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SAN FERNANDOVALLEY LOS ANGELES • GLENDALE • SANTA CLARITA VALLEY • BURBANK • CONEJO VALLEY • SIMI VALLEY • SAN FERNANDO • CALABASAS • AGOURA HILLS • ANTELOPE VALLEY

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SAN FERNANDOVALLEY BUSINESS JOURNALLOS ANGELES • GLENDALE • SANTA CLARITA VALLEY • BURBANK • CONEJO VALLEY • SIMI VALLEY • SAN FERNANDO • CALABASAS • AGOURA HILLS • ANTELOPE VALLEY

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Keys to Wealth Management

AN ADVERTISING SUPPLEMENT TO THE SAN DIEGO BUSINESS JOURNAL

AN ADVERTISING SUPPLEMENT TO THE SAN DIEGO BUSINESS JOURNAL June 22, 2015www.sdbj.comPage B36

Data as of January 2015 | *Through Praxity, aisbl

4747 Executive Drive, Suite 1300 | San Diego, CA 92121

102 Years in business

97 Countries served*

33 Industries served

51 Years in San Diego

4.9 Staff-to-partner ratio

1 Goal: to help you succeed

As an accounting firm, we love numbers.Here are a few of our favorites.

WWW.MOSSADAMS.COM

You’ve heard of material participation, but do you really understand how it might apply to your business?

Under Internal Revenue Code Section 469(h), the material participation standard is met only if the taxpayer is involved in the op-erations of the activity on a regular, continuous, and substantial basis. Depending on how material participation rules apply to you, there could be different, sometimes significant tax results.

There are two other terms that you need to understand in relation to material participation: passive and nonpassive income or loss. When you have passive losses in excess of your passive income, the excess losses become suspended. This different treatment could result in a sig-nificantly increased tax outcome. This is also a great example of when the material participation rules come into play.

Meeting the TestAny trade or business activity in which a taxpayer materially partici-

pates isn’t considered a passive activity. In order to provide a measure of certainty, the regulations provide that an individual taxpayer is treated as materially participating in an activity only if one (or more) of the following tests is satisfied:

• More than 500 hours is spent on the activity during the year.

• The taxpayer does all or almost all of the work in the activity for the year.

• The taxpayer spends more than 100 hours in the activity during the year, and no other individual, including nonowners, spends more time on the activity than the taxpayer.

• The activity is a significant participation activity in which the taxpayer participates for more than 100 hours during the year and the taxpayer’s annual participation in all significant participation activities is more than 500 hours. A significant participation activity is generally a trade or business activity that the taxpayer participates in for more than 100 hours during the year but doesn’t materially participate under any of the other material participation tests.

• The taxpayer materially participated in the activity for five tax years (consecutive or not) within the previous 10 tax years.

• The taxpayer materially participated in a personal service activity for any three tax years (whether or not consecutive) preceding the current tax year.

• In the event that none of the above situations are met, the taxpayer can still achieve material participation based on facts and circumstances, which is a very stringent test. If an individual participates in an activity for 100 hours or less during the year, the facts and circumstances test isn’t available as an option.

Combining ActivitiesMany taxpayers have difficulty meeting any of the above tests due

to their diversified line of businesses, or barely meet the test and could easily be challenged by the IRS. The good news is there’s an election available that allows taxpayers to combine multiple activities into a single activity for passive activity determination purposes, provided that these activities constitute an appropriate economic unit.

Once grouped, multiple activities are viewed as a single activity, which makes it much easier to meet the tests. However, the decision to make the election should be weighted carefully while taking into consideration factors such as when to group, what to group, and future business plans. Once the election is made, it’s irrevocable unless significant changes occur in the taxpayer’s business structure to warrant a new election.

There may even be circumstances where a taxpayer doesn’t want to qualify certain business activities as nonpassive due to other passive losses being available.

Real Estate ActivityAnother important aspect of passive activity rules relates to certain

taxpayers in the real estate industry. A real estate activity is deemed to be passive in nature unless the taxpayer materially participates in the rental activity and qualifies as a real estate professional. If the taxpayer qualifies as a real estate professional, losses from such activities can be used to offset wages, interest, and other nonpassive income. An individ-ual is a real estate professional for any tax year if both of these criteria are met:

• More than 50 percent of personal services performed by the taxpayer in all trades or businesses during the tax year are performed in real property trades or businesses in which the taxpayer materially participates.

• The taxpayer performs more than 750 hours of service during the tax year in real property trades or businesses in which the taxpayer materially participates. This criterion requires actual performance of services. For example, the Tax Court disallowed a taxpayer’s on-call and willing-to-work hours to count toward this 750-hour requirement.

Since passive activity income can also be included in net investment income that’s subject to the additional 3.8 percent net investment in-come tax for taxpayers with income over $200,000 (single status) or $250,000 (married status), it’s now even more critical that taxpayers properly identify their activities as passive or nonpassive and group them appropriately, if necessary.

The rules surrounding passive and nonpassive activity and material participation are complex. Careful study, planning, and proper documentation are essential to making the rules work for you.

Liang Li, CPA, is a tax senior manager at Moss Adams LLP. He provides tax services and consulting to high net worth individual clients and focuses on trusts, estates, and gift tax areas crossing different industries in Southern California. You can reach him at (858) 627-1418 or [email protected].

Bruce Knowlton, CPA, has more than 25 years of experience working with closely held middle-market companies and high net worth individuals, families, and business owners on income tax, business succession, and estate planning. You can reach him at (858) 627-1407 or [email protected].

When you have passive losses in excess of your passive income, the excess losses become suspended. This different treatment could result in a significantly increased tax outcome.

Another important aspect of passive activity rules relates to certain taxpayers in the real estate industry. A real estate activity is deemed to be passive in nature unless the taxpayer materially participates in the rental activity and qualifies as a real estate professional.

Material Participation Rules Might Change Tax Results

By Liang Li, CPA, Tax Senior Manager, Moss Adams LLPBruce Knowlton, CPA, Tax Partner, Moss Adams LLP

AN ADVERTISING SUPPLEMENT TO THE SAN DIEGO BUSINESS JOURNAL June 22, 2015 www.sdbj.com Page B37

Data as of January 2015 | *Through Praxity, aisbl

4747 Executive Drive, Suite 1300 | San Diego, CA 92121

102 Years in business

97 Countries served*

33 Industries served

51 Years in San Diego

4.9 Staff-to-partner ratio

1 Goal: to help you succeed

As an accounting firm, we love numbers.Here are a few of our favorites.

WWW.MOSSADAMS.COM


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Imagine you’re on a TV quiz show. The host turns to you and offers a list of topics, one of which is Your Personal Finances. Based on your knowledge, is this a category you would choose?If you answered no, you’re not alone. Four out of five Americans admit they

know more about a variety of topics than their own finances. That’s about the same share that would choose to answer questions about subjects far less personal, such as current events, entertainment, or science and technology.

These results were gathered as part of a research study, sponsored by Northwestern Mutual, to help gauge the American public’s overall financial knowledge – as measured by a financial IQ index – and its understanding of insurance products.

For me, the results were a powerful reminder of the reason I make it a point to help clients fully understand their personal finances, so they can make the informed choices that are right for them.

The survey found that some basic financial concepts are well-understood, in-cluding the best way to minimize losses in investments (88% answered correct-ly), asset allocation (79%), and dollar-cost averaging (57%). Likely because of their self-explanatory names, high numbers of Americans also recognize what disability income insurance and long-term care insurance are designed to do.

More often than not, however, Americans fail to understand many key fi-nancial concepts – like the average inflation rate over the past decade (known by about one in three), or the product that has traditionally mitigated inflation risk the best (less than one-third answered correctly). The lack of financial knowledge appears to be particularly acute when it comes to permanent life insurance, as only a small percentage of Americans seem to know even the basics of this type of risk protection.

Knowledge is power, though – and Americans recognize it. Nearly eight out of ten consumers feel the need to learn as much as possible about their

personal financial situation. I’ve certainly seen this to be true in my practice.As for where they find that information and whom they trust, I was glad

to learn that, when asked to rate the reliability of several sources of financial information, Americans rated financial advisors as the most reliable source.

Are you curious what your financial IQ might be? Find out by completing the survey at http://financialmattersquiz.com/.

About the researchOn behalf of Northwestern Mutual, independent research firm Mathew Greenwald & Associates, Inc. conducted an online survey of 1,664 Americans ages 25 to 65, between June 1 and June 8, 2010. Study participants were members of Synovate’s leading Global Opinion Panel. Survey data were weighted by gender, age, education, and household income to reflect the makeup of the U.S. population ages 25 to 65. Population statistics were based on data from the 2008 Current Population Survey.

Submitted by Northwestern Mutual

Article prepared by Northwestern Mutual with the cooperation of David W Mc Quade. David W Mc Quade is a Wealth Management Advisor with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. David W Mc

Quade is based in San Diego, CA. To contact David W Mc Quade, please call (619) 230-8093, e-mail at [email protected], or visit davidmcquade.com.

What’s your financial IQ?Provided By: David W Mc Quade, Northwestern Mutual

Imagine you’re on a TV quiz show. The host turns to you and offers a list of topics, one of which is Your Personal Finances. Based on your knowledge, is this a category you would choose?If you answered no, you’re not alone. Four out of five Americans admit they

know more about a variety of topics than their own finances. That’s about the same share that would choose to answer questions about subjects far less personal, such as current events, entertainment, or science and technology.

These results were gathered as part of a research study, sponsored by Northwestern Mutual, to help gauge the American public’s overall financial knowledge – as measured by a financial IQ index – and its understanding of insurance products.

For me, the results were a powerful reminder of the reason I make it a point to help clients fully understand their personal finances, so they can make the informed choices that are right for them.

The survey found that some basic financial concepts are well-understood, in-cluding the best way to minimize losses in investments (88% answered correct-ly), asset allocation (79%), and dollar-cost averaging (57%). Likely because of their self-explanatory names, high numbers of Americans also recognize what disability income insurance and long-term care insurance are designed to do.

More often than not, however, Americans fail to understand many key fi-nancial concepts – like the average inflation rate over the past decade (known by about one in three), or the product that has traditionally mitigated inflation risk the best (less than one-third answered correctly). The lack of financial knowledge appears to be particularly acute when it comes to permanent life insurance, as only a small percentage of Americans seem to know even the basics of this type of risk protection.

Knowledge is power, though – and Americans recognize it. Nearly eight out of ten consumers feel the need to learn as much as possible about their

personal financial situation. I’ve certainly seen this to be true in my practice.As for where they find that information and whom they trust, I was glad

to learn that, when asked to rate the reliability of several sources of financial information, Americans rated financial advisors as the most reliable source.

Are you curious what your financial IQ might be? Find out by completing the survey at http://financialmattersquiz.com/.

About the researchOn behalf of Northwestern Mutual, independent research firm Mathew Greenwald & Associates, Inc. conducted an online survey of 1,664 Americans ages 25 to 65, between June 1 and June 8, 2010. Study participants were members of Synovate’s leading Global Opinion Panel. Survey data were weighted by gender, age, education, and household income to reflect the makeup of the U.S. population ages 25 to 65. Population statistics were based on data from the 2008 Current Population Survey.

Submitted by Northwestern Mutual

Article prepared by Northwestern Mutual with the cooperation of David W Mc Quade. David W Mc Quade is a Wealth Management Advisor with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries. David W Mc

Quade is based in San Diego, CA. To contact David W Mc Quade, please call (619) 230-8093, e-mail at [email protected], or visit davidmcquade.com.

What’s your financial IQ?Provided By: David W Mc Quade, Northwestern Mutual

Create your financial plan with a Northwestern Mutual Wealth Management Advisor. Together, we’ll design a disciplined and balanced approach to protecting, accumulating, and managing your wealth, so you can take advantage of life’s opportunities. Who’s helping you build your financial future?

Achieve financial security with a plan that addresses risk first.

David W Mc Quade MBA, CLU®, ChFC®, CASL®Wealth Management AdvisorCA# 0C39219 (619) 230-8093davidmcquade.com

05-3055 © 2015 Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries. Northwestern Mutual Investment Services, LLC (NMIS) (securities), a subsidiary of NM, broker-dealer, registered investment adviser, and member of FINRA and SIPC. David W Mc Quade, Insurance Agent(s) of NM. David W Mc Quade, Registered Representative(s) of NMIS. David W Mc Quade, Representative(s) of Northwestern Mutual Wealth Management Company®, (NMWMC) Milwaukee, WI, (investment management, trust services, and fee-based planning) subsidiary of NM, limited purpose federal savings bank. Representative(s) may also be an Investment Advisor Representative(s) of NMIS. The Chartered Advisor for Senior Living (CASL®) designation is conferred by The American College of Financial Services. NCAA® is a trademark of the National Collegiate Athletic Association.


Our Experienced Team Gives Peace of Mind to Our Clients

5672 La Jolla Blvd

La Jolla, CA 92037

Call +1 858 459 0172

www.sage-cap.com

Sage Capital Advisors, LLC provides a full range of investment and wealth man-agement services, applying customized

strategies to manage risk and grow wealth responsibly. Our flexible approach makes it possible to advise and manage assets according to individual situations and goals.

Co-founded in 2005 by Diana Blair, president and Matt Johnson, chief investment officer, Sage Capital is one of the few financial services firms in the nation with a woman at the helm. Blair and Johnson pride themselves on growing a company that was built on a foundation of exhaustive in-house research and due diligence processes as an independent fee only advisor.

Sage Capital Advisors, LLC provides investment management and advisory services to Individuals, Trusts, Business Owners, Native American Tribes, Retirement Plan Participants as well as providing advisory services to Retirement Plans.

Sage Capital Advisors, LLC provides one-on-one attention that only a boutique firm can offer. We enjoy working with our clients and believe that the most important thing we can do is to truly carry the burden of investment decisions for them. To be, fully transparent, and to ensure that we understand and communicate the expectations that they have. We develop an Investment Policy Statement if needed and then apply that information to our clients’ portfolio in a non-emotional manner to achieve the desired goals and objectives over time. Our consultative approach allows us to provide our clients with peace of mind.

Our consultative approach provides direct solutions-based advice providing more understanding of the total financial picture with less jargon and rhetoric.

Blair, a former Wells Fargo vice president, developed financial education materials and content. “I do a lot of teaching, so when we manage a retirement plan I spend my time working with the participants educating them on how to manage their own investments,” Blair said.

Blair also works with the Native American community, teaching and developing programs to assist in the financial education and economic advancement of tribal communities.

Sage Capital’s investment management team is led by Johnson, a Chartered Financial Analyst or CFA®. Johnson provides in-house due diligence and research. We also provide portfolio reporting in an easy to understand manner, as

well as periodically publishing a newsletter with our economic outlook.Our clients also benefit from the knowledge and expertise of our team,

gained through decades of wealth management experience in finance and investments. Our independence give us the ability to take care of our clients in a manner unlike larger firms. Using custodians allows us to provide clients with transparency and focus on our fiduciary duty as a fee only firm.

“We provide our clients with a peace of mind that is achieved by an experienced team that diligently adheres to the highest ethical standards and integrity,” Blair said. “We really care about them.”

Boutique Financial Firm with Far Reaching Services

Left, Tim Dyer, managing director; Matt Johnson, chief investment officer; Carl Rustin, business development; Diana Blair, president; Jeremy Lund, chief technology officer and Jan Ozenbaugh, client service manager.

Submitted by Sage Capital Advisors, LLC

Visit www.sage-cap.com.


iniinnnniidywealth.com | 858.509.9500 | 12340 El Camino Real, Suite 450 | San Diego, CA 92130

Your Financial Success Is More Than Our Responsibility. It’s Our Passion.

Founded in 1991, Dowling & Yahnke is an independent, fee-only registered investment

adviser providing comprehensive portfolio management and retirement planning.

Giving our clients peace of mind in a complex

financial world

Much like a mariner that meticulously plans each detail of a voyage before setting sail, successful investors must determine where they want to go, chart a reliable course, carefully monitor

progress, and make the adjustments necessary to safely arrive at their destination.

Managing EmotionA successful voyage balances preparedness and a mindset for safety

with the need for steady progress toward the ultimate destination. A stretch of smooth sailing where much progress has been made may lead to complacency, leaving a mariner exposed to an unexpected storm. Likewise, investors may find themselves off course following a sharp market downturn or a period of strong returns.

Bear markets have long been associated with emotional and sometimes irrational investor behavior. Although natural to feel uncomfortable during times of market volatility, successful investors have confidence in the construction of their portfolio to withstand challenges during all economic cycles. Disciplined portfolio rebalancing to a long-term target asset allocation is akin to resetting the sail of a ship to ensure it remains headed in the right direction.

Staying on CourseMarket timing, a common practice among active investors, equates

to a mariner’s attempt to predict next week’s weather. Like being at sea, earning long-term market returns requires an investor to weather storms and take advantage of tailwinds. Executing the actions below provides the highest likelihood that an investor will arrive at their intended destination despite ever changing market conditions:

• Identifying a long-term asset allocation target that closely aligns with investor risk tolerance, investment objectives, and time horizon

• Ensuring appropriate diversification both among and within various asset classes • Minimizing portfolio costs, including management fees, mutual fund expenses, and transaction costs • Managing taxes by locating assets in appropriate accounts,

opportunistically harvesting losses, optimizing charitable giving, and implementing other tax saving strategies

• Rebalancing to a long-term target asset allocation to maintain the appropriate level of portfolio risk

Markets, like the open ocean, are unpredictable and require a proven, carefully constructed plan to weather unanticipated challenges.

To learn more about Dowling & Yahnke’s investment approach and services, call Will Beamer at (858) 509-9500.

Submitted by Dowling & Yahnke, LLCBy Will Beamer, CFA, CFP®, President, and CIODowling & Yahnke, LLC12340 El Camino Real, Suite 450, San Diego, CA 92130dywealth.com • 858.509.9500 • [email protected] & Yahnke gives our clients peace of mind in a complex financial world.

Can Your Portfolio Weather All Markets?“It is not the ship so much as the skillful sailing that assures the prosperous voyage.” — George William Curtis

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