Policy with 3.4 million face value and 180K cash surrender value. Policy was purchased for 640K dollars.

Female, age 76, joint survivorship policy, 2 million face value, surrender value of 290K. Policy was purchased for 390K dollars.

Since some of the profits are taxed as capital gain, additional tax strategies can be applied to minimize taxes due.

Contact me if you have a policy that may qualify. We can get an estimate of what fair market value you might expect at no cost to you.

A life settlement may also be effective for exiting a poorly performing variable annuity product.

I’ll be devoting an episode of my radio show “Simply Wealth” to this topic in the near future.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Having Trouble Selling Your Property? How About Auction?

2008-03-04T15:39:00.000-08:00

The biggest thing affecting my clients over the last year or so is that real estate is simply not selling the way it used to.

I can’t even count the number of times that a sale is all wrapped up after months of waiting, and at the last minute it falls out of escrow.

Most times it is due to the financing of the buyer not coming through as planned. In today’s market even “preapprovals” don’t seem to hold a lot of weight.

So although the buyer may lose a deposit, the sale doesn’t happen and the property goes back on the market. It may sit there for any number of months and sometimes the seller is forced to rent it out again just to keep afloat.

If your property is just sitting there with no bites, or you need to sell it sooner rather than later, you might consider putting it up for sale through auction.

I recently devoted a weekly radio show to this topic, and if the idea appeals to you take a listen.

An archive of all of the episodes of “Simply Wealth” is now available on the following website.

http://www.savegains.com

Go to the link above and click on the “Listen to My Radio Show- Simply Wealth” link located in the right hand selection menu.

Alternately, listen to the most current show at www.webtalkradio.net and even download it as a podcast.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

When Is a Year and a Day not a Long Term Gain?

2008-02-29T13:54:00.000-08:00

I read an interesting article today and had to share.

It’s one of those quirky things that you would probably not ever think about until you got caught in a really awful situation.

By now you know that long term capital gain is taxed at a lower rate than ordinary income, so if you hold an asset for longer than one year you receive a tax advantage when you sell.You actually must hold the asset for at least a year and a day to qualify.

So, something purchased on March 10 of one year could be sold on March 11 of the following tax year and receive long term capital gains treatment.

So when does this rule of thumb not apply?

Leap year, of course.

If you buy shares on February 28 in a year preceding a leap year, and sell them on the following February 29, your gain or loss is short-term, not long-term.

This surprising outcome is the result of a technicality. Your holding period for an asset is deemed to begin on the day after the date of purchase. That's why you can't get a long-term gain when selling on the anniversary of the date of purchase.

If you buy on April 10, your holding period technically begins on April 11. That's why you have to wait until April 11 of the following year to sell for a long-term gain.A purchase on February 28 in a year that isn't a leap year gives you a holding period starting on March 1.

Selling on February 29 the following year may seem good enough because it's a year and a day after the date of purchase. In reality though, you have a holding period that began March 1 and ended February 29 of the following year.

The way these rules work, that's a holding period of exactly one year: not good enough, because you need to hold more than a year to have a long-term capital gain.

I learn something new every day. Hope you did too.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

What About Investing in Real Estate Outside of the US?

2008-02-15T13:08:00.001-08:00

The US market is pretty shaky right now in real estate. So, what about investing outside the USA?

It may be worth looking into once you know how to do your due diligence and ask the right questions.

This is the topic of the week for my radio show "Simply Wealth". My guests are two experienced overseas investors, Mynette Boykin and Glen Fulton.

The are currently investing in Peru, Mexico, and Viet Nam amongst other countries where the markets are hot.

You can listen over the web at http://www.webtalkradio.net . Click on my name or the show Simply Wealth. You can also download it to your IPOD or mp3 player and take it with you on the road.

Paula Straub
760-917-0858
savegainstax@gmail.com
www.savegainstax.com

The Dish on Finding the Right CPA

2008-02-05T09:29:00.000-08:00

This week's guest on my radio show "Simply Wealth" is Diane Kennedy of http://www.taxloopholes.com/.

Diane is a very well known CPA and tax strategist and author of several books and courses.

An ongoing challenge for a lot of my capital gains clients is finding the right CPA. Even with a tax strategy for a particular asset sale, it is important to know how all the different taxes you may be subject to can affect your bottom line.

Diane uses a statistic from a study that 80% of CPAs don't understand actual tax planning. It is not their focus. Once you own a business or real estate investment, it is very important to have it structured properly and take advantage of all the deductions you are allowed.

It is important to have someone who understands that keeping as much money working for you as possible for as long as possible will increase your wealth.

Never assume because someone took a CPA exam (perhaps many years ago) that they are aware of current rules on more complex tax subjects. A good CPA will know how to research a strategy and be willing to be brought up to speed. A CPA, or other tax professional who is not willing or able to research can do you great disservice.

If you have an internet connection and speakers you can listen to the program on line. Just go to http://www.webtalkradio.net/ and click on my name or Simply Wealth and you can click on "listen now" or download a podcast if you have an IPOD or mp3 player.

Paula Straub
http://www.savegainstax.com/
760-917-0858
savegainstax@gmail.com

Simply Wealth Radio Program Debuts Today

2008-01-21T14:42:00.000-08:00

My radio program "Simply Wealth" is debuting today, January 21, 2008.

If you have a computer with speakers and an internet connection you can access it by going to http://www.webtalkradio.net and either clicking on "Simply Wealth" from the schedule page or going to hosts, and Paula Straub, and clicking on the link there.

My first guest is Monte Lee-Wen of the PPA Group and InvestorTours.com and the subject is whether commercial real estate is suffering the same rocky road as residential properties.

The show is also available in podcast form, so if you have an MP3 player, you can download to it and listen while on the road or at your leisure from anywhere.

Be sure to check it out. Next week I talk with guest Jack Guttentag about the mortgage meltdown and what to do if you need a loan or are in one that you can no longer afford.

Paula Straub
760-917-0858
www.savegainstax.com

Your Input Would Be Appreciated

2008-01-09T12:36:00.000-08:00

I have been asked to host a new weekly talk radio show which will be debuting January 21, 2008 on www.webtalkradio.net.

It will be called “Simply Wealth” and will be available on-demand from the website, in podcast form, and soon at many national public libraries in subscription form.

I’m very excited and can use your help to make it the best radio program online.

The show will be focusing on timely topics which will educate and inform listeners on ways to increase, maintain, protect and pass on their personal wealth.

Each week I will interview guests who are experts in their respective fields and I would love you to write and tell me what subjects you would like more information on and that would personally benefit you.

As my subscribers, your needs are very important to me.

Currently, shows will include managing the mortgage meltdown, how commercial real estate is holding up compared to residential, selling your home through auction, how to choose the right CPA, Long Term care for family members and more.

Send any suggestions for topics, any guest speaker recommendations, and any names of potential show sponsors to me at savegainstax@gmail.com or to my assistant Jessica at savegainstax@hotmail.com.

I want this program to help as many people as possible.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

AMT fix for 2007 Finally Here

2007-12-20T16:59:00.001-08:00

Well, the powers that be have decided to give the AMT (Alternative Minimum Tax) a band aid again this year.

There was a lot of dissension amongst Republicans and Democrats on how to save about 20million people from being hit with an average of 2K of extra taxes this year.

The republicans wanted to raise the income ceiling without adding a new tax somewhere else, and the democrats wanted to make sure the loss was paid for with a tax increase in another area to offset it.

The republicans won this round, as time was critical and the dems didn't have enough votes to veto it.

So, will you escape the AMT? It really depends. If you are married and make less than 66K as a couple you may.

If you have a large capital gain for 2007, you may not be so lucky as this may trigger it for your tax return.

There's not much time left to do anything about it, so make sure you run some calculations to see if you will owe extra tax this year.

Oh, yeah. The IRS now has to scramble to correct the forms for 2007 returns. They say that if you are expecting a tax refund, you can expect a delay. Happy New Year.

Hope you are in the lucky group that is not affected.

Paula Straub
www.savegainstax.com
760-917-0858

Blogging tools

2007-12-20T16:41:00.000-08:00

I'm evaluating a multi-media course on blogging from the folks at Simpleology. For a while, they're letting you snag it for free if you post about it on your blog.

It covers:

The best blogging techniques.
How to get traffic to your blog.
How to turn your blog into money.

I'll let you know what I think once I've had a chance to check it out. Meanwhile, go grab yours while it's still free.

Taking the Long Term View

2007-12-10T16:08:00.000-08:00

As I’ve said many times before, there isn’t anyone who is selling an appreciated asset who doesn’t want full liquidity, full control, high interest guarantees and no tax obligation whatsoever.

This is not an option unless you want the wrath of the IRS upon you. So, the best option is to use the current tax laws to full advantage and give up some of the above to receive some savings in return.

Unless you are doing a 1031 exchange which can defer all taxes, to save on capital gains you need to resolve yourself to take payments in one of the other strategies over time.

If you take it all at once, you pay taxes all at once. Period.

Receiving a payment stream is really a good thing in most cases. Especially for anyone approaching or already in retirement.

There is a reason why you don’t receive your company pension or your social security in a lump sum. Most people would go through the entire amount long before their lives were over and would have nothing to live on.

Just check the statistics on Lotto winners and professional athletes and entertainers.

I know it is appealing to think of a big pile of money sitting in your bank account where you can access it at any time. But, ask yourself when was the last time you needed to access a huge sum all at once while you were growing your asset over the years.

The next article will focus on some instances where having an ongoing income stream can really be of benefit.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Case Study for Lump Sum Distribution Tax Reduction

2007-12-04T14:08:00.000-08:00

Ask anyone in the tax business and they will tell you the worst way to be taxed is as ordinary income. This is because (with the possible exception of some corporate rates) you will pay tax at the highest rates in effect.

I’ve had several clients receive large sums of compensation in 2007. The reasons range from a pension or deferred compensation lump sum payout that was unavoidable, to a large lump sum that resulted from a business sale payout package.

Once income is received there is no way to defer the tax due. However, there may very well be a way to minimize it. Let’s look at a real life example.

Client Mark received a lump sum income distribution of 1 million dollars in 2007 from a business sale. He was going to owe close to 45% in income tax, or 450K. That would have left him with only 550K to retire on.

Since the taxable event had already occurred, his only option was to try and reduce the 450K tax bill.

This was accomplished with a Charitable Installment Bargain Sale. The idea was to get a large tax deduction to reduce the income tax due and then receive a guaranteed income stream over a period of 25 years.

Of the million dollar income, 750K was placed in a Charitable Bargain Sale with an initial donation of 75K cash to the charity. This was able to generate a 509K tax deduction when calculated using the 25year installment payout option for the remainder.

Even with the IRS rules for charitable deductions on high income earners, Mark will be able to reduce his AGI by almost 50% in 2007 using his tax deduction. He will receive monthly payments of $4,227.60 for 25 years for a total return on his 750K of $1,268,280.00 and his tax bill will be reduced by at least 50% for 2007 and be closer to 225K, for an immediate 225K tax savings.

That’s close to one quarter of one million dollars of immediate tax savings, and his income stream will be partially non taxable, as he has already paid tax on the principle. Only the interest component will be taxable as ordinary income in future years.

Every case is different, and including your tax advisor in the planning process is essential. All aspects of your situation should be considered, as well as estate and retirement planning needs.

It is definitely worth exploring your options when a large sum of income is accrued in one calendar year, especially if you are nearing retirement and will be needing as much of this money as possible to sustain your future income.

Be sure to put something in place prior to December 31sr . If you wait past the end of the tax year you will owe all of the tax in April.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Upcoming Appearance on the Daily Bear Radio Show 11/27/07

2007-11-26T16:37:00.000-08:00

Just wanted to let you know I will be appearing live on the radio on “The Daily Bear Show” on Money Matters Radio Network on Tuesday, November 27, 2007 at 8:20a.m PST/11:20am EST.

I’ll be discussing with host Lou Michaels how to maximize your retirement savings with capital gains tax strategies.

You can listen live on the internet with streaming audio at

http://www.moneymattersradio.net/

Hope you get a chance to tune in!

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Those in These Categories Need to Take Action by Year’s End

2007-11-05T12:47:00.000-08:00

Does this sound like your situation?

It’s already November and the end of the tax year is approaching quickly. If you are in any of the following situations, you need to act now or it will be too late to lower your tax obligation for 2007.

* You sold an asset in 2007 tax year with capital gain of over 100K and did not have a tax saving strategy in place prior to sale.

* You are getting a large lump sum of compensation by December 31st which will put you into a high tax bracket and you will be sending 33%-50% to the IRS in the form of income tax.

* The sale of your asset will occur on or before December 31, 2007 and you will have a capital gain of over 100K.

Depending on which category you fall into, your savings could range from significant to massive. In all the above cases, it is crucial you have the understanding of the consequences vs. rewards should you decide to act and protect your monies.

Many people think that April is my busiest month since that is tax deadline. This is true for CPAs and tax professionals who file returns but not for me.

December is one of my busiest months because it is the last chance to minimize a tax obligation which occurs in the current calendar year.

With the pressure of the holidays approaching, give yourself a gift and don’t wait until the last minute to hang onto your gains. It’s no fun come April 15th when you have to write out a huge check to the IRS and you wish you could have a “do-over”.

Fill out the confidential Qualification Questionnaire at the link below and I will contact you directly, or call me at (760)917-0858 for a complimentary consultation. You still have time to act, but this window will be closed before you know it!

http://www.savegainstax.com/qq.html - Questionnaire link

Paula Straub
Save Gains Tax LLC
savegainstax@gmail.com
http://www.savegainstax.com/

Bottom Line – Installment Sale Through a Foundation – Part V

2007-10-31T12:50:00.000-07:00

So far, I have addressed some of the ins and outs of the 1031 exchange, the Charitable Remainder Trust, the Structured Sale, and now will do the same for the Installment Sale Through a Foundation.

There is no one particular strategy that is right for everyone, and it behooves you to work with someone who can review your whole financial picture and needs so that you can compare and contrast all of your options and find the right one or ones for you.

The Installment sale through a foundation works with pretty much all highly appreciated assets. Currently, there is only one foundation set up to handle this transaction though I predict more will follow suit over time. This strategy had been in the works for over a year to handle the disposition of C-Corps, but was put into full swing in January 2007 following the removal of the Private Annuity Trust for tax deferral by the IRS in October 2006.

A Charitable Bargain Sale is performed by a 501C3 Charitable Foundation and the asset is purchased by the Charity at a discount from Fair Market Value. The Charity then sells the same asset at fair market value to your buyer and receives the proceeds in cash.

The amount of discount is your donation to the charity, which launches a charitable deduction for you to reduce your taxable income for up to a total of 6 years, or until the deduction granted has been fully used up. If there are taxes due for depreciation recapture or due to forgiveness of debt, this deduction will reduce the amount owed at time of your next tax filing. There will also be partial forgiveness of capital gain and depreciation recapture on the amount donated.

The charity then enters into an installment sale agreement with you, the seller, to pay back the remainder of the money over time in installment payments with a fixed interest rate on those monies between 5.5 and 6%. The remainder of the capital gains tax due is paid only as received as in the Structured Sale and is spread out over many years.

Your actual tax deduction will be greater than the original contribution, as there is a projected deduction added for an additional contribution at the end of the contracted payments. Any interest earned in excess of the interest paid out to you will go to the charity once the installment agreement has been satisfied. The charity provides a letter of explanation regarding the deduction to the IRS at time of close and to you for your records.

Since you have an installment contract with the foundation, if there is a need to amend the terms in the future, as long as both parties agree and any penalties for early withdrawal are accounted for and paid, the contract can possibly be amended or canceled. Please note, although circumstances may warrant such an act, it is almost always better financially to stick to the original terms.

So, what you need to address is how much will it cost to set up? How is my money invested and protected? What if something happens to the foundation? Are there any ongoing fees? Do I have legal representation? Do my heirs get any monies left over if I pass away before the installment agreement has been satisfied?

Because your monies are invested and segregated with a large insurance company in a commercial annuity product with a principal guarantee there is little risk of loss, as is the case with the Structured Sale. Since here the annuity is not annuitized, it allows for a higher interest rate payout and more flexibility.

It is always a good idea to compare each vehicle side by side for your unique situation. The bottom line should be safety, tax minimization and overall return. The whole idea is to keep as much of your proceeds as legally possible and to do it with as little risk as possible.

It is just as imperative to work with a professional who understands the ins and outs of each strategy and can explain the pros and cons of each. If you don’t know the right questions to ask or what answers to expect, you may not fully understand what you have committed to and it will be too late to change your mind.

This is where I can be of most help.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Wildfire Aftermath

2007-10-31T11:52:00.001-07:00

I just want to take a moment to thank everyone who sent their good thoughts my way during the recent fires here in San Diego. It worked because my home was spared despite spending three days with my bags packed and on standby evacuation status.

Many others weren’t as fortunate and are faced with the inordinate task of getting their lives back on track after losing everything they own.

A tragedy such as what happened throughout Southern California will have some far reaching impacts that most don’t think about.

Those who lost businesses no longer have a source of income but may still have outstanding business expenses to deal with. Those who lost homes with mortgages still have those payments to make as well as the cost of alternative living arrangements.

Those with properties for sale in affected neighborhoods will no doubt be forced to reduce asking prices or hang onto them for years.

Many will face foreclosure or bankruptcy. Insurance often does not cover all the expenses which arrive and it takes a long time to rebuild.

Real estate is a great investment in most cases and should be part of any portfolio. If you are house rich and cash poor any act of nature can upset your financial and retirement plans. And, yes, it Can happen to you.

Ask any of the people affected by these fires if they’d rather have a guaranteed income stream still arriving every month at this point or a paid up home which has just been demolished. I know what my choice would be.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The IRS Giveth, and the IRS Taketh Away

2007-10-25T14:57:00.000-07:00

If you haven’t noticed a pattern yet, when tax law changes to benefit one segment of the population (resulting in a loss of revenue to the IRS), there is usually some other change that reduces benefits to a different population segment, thus making up for the former loss.

Such is exactly what will happen if pending legislation passes into law.

HR 3648, or the Mortgage Cancellation Tax Relief Act, passed the House of Representatives Oct. 4, 2007 and is up for consideration in the Senate. If the bill becomes law, its tighter restrictions may require a new strategy for some investors.

Here is the gist in laymen’s terms of what this might mean to the average investor.

If you are in danger of foreclosure on your existing mortgage, a buyer may make a deal with your lender to purchase your home for less than what you owe. You are “forgiven” the difference from the lender, but under current tax law you must declare this forgiven amount as income on your tax return and pay income tax on money you don’t have. If you are already having trouble making mortgage payments, you often have trouble coming up with this extra tax payment and you are back to square one.

HR 3648 would exempt you from having to declare this as income in this situation. That’s the good news, but that’s a lot of money the IRS would be losing.

So, in order to save those with mortgage issues, the proposal is to tighten the rules for taking some personal exclusions on primary residences. Currently, if you own and live in your home for at least 2 of the last 5 years, you are allowed a personal exclusion of 250K if single and 500K if married filing jointly for capital gain when you sell.

What patient and savvy planners have been doing is selling their primary residences, taking the exclusion and moving into their appreciated second home or investment property for 2 years and then selling it and taking another exclusion to once again avoid capital gains tax.

What HR 3648 will do is limit the amount of exclusion available to you to the gain accrued only during the time you reside in that second property. So, if the property had increased in value by 300K prior to you moving in, then another 100K in the 2 years you resided in it, your exclusion would be limited to 100K when you sold and not the currently allowed 400K total gain (if married).

As with any tax law, if you are in neither of these situations you probably could care less. If you fall into the second category you will need a “plan B” to minimize your capital gains. Just be aware that laws constantly change and what is true today may be obsolete tomorrow. It’s a full time job just keeping up!

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Bottom Line - Structured Sales - Part IV

2007-10-16T13:32:00.000-07:00

This is the fourth part in a series designed to give some food for thought when considering different tax saving strategies.

When utilizing a structured sale, there are several different parties involved. The company handling the proceeds from the sale and effectively making payments back to you over time is the “Assignment Company”.

Your buyer actually never revokes his obligation to make the payments to you, but assigns this obligation to the assignment company. There is not a whole lot of risk in doing this the way it is set up, but some buyers may not be on board with the concept.

The assignment companies currently offering the structured sales are located offshore in Barbados. There are many favorable tax breaks for offshore companies, but should the need arise to ever enter into a legal action with an offshore company, it is a bit more complicated than if the company were in the USA. They are subject to different tax laws and it is a bit more involved to litigate outside the US.

The insurance company who will hold your funds in a single premium immediate annuity and pay you somewhere between a fixed 3-4% interest rate is a large, well established company such as Prudential or Allstate. Due to current requirements for all insurance companies, there is little risk that you will not be repaid as promised.

Once the payments begin, there is little to be done but receive them until the obligation has been repaid. Canceling is not really an option without incurring major loss.

If you have a large amount of depreciation recapture, or a large mortgage, there will be a significant tax obligation due on sale. These numbers need to be addressed prior to implementation so you keep enough out of the transaction to pay the tax bill and don’t get stuck owing money you must take from savings or worse yet have to take out a loan to pay back.

You do get the chance to spread out the remainder of capital gains tax due over time, the risk is low and the fees are minimal. You have to weigh this against what you will owe right away, and the fact that you are locked in for many years at a low interest rate and little option to change the terms or cancel without substantial penalties.

As always, if you have a good understanding of what is involved, you are better able to choose what suits your needs. Make sure you always deal with an experienced party who will make sure the transaction is set up properly and follows all the IRS guidelines and reporting procedures.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Bottom Line - The Charitable Remainder Trust (or any Irrevocable Trust) Part III

2007-10-09T16:13:00.000-07:00

The Charitable Remainder Trust has been around for quite a while as well. It comes in many different forms that have acronyms like CRT, CRUT, CRAT, NIMCRUT, CGA. There are a couple of capital gains tax strategies that also involve non-charitable irrevocable trusts.

The differences are too complex to go into detail in this article, but the gist is that you pledge all or part of an asset to a charity either immediately or at your death for benefits like a tax deduction, tax forgiveness and an income stream while living. For the non-charitable trusts, you basically give up control of your asset for a series of installment payments and pay taxes as you receive principle.

The IRS allows you favorable tax treatment if you pledge to a charity and exchange control of your asset for a series of interest payments. Here are some considerations when contemplating an irrevocable trust.

Who will own the trust? The Charity or (if a non-charitable trust) Related and/or Unrelated parties? What happens if something happens to one of the owners? Who does ownership pass to then? Will the new owner have your best interests at heart?

What happens if the trust defaults on making payments?

One might be perfectly comfortable with a chosen representative, but what if they pass away or are no longer able to handle their responsibility?

What are the costs involved in setting up and maintaining a trust? Once you find out what it costs to establish one, administer one, file annual tax returns and audit one on an ongoing basis you may be taken aback at how fees diminish anticipated returns.

Who is the trustee? This is supposed to be a knowledgeable person and fiduciary who invests the funds prudently with the main goal of meeting the payment obligation for the length of the agreement.

You might be lured into believing the assets will generate high returns on an ongoing basis and are not limited to principle protecting vehicles. What you may not realize is:
If the trust does make more money than it is obligated to pay out to you each year it must file its own tax return and pay income tax. Trust income tax rates are higher than personal income tax rates and can quickly reduce a gain.
Most of the money you will receive in annual payments will be taxed at ordinary income rates. Depending on the amount and your tax bracket, this might also take a huge chunk of your payment stream.
If the funds are not in a guaranteed environment, this means the funds can also lose money. If your payments are fixed, the trust can run out of money prior to your full payout. If you are getting variable income, it can decrease in future years, just when you may need more to offset inflation. Do you have other sources of income if this should happen?
The more actively managed the funds are, the higher the trading costs and management fees. This also requires more careful auditing and oversight.

A charitable trust will leave the remainder to the charity at your death. If you have heirs to consider, you may have to use insurance to replace the amount passed to charity. Are you insurable? Can you afford the insurance premiums?

Again, the considerations above are not comprehensive but should give much food for thought. There are ways to protect your funds and still give you a good return. For many, slow and steady should outweigh shooting for the brass ring at a stage in life where protection is more important than accumulation and the associated risk.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

A Good Problem to Have

2007-10-08T17:56:00.000-07:00

It is true, the more money you have, the more options you have. That’s all good, and evidenced by a recent situation I encountered.

A man and his wife in their mid-fifties were receiving their portion of family real estate holdings in an upcoming sale. Their portion of the gain was 4.5 million dollars. They live in California, and there was depreciation recapture involved, so their tax obligation was over 1.3 million dollars if they sold outright and paid their tax bill.

We discussed many options and there was no bad plan. Most of us would be thrilled to have the choices they did. This was not their only asset or source of income. Even if they paid their taxes it would not have affected their current or future life style.

What they decided to do was a bit surprising, but given their situation, it worked for them.

They chose to do a 1031 exchange, but their choice of exchange property was a 4.5 Million dollar single family home that they eventually want to make their primary residence.

They plan to rent it out for a couple of years (who actually rents a 4.5M house?) to satisfy the exchange rules and then move in.

Even in California, 4.5M buys a pretty darn nice property. I can’t even fathom paying property taxes, insurance costs and upkeep on an annual basis- even if there is no mortgage. But then again, this is a problem I would love to have!

As you can tell, this couple can afford to take a loss if they have to. They have other assets and income which are unrelated to this property, and have options most of us will never have to worry about deciding between.

Their biggest concern going forward will be estate planning for passing wealth tax efficiently to future generations. (lucky kids)

I wonder if they have any interest in “adopting”. I am going to throw my hat in the ring.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

The Cost of a 1031 Exchange

2007-10-01T10:04:00.000-07:00

To do a 1031 exchange, you must file paperwork with a Qualified Intermediary prior to close of escrow. The QI receives the money from the sale of your relinquished property and holds it until you purchase the exchanged property. They release the funds in escrow at the close of the exchange. You must never have possession of these funds per IRS 1031 exchange rules.

There are not enough regulations to govern those acting as Intermediaries. Property sellers in Idaho found out the hard way. Below is the link to the article describing how many exchangers lost their entire investment.

http://www.idahostatesman.com/localnews/story/171612.html

There is a way to insure your funds. It is in associating with an experienced QI who is educated, insured and bonded and also pays interest on your funds while they are being held.

Fees differ even within the same state. The most expensive one is not necessarily the best. I refer my clients to a well known national firm who charges a flat $400.00 fee per exchange. I receive no compensation from these referrals. I just know they know what they are doing, the client is taken care of and that the money will be safe.

Another way a poor intermediary can harm you is if they do not keep up with your particulars and work with you to insure all of the deadlines are met. Many will leave it up to you to keep track of important dates and will only inform you it is too late if you should fall outside the IRS parameters.

Learn from the unfortunate mistakes of others. Enlist the help of experienced professionals who will guide you through whatever process you choose and make sure all is done correctly, legally and timely. It’s taken me a long time to develop a team I can count on. When we work together they become your team as well.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Bottom Line - The 1031 Exchange Part II

2007-09-28T12:59:00.000-07:00

1031 Exchanges have been around for quite a long time. The IRS has clear guidelines on what qualifies and the rules for doing one. If you qualify, doing one correctly allows you to defer all taxes until you eventually sell your property outright. This article isn’t to go over the details. it’s to point out some of the considerations when doing an exchange.

You are exchanging for another piece of real estate. Whether it is one you will own and manage alone or if you will be a tenant in common, you need to be aware of the costs and risks of the exchanged property.

What will be the costs of ownership of the new property? Will insurance costs increase, property taxes go up? Are there association fees? Management fees, deferred maintenance to handle? Are there vacancy issues, long term leases, rent control issues, etc?

Will the time constraints of the 1031 allow the exchange plenty of time to complete? What if a last minute disclosure is uncovered that makes the purchase unsatisfactory?

What are the demographics of the new area? Property values increasing? Employment rate at a solid level? What is the risk of hurricane, earthquake, floods, etc.?

If you own with others, does majority vote carry a decision or must it be unanimous?

If it’s an income property, what is going to be your cash on cash return? Will it be variable or contractual? Beware of high projections that may be significantly reduced after fees and costs of maintenance, improvements, operations, etc.

Consider how long you intend to own the new property.
Know if the area is in an emerging market or a built out section. Are any major developments scheduled nearby that may affect future values?

If this property is to pass to heirs in the event of your death, are they capable of managing it or knowing how to liquidate it in a cost effective manner?

The list above is not comprehensive, but should plant some seeds regarding aspects to ponder before entering into an exchange.

Exchanges are great when all goes according to plan, but can also be a nightmare when unexpected situations present themselves.

Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

Bottom Line- Protecting Yourself and Your Investments- Part I

2007-09-24T16:21:00.000-07:00

Above all else, when implementing a Capital Gains Tax Saving Strategy, there are three things you need to find out.

How much do I get to keep when all is said and done?
Is my investment protected from loss, or is it an acceptable risk for me?
Is the strategy legal and IRS compliant?

This may seem simple, but the answers are not always obvious. You have to be able to sift through any sales hype and know what is guaranteed and what is simply projected.

The capital gains tax planning industry is dynamic. That means as tax law changes, strategies change. It is inevitable. If your criteria for choice is that a strategy has been around for many years, your choices will be quite limited and perhaps not even a good fit.

Just because a company is fairly new, this reason alone is not cause to dismiss what is being offered. Instead, inquire about the experience of the providers, the structure of the plan, the adherence to law, the protection you receive, and be sure you understand the process and what is involved.

In many cases, fees alone negate any potential extra return. Once you are in a strategy it is probably too late or too costly to switch course.

The next few articles will provide some basic insight on what different strategies entail.

Keep in mind, I don’t believe any strategy is necessarily “Bad”. As long as you understand the ins and outs and it meets your personal goals and risk tolerance, it may be the one for you.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to http://www.savegainstax.com/qq.html

Is There a Chance You Will Outlive Your Savings?

2007-09-11T14:33:00.000-07:00

In recent surveys one of the biggest concerns of retirees is that they will run out of savings or not have enough money to live on down the road.

Between inflation, health care, long term care, the uncertainty of social security and nonexistent or dwindling retirement and/or pension income, it is a very valid concern.

For many, appreciated assets such as real estate, their businesses, stock portfolios, or professional practices are intended to be the mainstay for retirement purposes.

Often, 20, 30 or even 40 years have been spent in the accumulation phase. The value of the asset has probably increased many times over. It is reasonable to think that this increase is yours to keep when it comes time to sell.

The reality is that depending on the asset and how it is held, 15-50% of your profits might be given in the form of taxes to the IRS, never to be seen again. Can you really afford to lose that much and still survive financially throughout your remaining retirement years?

Even if you can, do you want to?

A common thought is to pay the tax and reinvest what is left over. Sounds good, right? You’ll be back to where you started in no time. Chances are good that you are wrong again.

If you are close to or in retirement, you need to protect this money, as you cannot afford to lose any via a risky investment. There is no longer time to recover large losses because you are not working as much or at all. You also have to realize you will be draining this asset over time to live on, so each year less interest will accumulate.

So, you have to put it in a relatively safe investment. Safe investments tend to have low returns. Often these returns are taxable, so the proceeds are further lowered by income tax. You’ve just given away a good portion of your asset sale to taxes, and now that lump sum goes to work at low interest rates, it decreases over time, and the interest is often taxable.

If it is invested in a less liquid area such as real estate or annuities, you won’t be able to easily access your principle in large amounts anyway. Borrowing equity from a property means making payments to a lender, and where is the repayment money going to come from if you are not working?

Look at how long you have held your asset and how often you have ever needed a large lump sum all at once. The income you received was most likely on a monthly basis all along, either as rental or business income. Don’t forget, if you do need a large sum for some reason, you still have collateral the bank recognizes to borrow against, or you might keep some as cash for emergency purposes.

The bottom line is that you, the seller, often benefit most when you retain as much of the asset appreciation as possible, defer or spread out the tax obligation for as long as possible, and receive a guaranteed monthly income over a number of years or the rest of your life depending on how you set it up. This is the philosophy of retirement plans, pensions, annuities, social security and all other forms of retirement income vehicles.

Ask yourself if it is your goal to have enough money to live on forever, or if you want to face the dilemma of re-entering the work force at an advanced age to make ends meet? That is, if it is even possible due to inevitable health constraints and job availability.

Don’t think with a short term vision. Look far into the future and take steps to secure it for you and your family.

Paula Straub
http://www.savegainstax.com/
askpaula@savegainstax.com
760-917-0858

Fill out a Qualification Questionnaire and find out if you qualify to save capital gains tax at:
http://www.savegainstax.com/qq.html

Know Your Risk Tolerance

2007-09-11T14:30:00.000-07:00

Everything in life has risk. When it comes to finances, whether they are placed into a savings account, cd, the stock market, real estate, hedge funds, etc. there is an associated risk.

The extremes are that the savings account risk is that your money won’t keep up with the cost of inflation. On the other end of the spectrum, the investment could potentially lose all value.

When you are selling a highly appreciated asset, you need to determine exactly what risk tolerance is for the proceeds. This will help determine what course of action is right for you.

Here are just some of the factors that should be considered.

Do you have other assets or is this your only one?
Are you still earning income, close to retirement, or already retired?
Are you comfortable owning stocks, real estate, annuities or fixed rate savings?
Do you need a certain amount of monthly income, do you want to leave the largest legacy or is your intent to be charitable?
Do you need to remove assets from your estate for estate tax planning purposes?
Do you pay too much in ordinary income tax?
How important are guaranteed returns?
Do you understand the benefit of the time value of money?
Are you aware of how leveraging your assets may increase your return potential?
How would a loss of any kind affect the rest of your finances?

Identifying the risk is just the beginning of your decision making process. However, it will narrow down which options allow you to sleep comfortably at night. When all is said and done this is perhaps the most important aspect there is.

Paula Straub
http://www.savegainstax.com/
askpaula@savegainstax.com
760-917-0858

Fill out a Qualification Questionnaire and find out if you qualify to save capital gains tax at:
http://www.savegainstax.com/qq.html

Let Me Be Your Advocate

2007-09-11T14:26:00.000-07:00

Having someone on your side who knows the right questions to ask is crucial.

I think the only thing worse than not knowing the right questions to ask is not knowing if the answers you get are accurate, complete or even truthful.

I run into this same dilemma every time I take my car in for service. Outside of the basics, the mechanic can convince me that I won’t even make it home without an expensive repair because my knowledge of auto mechanics is minimal.

A good solution for me is to bring along a friend who is more familiar with the inner workings of autos. Once the mechanic realizes that he or she is speaking with someone knowledgeable, it is less likely that they will propose a repair that is unnecessary or overcharge.

One of the services I offer my clients is to be their advocate when speaking with an individual making an alternate proposal. I know exactly what questions need to be asked and the answers that should be forthcoming.

All parties involved should be present on a conference call, so there is no “he said, she said” and everyone hears the same thing. On my end, I also welcome anyone the client would like to have present during our discussions, so that any questions they have are also addressed.

Once you have all of the pros and cons of each option, you have the tools to make a truly educated choice.

Remember that as long as whoever you are dealing with is being straight with you, you’ll know you are doing the right thing for your situation.

Paula Straub
http://www.savegainstax.com/
askpaula@savegainstax.com
760-917-0858

Fill out a Qualification Questionnaire and find out if you qualify to save capital gains tax at:
http://www.savegainstax.com/qq.html

Selling Stock Portfolios

2007-09-05T12:10:00.000-07:00

Most people typically don't sell huge amounts of stock in a single year unless they need a big loss to offset other large gains.

However, sometimes one has no choice. A common situation is when someone is given or buys stock options for a very low price and hangs onto them hoping the price will really rise.

When this happens, there are times when the company issuing the stock has the opportunity to repurchase these shares or options at a set price. Or, the company is sold and the new company will buy the old shares outright.

Some municipal bonds can also be called if the issuing municipality can refinance the bonds at a lower interest rate. This often makes a sale the best choice, rather than receiving a lower interest rate and reduced income.

So, assuming you sell these assets for more than you originally paid for them, you are faced with a capital gain and capital gains tax.

If the amount is significant, it often behooves you to put a tax savings strategy in place before the sale happens. The Charitable Installment Bargain Sale lends itself well to this situation.

For instance, a million dollar stock sale launched an immediate 337K tax deduction, forgiveness on 55K and a 15 year payout of $92,657 per year for a total of $1,389,859. If tax had been paid at time of sale, it would have totaled around 243K. This tax repayment can now be deferred over 15 years, so nearly one quarter of a million dollars continues to work for the seller earning interest.

The tax deduction also is enough to reduce the sellers income tax bill by 30% over the next six years, resulting in significant additional savings.

The key, as always, is in knowing what options are available and initiating a beneficial tax strategy prior to sale.

Paula Straub
www.savegainstax.com
760-917-0858

Fill out a qualification questionnaire and find out if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Business Lending- Have Funds Dried Up?

2007-08-23T10:02:00.000-07:00

The last post was on how the tightening credit market is affecting sellers of residential real estate. Now here is what I am seeing regarding commercial financing for business purchases.

I have several clients in various stages of selling their businesses. The reasons for sale vary from retirement to having an offer come from out of the blue, to exiting one business to begin something new.

I am seeing requests for due diligence become longer than in the past, and I believe in some circumstances this is in part because it is becoming more difficult to raise the necessary capital to complete the buy.

In one incidence, an employee wanted to purchase the business from her employer. The business was successful, she had the right experience and skill to run it, and it had been established in the community for 26 years. She had good personal credit, but she was unable to find any lender to issue the funds. There have been two other parties interested in the three months since, but none have come forth with the capital to date.

Another case finds a younger owner who was approached by a large corporation with a proposal to purchase his successful business which he began about 10 years ago. The offer was so strong he couldn't refuse and the purchaser promised a sales contract within a couple of weeks. That was 4 months ago. Every time I check in, the buyer is still interested, but is saying they are taking longer to get the funding together than expected. They have provided some earnest money, but being in limbo is very frustrating.

There are still plenty of buyers with existing capital to make business purchases, and I believe the sales in the examples above are going to happen, just not in the time frames that were initially outlined.

There will always be transactions happening. A bit more patience is now often necessary.

Next: Selling stock portfolios

Paula Straub
760-917-0858
www.savegainstax.com

Fill out a Qualification Questionnaire to find out if you qualify to save capital gains tax.
http://www.savegainstax.com/qq.html

How the Lending Crunch Affects Sellers

2007-08-23T09:27:00.000-07:00

I'm sure you've been seeing all the stories about mortgage lenders cutting jobs, filing for bankruptcy, and tightening the rules on new loans. It is indeed a mess.

If you are selling an asset- how does this affect you? The next couple of posts will give examples of what I am seeing on a weekly basis.

First are those selling residential real estate. Properties that were previously selling typically within a month are now taking much longer. Often times, even when an offer is made and accepted, the financing which the buyer supposedly qualified for falls through before close of escrow and the process begins all over again. There is a lot of "hurry up and wait".

Prices are being reduced and saving capital gains tax becomes even more important for those who need to sell. Others, who have less pressing needs are deciding to re-rent if this is possible and a few are offering seller financing.

This too shall pass, as all forms of investments surge in some cycles and decline in others. It's a reminder that diversification is critical to any financial plan.

Next - selling businesses

Paula Straub
www.savegainstax.com
760-917-0858

Fill out a qualification questionnaire and find out if you qualify to save capital gains tax.
http://www.savegainstax.com/qq.html

Case Study of Multiple Taxable Events in Same Tax Year

2007-07-31T14:40:00.000-07:00

Recently I had a case where the same gentleman- I'll call him Joe- had two separate capital gains triggering incidents happen in the same tax year.

The first was a re-finance of a previous owner carry-back mortgage which triggered the remaining amount to be repaid in full prior to the end of the installment agreement. For several years he had been spreading out the capital gains tax and repaying it as he received principle through the payments made by the buyer. The amount of gain distributed and taxable at the end was about 400K.

The second event was also the result of an installment agreement issue. The buyer had been having trouble keeping up with the payments and foreclosure was the next logical step. A new buyer came to the rescue and agreed to pay off the remainder due from the original installment agreement plus the penalties assessed. This still meant receiving the remaining amount due as a lump sum and this was also about 400K..

It was too late to defer any capital gains tax in the first scenario, but not in the second. Joe did not need to keep a large lump sum, but did need an income stream to replace the payments he had been receiving monthly since his original sales.

So, the best solution was to do two Charitable Installment Bargain Sales. One with 300K cash and one with the remains of the second transaction.

What this accomplished was to give Joe almost a 200K tax deduction to reduce the amount of tax he was going to have to pay from the first transaction. He was able to cut it in half. Then his monthly income will be about $6500.00/month for the next 12 years. He is now 82. The way it is set up, each year those payments become less and less taxable.

Joe also has 100K from the proceeds to pay what taxes are due and put some in the bank for a rainy day or emergency.

If he passes on before the end of the 12th year, his heirs will receive the remaining payments.

Each case has a different solution depending on what there is to start with and what goals you wish to meet. Be sure and find out what your options are, or you may only have one- pay the tax in one big lump sum.

Paula Straub
760-917-0858
savegainstax@gmail.com

Fill out a Qualification Questionnaire to see if you qualify to hang onto your capital gains.
http://www.savegainstax.com/qq.html

Results of Very Non-Scientific Poll

2007-07-23T15:56:00.000-07:00

Several weeks ago I sent out an email regarding a case where potential clients had decided it was just easier to pay over 900K in taxes than worry about executing a tax saving strategy.

I asked my readers for any responses as to whether or not there was a certain amount of money one had to have in order to not make an effort to protect close to one million dollars.

I was actually hoping someone might reply in the affirmative and tell me why they felt that way. 100% of the responses I received all stated that no matter how much money they already had, it was worth it to them to hold onto as much of that 900K+ as they could.

After reviewing all the email replies, I realized I was hearing only from a very select savvy group. After all, those who read my emails and educate themselves on protecting their assets are the ones motivated enough to send in a reply.

I doubt anyone not worried about a mere 900K going to the tax man is even on any of my email message lists. I'm also thinking anyone on the fence probably isn't going to speak up and write to tell me they have more money than they know what to do with.

So, my poll really wasn't unbiased afterall. Thank you to all who took the time to send a comment. I hope to be able to assist you in the future keep as much of your asset as possible when it's time to sell.

You are the ones learning how to protect what it's taken so long to build and I'm with you all the way!

Paula Straub
760-917-0858
www.savegainstax.com

Fill out a Qualification Questionnaire and see if you qualify to hang onto your capital gains.
http://www.savegainstax.com/qq.html

You Will Shoot Yourself in the Foot and Your Advisor Will Help

2007-07-10T16:15:00.000-07:00

This isn't my first message regarding "advisors" who harm clients by thinking they know more than they do. It is probably one of the most frustrating things in my work and it doesn't have to be that way. The solution is obvious.

When dealing with Capital Gains Tax Strategies, it is safe to say that 98% of all the attorneys, tax professionals, financial planners and real estate brokers in the US are not up to speed on what is currently available or how to compare the options. This is not the problem. I wouldn't expect them to be, anymore than I would be up to debating how to file tax returns or do the legal contract language for a trust.

The problem is that when a client comes to them for help on a capital gains tax issue they hand out advice without having all the facts. And they often get paid a lot for this bad practice. That is just wrong.

I can say this definitively, because I see it happen almost every day. There is a simple solution to make sure this does not happen to you. Here it is.

When you are exploring your Capital Gains Tax options for your asset sale, be sure your advisor hears the same thing you do. They should know your financial situation. If they are in on the discussion process from the beginning, they can voice their concerns or offer what they think is a better solution. You will hear the conversations from both sides and can draw your own conclusions.

If they advise you not to do something before they bother to look at the benefits, they do not have your best interest at heart.

I do not respect any advisor who refuses to have a conversation with all parties. Period. They usually have their own agenda and it's not to help you.

Ask yourself: "Why would I trust the advice of someone who didn't offer me these options to begin with and won't take the time to discuss them if there is even a chance it will be the best strategy for me and my family?"

If their concept of how to proceed is truly best, why wouldn't they jump at the chance to show "how knowledgeable" they are and confirm why the client should take their advice?

I am always receptive to hear another professional's opinion and will yield to any better suggestion or plan that benefits my client. That new insight allows me to help future clients even more effectively.

If your other advisor doesn't think along those same lines, how exactly are they helping you? They are doing you much more harm than good, and you probably don't even realize it.

I probably sound like I'm ranting a bit, but I see too many people taken advantage of by someone they should be able to trust to act in a fiduciary capacity. It is you, the client, who suffers.

Paula Straub
savegainstax@gmail.com
760-917-0858

Fill out a Qualification Questionnaire to find out if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

No Capital Gains Tax in 2008?

2007-07-05T11:43:00.000-07:00

If only that were true... It is true that the capital gains tax rate for low income tax brackets (10% and 15%) in 2008 goes to 0%.

But, before you run out and plan to sell your rental with a 300K gain, be sure you understand that most of that gain will not be taxed at 0%. Bummer, I know...

We don't know what the qualifying incomes are for 2008, but for 2007 they are up to $31,850.00 for individuals and $63,700.00 for married couples filing jointly.

So, if the levels didn't change for 2008 (they usually go up slightly each year) and you are married making 50K/yr as a couple, only the first $13,700.00 of capital gain is taxed at 0%. The remainder is taxed at 15%. So, in the above example, $286,300.00 is taxed at the 15% maximum long term rate.

Don't forget to add your state and/or city taxes into the equation as well. This can easily add another 5-9.5% depending on your state of residence and state of property sale.

And, don't forget the recaptured depreciation tax This doesn't get the 0% break either.

So, don't plan on reaping the entire profit tax free in 2008 if you have a large gain. The IRS isn't quite that generous!

Paula Straub
760-917-0858
www.savegainstax.com
savegainstax@gmail.com

Fill out a Qualification Questionnaire at http://www.savegainstax.com/qq.html to find out if you qualify to hang onto your capital gains.

Marital Primary Residence Exclusion on Death of Spouse

2007-06-27T13:31:00.001-07:00

I’m often asked whether the 500K marital exclusion carries over upon the death of a spouse. The answer is not always straight forward.

Typically, if both spouses owned and lived in a home for at least two of the last five years and file a joint return, there is a 500K exclusion on capital gains tax when the house is sold.

If one spouse dies and the house is sold in the same tax year, a joint return can still be filed and the exclusion taken. Otherwise the exclusion drops to 205K for the remaining spouse.

However, other tax rules may come into play.

If the deceased spouse passed their portion of the home to the surviving spouse, in most cases the surviving spouse receives a step up in basis for the half they just inherited. So, if the house was purchased for 100K and each spouse owned 50%, each have a cost basis of 50K. If the house is valued at 400K when the first spouse passes away, their half is now stepped up to 200K, so the remaining spouse now has a new cost basis of 250K.

Also, if the couple lives in a community property state, the remaining spouse may qualify for a 100% step up in basis if the property is titled as community property with rights of survivorship.

Rules vary from state to state, but finding out how you would be affected if you are married and your spouse passes away is crucial. It is a discussion every couple should have, as it is certain we will pass on and we commonly don’t have a say as to when this will be.

Most couples have no idea how the death of their spouse will affect their financial future. Children with aging parents should also take an active role in making sure their parent’s affairs are in order.

Paula Straub
760-917-0858
savegainstax@gmail.com
www.savegainstax.com

Fill out a qualification questionnaire and find out if you qualify to hang onto your capital gains. http://www.savegainstax.com/qq.html

Q and A Regarding "Intent" and the IRS

2007-06-25T12:59:00.000-07:00

When it comes to taxes, the IRS does often look at “intent” to determine whether certain things qualify for certain tax rules.

Such as, when you purchase a property, do you intend to hold it for investment purposes or is your intent to fix it up and sell it right away?

I got a question today from a military individual stating he had purchased a property that was “going to be” his primary residence, but he had never lived there and had rented it out since purchase. He had been renting in another state for the last few years.

Now he wants to sell and wanted to know if he can qualify for the personal residence exemption.

Unfortunately, he can’t. To satisfy the test for exemption you have to both own and reside in a primary residence for at least 2 of the last 5 years. Intent to live there does not come into play unless you actually do.

And, no, it also doesn’t matter if he sells the “intended” house and buys a new primary residence and lives there immediately. He still doesn’t qualify for the exemption.

One possible option, if he is patient, is to do a 1031 exchange on the property he is selling and purchase a home he would eventually like to live in. If he rents out the new place for a couple of years, and then moves in, he can eventually (after 5 years) in this case, qualify for the personal exemption when he sells.

Paula Straub
760-917-0858
savegainstax@gmail.com
http://www.savegainstax.com/

Fill out a Qualification Questionnaire and find out if you qualify to hang onto your capital gains. http://www.savegainstax.com/qq.html

At What Point do You Need to Have an Exit Strategy in Place?

2007-06-20T15:26:00.000-07:00

If you have an asset such as a business, a stock portfolio, real estate or a pricey collection it is never too soon to educate yourself about how you plan to exit or sell. Although a lot may change before the actual sale, you never know exactly when some unforeseen event may trigger the need to sell.

As to how soon you should have a specific strategy in place, the answer is definitely prior to close.

Below are some of the main considerations which need to be taken into account.

1. Your age now and your age at time of sale
2. The amount of gain you will potentially realize and the amount you’d owe in taxes if you had to pay at time of sale.
3. Your need for income- now or in the future
4. Whether or not you are at a point in life where you can invest the proceeds in anything with risk of loss or if you need asset protection.
5. Your needs to provide for your heirs.
6. Your estate planning needs and charitable intent, if any.
7. Any other income and assets you have and how the sale of the one in question might impact the rest.
8. The manner in which title is held and if the proceeds must be divided.

There are a lot of important factors with each unique situation. You need to work with someone who not only keeps up on the ever changing tax laws, but who also has the ability to guide you in the right direction that will meet your goals and make sure everything is done right.

There are good educational resources available at

www.Paula-Straub-Capital-Gains-Tax-Site.com if you’re in the research stage.

If you have a current sale pending, fill out a Qualification Questionnaire at www.savegainstax.com/qq.html and find out what you need to get started on right now.

Paula Straub
760-917-0858
savegainstax@gmail.com

Is 960K a Lot of Money to Write a Check For?

2007-06-13T09:43:00.000-07:00

Occasionally I have a case that gives me pause. I have to wonder at what point loss of money is no longer important to some.

I’d like to hear some opinions from my subscribers. After you’ve read this article, if you would, drop me a quick email to savegainstax@gmail.com and let me know how you decide how much is too much to pay in taxes- assuming you have a solid alternative.

My recent discussions were with a son regarding the sale of his family business. His parents were the only stock holders so they made the final decision. They were in their early 70s and about to retire. Both are in good health.

The business had a gain of about 3.2 million dollars and the tax bill was going to be approximately 960K. Real estate was involved, so recapture of depreciation was also an issue.

The son was concerned about losing that much of their profits, so he was doing some research on how they could minimize their tax burden. Any way we looked at it, it behooved them to do something rather than nothing. Their options were all very good.

To make a long story short, the parents decided they would just sell and pay the taxes due. Granted, paying taxes is everyone’s right and Uncle Sam will be very happy to receive close to one million dollars in a nice lump sum. (I just wish it was put to better use once collected)

Although 2.24 million (after taxes) is certainly a grand profit, I can’t help but think the 960K tax bill is way to much hard earned money to part with. Here are some thoughts that keep me in a quandary.

The parents had more than enough to live comfortably with the after tax proceeds. But, since they have children and grandchildren, it would mean a much larger legacy for their heirs if they paid less in taxes and left more at their passing.
If they didn’t care about their heirs, what about earmarking that money for a charity with a good mission? It could have made a significant contribution towards disease, poverty, spiritual enrichment, global warming, etc.
The after tax money still has to be invested somewhere. Their intent was not to begin long term real estate accumulation or gamble in the stock market at their age. If placed in taxable investments with principle guarantee for safety, this means a fairly low interest rate, and what they need to live on is taxed at ordinary income tax rates when withdrawn. So, why not have spread out the tax burden, and be taxed at mostly capital gains tax rates vs income tax rates and increase their lifetime income as well?
This money is still also in their taxable estate. It is subject to creditors, medical expenses, and possible estate tax when they pass.
Even keeping out a large lump sum and reducing the taxes due on it with a tax strategy and spreading out the taxes on the remainder over a number of years would make a lot of sense.

My only conclusion is that to some individuals, once they have a certain amount of money, paying a large tax really doesn’t seem that burdensome. To me, no matter how much I have accumulated, I don’t see myself paying close to one million dollars if I have a valid alternative. I bet Donald Trump or Warren Buffet would agree.

Drop a line and let me know if, in the same situation above, you would have paid the 960K and have been done with it, or if you would try and keep as much of that working for you for as long as possible.

Is there really a point where money doesn’t matter?

I’ll keep a tally and send out the results in a future email.

Paula Straub
760-917-0858
savegainstax@gmail.com
www.savegainstax.com

Fill out a Qualification Questionnaire and find out if you qualify to save capital gains.
http://www.savegainstax.com/qq.html

5 Common Mistakes People Make When Selling Their Highly Appreciated Assets and How to Avoid Them

2007-06-04T17:59:00.000-07:00

You may have spent many years of your life waiting for your real estate, business, practice, stock portfolio or collection to grow in value. Then, the time comes when you are ready to sell. You find a buyer, negotiate a fair price, and then lose 15-45% of your gains to Uncle Sam, the average being about 25%.

The good news is that you have choices to avoid a good portion of this loss. You can also avoid the following mistakes I find most common amongst less savvy sellers. Below are just a few.

Mistake number 1: Not having a plan in place prior to sale. Worse yet, not even knowing you have multiple options available to you.

Mistake number 2: Getting your financial and tax planning advice from someone not qualified to provide it. Chances are, your hairdresser or golf buddy don't keep up to date on this type of specialized subject. Yet, I see time and time again, people relying more on the opinion of a relative or acquaintance than on the experience of a specialist. If Uncle Joe is the one making the choice for you at least bring him into the loop at the beginning so he hears the same information you do and can have his concerns addressed.

Mistake number 3: The misconception that you must have "total control" of your asset of all times. The IRS has specific rules that in order to defer or spread out repayment of capital gains, most strategies require that you are not able to be in full control of your asset and still enjoy tax benefits. Your control is in setting up a plan that will meet your needs over the period of time you choose. Social Security or a Pension plan pays you over time and with a payment you can rely on receiving. The same concept applies here.

Mistake number 4: Forsaking safety for the unrealistic "big score". Unless you are at a point in life where you can gamble your principle, this is not the time to think you will get double digit returns each and every year without the very real risk of major loss. If you don't have a time horizon of at least 10 years before you need to access any of the funds to live on, this is the time to protect yourself and insure against loss. Keep a portion aside if you still want to play the odds.

Mistake number 5: Doing nothing for fear of making some sort of mistake. This is not to say jump into something you don't understand. Instead, take the time to understand the pros and cons. Ask the questions you are most concerned about and be sure you have received answers that make sense and make you feel comfortable before proceeding ahead. Get a second opinion from another qualified source, but make sure everyone talks to each other instead of one "professional" bad mouthing the other with misleading facts. Be suspicious of anyone not willing to joint conference to present their view and address their concerns. Your advisor should always put your interest first.

Do be proactive. Do consult with someone who specializes in this area. Be honest about your major concerns and don't be afraid to ask questions until you are satisfied with the answers. A good plan will save you a lot of money, protect you through your retirement years, and provide the security your asset sale was meant for.

Paula Straub
www.SaveGainsTax.com
760-917-0858
savegainstax@gmail.com

Fill out a Qualification Questionnaire and find out if you qualify to save capital gains tax.