yead end tax strategies for real estate investors

Year End Tax Strategies for

Real Estate Investors

www.LermanLaw.comwww.uDirectIRA.com

www.KeyStoneCPA.comwww.HasslefreeCashflowInvesting.com

David CampbellDavid Campbelldeveloper / broker / syndicator

Former high school & college band director Professional investor over $800 million of real

estate experience

Self-made multi-millionaireReal estate & business advisor

Financial mentorHouses, condo-conversion, multi-family, winery, resort, office, retail, medical office, commercial

development, home building

[email protected]@HasslefreeCashflowInvesting.com

Begin with end in mindBegin with end in mind

��NOT a sales pitchNOT a sales pitch

��NOT investment, legal, or tax adviceNOT investment, legal, or tax advice

��NOT an investment offeringNOT an investment offering

Helping other people live more abundant lives by giving knowledge and support for our others to

invest profitably and with mental tranquility.

WHAT THIS WHAT THIS ISIS !!

��This This ISIS an educational an educational

service to our existing service to our existing

clientsclients

��This This ISIS a job interviewa job interview

Real Estate Investor Tax Advantages

•Tax Rate Reduction

• Capital Gains versus Ordinary Income

•Taxable Income Reduction

• Depreciation / write offs

•Tax Deferral

•Self-Directed IRA / 1031 exchange / capital gains

•Tax Avoidance

•Estate planning / 1031 swap till you drop

$ 1,271,408 $ 775,496 GROSS PROFIT

$ 1,171,804 $ 875,496 2042

$ 995,395 $ 757,595 2040

$ 845,544 $ 655,572 2038

$ 718,252 $ 567,287 2036

$ 610,123 $ 490,892 2034

$ 518,272 $ 424,785 2032

$ 440,249 $ 367,580 2030

$ 373,972 $ 318,079 2028

$ 317,672 $ 275,244 2026

$ 269,848 $ 238,178 2024

$ 229,224 $ 206,103 2022

$ 194,716 $ 178,348 2020

$ 165,402 $ 154,330 2018

$ 140,502 $ 133,547 2016

$ 119,350 $ 115,563 2014

$ 100,000 $ 100,000 2012

10% Profit Pay 15% CAP Gains Tax 10% Profit Pay 25%

Ordinary Income Taxes

Tax Rate Reduction

Taxable Income Reduction

Gross Income

X Rate

TAX OWED

(Gross Income

less Deductions

less Depreciation)

X Rate

TAX OWED

Tax Deferral

Arbitrage IRS

Invest at 10%

-Borrow from IRS at 0%

------------------------------------

PROFIT on IRS’s MONEY 10%

Arbitrage Bank

Invest at 10%

-Borrow from BANK at 5%

------------------------------------

PROFIT on BANK’s MONEY 5%

$ 1,233,705 $ 775,496 NET PROFIT

$ 411,235 paid along the way Income Tax Owed

$ 1,644,940 $ 775,496 GROSS PROFIT

$ 1,744,940 $ 875,496 2042

$ 1,442,099 $ 757,595 2040

$ 1,191,818 $ 655,572 2038

$ 984,973 $ 567,287 2036

$ 814,027 $ 490,892 2034

$ 672,750 $ 424,785 2032

$ 555,992 $ 367,580 2030

$ 459,497 $ 318,079 2028

$ 379,750 $ 275,244 2026

$ 313,843 $ 238,178 2024

$ 259,374 $ 206,103 2022

$ 214,359 $ 178,348 2020

$ 177,156 $ 154,330 2018

$ 146,410 $ 133,547 2016

$ 121,000 $ 115,563 2014

$ 100,000 $ 100,000 2012

10% Profit with Tax Deferral 10% Profit but Pay Taxes Tax Deferral

$ 1,644,940$ 775,496 NET PROFIT

ESTATE PLANNING SWAP TILL YOU DROPpaid along the way Income Tax Owed

$ 1,644,940 $ 775,496 GROSS PROFIT

$ 1,744,940 $ 875,496 2042

$ 1,442,099 $ 757,595 2040

$ 1,191,818 $ 655,572 2038

$ 984,973 $ 567,287 2036

$ 814,027 $ 490,892 2034

$ 672,750 $ 424,785 2032

$ 555,992 $ 367,580 2030

$ 459,497 $ 318,079 2028

$ 379,750 $ 275,244 2026

$ 313,843 $ 238,178 2024

$ 259,374 $ 206,103 2022

$ 214,359 $ 178,348 2020

$ 177,156 $ 154,330 2018

$ 146,410 $ 133,547 2016

$ 121,000 $ 115,563 2014

$ 100,000 $ 100,000 2012

10% Profit with NO TAX EVER 10% Profit but Pay Taxes Tax Avoidance

[email protected]@HasslefreeCashflowInvesting.com

“Quarter-Back” of your Investing Team”

NEW HOUSES

PASSIVE SYNDICATIONS

COACHING

David Campbellwww.HasslefreeCashflowInvesting.com

Presented By

(877) 975-0975

KEYSTONE CPA, INC.

2011 YEAR-END TAX PLANNING STRATEGIES

www.KeystoneCPA.com

Federal Income Taxes @ 35%

State Income Taxes @ 11%

Current Tax Rates

Payroll Taxes @ 15%

Capital Gains Taxes @ 15%

Estate Taxes @ 35%

(877) 975-0975 www.KeystoneCPA.com

Brand New Taxes

Unearned Income Medicare Contributions Tax

….Wow, that’s a mouthful!

-Brand New Tax on Net Investment Income = Another 3.8%

Hospital Insurance Tax….Another Innovative Brand New Concept

-Brand New Tax on Earned Income = Yet Another 0.9%


www.themegallery.com Company Logo

Redirect Tax Dollars to Your Retirement Accounts

• Pay Yourself Rather than the IRS

• Create Tax Deferred Money to Invest in Real Estate

• Start a Bucket of Tax Free Money for Life


2011 TAX REDUCTION STRATEGIES

Income Deferral


2011 TAX REDUCTION STRATEGIES

Accelerate Expenses

EXPENSES


2011 Bonus Depreciation

2011201120112011


For Real Estate Investors


Contact Us

Company Logo(877) 975-0975

KEYSTONE CPA, INC. Maximizing Profits & Increasing Wealth

www.KeystoneCPA.com

AS SEEN ON:

(877) 975-0975

www.KeystoneCPA.com

Presented By

FREE! Downloadable eBook

*****Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, (1) for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency, (2) promoting, marketing, or recommending to another party any transaction or matter addressed herein. The information contained within is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Before making tax or business decisions, please consult your professional tax advisor. This message (including any attachments) contains confidential information intended for a specific individual and purpose, and is protected by law. Any disclosure, copying, or distribution of this message, or the taking of any action based on it, is strictly prohibited. *****Copyright © 2011 by Keystone

CPA, Inc.

(877) 975-0975

Essential ResourcesEssential Resources

�� cashcash

�� cash flowcash flow

�� creditcredit

�� equityequity

�� timetime

�� talenttalent

�� strategic relationshipsstrategic relationships

�� control of an opportunitycontrol of an opportunity

LIMITED

INFINITE

LIMITED and INFINITE

�� cashcash

�� cashflowcashflow

�� credit (other peoplecredit (other people’’s)s)

�� equityequity

�� timetime

�� talenttalent

�� strategic relationshipsstrategic relationships

�� control of an opportunitycontrol of an opportunity

Traditional IRA

Self-Directed IRA

TAX DEFERRAL

How to SelfHow to Self--Direct Your Retirement SavingsDirect Your Retirement Savings

uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the

services of a competent professional should be sought.

WhatWhat’’s the Difference?s the Difference?

Typical IRATypical IRA

•• StocksStocks

•• BondsBonds

•• Mutual FundsMutual Funds

•• CDCD’’ss

SelfSelf--Directed IRADirected IRA

•• Rental PropertyRental Property

•• NotesNotes

•• Private StockPrivate Stock

•• LLCLLC’’ss

•• Tax LiensTax Liens

•• Foreign PropertyForeign Property

•• Raw LandRaw Land

•• Etc.Etc.

What Are The Limits?What Are The Limits?

A SelfA Self--Directed IRA can invest in anything EXCEPTDirected IRA can invest in anything EXCEPT

1.1. Life Insurance PoliciesLife Insurance Policies

2.2. CollectiblesCollectibles1.1. ArtworksArtworks

2.2. CoinsCoins

3.3. Collectible CarsCollectible Cars

4.4. AntiquesAntiques

5.5. GemsGems

6.6. StampsStamps

7.7. RugsRugs

What if your funds are with your What if your funds are with your

current employer?current employer?

Your plan will probably NOT allow you to self-direct

Must wait until you leave the companyTo rollover retirement plan

You can request an “in-service” transfer from your current plan administrator.

Prohibited TransactionsProhibited Transactions

(IRS Publication 590)(IRS Publication 590)

•• Borrowing money from the IRABorrowing money from the IRA

•• Selling property to it.Selling property to it.

•• Using it as security for a loan.Using it as security for a loan.

•• Buying property for personal use (present Buying property for personal use (present or future) with IRA funds.or future) with IRA funds.

Disqualified PersonDisqualified Person

•• Disqualified persons include your fiduciary and Disqualified persons include your fiduciary and

members of your family (spouse, ancestor, lineal members of your family (spouse, ancestor, lineal

descendant, and any spouse of a lineal descendant, and any spouse of a lineal

descendant). descendant).

Qualified PersonsQualified Persons

•• Aunts & UnclesAunts & Uncles

•• CousinsCousins

•• Brothers & SistersBrothers & Sisters

•• Unrelated friendsUnrelated friends

•• Nieces & NephewsNieces & Nephews

Prohibited TransactionsProhibited Transactions

•• Neither you nor any disqualified people Neither you nor any disqualified people

may benefit from IRA may benefit from IRA

•• Cannot buy, sell or exchange property Cannot buy, sell or exchange property

between plan and between plan and

–– Self or Self or

–– Disqualified peopleDisqualified people

•• Cannot provide goods, services or facilitiesCannot provide goods, services or facilities

SelfSelf--Directed IRA Directed IRA -- StructureStructure

•• YouYou

•• Your IRAYour IRA

•• TPATPA

•• CustodianCustodian

Buying Real Estate With Your IRABuying Real Estate With Your IRA

ProsPros

1.1. Capital gains are tax freeCapital gains are tax free

2.2. Positive cash flow is tax free Positive cash flow is tax free

3.3. No time limit for holding propertyNo time limit for holding property

4.4. IRA can borrow moneyIRA can borrow money

–– Leverage your investmentLeverage your investment

5.5. Potential to earn a larger rate of return on Potential to earn a larger rate of return on

invested capitalinvested capital

Buying Real Estate With Your IRABuying Real Estate With Your IRA

ConsCons

1.1. No tax advantages of owning real estate No tax advantages of owning real estate

2.2. No deduction for capital lossesNo deduction for capital losses

3.3. You are solely responsible for all gains or You are solely responsible for all gains or

losseslosses

4.4. You cannot replace lossesYou cannot replace losses

Buying Real Estate Buying Real Estate -- The ProcessThe Process•• Open a selfOpen a self--directed accountdirected account

•• Shop for a propertyShop for a property

•• Remember, itRemember, it’’s the IRA that is the buyers the IRA that is the buyer

•• Custodian to sign Custodian to sign ““Offer to PurchaseOffer to Purchase””

•• Submit a Buy Direction Letter for earnest money Submit a Buy Direction Letter for earnest money

depositdeposit

•• Funds wired to closing from your IRAFunds wired to closing from your IRA

•• Fund & RecordFund & Record

•• Rents are made payable to your IRARents are made payable to your IRA

IRAIRA--Owned LLCOwned LLC

““Checkbook IRACheckbook IRA””

•• IRA purchases shares of a newlyIRA purchases shares of a newly--formed formed

LLC formed for this purposeLLC formed for this purpose

•• LLC receives funds in itLLC receives funds in it’’s checking accounts checking account

•• LLC follows same rules as IRA for LLC follows same rules as IRA for

investinginvesting

3 Types of Plans3 Types of Plans

•• IRAsIRAs–– Individual Retirement AccountsIndividual Retirement Accounts

–– What you are doing for your own retirementWhat you are doing for your own retirement

•• Qualified PlansQualified Plans–– ERISA controlledERISA controlled

–– Typically, what an employer provides youTypically, what an employer provides you

•• Other PlansOther Plans–– EducationEducation

–– HealthHealth

Types Of SelfTypes Of Self--Directed PlansDirected Plans

IRAsIRAs Qualified PlansQualified Plans Other PlansOther Plans

TraditionalTraditional 401K/ 457/ 403b401K/ 457/ 403b CoverdellCoverdell

RothRoth Defined BenefitDefined BenefitHealth Savings Health Savings

AccountAccount

SEPSEP Profit SharingProfit Sharing

SimpleSimple Individual KIndividual K

SpousalSpousal

How Do I SelfHow Do I Self--Direct?Direct?

1.1. Complete an applicationComplete an application1.1. Provide copy of driverProvide copy of driver’’s licenses license

2.2. Copy of statementCopy of statement

2.2. Fund your accountFund your account1.1. Annual ContributionAnnual Contribution

2.2. TransferTransfer

3.3. RolloverRollover

3.3. Tell us what you want to invest inTell us what you want to invest in

KaarenKaaren Hall, PresidentHall, President

uDirectuDirect IRA Services, LLCIRA Services, LLC

(866) 538(866) 538--35393539

[email protected]@uDirectIRA.com

uDirect IRA Services, LLC2522 Chambers Road, Ste 100

Tustin, CA 92780

• Certified Specialist in Estate Planning, Trust and Probate Law by the California State Bar Board of Legal Specialization

• Super Lawyers of Northern California for 2009 and 2010• Marin Estate Planning Council• Co-founder/head Mentor Group, Marin County Bar

Association Estate Planning Section• Frequent lecturer• Voted #1 Favorite Lawyer - The “J.” Newspaper Readers’ Poll

2007 Marin and Sonoma Counties• UCLA, BA, magna cum laude 1980, USC- JD 1983

Michelle C. LermanLerman Law Partners, LLP

Copyright 2010 -2011@ Lerman Law Partners, LLP All Rights Reserved

Disclaimer

This seminar is offered with the understanding that neither Michelle C. Lerman, nor Lerman Law Partners LLP is engaged in offering you legal or other professional advice, and we have no attorney-client relationship with you unless you sign an Engagement Agreement. Any actions with regard to the information contained in this seminar should be undertaken only upon the advice and counsel of competent legal, tax and estate planning professionals.

IRS Circular 230 Disclosure Nothing contained in these presentation materials was intended or written to be used, can be used or may be relied on for the purpose of avoiding penalties that may be imposed under the IRC of 1986, as amended, and may not be used to support the promotion or marketing of or to recommend any federal tax transactions discussed in this presentation.

CRITICAL PROVISIONS OF THE 2010 TAX ACT

1. $5M BASIC EXCLUSION

2. 35% FLAT RATE FOR ESTATE

AND GST TAX

3. SUNSET AT END OF 2012

LEVERAGE THE GIFT!

• INSTALLMENT SALE

• QPRT

• LIFE INSURANCE TRUST

ANNUAL EXCLUSION GIFTS

• BY DECEMBER 31

• AGAIN IN JANUARY 2012

PAYMENTS FOR TUITION AND MEDICAL EXPENSES

• UNLIMITED AMOUNT

• PAY DIRECT

Michelle C. Lerman

Lerman Law Partners, LLP

• Los Angeles

• San Francisco

• San Mateo

• San Rafael

(310) 295-1951

(415) 454-0455

www.lermanlaw.com

[email protected]

Jeffrey H. Lerman, Esq.

T M

www.RealEstateInvestorLaw.com

[email protected]

800-553-7626

800-5-LERMAN

Year End Tax Strategies for

Real Estate Investors

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