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$: Mark Kohler - Microsoft · Mark Kohler Slide 5 { Help you save taxes { Give you more strategies to build wealth { Assist in building the support structure for you } Z] À Z ^u ] v$
Tax & Legal Day 1

Mark Kohler

Rev 08/01/2015

©2015 Renatus, LLC

All rights reserved

Tax & Legal

Renatus | Tax & Legal 2

Mark Kohler

DISCLAIMER

You have selected this class in the Renatus class offerings using tuition hours or otherwise redeeming your opportunity to attend

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Tax & Legal


Mark Kohler

NOTICE TO ALL RENATUS STUDENTS AND INSTRUCTORS

Renatus (hereinafter “RENATUS”) is committed to providing only the highest level of real estate

investment education by following sound pragmatic, ethical, and legal principles. Due to the complexity

of real estate investing, RENATUS emphatically demands that all Instructors strictly adhere to the

curriculum which has been created, reviewed, and approved by RENATUS’s legal counsel. No extraneous

verbal or written materials may be presented to RENATUS students.

The following issues should be carefully noted:

1. RENATUS curriculum is not intended as legal advice for any individual or particular transaction. Instructors are not authorized to practice law during course instruction. Nothing said during course instruction or contained in written materials should be relied upon or construed as legal advice. Students are expressly advised to seek the assistance of a competent legal professional as students engage in actual transactions.

2. RENATUS will not teach and does not condone any real estate investment technique or strategy which requires the use of fraud, deceit, false statement, misrepresentation, concealment, conspiracy, breach of contract, tortious act, or violation of local, state, or federal common law, statutory law, or regulatory law.

3. Any real estate investment strategy wherein all or any part of the property or any interest in the property is sold or transferred will likely trigger a clause (found in most mortgages) commonly known as the “due on sale” clause. This clause does not prohibit the transfer or sale of an interest in property, but rather gives the mortgagee the option to call the note due and payable in full after a 30-day notice. RENATUS will not teach and does not condone any technique or strategy to conceal the triggering of any due on sale clause and encourages transparency and full disclosure of all material facts or information to all parties whenever required by regulation, law, or contract.

By participating as a RENATUS Instructor or RENATUS student, said Instructor and/or student hereby

acknowledges that he/she has read and understands the foregoing, and hereby agrees to follow the

same.

Tax & Legal


Mark Kohler

Slide 1

Welcome to

Tax and Legal

DAY 1 with

Mark J. Kohler CPA, Lawyer, Best Selling Author, Radio

Show Host, Blogger- SCRATCH THAT: Scout Master

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Tax & Legal


Mark Kohler

Slide 2

www.markjkohler.com

Mark J. Kohler, JD, CPA, PC ©

Thursdays, 4pmPST/ 7pmESTwww.refreshyourwealth.com

LIVE on BizTalkRadio.comPodcast on iTunes

1-888-801-0010Free 15min Interview

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Tax & Legal


Mark Kohler

Slide 3

This Presentation does not constitute an attorney or CPA-client relationship and it is also in your best interest to consult competent legal and tax professionals when conducting actual transactions.

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Tax & Legal


Mark Kohler

Slide 4

Weekly Newsletter with…

- Critical Deadlines

- Tax & Legal Tips

- 2 Min Video Tips

- Radio Show Topic

Text the Word “TAX” to

435-245-1144FREE E-BOOK

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Tax & Legal


Mark Kohler

Slide 5

• Help you save taxes

• Give you more strategies to build wealth

• Assist in building the support structure for you to better achieve the “American Dream”

• Present concepts in Asset Protection to protect your wealth

• Make this the most informative and beneficial tax and legal class you have ever attended!!

• and….Help you save more taxes….

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Tax & Legal


Mark Kohler

Slide 6

• Section 1- Small Business Basics and the “Hot” Write-offs in 2015 UPDATE!!

• Section 2- Choice of Entity and Options

• Section 3- Rental Real Estate and Advance Sale of Property Tax Strategies

• Section 4- Asset Protection from Business Operations and for our Assets

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Tax & Legal


Mark Kohler

Slide 7

• Section 5-Paying Family Members and Funding

Retirement Plans

• Section 6-Health Care Tax and Cost Saving Strategies

• Section 7- Identity Theft Protection

• Section 8- Estate Planning and Bringing it all

Together

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Tax & Legal


Mark Kohler

Slide 8

Small Business Basics and the “HOT” Write-Offs in 2015 UPDATE!!

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Tax & Legal


Mark Kohler

Slide 9

TAX GOLDEN RULES• Utilized a comprehensive approach

• The IRS treats different types of transactions and income VERY differently

• Beware of one-size fits all approaches

• Align your risk tolerance and the proper tax professional

• Continue to learn of new tax strategies

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Tax & Legal


Mark Kohler

Slide 10

#1 TAX STRATEGYStarting a Small Business!!

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Tax & Legal


Mark Kohler

Slide 11

Track Your Start-Up Costs

First 5k IMMEDIATELY deductiblethe rest Amortized over 15yr

Must have income to show start up

Multiple businesses can haveseparate start-up costs

Spread education amongst variousstart-up businesses

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Tax & Legal


Mark Kohler

Slide 12

Potential Deductions

• Medical Insurance• Sub-contractors• Employees• Family employees• Annual meetings/retreats• Capital expenses• Equipment and furniture• Business development• Business travel• Business board meetings• Educational related to job• Legal and accounting fees• Qualified pension plans

• Meals and entertainment• Compensation and salaries• Office rents-comm. lease• Office utilities-comm. lease• Office supplies• Business gifts• Automobile Insurance• Property/casualty insurance• Advertising and marketing• Depreciation of capital assets• Taxes-property, payroll taxes• Repairs and maintenance• Interest on loans

• Parking fees• Postage and shipping• Telephones/cell• Banking fees• Consulting fees• Seminars/trade shows• Office Expenses• Research/Experimentation• Professional dues• Public service organ. dues• Casualty and theft losses• Employee discounts at cost

Good Records are Critical!!!Not every tax deduction is a viable possibility for every business owner and must be carefully considered and

substantiated before being deducted on a tax return.

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Mark Kohler

Slide 13

Dining

Type 1

General Dining

- With Someone Else

- Talking Business

- Food, Tips, Drinks, etc…

Limited by 50%

Type 2

General Dining

- By Yourself

- While Traveling


Limited by 50%

Type 3

Event Dining

- At Work for employees

- At Event location NOT

restaurant


100%

• Receipts

• Per Diems

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Mark Kohler

Slide 14

• Limited by 50%

• Talking business

• Hobbies

• Toys

• Keep good records

Entertainment

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Mark Kohler

Slide 15

• iPads

• Phones

• Internet

• Office Equipment, etc…

Electronics

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Mark Kohler

Slide 16

1. Meet a Vendor

2. Meet a Client

3. Corporate Meeting

4. Visit a Rental

5. Attend a Workshop

Hotel, air, valet, tips, rental car, rental car gas, tolls, taxis, limos, ferry’s, subways, horse and carriage. 100%!!! Deductible

Cruises- Watch out!!

Travel

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Mark Kohler

Slide 17

Traditional MethodExpenses attributable to theportion of the home or separate structure

(a) Exclusive, and(b) Principal Place of Business

Simplified Option- $5.00 per square foot

(max 300 feet- $1,500 deduction)No depreciation or recapture

Home Office

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Mark Kohler

Slide 18

Business2015 – 57.5 cents

Medical/Moving2015 – 23 cents

Charitable2015 – 14 cents

Personal andCommuting Non-Deductible

Auto – Mileage versus Actual*Always keep mileage records if there is personal use

Mileage Actual

- Don’t Forget Business % ofInterest on Auto Loan

Next Slide

Automobile

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Mark Kohler

Slide 19

- Fuel

- (Repairs and Maint ?)

- % of Lease Payments

- Small lease add backschedule

- Mileage limits &residual value?

- Amortize downpayment

-Fuel, repairs, maintenance, auto loan interest, etc..

Actual

LeaseOwn

AUTODepreciation Limits

$3,160

NO Bonus in2015

BONUS only forNew Cars

SUV/TRUCK>6,000 lbs

Depreciation Expense$25,000

NEW or USED

BIG TRUCK>6,000 lbs +6ft bed

Depreciation Expense$25,000

(used to be $500,000)

NEW or USED

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Slide 20

Example$25,000 Section 179 Deduction$ 3,060 Standard Depreciation$ 6,000 Fuel$ 1,500 Insurance, maintenance, etc..$ 3,000 Interest

$38,560 Total Deduction

SUV or truck with less than 6ft bed


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Slide 21

- Federal Tax Credit of up to $7,500- State Tax Credits can be as high as $5,000

Lets assume you drive 15,000 miles:Gas costs an average of $3.20, Electric Costs are estimated at 75 cents per gallon of gas (Scientific American). Thus, you are saving approximately $2.45 per gallon. At 36 miles to the gallon, driving 15,000 miles you also save $1,020 in gas.

With the mileage deduction (assuming 90% business use) that is a $6,750 deduction, in a 30% tax bracket (combined) you save $2,025 in taxes

You essentially save upwards of $15,545

Tesla Model S$72,240

Nissan Leaf$27,069 Chevy Volt

$27,495

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Mark Kohler

Slide 22

BREAK


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Mark Kohler

Slide 23

Choice of Entity and Options

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Mark Kohler

Slide 24

• Type of income being created

• Tax planning

• Asset protection needs

• Where you are doing business

• Partnership considerations

• Administrative issues

Choice based onVarious Factors

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Mark Kohler

Slide 25

• Setup the Correct Entity

• At the Right Time

• In the Proper Place

Primary Objectives

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Mark Kohler

Slide 26

Sales & Operations

SOLE

PROPRIETORSHIP

Schedule C

Self-Employment

Tax

15.3%

Rentals

Schedule E

NO

Self-Employment

Tax

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Mark Kohler

Slide 27

Sales & Operations

C

CORPORATION

1120 Tax Return

Corporate Tax

15-35%

THEN

Personal Fed & State

Rentals

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Slide 28

Sales & Operations

S

CORPORATION

1120S Tax Return

NO Corp Tax

NO SE Tax

NO ObamaCare

W-2

Required Salary

for participating

Owners

Rentals

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Mark Kohler

Slide 29

Kohler Payroll Matrix(a starting point)

Net-Income

Payroll as a

percentage

of Net-Income

400k100k

33% (36k)

1/3 to 2/3

40k

50% (20k)

25% (96k)

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Mark Kohler

Slide 30

S-Corporation Salary

(Recent Case)

David Watson

- CPA

- $203k Profit

- $24k Salary (12% allocation)

- IRS wanted $130k (64%)

- Court awarded 91k (45%)

13 other cases lost by taxpayers last year

- WHY: zero (0) payroll

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Slide 31

Sales & Operations

Limited

Liability Company

(LLC)

Rentals

100%

Schedule E

NO

Self-Employment

Tax

HOLDING COMPANY

Single Member LLC

Rentals

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Slide 32

Limited

Liability Company

(LLC)

1065 Tax Return

MULTI-MEMBER

HOLDING COMPANY

FAMILY

TRUST

Sales & Operations

Rentals

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Mark Kohler

Slide 33

Sales & Operations

Limited

Liability Company

(LLC)

1065 Tax Return

MULTI-MEMBER

OPERATIONALCOMPANY

S

CORPORATION

S

CORPORATION

Rentals

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Slide 34

Sales & Operations

Limited

Liability Company

(LLC)

1065 Tax Return

SINGLE MEMBERSPECIAL PURPOSE

IRA/401k LLC

HOLDINGCOMPANY

Rentals

Self Directed

Retirement

Plan

IRA/401k

100%

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Slide 35

Sales & Operations

Limited

Liability Company

(LLC)

1065 Tax ReturnMULTI-MEMBERSPECIAL PURPOSE

IRA/401k LLC

HOLDINGCOMPANY

Rentals

Self Directed

Retirement

Plan

IRA/401k

??%

Self Directed

Retirement

Plan

IRA/401k

Mortgage

Company??% ??%

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Mark Kohler

Slide 36

XYZ Holdings, LLC‘Series’

Limited Liability

100%

XYZ Holdings, LLC

Sub Series#1

XYZ Holdings, LLC

Sub Series#2

One(1) Tax Return – Save onAdministrative Fees

Rentals #3Rentals #2

Rentals #1

FAMILY

TRUST

SERIES LLC

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Slide 37

XYZEnterprises, Inc.

(S-Corp) 1%XYZ

Investments, LP

(Limited Partnership)Long TermReal Estate

Projects

ChargingOrder

ProtectionCapital Gain &

Rental Income $$Tax Losses

Vacation Home & Incoming Producing

Assets

Salary $$100%

99%

General Partner

Dividends $$

Family LimitedPartnerships

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Mark Kohler

Slide 38

BREAK


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Mark Kohler

Slide 39

Rental Real Estate and Advance Tax Strategies for Selling Property

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Slide 40

Appreciation Mortgage Reduction

Tax Deductions Cash Flow

4 Benefits of Rental Property

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Slide 41

Passive Investors ANYONE Qualifies, but ONLY deductible against other PASSIVE INCOME

Active InvestorsJust make decisions and you Qualify. However, losses are limited to 25k and phase out at 150 Adjusted Gross Income.

Real Estate ProfessionalsTwo-part TEST:

1) 750 Hours a year DOING Real Estate, AND2) Primary Occupation is Real Estate

THEN….Must Materially participate under 1 of 7 tests.

IF YOU QUALIFY…ALL RENTAL LOSSES ARE DEDUCTIBLE!!

3 Types of Real Estate Investors

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Tax & Legal


Mark Kohler

Slide 42

Family

Revocable Living

Trust

Personal Home

Life Insurance

Investment

Accounts

Properties

LLC(Limited Liability

Company)


Company)

Properties

NEWCO, INC(S-Corp)

100%

Sole Proprietorship

100%

Passive

Loss

Carry

Forwards

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Tax & Legal


Mark Kohler

Slide 43

To be or not to be…..

Benefit Drawback

Dealer/Professional

NONDealer/

Professional

Deductall losses

in full

SE Tax onordinary income

-----No 1031sunless…

No SE Tax-----

More flexibilitywith 1031s

Losses againstordinary incomecapped at $25K

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Tax & Legal


Mark Kohler

Slide 44

• Capital Gain Rates (Watch out for Dealer Status)

• Sale of Home Exemption (primary residence)

• 1031 Exchange

• Installment Sale

• Charitable Remainder Trust

Watch our for Dealer Status and Short-termSelf-Employment Tax

Sale of Property Strategies

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Tax & Legal


Mark Kohler

Slide 45

• Capital Gain rates (12 month holding period):(1) 0% if taxable income falls in the 10% or 15% marginal brackets(2) 15% if taxable income falls in 25%, 28%, 33% or 35% brackets(3) 20% if taxable income falls in the 39.6% marginal bracket(4) 25% on Depreciation Recapture

• Net investment income tax (Obama Care) at a rate of 3.8% on the lower of net investment income or modified adjusted gross income over the following thresholds:

• Married Filing Jointly or Qualifying Widow(er): $250,000• Single or Head of Household: $200,000• Married Filing Separately: $125,000

TOTAL TAX COULD BE AS HIGH AS: 23.8% or 25% (recapture) + State Tax

Capital Gain Rates

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Mark Kohler

Slide 46

Two Part Test:1. Own 2 out of the previous 5 years

2. Occupy as your personal residence for the same 2 out of previous 5 years

Exclude: 250k if your Single500k if your Married

* Beware of new rules when your home has been both a ‘rental property’ and your ‘primary residence’.

Sale of Home Exemption

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Mark Kohler

Slide 47

The TransactionSelling a property and buying another at Equal or Greater value

Sell 1 and buy 3 OR Sell 3 and buy 1 (or more …)

Taxpayer Seller

Buyer

QualifiedIntermediary

Replacement

Property

Replacement

Property

Exchange

$$

Exchange

Property

1031 Exchange

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Mark Kohler

Slide 48

• Dealers don’t qualify (no rehabs…no contractors…)

• Actually ‘required’ if you are receiving payments over time UNLESS you elect out

• Does not apply if you have a ‘loss’

• In every year there the $$ received it is broken down into the following sections:

Return of Basis portionCapital Gain portionInterest on Note

Selling a property OVER TIME and receiving PAYMENTS.“Spreading out the Gain”

Installment Sales

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Tax & Legal


Mark Kohler

Slide 49

The Charitable Remainder Trust

“The White Board”

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Mark Kohler

Slide 50

Creative Approach

Home

Sale of Home Exemption

250k or up to 500k

Land

Charitable Remainder Trust

Asset Protected, Stream of Income

NO TAX

Land and Buildings

1031 Exchange

Trade for rental properties

DEFER THE TAX

50 Acre Property

Boot or Cash

Outright or Installment

Sale with Note

$$


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Mark Kohler

Slide 51

BREAK


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Tax & Legal


Mark Kohler

Slide 52

Asset Protection from our Business Operations and for Our Assets

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Mark Kohler

Slide 53


Company)

LLC(Sub-Series)

Single

Member

LLCs(Limited Liability

Company)

Single

Member


Company)

Single

Member


Company)

Arizona

Illinois

Idaho

Illinois

SERIES LLC

PARENT

COPE LLCUtah or Wyoming


Company)

LLC(Sub-Series)

LLC(Sub-Series)


Company)


Company)


Company)

ArizonaIllinois

Idaho

COPE


Company)

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Tax & Legal


Mark Kohler

Slide 54

Maintaining the Corporate Veil

1. Separate checking

2. Inform the world

3. Contractual requirements

4. Ownership of property

5. Company maintenance

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Tax & Legal


Mark Kohler

Slide 55

1. Get it in writing and reviewed by an attorney

2. Negotiate for the worst case scenario

3. If they say you don’t need an attorney… RUN!

4. Do your due diligence on your partner and the project

5. If they say you have to move immediately, watch out!

Checklist for Investing with Others

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