MFM LIVE with attorney, CPA, and RE investor John Hyre III talking about the CARES Act

MultifamilyMasters LIVE is an educational series where we talk about the ins & outs of real estate. During this call we have special guest John Hyre III who is a well-respected attorney, CPA, and real estate investor.

During this presentation he is going to give you the ins & outs of the CARES Act and he talks about how to keep more of your money in your pocket with special tax advantages you may not be taking advantage of right now.

VIDEO TRANSCRIPTION

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etc etc etc long story short we’re here
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to help you win I partnered up with two
02:19
awesome individuals to make multifamily
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masters happen and we have a really
02:24
solid team around us I partnered up with
02:26
a gentleman named pal Qi who has
02:28
approximately a thousand plus apartment
02:31
I have 600 plus apartments I have 20
02:34
years real estate experience Farris Musa
02:37
our third partner has 1,500 plus
02:39
apartments we have an awesome team with
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Bethany Smith who just closed on the 40
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unit she’s doing some incredible things
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Kyle Mitchell who has an awesome podcast
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recently bought a hundred-plus unit
02:53
apartment building in Arizona that dude
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is absolutely on fire he’s someone
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you’re going to want to follow
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cual who’s an absolute brainiac and we
03:01
have rioni tran who helps us out as well
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as chris collins so we have an awesome
03:07
team that’s what sets us apart from some
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of these other platforms from some of
03:11
the other Facebook groups we’re very
03:12
well experienced there’s a group of us
03:15
we’re not a one-man show we’re really
03:18
here to help you with every aspect of
03:20
business every aspect of real estate so
03:23
with that being said I’m going to let my
03:25
partner’s mr. pouchy and Faris introduce
03:28
themselves a little bit talk about
03:30
themselves and we’re going to introduce
03:31
the guest speaker tonight who is going
03:33
to be talking about the cares act go for
03:36
pal awesome I also appreciate that
03:38
garrison so my name is pawel Chi I
03:41
started a multi-family masters about two
03:44
and a half years ago and now it’s grown
03:46
to you know from one chapter here in LA
03:49
to now we have over 60 chapters all
03:52
throughout the world to globally and a
03:55
bunch all over the place around the
03:58
United States still growing still very
04:00
active still got a lot of interest from
04:03
other people and and chapter supplying
04:05
all the time and a little about me real
04:09
quick had been involved in real estate
04:11
since I guess about five years now and
04:15
have purchased seven properties totaling
04:18
over a thousand units all together some
04:21
buy myself some JV some syndications and
04:25
that’s kind of where I’m at and looking
04:27
to
04:27
in you that and continue to grow as much
04:29
as possible how about you first all
04:32
right hello everyone Faris Moussa for
04:34
those who they don’t know me as garrison
04:37
mention of a company called disrupt
04:38
equity along with our offense levels and
04:40
you know we have properties throughout
04:42
Texas but you know we’re kind of
04:43
obviously heavily focused on
04:44
multi-family masters we have to run the
04:46
Houston chapter and you know as part of
04:48
kind of meet garrison and pal putting
04:50
together really a roadmap for MFM one of
04:53
the biggest things we wanted to do is to
04:54
add value right and really figure out
04:56
how do we continue to teach and educate
04:58
people that’s a big part of nfm and kind
05:00
of you know really a big part of our
05:02
chart and so one of the biggest things
05:04
that we’ve heard lately obviously scares
05:05
act there’s a lot of misinformation I
05:07
mean it’s insane to me obviously for us
05:09
and our company we’re heavily kind of
05:11
exploring all different options and they
05:13
just you run across people that have all
05:14
sorts of crazy assumptions and so we
05:16
really wanted to bring on an expert to
05:18
help Emma them and everyone else that’s
05:20
part of it if I’m learn what the cares
05:22
act is and what it isn’t how to do
05:24
things the right way to you know how to
05:26
avoid doing in the wrong way and one of
05:28
the things to kind of consider and so
05:29
kind of would that said obviously we
05:31
decided to for those who they don’t know
05:33
we do MFM live we do it once a month
05:34
that’s kind of the typical Charter but
05:36
right now we’re trying to move to every
05:37
two week
05:38
cadence right so we can really bring on
05:40
more speakers and add more value for
05:41
people that are interested in different
05:43
topics and so for this one one of the
05:45
ones we kind of brought to the forefront
05:46
really is just you know bringing on an
05:48
expert of the carrots act and you know
05:51
as part of doing that obviously John’s
05:53
name came up as kind of a garrison
05:55
recommend that John he has that
05:56
relationship with John and you know John
05:58
is an expert in just really tax he’s a
06:01
tax attorney from Columbus Georgia 22
06:04
years of experience and from us one of
06:06
the most knowledgeable people that we
06:08
collectively know in the space that can
06:09
help kind of give guidance and so we
06:11
wanted to absolutely make sure John
06:13
would hop on and really help teach us
06:15
myself included and everyone else on
06:17
this call more about the carrots act and
06:19
the things to kind of look forward to
06:20
and so I think John I’ll let John
06:22
introduce himself but as I mentioned he
06:24
definitely comes highly recommended lots
06:26
of user experience and it’s a dedicated
06:28
tax attorney and I think after this I’m
06:30
actually gonna probably follow up with
06:31
John separately because I’ve been
06:32
looking for a good tax attorney
06:34
kind of for us in our business and so
06:36
John definitely look for that email from
06:37
me a little bit later but with that said
06:39
John you wanna hop on in
06:40
introduce yourself and kick it off hit
06:46
the unmute button John okay there we go
06:53
there we go already so I’ll introduce
06:56
myself and then we’ll share some slides
06:58
I’m a tax attorney tax accountant real
07:02
estate investor that’s roughly the order
07:04
of competence I’m a very very very good
07:06
attorney a very good accountant I do
07:09
okay at real estate investing the
07:11
problem is I’ve had to go more and more
07:12
passive because the practice takes so
07:14
much time there was a time when I tried
07:16
to do everything and that did not work
07:17
well so the the real estate investing
07:20
has gotten more passive I live in Puerto
07:23
Rico now so I thankfully um bilinguals
07:26
have made the move easier but I knew
07:27
here because the tax rate on my practice
07:31
income and my sales of books and
07:34
webinars and whatever mic my tax rate
07:36
down here believe it or not it’s one of
07:38
the few places in the world you can do
07:40
this six percent federal state and local
07:43
combined there’s you were toriko as a
07:49
u.s. territory has benefits that you
07:52
don’t get by investing in a foreign
07:54
country for example if I moved to
07:56
Switzerland let’s say the Swiss taxed me
07:58
at 20 percent in my US brackets thirty
08:00
five percent the IRS comes and picks up
08:02
the fifteen percent differential not so
08:05
in US territories and Puerto Rico I
08:08
think is the most attractive of all the
08:09
territories and the first thing I would
08:11
say is suspend your disbelief based on
08:14
what you’ve heard from the media because
08:15
there’s a lot of MIS reporting on Puerto
08:17
Rico first thing I’ll say is that you’ve
08:18
got any amount of money like many things
08:20
in the world
08:21
money solves problems so people ask me
08:24
well do you have electricity after the
08:26
hurricane you know that was two years
08:27
ago well yeah the whole island does and
08:29
the building I’m in never lost
08:31
electricity for ten minutes because they
08:34
have their own generators everybody down
08:36
here is a prepper because of hurricanes
08:37
incompetent government you name it so
08:40
just some background I mean I have a
08:43
virtual practice we have clients
08:44
nationwide it’s all done pretty much in
08:46
this four
08:47
most of them are real estate investors
08:49
we do have a fair amount of small
08:51
businesses now that are not real estate
08:53
actually the real estate especially the
08:55
rentals are more complicated than normal
08:57
small businesses I would say normal
08:59
small business from a tax standpoint is
09:02
easier to handle than real estate so we
09:05
do consulting returns we fight the IRS i
09:08
love-love-love going to tax court after
09:12
audits have gone bad
09:14
unfortunately in 25 years of practice
09:17
I’ve never been able to take a tax court
09:18
case to its conclusion because the IRS
09:21
always settles with me and the
09:22
settlement is always so good that I tell
09:24
the court the client they’re crazy to
09:26
keep paying me based on the settlement
09:28
we got so just a little bit of
09:30
background I do invest I have done a lot
09:32
of low income and that’s time intensive
09:35
enough that I don’t do that anymore
09:37
we’ve almost we’ve sold almost
09:38
everything we bought during the prior
09:40
crash just in time for a new one so I
09:42
guess we can start buying again and
09:45
that’s that’s the optimist in me so lots
09:47
going on what you’re gonna see tonight
09:49
is a shortened version to keep this
09:51
roughly within an hour I did write when
09:55
the new law came out the cares Act in
09:57
five days of it coming out I had read
09:59
the 800 page books multiple times and
10:02
having done that within five days
10:04
multiple times wanted to kill others and
10:06
myself but instead decided to put on a
10:09
webinar about five days after the law
10:11
came out that was about a three hour
10:13
webinar so I’ve cut some slides I’ve
10:15
made it a lot shorter I want to cover
10:17
essentials and I especially want to
10:19
focus on what you’re not hearing so I’m
10:22
going to be very short on the PPP that’s
10:26
the payroll protection program that’s
10:28
the one where you get a loan that gets
10:30
forgiven I’m gonna be very brief on it
10:32
why a it’s changed a ton since the law
10:35
passed it mutated faster than the damn
10:37
virus and so everybody’s been all over
10:40
it and for the moment it’s quiet because
10:42
we’re out of funding now I think they
10:44
are about to reauthorize funding it
10:46
looks like they’re negotiating
10:48
garrison I haven’t been on one of yours
10:51
before how politically incorrect do I
10:54
get to be do I get to be my normal self
10:56
you do your thing my mind you’re the
10:59
you’re the guest speaker open mic
11:01
all right so the Communists have decided
11:05
that we sent the Republicans who are
11:07
imperfect right we can Republicans are
11:09
so easy to pick on especially with Trump
11:11
around I mean I love Hatem people always
11:13
ask me how can you listen to what Trump
11:16
says and my response as well Trump
11:19
doesn’t think about what Trump says so I
11:21
don’t either but I do pay an awful lot
11:24
of attention to what he does and I like
11:27
the vast majority of it as far as the
11:30
Socialists who’ve gone hard nuts left
11:32
here’s where we’re at so we’ve got this
11:34
PPP program it’s a huge boon to small
11:37
businesses as a practical matter you
11:39
have to be either on a Schedule C which
11:41
for you real estate investors means
11:43
you’re flipping you’re assigning you’ve
11:45
got a management company separately set
11:48
up for your rental multi-family type
11:50
stuff it only applies if you have w-2s
11:52
or something that passes through on a
11:54
Schedule C or shows self-employment
11:56
income on your on your 1040 so there are
12:00
limits to whom it applies it’s been a
12:03
program I mean they have three hundred
12:04
and fifty billion and it went like this
12:06
within weeks they used up all that money
12:08
which tells you what a great need there
12:10
is out there now I also think a lot of
12:11
people who should not have taken it did
12:14
take it we’re going to talk about that
12:15
in a minute because there are some
12:17
federal criminal you know felony type
12:18
issues with doing that so I’m going to
12:21
cover it briefly because it’s gotten a
12:22
ton of coverage so I’m going to make
12:23
some generalizations based what I’ve
12:25
seen with my clients but I’m really
12:27
gonna focus on things you haven’t heard
12:29
so much about likewise the idle loans i
12:32
IDL these are the ones straight through
12:34
the SBA also apply to landlords fact
12:37
more applicable I think to landlords
12:39
than the PPP because if you can show
12:41
lost rent whether it’s air B&B style
12:44
rent or normal rent you probably qualify
12:47
for some sort of idle um but again
12:49
there’s been so much written on it and
12:51
so much out there I wanted to focus on
12:53
our scarce time adding values I’m gonna
12:55
talk about a few things you probably
12:57
haven’t heard of because everyone has
12:59
been so focused on the idle loans and on
13:02
the PPP so I’m gonna bring up the slides
13:04
here in a second and that takes me back
13:07
to the discussion of the Communists so
13:09
the PPP funds ran out the Republicans
13:13
proposed a very simple bill
13:14
let’s add 250 billion to this people
13:17
needed it was popular they used money
13:19
the Democrats said no no no we want
13:23
another 250 or so billion of stuff that
13:26
we’re into we need some social justice
13:28
types of things now in fairness to them
13:30
some of the stuff they asked for makes
13:32
some sense
13:33
some of it is mislabeled as something
13:35
that looks like it makes sense but
13:36
bottom line they’re holding them at the
13:37
legislation this badly needed funding
13:40
hostage and I think voters should
13:42
remember that when the time comes for
13:44
those of you who say there is no
13:46
difference between Republicans and
13:47
Democrats there isn’t as much difference
13:50
as I would like but there’s quite a
13:52
difference and we’re seeing it so I do
13:55
think that if you’re interested in these
13:56
or you started with them you want to
13:58
make sure you’re in line because the
13:59
funding for the PPP will almost
14:01
certainly be renewed there’ll be more
14:03
funding shortly and you want to be ready
14:05
the number one issue we’ve seen with
14:07
both programs is that you’re you all and
14:10
by you all I mean entrepreneurs in
14:12
general your paperwork sucks right in
14:16
order to get these loans to go through
14:18
the bank you don’t have a lot of time
14:20
you saw how fast the funds ran out you
14:22
can’t be fiddling about running about
14:24
and scrambling to get paperwork in order
14:26
for example if you’ve going for the PPP
14:28
you better have your payroll tax returns
14:31
your 940 ones ready to go this is not a
14:34
oh I’ll get back with you I filled out
14:36
the application but I don’t have the
14:38
backup documents you know I mean most of
14:41
you that do multifamily it would be
14:42
familiar with the loan process and how
14:44
to document these things but you don’t
14:46
have time to procrastinate the way you
14:47
normally do the funding on these things
14:49
moves so quickly and there’s such a need
14:52
for it you have to be on it hard and
14:54
fast so the first thing I would do after
14:56
this call if you’re interested in PPP or
14:58
idle is go find out what paperwork is
15:01
needed and start it now so that the
15:03
instant there’s funding you can submit
15:06
things in short order efficiently and by
15:08
the way submitting imperfectly is
15:10
probably worse than not submitting at
15:11
all because if you submit and you’re
15:13
missing something
15:14
hey they sit on it before they tell you
15:16
you’re missing something and then when
15:18
they finally tell you you’re missing
15:19
something you go to the back of the line
15:21
and given how fast the fundings running
15:23
out going to the back of the line is a
15:25
serious thing indeed so you really need
15:27
to be honest
15:28
you really need to be organized with it
15:30
let me go ahead and share my slides so
15:34
let’s see if this functions as planned
15:36
share screen says here I cannot share
15:41
screen while another participant is
15:43
sharing so somebody’s sharing something
15:46
and I cannot
15:49
looks like Samantha Yi and you’re
15:52
sharing your screen oh I’m sorry
15:56
um I must have put on you weren’t
16:02
looking at porn right this is relevant
16:03
we’re good
16:04
oh my gosh well I’m sorry I was going to
16:10
share email that I got today regarding
16:14
the PPP applications but let me get out
16:17
I don’t know how I just hit the stop
16:19
share Samantha okay thank you
16:23
by the way one of my traditional things
16:27
when I do one of these is well I drink
16:29
and so today we’ve got the wee little
16:32
because we’re in Puerto Rico and I live
16:34
very close to the largest by far a party
16:36
distillery in the world and they’ve
16:38
gotten me hooked on rum so today’s rum
16:41
because we’re not going to drink cheap
16:43
things for you guys I mean for you guys
16:45
that are vicariously sharing we only do
16:47
the best and so this is Bacardi dress
16:50
saravali me tada
16:51
this was a gift from the wife even has a
16:55
nice little inscription at the top
16:56
that’s rather off-color so we’re not
16:58
gonna show that part she had some rather
17:00
suggestive things the man is very
17:02
fitting for Karuna yeah there you go
17:04
right to hell with the beer show me some
17:06
rum
17:06
it’ll kill the corona dive you the rum
17:10
the way you might do chemo the object is
17:12
to have the rum kill whatever’s
17:14
bothering me before it kills me Olga
17:18
wants a shot game on Olga we’re always
17:20
come on to Puerto Rico and I’ll buy the
17:22
first round by the way if you haven’t
17:24
had a rum old-fashioned instead of the
17:28
regular one with bourbon or rye you
17:30
haven’t lived you’ve got to have a rum
17:31
old-fashioned it will make you take back
17:33
stuff you never stole alright let’s go
17:36
to share our screen can y’all see it
17:41
yep yeah good to go I’m gonna start
17:44
scrolling and hitting it all right very
17:46
quickly the disclaimers this is not
17:49
legal advice this is educational legal
17:51
advice happens when we have an
17:52
attorney-client relationship which we
17:54
don’t when you’re paying me 500 bucks an
17:56
hour and I look at your personal
17:58
situation that’s not what’s happening
18:00
right now you’re paying me way less as
18:01
it nothing and so this is education not
18:04
legal advice what does that mean if you
18:06
use the education and it blows up in
18:08
your face you get a Darwin Award and I’m
18:10
not liable also I’m not sensitive or
18:13
politically correct I like triggering
18:14
people again I view that as somewhat
18:16
Darwinian we trigger people they fall
18:19
down the stairs and bump their head it’s
18:20
all good the race is better off all
18:24
right some brief PPP comments small
18:28
community banks consistently across the
18:30
board we’re more flexible faster I have
18:34
my clients I’d say 90% of the emails I
18:38
got within the first week were from
18:40
small community banks having improved it
18:41
the big nationals are way slower the
18:44
relationship matters a lot so if you
18:47
don’t have one you might have go to the
18:48
bank and make one having a large account
18:50
amount helps also just talking to
18:53
whoever your bank or as having them know
18:55
you getting you to the front of the line
18:56
is going to matter quite a lot this is
18:59
important this third bullet point a lot
19:01
of people signed for this in the Heidel
19:02
who should not have to be specific you
19:05
are signing under penalties of perjury
19:08
federal perjury and you’re not a Clinton
19:11
so you don’t get out of perjury charges
19:12
you’re fine signing under penalties of
19:15
perjury that you need and I saw a lot of
19:20
people who are sitting on huge cash
19:22
reserves go for this money there’s no
19:24
way they can argue with a straight face
19:26
that they need it to give you an idea I
19:28
didn’t go for it God thank God I’m so
19:30
grateful my business is booming right
19:33
now the phone’s ringing off the hook
19:34
even more than normally because people
19:36
are looking for our help on the stuff
19:38
I’m going to discuss with you
19:39
so I cannot argue with a straight face
19:41
that I need the money we’re doing better
19:43
than ever I didn’t go for any of this so
19:45
if you signed a federal document a
19:47
federally guaranteed loan and you said
19:50
something on there that was false and
19:51
you knew it people have gone to jail
19:54
just for check
19:54
the wrong thoughts on one of these so if
19:57
you took this money be the idol or the
19:59
PPP I really damn well hope you needed
20:02
it and you’re not putting yourself at
20:04
risk
20:04
you notice Shake Shack gave back the
20:06
money that was just in the news today
20:08
Shake Shack had I think it was like I
20:10
don’t know twenty million ten million
20:13
ten million of some big number they gave
20:15
it back why do you think that is because
20:17
their lawyer looked at that after they
20:20
did it and said what did you sign what
20:23
did you say you better give that money
20:25
back right Orange bad on you just
20:28
totally bad make sure that you have
20:31
scheduled cease and 1099s if you don’t
20:34
have employees you can qualify for the
20:36
PPP if you have a schedule see if you’d
20:39
get 1099s you want to show up with those
20:40
otherwise you want to show up with your
20:42
2019 Schedule C which means you have to
20:44
get it done showing that you made money
20:46
some banks will accept a really good set
20:48
of books a profit and loss and a balance
20:50
sheet but you better show up with good
20:52
records I’m not just going to take your
20:53
word for it
20:54
contractors generally don’t count as
20:56
employees they have to file for their
20:58
own P P P so those are the major
20:59
revelations from the last few weeks I’m
21:01
not going to spend a lot of time on it
21:02
because you’ve seen this ad nauseam
21:04
elsewhere idle this is the loans
21:07
directly from as long as we
21:31
did we just lose John hopefully he will
21:37
log right back in order he goes far away
21:43
go ahead pal go ahead and take this
21:45
presentation over yeah I’m thinking it’s
21:47
all you me I got it
21:48
except for it it is uh you know I can’t
21:53
I can’t say that the disclaimer with me
21:55
you know it is actual attorney-client
21:59
privilege when when did we talk just
22:02
kidding this is where if you just give
22:07
them long enough intro out before you
22:09
start you’ll you’ll be okay mm-hmm I am
22:12
belchy I’m not an attorney anything I
22:15
say can and will be used against me
22:18
anyways
22:19
let’s wait a few more minutes seeking
22:22
the house back home oh he was doing good
22:29
and I guess I’ll think oh I do agree
22:32
with him about the small banking
22:33
relationship I mean we we saw that
22:36
firsthand I mean really talking to a big
22:39
and I’m glad we made a change back in
22:41
Janie we’re actually December we moved
22:43
all of our accounts off of Wells Fargo
22:45
to a small bank and it’s been great I
22:48
mean having kind of a specific person
22:49
there they kind of see all the accounts
22:51
that we have and we do get that extra
22:53
level of touch and so on for those of
22:56
you that haven’t done that I do highly
22:58
recommend that which bank
23:05
we’re in a independent I BTX oh really
23:12
any you know you want any small a medium
23:13
bank right that’s maybe my my answer I
23:24
know me personally I’ve used US bank for
23:27
a long time and they’ve been pretty good
23:29
to me even when I wasn’t doing any real
23:32
estate investing at all and and now all
23:33
through with real estate investing they
23:35
still are still are doing and really you
23:37
know doing good things like I said I
23:39
just got a lot and a credit with them
23:41
recently and it was like in the middle
23:43
of all this and
23:44
went through and come back
23:48
John’s building never lost power nothing
23:50
during the hurricane but did right now
23:51
right Justin yeah can you hear me yeah
23:54
we can hear you go okay so here’s the
23:56
deal the internet here is usually pretty
23:58
good these last few weeks once in awhile
24:00
it drops I moved closer to the router
24:02
sorry about that I’ll pick up where I
24:04
left off hopefully it doesn’t happen
24:06
again but it’s a Murphy’s Law thing hold
24:09
on
24:09
what nobody under like my wife’s bossing
24:15
me around and it’s being recorded so we
24:16
have proof right this is what happens
24:19
when you marry a Latina they do not lack
24:20
for the whole imperative case good lord
24:24
all right let’s get that slippery
24:26
attorney complete wait just we have to
24:29
make sure the internet doesn’t drop
24:30
because now she’s given me the Loretta
24:31
Bobbitt look and we want to make sure
24:33
that I stay on screen being recorded
24:36
constantly otherwise you need that
24:39
evidence hard yeah at least at least you
24:41
know you guys could see what happened
24:43
all right let’s go back to the share let
24:47
me know when you can see the share I
24:49
think he dropped off in the previous
24:51
screen now yeah yeah yeah let me back it
24:54
up so let’s see here okay so there’s the
25:01
idle moans we were talking about how the
25:03
free money isn’t free it’s actually an
25:06
advance on a loan they’re not giving
25:08
everyone the advance they’re not giving
25:09
everyone the full advance and the only
25:11
time the advance becomes forgiven is
25:14
when they reject you for the loan if
25:16
they gave you an advance but they reject
25:18
you for the loan then it becomes
25:20
actually a freebie a giveaway so I think
25:23
there was a lot of let’s just say
25:26
optimistic advertising in terms of how
25:29
that was portrayed and we have seen
25:32
landlords and Airbnb r–‘s getting those
25:35
loans and again the same statement
25:37
applies you are saying under penalties
25:39
of perjury federal law that you need the
25:42
money now there’s some discussion of
25:45
who’s you like you might just be the
25:47
company so if the company’s broke and
25:48
you have a million in your bank account
25:50
yeah there’s an argument that the
25:51
company needed the money so you have to
25:53
pay attention to who’s signing but given
25:56
that that’s a federal issue I would have
25:57
a little bit of
25:58
care with it all right
26:01
what I’m going to cover now applies
26:03
directly to landlords which would
26:06
presumably include multi-unit people
26:08
towards the end I’m gonna switch over to
26:10
what applies only to w-2 people let me
26:14
reach down here and get my booze I moved
26:16
because this is closer to the router so
26:19
instead of being custom set up with a
26:21
little table for booze I actually have
26:23
to reach for it which is very sad yet
26:28
ask yes I’m going to seat them okay so
26:33
unemployment I just wanted to reiterate
26:35
I talked to a lot of landlord clients
26:37
who are worried about getting paid if
26:39
your tenant had any sort of job
26:41
including as a contractor not just a w-2
26:44
let’s say they were an uber driver or a
26:47
roofer let’s assume they were legal and
26:49
actually received a 1099 as opposed to
26:52
illegal and receiving cash not that that
26:55
ever happens if you have tenants who are
27:00
eligible for unemployment so they worked
27:02
full time for a w-2 part-time for a w-2
27:05
part
27:07
excuse me part-time for a 1099 there are
27:11
massive benefits for them in fact it’s
27:13
gonna create a already has really
27:14
created a labor shortage in some areas
27:16
because the federal supplement to
27:19
regular unemployment is extremely
27:21
generous specifically if somebody is on
27:23
a 1099 all they gonna do is show that
27:26
they were making money on a 1099 it
27:28
appears there isn’t even a threshold for
27:30
the amount they take that into the state
27:33
once the states are geared their
27:35
computer systems are still behind they
27:37
take that in they immediately qualify
27:40
for one-half the state average which is
27:42
typically around two hundred and fifty
27:43
dollars per week plus six hundred
27:46
dollars per week from the feds
27:48
so they qualify if they were contractors
27:51
that really of any sort for about eight
27:54
hundred bucks a week
27:55
that’s generally enough to make the
27:57
rebbe if they were an employee then the
28:00
amount they qualify for is gonna be
28:02
driven by the state formula in other
28:04
words maybe two hundred a week maybe a
28:06
hundred a week maybe three hundred a
28:07
week under the state formula but the
28:10
feds are still adding
28:11
600 a week to that for 39 weeks
28:14
furthermore it’s retroactive so even
28:17
though right now the states really
28:19
aren’t ready to process these claims
28:21
they’re only now getting into it and in
28:24
fairness this is all changing so quickly
28:25
and government isn’t really known or set
28:28
up for speed that’s a tremendous amount
28:33
of money so if you’re if your tenants
28:36
had a job even as a contractor even
28:40
part-time they probably qualify for an
28:42
awful lot of unemployment what I did
28:45
with one of my tenants because I only
28:46
have three tenants left right we’ve sold
28:48
just about everything else with one of
28:51
them we set up a forbearance agreement
28:52
basically we went to our TANF landlord
28:55
attorney we got an agreement that said
28:57
you’re behind we can evict you we’re not
28:59
going to evict you we’re gonna hold off
29:01
as long as a you show us progress on
29:04
your unemployment filings B once you get
29:06
these checks were made whole we’re not
29:09
going to charge you a late fee but we do
29:11
expect to get paid if you’re getting
29:13
unemployment and if you don’t pay us but
29:15
you have the money then we have an
29:17
agreement that says we can automatically
29:19
evict you I also want that in writing to
29:22
show a judge that I’m a good guy I was
29:25
waiting I was patient
29:26
I didn’t evict anyone right away and I
29:29
would say it’s in your interest if your
29:31
tenants are not real sophisticated a lot
29:34
of them aren’t you might even help them
29:35
with the filing process or had one of
29:37
your team one of your management people
29:38
help them with paperwork because a lot
29:40
of people are not good at paperwork we
29:43
have found that if you try and sign up
29:44
for unemployment late at night after
29:46
10:00 p.m. you’re more likely to get it
29:49
because the sites are crashing in other
29:51
words the state websites are really not
29:53
geared for this so I just wanted to
29:55
point out that the unemployment people
29:57
who normally don’t qualify do and the
30:01
amounts are very large this is
30:03
indirectly important to you
30:05
because it allows your tenants to pay
30:07
now if your tenants did not have a job
30:09
they were presumably paying through some
30:11
other means and that other means
30:13
hopefully presumably continues all right
30:17
let’s talk about loans from qualified
30:19
retirement plans so if you have a non
30:22
IRA plan typically a 401 K but
30:25
other versions of qualified retirement
30:27
plans if you have that soul of a if you
30:31
have a regular 401k presumably one that
30:34
is self are we need to mute everybody
30:37
somebody here needs muted everybody
30:40
check and make sure you’re muted oh
30:50
alright cool so you can borrow from a
30:56
401k the normal rule hey the law allows
31:00
you to borrow but the 401k plan also has
31:03
to allow it and not all of them do most
31:06
of the stuff directed ones do allow it
31:08
what’s the amount it allow you to
31:09
borrowed normally 50% of the assets in
31:13
the plan or $50,000 whichever is greater
31:16
so $50,000 or 50% of the assets in the
31:21
plan sorry whichever is lesser that was
31:24
a missed I need to drink again I can’t
31:26
believe I misspoke on that so 50% of the
31:31
assets in the plan for 50 grand
31:34
whichever is less that’s how much you
31:35
were able to borrow from your 401k
31:37
that’s changed now you have to change
31:39
the plan documents to permit this right
31:42
they give you until 2022 to change the
31:45
plan documents so they’re giving you a
31:47
lot of time to have done retro actively
31:49
for most of you that have access to self
31:51
directed 401k plans your custodian will
31:54
make a change or your your plan provider
31:56
for those of you who have 401ks that
31:58
your job for those of you still have w-2
32:01
job jobs that’s just gonna depend on
32:03
whether or not your employer wants to do
32:04
do this but they’re saying is you can
32:06
now borrow the lesser of a hundred
32:09
percent of the plan assets for a hundred
32:11
grand so basically they’ve doubled the
32:14
amount you can borrow a hundred percent
32:16
of the plan assets up to a hundred grand
32:20
whichever is less so this is if you need
32:23
it against somebody is not muted and
32:26
you’re fiddling around with papers or
32:27
something this is not the time to turn
32:30
your porn up really loud either so if
32:32
y’all check your microphones
32:36
so you can’t borrow from an IRA this
32:38
only works with qualified plans 401k is
32:41
the change in the law is as long as you
32:43
adapt your plan documents you can borrow
32:45
more you can borrow up to $100,000
32:49
instead of 50 grant now let me give you
32:51
a caution you do have to qualify my next
32:54
slide is gonna show what are the
32:55
qualifications to be able to borrow this
32:58
much so we’re gonna get into that if you
33:00
look at the first bullet point here this
33:02
is only a planet to qualify the
33:03
individuals we’re gonna define that on
33:05
the next slide who’s it all about
33:07
individual it’s pretty easy to qualify
33:09
next only do this if you really have two
33:12
guys I love buying real estate including
33:16
rentals I still have some rentals and
33:17
401ks over selling I love using stuff
33:20
directed retirement accounts to do this
33:22
it’s a highly tax efficient thing to do
33:24
if done right especially in a 401k where
33:28
it’s much easier to borrow in order to
33:31
buy real estate so as one of the
33:32
strategies need to get another time we
33:34
can get into but you only take money
33:37
about a retirement plan in an emergency
33:40
why because in the retirement plan the
33:43
money grows tax-free that’s like the
33:45
womb they love the womb the womb is warm
33:48
and happy and we listen to classical
33:51
music in mommy’s boys to Maci DC and
33:54
it’s all good but then when you get
33:56
forced out of the womb of nasty someone
33:59
smacks you it’s cold and worst of all
34:02
taxable so we like money to stay in a
34:05
401k because it grows tax pretty
34:07
particularly in a Roth
34:08
we don’t like to take it out into the
34:11
taxable world except for two reasons
34:13
either one you really really really
34:16
really really need the money or two
34:19
there’s the deal outside the IRA or I
34:22
should say outside the 401k that you
34:25
can’t do inside there are certain types
34:28
of deals without going into details that
34:30
are prohibited inside the Vivaro and
34:33
care and IRA so for example let’s say my
34:35
mom wants to sell me a really good
34:37
property really cheap my mom would never
34:40
do that love you hon but it’s true so I
34:44
can’t buy a really sweet property in my
34:47
401 K from my mother because she
34:49
in person however if I took the money
34:52
outside of the 401k now I to buy the
34:55
property from mom so those are the two
34:57
reasons to take property to take money
34:59
out of a 401k or an IRA you desperately
35:02
need it and engage the benefit of that
35:04
that the benefit of tax-free or there’s
35:08
a deal that you otherwise couldn’t do in
35:10
one of those two counts who’s a
35:12
qualified individual and here you have
35:15
it I’m gonna go through it briefly we
35:16
can email these slides out so you guys
35:18
can refer back to them later and this is
35:20
being recorded so once they delete out
35:22
the part where I was offline you can
35:23
come back and rewind and listen but if
35:25
you’re diagnosed with the virus with an
35:27
approved test if you have a spouse or
35:30
dependent who’s diagnosed or and here’s
35:33
the really great broad one who
35:35
experiences adverse financial
35:37
consequences as a result of being
35:39
quarantined for load or laid off having
35:41
work hours reduced through the virus
35:44
being unable to work or lack of
35:46
childcare closing a reducing of hours so
35:49
reduction and out course of business
35:51
owned or operated by the individual and
35:53
their factors as to IRS may put out so
35:55
that last paragraph the third paragraph
35:57
is where the money is at but now if
36:00
you’re diagnosed of this at any time you
36:03
want to save that paperwork because
36:05
that’s your you ticket to being a
36:07
qualified individual and allows you to
36:09
have this extra ability to borrow from
36:12
the 401k so you have to be qualified
36:14
individual take a look at these bullet
36:16
points and be one of these three and you
36:19
have to have a plan document modified
36:22
from the old law to the new law that
36:25
permits you to borrow in this manner so
36:27
it’s a way to access money in addition
36:31
to borrowing you can also take up to
36:34
$100,000 withdraw from your retirement
36:37
plans you can take $100,000 withdraw
36:40
remainder through these special
36:41
conditions first of all to take that
36:43
special withdrawal you have to be monies
36:46
of qualified individual since the same
36:48
rules
36:49
what kind of withdrawal can you take
36:52
first of all this can be done through
36:55
IRAs and 401ks so if you have a 401k and
36:59
you have Ida raise
37:02
you can take this $200,000 withdraw from
37:04
the IRAs all the IRAs are treated as one
37:07
account it doesn’t matter how many
37:09
you’ve got or you can I should say and
37:12
you can take $100,000 from 401k in fact
37:16
the 401k you could take the hundred
37:19
thousand dollar loan and if you still
37:21
have a hundred thousand dollars left in
37:23
the 401k you can also take a hundred
37:26
thousand dollar withdraw so you can
37:29
potentially take up to two hundred grand
37:31
out of a 401k so there’s the qualified
37:35
individual slide what does this mean
37:37
they’re waiving the early withdrawal
37:39
penalties so if you withdraw money from
37:41
an IRA or 401k before you’re fifty nine
37:43
and a half there’s a 10% penalty that
37:46
penalty is being waived what they’re not
37:48
waiting is the income you’re still
37:51
taxable your spittle tax dole unless
37:54
what so you pull a hundred grand out of
37:56
your IRA you pull the hundred out of
37:59
your 401k you can avoid taxation on that
38:03
money so they automatically waived early
38:06
withdrawal penalty but the default rule
38:08
is you’re still taxable unless what you
38:10
pay the money back to the plan within
38:13
three years you put the money back in
38:15
the IRA you put the money back then for
38:17
one take or you put the money back into
38:21
an account that the IRA could have been
38:24
rolled over into or that before oh one K
38:27
could have been rolled over into so if
38:30
you put the money back within beers the
38:31
same account or into any account that
38:34
those accounts could have been rolled
38:37
over into you avoid the tax altogether
38:41
it ends up being alone so it’s another
38:45
way to access retirement money and again
38:47
the same rules of Claudel you only do
38:50
this if you really have to or you only
38:54
do it if there’s such a sweet deal
38:56
outside the IRA or 401k that you could
38:59
not have done it inside there’s no
39:01
withholding on these withdrawals
39:03
now they haven’t clarified these last
39:06
few bullet points they haven’t clarified
39:08
do you file for the income on the 2020
39:12
return or do you wait until 2023 to see
39:16
if you paid it all back the IRS hasn’t
39:18
clarified this yet so we are didn’t
39:20
expect some guidance from them which tax
39:23
returns which year do we report this in
39:26
it now even if you don’t pay the money
39:29
back so you take this withdraw you’re a
39:32
qualified person you pull a hundred
39:34
grand out you think you’re gonna pay it
39:36
back you swear a dog’s gonna pay it back
39:38
it’s just like you’re gonna lose weight
39:39
January 1st and by February 1st you’re
39:42
eating Ho Hos and Twinkies and drinking
39:44
rum it all just went to hell so you
39:46
ended up not paying the money back what
39:48
happens you’re taxed on the withdrawal
39:50
unless that’s a qualified Roth IRA
39:53
withdraw in which case you could have
39:54
pulled the money anytime anyway so
39:57
you’re taxed on it but you’ve got three
39:59
years to pay the tax the taxes spread
40:01
out over three years so you can pull up
40:04
to a hundred grand if you pay tax on it
40:07
it’s spread out over three years there’s
40:10
no early withdrawal penalty and if you
40:13
pay it back within three years it’s
40:15
really alone instead of having been a
40:18
distribution so these are ways to tap
40:21
some money if you need to required
40:25
minimum distributions I put our IDs
40:27
because I was in tax decode and wasn’t
40:29
thinking of talking to human beings
40:31
so RMD for humans means required minimum
40:35
distributions once you’ve had depending
40:38
on when you were born the age of seventy
40:40
and a half or the age of 72 or if you
40:44
have an inherited IRA you are required
40:47
to withdraw a certain amount per year
40:49
well for 2020 there’s no requirement
40:53
basically the RMD law does not apply in
40:55
2020
40:56
hold on quick interruption i’m auram my
40:59
celly fellow if i said and then to
41:01
affable you stay in love see now I’m
41:04
being nice to her because I want
41:05
something so she’s bringing me the plug
41:08
I was running on battery it’s running
41:10
down sooner than I wanted so now it’s a
41:12
motor seat they’re all in the technique
41:15
Jen it’s all in the technique and see
41:19
she won’t harm him this is great I’m
41:21
being recorded theater put the knife
41:23
down all right
41:28
so required minimum distributions if you
41:31
already made the required minimum
41:33
distribution you had 60 days from when
41:36
you took the required minimum
41:38
distribution that’s just to put it back
41:40
so you have 60 days to put it back from
41:43
when you took it or you have you just
41:47
count it towards your $100,000
41:48
distribution if you’re going to take the
41:50
bottom line required minimum
41:52
distribution rules don’t apply for 2020
41:55
and let’s click back on here scroll down
41:59
okay you have more time to make 2019
42:04
contributions so 2019 contributions to
42:07
your IRA s health savings accounts and
42:09
Coverdale accounts normally you have
42:12
until 4:15 April 15th of 2020 to make
42:16
your 2019 contribution now you have
42:19
until July 15th to make those so if you
42:21
missed it you didn’t miss it but it only
42:24
applies to IRAs
42:25
health savings accounts and covered else
42:28
it does not apply the 401 k’s in other
42:30
words if you missed the 401k
42:31
contribution in 2019 you missed it here
42:38
are some deadlines that have been
42:39
extended 1040s
42:44
and form 1120 that’s for a c-corporation
42:46
that’s on a calendar year c-corporation
42:48
that’s on a calendar year not on a
42:50
fiscal year those have been
42:52
automatically extended to 7:15 late
42:55
payments the penalties for paying after
42:57
April 15th have been waived through a
43:00
July 15 extended deadlines have not
43:04
changed so for your S corporation and
43:06
partnership returns you have until
43:08
September 15 for your personal return
43:11
and your corporate return you have until
43:12
October 15th assuming that you extended
43:15
in a timely manner here are some
43:17
important ones guys for ten thirty ones
43:19
your 45 day period to select properties
43:23
and your 180 day period have been
43:25
extended if any of those days Falls
43:29
after April 1st but let’s see April 1st
43:33
through July 14th so if your 45 day or
43:36
your 180 day right on a 1031 you have 45
43:39
days to what okay
43:41
properties you have 180 days to do what
43:43
close on the replacement property if any
43:46
of those dates fell between April 1st
43:49
and July 14th the actual deadline is
43:52
July 15th
43:53
so they’ve extended your deadlines
43:55
here’s my favorite that’s second to last
43:57
bullet point I don’t know if you guys
43:59
have done a webinar on opportunity zones
44:01
if you’re not doing apartments and
44:04
Opportunity Zones multifamily units and
44:06
Opportunity Zones you are you are high
44:09
right you are and it’s not even a good
44:11
high like cheap bad heroine mixed with
44:14
crack a bad high opportunity zones are
44:19
the sweetest tax break if you can
44:21
qualify for them they give you a very
44:22
brief synopsis maybe we’ll do another
44:24
webinar on those opportunities zones are
44:27
basically there are certain zones there
44:29
census tracts it’s mostly lower income
44:32
down and out areas but some of it is
44:35
gentrifying some of it’s becoming very
44:37
nice very quickly or at least it was if
44:40
you buy rehab and rent in those areas so
44:46
you do what you guys normally do but I’m
44:48
going to add two steps I know you guys
44:50
normally Buy I know you normally hold I
44:53
know you normally rent you’re used to
44:55
that part if you happen to do that in an
44:58
opportunity zone and you do massive
45:01
rehab or new-built you do massive rehab
45:04
or new bills and I’m not going to define
45:06
those terms now I’m just using normal
45:08
English because I don’t want to get into
45:10
a bunny trail if you do that several
45:12
wonderful things happen first of all to
45:15
have an opportunity zone fund which is
45:17
really just an LLC that follow certain
45:19
rules you have to invest capital gains
45:22
in it so for example you sell an
45:24
apartment building you have capital
45:25
gains maybe instead of a 1031 you invest
45:29
those capital gains into an opportunity
45:31
Zone LLC which by the way you can have
45:34
your own privately held small
45:36
opportunity Zone LLC we set them up for
45:38
people all the time so you can have your
45:40
privately held little opportunity zone
45:42
fun what happens when you invest capital
45:44
gains into that three wonderful things a
45:46
the capital gains are deferred until
45:50
2026 the capital gains are defer which
45:54
is net present value right
45:55
what I rather pay taxes today or in
45:57
seven years hello seven years to the 10%
46:02
of the capital gains are forgiven if you
46:05
hold the fund that is the LLC if you
46:07
hold the LLC for five years ten percent
46:10
of the capital gains are forgiven
46:11
so in 2026 you only pay ninety percent
46:14
of the capital gains and the best
46:16
benefit of all this is by far the best I
46:18
call it the JLo benefit because it’s
46:21
this great big beautiful back-end once
46:25
the LLC the opportunity’s own fund LLC
46:28
turns ten so it completes its tenth
46:31
birthday anything it sells sells
46:35
tax-free with no depreciation recapture
46:40
let me repeat that once the
46:42
opportunity’s known LLC turns ten
46:45
anything it owns sells tax-free with no
46:51
depreciation recapture do I have your
46:55
attention so one of the benefits that
46:58
they have with with the covet with the
47:00
cares Act is that they extended the
47:02
deadlines there are certain deadlines
47:04
when you have a capital gain you have a
47:07
certain amount of time to reinvest that
47:10
capital gain into an opportunities own
47:13
LLC and that amount of time is typically
47:16
a hundred and eighty days up to a year
47:18
and a half now it depends on things we
47:20
don’t want to get into right now
47:21
bottom line is if you had capital gains
47:23
in 2019 it’s probably not too late to
47:28
roll those into an opportunities own
47:29
fund even if it’s your own private fund
47:32
and then go buy two apartment buildings
47:34
in these areas but it only works for new
47:37
build and for massive rehab so if you’re
47:40
buying turnkey unless you’re buying a
47:42
new build turnkey it doesn’t really work
47:44
but the tax benefits guys of this are
47:46
huge and they’ve extended some of the
47:48
deadlines on that now if I didn’t put it
47:52
on here note my last slide if it’s not
47:54
on here the deadline didn’t change
47:56
please stop calling and emailing me and
47:58
asking me did my S corporation deadline
48:01
change no it’s not on here it didn’t
48:03
change
48:05
all right net operating losses for those
48:09
of you generating losses the Trump tax
48:12
law changed how net operating losses are
48:15
treated you are no longer allowed to
48:18
carry them back if you generate losses
48:21
let’s say you have a bunch of
48:22
depreciation losses from your
48:24
multifamily units and you also qualify
48:27
as a real estate professional
48:29
then these losses translate into net
48:31
operating losses meaning they’re usable
48:34
on your 1040 they drop other types of
48:37
income if you have net operating losses
48:39
from your apartment complexes and let’s
48:41
say you have w2 income those losses can
48:44
reduce the w2 income to zero let’s say
48:47
you’ve got so many losses it reduces
48:50
your income to zero that’s called a net
48:52
operating loss the Trump tax law said
48:55
you can only take those forward into the
48:57
future but now for tax years 2018 2019
49:02
and 2020
49:03
so 2018 which means you’ll have to amend
49:06
if this applies to that year for the
49:08
years 2018 2019 and 2020 if you have net
49:13
operating losses you can carry them back
49:16
five years and get refunds in other
49:19
words I could take my 2018 loss back to
49:21
my 2013 return reduce my 2013 income to
49:26
zero carry whatever loss is leftover
49:29
into 2014 reduce that income and so on
49:34
why is that favorable because you get
49:36
immediate refunds right if you can carry
49:38
losses from 2018 19 and 20 back into the
49:42
past and amend prior returns you can get
49:45
refunds on those prior returns should
49:48
you do that that’s a net present value
49:50
calculation now you or your accountant
49:52
need to run the numbers right I’ll give
49:55
you an example if you had $50,000
50:00
taxable income showing on your tax
50:02
return 2013 through 2017 low bracket
50:07
income only taxed at 15% and in 2021 you
50:12
think you’re gonna be making a million
50:13
bucks you’re gonna be in the 37 percent
50:15
bracket you don’t want to carry back you
50:18
want to carry forward
50:19
because the value of offsetting 37%
50:23
income is much higher than the value of
50:25
offsetting 15% income even taken into
50:28
account that you’d get a refund on the
50:30
15% income right away so you got to do
50:33
the math on these net operating losses
50:34
so for those of you who are showing go
50:37
to your 2018 return go to your 2019
50:40
return if you’re showing taxable income
50:42
of zero or less if you’re showing a net
50:46
operating loss ask your CPA just email
50:48
your CPA did I have a net operating loss
50:50
in eighteen or nineteen and if the
50:52
answer is yes you did say all right
50:54
please do an analysis look and see is it
50:57
worth carrying back five years and
51:00
getting immediate refunds or should I
51:02
hold on to that loss and take it forward
51:05
right so talk to your accountants about
51:08
that this is a tremendous opportunity oh
51:11
now I got I’m using Trump words
51:12
tremendous huge
51:18
so there’s your action item on the
51:20
second slide if you had off you’ll find
51:22
out if you had net operating losses what
51:24
we call NOLs in the tax world and if you
51:27
do figure out are they better applied in
51:29
the past or in the future
51:33
qualified improvement property all right
51:36
if you have commercial non-residential
51:38
property commercial non-residential
51:42
property restaurants retail
51:44
establishments etc if you did internal
51:48
improvements so not external not a patio
51:52
not an awning not the sidewalk if you
51:55
did internal improvements to the to
51:58
whatever commercial non-residential
52:00
property you’ve got they changed the
52:02
depreciation retro actively the
52:05
depreciation was over thirty nine and a
52:07
half years which meant let’s say I had a
52:09
restaurant and I did a brand new bar
52:12
area and I put a hundred grand in it at
52:14
a thirty nine and a half percent
52:16
depreciation rate what’s that worth to
52:18
me about twelve hundred dollars in
52:20
depreciation per year that’s so fat not
52:23
so good they change the law guess how
52:25
much of that hundred thousand dollars
52:27
you can now depreciate in year one all
52:29
of it you can take all of it through
52:32
what’s called
52:33
depreciation from 18 going forward so if
52:37
you put an internal commercial
52:40
non-residential improvement into service
52:43
in 2018 or 2019 doesn’t include by the
52:47
way does not include elevators and
52:49
escalators but if you put something like
52:51
that in the service ask your accountant
52:54
this
52:54
did I have any thirty nine and a half
52:56
year property on my returns put into
52:59
service in eighteen or nineteen
53:01
did I have any thirty nine and a
53:04
half-year property put into service in
53:07
eighteen or nineteen and if the answer
53:09
is yes the next question is was it an
53:12
internal improvement that was not an
53:14
elevator or escalator and if the answer
53:16
is yes you probably want to amend
53:18
because your deduction just went up by
53:21
some massive amount so internal non
53:25
residential commercial improvements get
53:28
retroactive ability to write off the
53:31
improvement all of it at once instead of
53:34
depreciating it little by little
53:38
there’s an example you guys can look
53:40
through what it’s very similar to what I
53:42
just said verbally slightly different
53:43
numbers I’ll let you go back and look
53:46
through it because I want to get through
53:47
I got a bunch more slides I’m trying to
53:48
jam it all in all right going forward
53:52
this only applies if you’ve got w-2s or
53:56
a Schedule C so if you’re a strictly
53:59
landlord person all your income is
54:01
coming through on Schedule E or on line
54:04
two of your k1 as rental income or
54:06
rental loss the rest of this doesn’t
54:08
really apply to you now maybe it should
54:11
apply right for you guys that have multi
54:13
units they have a lot of units you may
54:16
want to have a separate management
54:18
company if you don’t have a separate and
54:21
management company typically but not
54:23
always a c-corporation
54:25
then you’re probably missing out on some
54:27
huge tax benefits so if you don’t if you
54:31
have a lot of units even if you don’t
54:32
have that many units if you don’t have a
54:35
separate management company especially
54:38
if you have a large volume of units if
54:40
you don’t have a separate management
54:42
company probably a c-corp maybe an
54:45
escort I
54:45
can’t tell you for sure because I need
54:47
to know more about you you’re missing
54:49
out on an awful lot of benefits let me
54:52
give you an example your normal rental
54:54
income does not qualify you to have a
54:57
401k and to buy real estate tax-free
55:01
truly tax-free through a Roth 401k
55:05
having a management company can qualify
55:08
you for a 401 K maybe even for a defined
55:11
benefit plan which I’ve seen people
55:14
contribute annually two hundred and
55:16
fifty grand or more tax deductible to a
55:18
defined benefit plan and then turn
55:21
around and go buy property with that I
55:23
mean when you’re jacking two hundred and
55:25
fifty grand a year into a retirement
55:27
account it adds up pretty quick you can
55:30
buy properties through that account
55:32
pretty quick maybe even without a whole
55:34
bunch of leverage so something to think
55:37
about just a side note here if you don’t
55:39
have a management company it may make
55:41
sense and just a rule of thumb size
55:44
matters right if you’re if you’ve got a
55:48
half a dozen to a dozen single-family
55:50
residences which I understand that’s not
55:52
what you guys are really into but maybe
55:54
you got some people that do that a
55:56
management company probably doesn’t make
55:58
sense for you because there has to be a
55:59
certain scale for it to make sense but
56:02
if you’re getting into multifamily and
56:04
if you’ve got the numbers of units that
56:06
some of you were talking about you
56:08
really want to sit back and talk to
56:10
somebody I know a guy in Puerto Rico who
56:13
does business nationwide you might want
56:15
to talk to about getting a management
56:19
company set up and maxing out the
56:20
benefits on that so if you have
56:24
employees and that includes you that
56:27
includes your kids and it includes your
56:29
spouse
56:30
let’s say you do have an S corporation
56:32
for some reason you have a C corporation
56:35
for some reason and it’s gotten ploy
56:37
ease and those employees it might be
56:39
that the only employee is you you are
56:42
required to pay sick and family leave
56:46
due to coronavirus you are required to
56:51
pay this and we’ll walk through what the
56:52
requirements are that’s the bad news
56:55
let me give you the good news the
56:57
government will reimburse you 100
56:59
percent for what you pay the government
57:02
will reimburse you 100% for the sick and
57:06
family leave you pay so what’s the angle
57:10
first of all with employees that are not
57:12
family look you got to follow the law it
57:15
says if you got employees you got to pay
57:17
this so you pay it because you don’t
57:19
want to break the law but then you go
57:21
get reimbursed why might that be
57:23
beneficial if you can pay a regular
57:26
employee sick leave for two weeks
57:28
instead of paying a regular salary you
57:33
pay them sick leave that might be equal
57:35
to their regular salary depends how much
57:37
they make and then the government
57:39
reimburses you for that two weeks of
57:41
salary congratulations the government
57:44
just paid two weeks of salary for you
57:45
now that could be worth something right
57:48
I’ve got I pay a local attorneys here
57:52
let’s just say in the upper tens let’s
57:55
say 80 grand the year what’s two weeks
57:57
worth if the government’s picking up the
57:59
tab I like it if you have to pay ten
58:02
weeks of family leave which it maxes out
58:04
at two hundred bucks a week if you have
58:07
to pay for it then let the government
58:09
pick up the tab now let’s switch gears a
58:12
little let’s say you’re the sole
58:14
employee in a company are you feeling
58:17
sick if you are and we’ll go through the
58:21
requirements I’m being mildly facetious
58:23
if you qualify if you have the virus or
58:27
if the lockdown meant you could not work
58:30
and that’s the key that you really could
58:32
not work you pay yourself for the period
58:35
the government reimburses you for that
58:37
pay so let’s go through the requirements
58:40
and again you’re gonna have these
58:42
powerpoints you’re gonna have this
58:43
recording so I’m gonna go a little bit
58:45
quickly but you can rewind and listen to
58:47
it because I want to get through this in
58:49
a reasonable amount of time so the
58:51
requirement kicked in April first if you
58:54
have fewer than 500 employees you must
58:57
pay 80 hours which is basically 10 days
58:59
you must pay 80 hours 10 days of sick
59:03
leave and that number that’s the typo
59:06
that 12 weeks is 10 weeks of family
59:07
leave we’re gonna go through both of
59:08
those so 10 weeks of family leave 2
59:11
weeks of sick leave
59:12
sick leave is at the person’s normal
59:15
rate whatever you normally pay them but
59:18
it’s capped at 511 dollars a day it’s
59:22
capped at 511 dollars a day can you pay
59:25
more than that sure but you’re not going
59:27
to get reimbursed for it so if someone’s
59:30
sick and we’re gonna go through what
59:31
does that mean to be sick but the key is
59:34
the employee really cannot work so if
59:37
one of your employees gets the virus and
59:39
they’re down because this thing’s nasty
59:40
and it puts you down for two weeks you
59:43
pay them the government reimburses you
59:45
what if you’re the employee well nothing
59:48
in the law said that the owner cannot
59:50
benefit from this so if you’re the
59:52
employee who’s down for for two weeks
59:54
with the virus or because of a lockdown
59:56
cannot work because that counts you can
59:59
pay yourself for two weeks but bear in
60:01
mind you truly cannot work right it’s
60:04
not wink wink I’m still working no no no
60:08
no you’re signing stuff under penalties
60:10
of perjury guys none of you look good in
60:12
orange more importantly if you go to
60:14
prison you can no longer pay my bill and
60:16
that makes me sad
60:18
or when you do pay it you send me like
60:20
packets of cigarettes and stuff and at
60:22
first of all I don’t want your
60:23
cigarettes and second I don’t want to
60:24
know what you had to do in prison to get
60:26
those cigarettes right that’s like TMI
60:28
TMI so don’t do that to the extent you
60:33
do this you cannot overlap it with the
60:37
wages that will reimbursed under the PPP
60:39
program so if you remember the first
60:41
slide the payroll Protection Act the way
60:43
that works is is the government gives
60:45
you money it’s a loan until you use it
60:48
to what pay your employees among other
60:50
things then it becomes a grant they
60:52
forgive it you cannot use the same wages
60:55
you can do both you can do PPP and sick
60:59
leave it’s just got to be different two
61:00
different time periods so if I use PPP
61:03
money to pay my employees in March and
61:06
April I’m gonna have to do the sick
61:08
leave during May I can’t overlap it but
61:11
I can still do both just during
61:13
different times there’s a lot of
61:14
confusion and a lot of people are not
61:16
getting that right so basically the
61:18
employee can’t work and we’re gonna go
61:20
through the reasons that qualify a
61:21
sickness and for Family Leave you’re
61:24
required to pay them a certain amount
61:26
in the case of the sick leave up to 511
61:29
bucks a day and the government
61:32
reimburses you so there’s again I’m a
61:35
little redundant on this one how do they
61:37
reimburse you it’s a tax credit against
61:40
your employer payroll taxes so when you
61:43
file at w-2 there’s withholding for
61:45
Social Security
61:46
the government says to reimburse you for
61:49
the sick leave you paid or for the
61:51
family leave you paid we’re gonna let
61:53
you keep that money don’t send us the
61:55
Social Security tax you keep that and
61:58
then you look at the math and you say
61:59
well I paid them more than I withheld on
62:02
Social Security taxes and the government
62:04
says alright if that happens right it
62:07
doesn’t always happen let’s say you have
62:08
one employee that’s sick and you’re
62:11
paying for six employees you can hold
62:13
back the withholding on the on the
62:16
payroll taxes on all six employees to
62:19
cover the salary the one so sometimes
62:21
the withholding is enough to reimburse
62:23
you on the spot immediately but if not
62:26
that’s okay the government will cut you
62:28
a check you file a Form with the
62:30
government you file the payroll taxes
62:33
and they have a new form that just came
62:35
out the form seventy two hundred where
62:37
you say to the government the payroll
62:39
withholding that you allowed me to keep
62:41
was not enough to reimburse me for the
62:44
sick leave I paid people I need a check
62:47
and you file this form and they send you
62:50
a check what we commonly refer to as a
62:53
refundable credit so that’s how this
62:56
works
62:57
up to eight hours a day for two weeks no
63:00
don’t spread out the sick leaves the way
63:02
the law is written if you do eight hours
63:05
a day for ten days you get reimbursed if
63:07
you do for example four hours a day for
63:12
four weeks you don’t get reimbursed all
63:14
the money you only get reimbursed half
63:16
so you want to make sure the sick leave
63:18
is eight hours a day for two weeks and
63:21
that’s where it maxes out you don’t want
63:23
to make it part-time or you’re gonna
63:25
mess yourself up on some of the
63:27
reimbursements by the way if you owe the
63:29
feds money they’re not going to cut you
63:32
a check they’re going to keep it and
63:33
apply it to whatever you owe them so you
63:35
can still withhold the payroll tax but
63:37
if you file a form with the feds
63:40
look the payroll tax withholding wasn’t
63:42
enough send me a check some of that
63:44
checks committee they’re gonna keep if
63:46
you owe them money so watch out for that
63:48
that link at the bottom is a rare thing
63:51
it is a coherent explanation of this by
63:55
the IRS
63:56
so this credit does sick leave credit
63:59
this family leave credit the IRS
64:02
actually does a pretty decent job of
64:05
explaining this credit at that link go
64:09
through it go through these slides what
64:11
do I want you to remember and I’m gonna
64:13
cover family leave in a second and I’m
64:15
gonna cover what does it mean to be sick
64:17
in a second but what do I want you to
64:20
take away from this if I got employees
64:23
and they’re sick the government’s gonna
64:25
pick up two weeks even if that employees
64:27
me and we’re gonna talk about what does
64:30
it mean to be sick cuz you can be sick
64:33
for the government without actually
64:36
having the virus we’re gonna go through
64:38
that what that means it’s a pretty broad
64:40
definition it’s pretty generous so
64:45
here’s what the sick leave causes our
64:48
employee is subject to a federal state
64:50
or local quarantine or isolation order
64:52
guys if you’re under an isolation order
64:54
you’re sick as long as what you can’t
64:57
work now see for me that this doesn’t
65:00
work my practice is virtual my practice
65:03
hasn’t missed a beat during this virus
65:05
Puerto Rico has the strictest quarantine
65:07
in the United States we are not allowed
65:10
outside we’re not allowed to leave our
65:13
place we’re not allowed outside except
65:15
for maybe in our backyard which I don’t
65:17
have one in our apartment complex we’re
65:19
not allowed to leave except to go to the
65:21
doctor to get food at the grocer or one
65:24
of the restaurants that does takeout and
65:27
what was the other one the bank those
65:30
are the three reasons
65:31
if you leave home and it’s not for one
65:33
of those reasons it’s a $5,000 ticket
65:36
five thousand bucks and the cops are
65:38
everywhere looking for it now why do
65:40
they do this why is it so draconian
65:42
anyone who’s been around Latins knows
65:45
right Latins are not much for following
65:47
rules okay they got a lot of great
65:49
traits and that’s maybe a great trait
65:51
and maybe a bad trait depends on how you
65:52
want to
65:53
spin it but Latins are not much into
65:56
rules so they had to do a really
65:58
hardcore lockdown here in Puerto Rico or
66:00
forget it nobody would listen I mean
66:02
they’d just be like ah you’re not this
66:04
rule is a stupid I’m not listening Oh
66:06
what $5,000
66:08
okay yeah I listen so that’s just the
66:11
culture it’s just how it is so I don’t
66:14
qualify though why because I’m still
66:16
able to work I’m not missing any time so
66:19
what are the other ones the employee has
66:21
been advised by a healthcare provider to
66:23
self quarantine due to concerns related
66:25
to code with 19 or the employees
66:26
experiencing symptoms and seeking
66:28
medical diagnosis if your employee is
66:31
home for any of those reasons and unable
66:33
to work that’s the key then they’re
66:35
eligible for this here’s an example you
66:38
pay an employee five grand in sick leave
66:40
and the Social Security withholding is
66:43
only three grand you keep the three
66:45
grand and you get a refund of two
66:47
thousand in other words you ask the feds
66:49
to send you a check for mm let’s switch
66:51
the example around a little if the
66:54
employer Social Security portion is nine
66:56
grand and the employee was only five
66:59
grand then you keep five grand and you
67:02
send the other four grand in on the
67:04
withholding just to give a very simple
67:05
example of how this functions your
67:07
payroll company should run at all I’m
67:09
giving you the the basics so you have a
67:12
clue but your payroll company should do
67:14
all this you just let them know I got
67:17
sick leave I want the federal money how
67:19
do I do this and do it retroactively if
67:22
you already had employees from roughly
67:25
mid-march I think the date was March
67:27
12th from month if you had employees who
67:29
were home and could not work because of
67:32
this go retroactively tell your payroll
67:35
company some of what I paid them was
67:38
sick leave I didn’t realize it was sick
67:41
leave at the time but this tax lawyer
67:43
persuaded me that it was in fact sickly
67:45
because I’m just that kind of guy and I
67:48
got to get my mone from the feds all
67:52
right family leave up to ten weeks
67:55
maximum two hundred dollars per day
67:58
maximum two hundred per day up to a
68:01
total of ten grand so it could add up
68:03
this is if they’re required basically to
68:06
stay home
68:07
and take care of family this is in
68:09
addition to sick leave so the employee
68:12
is caring for an individual who’s
68:14
subject to a federal state or local
68:15
quarantine or an nvidia digital that the
68:18
end way when we start to talk that fast
68:21
we need to calm down
68:29
therapy so the employee is caring for an
68:35
individual who is subject to a federal
68:37
state or local quarantine or has been
68:39
advised to self quarantine the employee
68:41
is caring for their son or daughter if
68:43
the child’s school or childcare facility
68:45
has been closed I bet that’s pretty
68:47
common I’ll bet a lot of people out
68:49
there have employees who can’t come in
68:51
because of this and maybe the nature of
68:53
their job is they can’t work for example
68:56
in food service or something maybe a
68:58
rehabber maybe a handyman they qualify
69:01
for family leave in fact you have to pay
69:03
it but at least the government’s gonna
69:06
pay you back for it last but not least
69:08
the employees experiencing any other
69:11
substantially similar condition
69:13
specified by Health and Human Services
69:15
in consultation with a crapload of other
69:18
bureaucracies here’s my guess they
69:20
haven’t gotten their feces and order yet
69:22
on that last one they’re supposed to
69:23
come up with rules that’s been kind of
69:25
slow because well government if you’re
69:31
self-employed even if you have no w2
69:33
employees you can still qualify for this
69:36
in other words had you been an employee
69:39
had you been an employee but you weren’t
69:43
but had you been an employee and you
69:46
would have qualified for sick leave you
69:49
can take a deduction for this on your
69:50
tax return in 2020 nice big fat
69:53
deduction up to that what was that
69:56
number five grand for sick leave ten
69:58
grand for family leave if you’re
70:01
self-employed and you would have
70:02
qualified for family leave and again you
70:05
couldn’t work then you can qualify for
70:08
up to that ten grand from the feds
70:10
really it’s a credit I said deduction I
70:12
lied I’m a lawyer it’s what I do you’ll
70:15
qualify for the credit even if you’re
70:17
self-employed so if you’re filing a
70:19
Schedule C
70:20
if you’re showing self-employment income
70:24
on your form 1040 even if it flowed
70:28
through from a partnership even if
70:31
you’re not an employee you still qualify
70:34
for this benefit now here’s the catch
70:36
you don’t get it now you see if you are
70:39
an employee or you got employees you can
70:41
get the federal money within a month or
70:43
two by the filing forms I showed you on
70:46
the prior slides with this you got to
70:49
wait until you file your 2020 return but
70:52
if you’re self-employed let’s see you
70:55
know self-employed people I got a buddy
70:57
back home with AZ HVAC and cuz of the
71:00
lockdown orders he couldn’t go to work
71:02
did these conditions apply to him yeah
71:05
so as a self-employed guy can he take
71:08
advantage of this cuz he couldn’t go to
71:10
work yeah so that’s worth something okay
71:14
this is a big one employee retention
71:16
credit let me let me summarize this is
71:20
an easier one to explain so the last one
71:31
was the hardest one to explain you may
71:33
have to go back through the slides you
71:34
may have to listen to it once or twice
71:36
bottom line look at those slides that
71:38
describe what qualifies as sick leave
71:41
what call qualifies as family leave as
71:43
long as the person in question can’t
71:45
work now here we don’t have the
71:47
requirement of can’t work so I like this
71:50
this one actually applies to me this is
71:53
the one thing I can actually take what
71:56
is it
71:57
the gist it’s a $5,000 handout her
72:00
employee for not firing them now there
72:05
are some strings but they’re not that
72:06
many strings so if you don’t apply for
72:09
anything don’t qualify for anything else
72:10
like I didn’t qualify for the PPP which
72:13
by the way if you took PPP you don’t
72:18
qualify for this employee retention
72:19
credit it’s either/or
72:21
I didn’t qualify for PPP I was not
72:24
willing to sign something saying I
72:26
needed it under penalties of perjury so
72:30
I’m gonna take this let’s walk through
72:32
the requirements you
72:34
have a traitor business is landlording a
72:36
trade or business by the way guys that’s
72:39
a huge question that a lot of your
72:40
accountants have screwed up for very
72:42
important Code section Code section 199
72:45
cap a the pass-through deduction is a
72:49
huge deduction it says take 20 percent
72:52
of your net income 20 percent of your
72:56
net income that’s the deduction
72:58
congratulations if what you have a trade
73:02
or business
73:03
so as being a landlord a trader business
73:06
that’s a hugely important question for
73:10
the pass-through deduction and after
73:12
doing a ton of research here’s what it
73:14
boiled down to and I did like ten or
73:16
twelve hours of research on this to
73:18
uncover it all if you are a landlord
73:22
even if other people do all the work in
73:26
other words we’re not asking are you
73:28
passive that’s a separate question and a
73:31
lot of accountants don’t realize that if
73:33
you’re passive it has nothing to do with
73:37
do you have a trade or business if you
73:39
have rental properties and they are not
73:43
triple net leased which typically
73:45
residential is not triple net leased
73:47
that’s only commercial if you have
73:49
rental properties and they’re not triple
73:52
net least you got a trade or business
73:54
that’s important remember that because
73:56
it applies to other sections of the code
73:58
that we’re not talking about today if
74:01
you’re a landlord even if someone does
74:05
everything else you don’t do anything
74:07
personally so as far as you’re concerned
74:09
its passive someone else does all the
74:11
work if you have rental units and
74:14
they’re not triple net leased you 99%
74:17
likely have a quote unquote trade or
74:20
business which means among other things
74:23
you get to take the pasture deduction so
74:26
if you have an accountant who said you
74:28
don’t qualify for the pass-through
74:29
deduction and I’ve seen this with large
74:32
unit investors they’re on crack they
74:35
need to be fired actually they probably
74:36
need to be killed then fired so likewise
74:41
with this credit you have to have a
74:43
trade or business is being a landlord a
74:46
trade or business
74:47
yes is having a management company to
74:50
manage rental properties a trader
74:53
business yes
74:54
yes it’s a trade or business so if you
74:57
have a trade or business and you employ
74:59
people during the hard times and we’re
75:02
gonna define hard times in a minute
75:04
you employ people during hard times you
75:09
get a credit of up to five thousand
75:11
dollars per employee the credit is one
75:13
half of their wages so if you’re paying
75:16
them ten grand or more during the hard
75:18
times then you get a credit of up to
75:21
five thousand dollars and similar to the
75:24
credit for family leave similar to the
75:27
credit for sick leave you get a damn
75:29
quick it comes off of your 940 ones your
75:33
payroll tax filings and if that amounts
75:35
not enough you can file a 70-200 a
75:39
foreign 7200 in order to get an
75:41
immediate check from the government so
75:43
this money you should be able to get
75:45
this I would say easily before the end
75:47
of June if you’re presently employing
75:49
people and this particular time counts
75:52
for you as a hard time and we’re gonna
75:55
define hard time in a minute so what’s
75:57
the gist up to five thousand bucks per
76:00
employee if they were employed during
76:03
the hard times what are the hard times
76:09
the operation of the trader business was
76:14
partially or fully suspended and I put
76:16
in blue partially suspended the
76:19
operation of the trader business was
76:21
partially suspended during the calendar
76:25
quarter due to orders from an
76:27
appropriate governmental authority
76:29
limiting Commerce travel or group
76:31
meetings due to coronavirus so your
76:35
trader business was partially suspended
76:38
what does that mean for example here in
76:40
Puerto Rico is my trader business
76:43
partially suspended look we’re still
76:45
working we’re still doing really well
76:47
but we do have some issues because we no
76:51
longer go to the office and see each
76:53
other now some of that gets made up
76:55
through through zoom some of that gets
76:59
made up by printing in different places
77:01
we do the
77:01
best we can to make up for it but is our
77:04
business functioning the same way it was
77:06
completely a hundred percent on all
77:08
cylinders the same as it was before the
77:11
lockdown orders here in Puerto Rico that
77:14
keep us from going to the office no my
77:16
speaking business I used to travel and
77:19
speak now I do a lot more of that
77:22
virtually that was kind of my direction
77:24
anyway but that’s been partially
77:26
suspended so you got to think about has
77:29
my business been partially suspended due
77:34
to what orders from a governmental
77:37
authority limiting commerce travel or
77:39
group meetings now for a lot of you I
77:42
think the answer is going to be yes I
77:44
think the answer is gonna let me ask you
77:47
this on your rental properties are there
77:51
limits to your ability to rehab are you
77:54
limited in your ability to rehab are you
77:57
limited in your ability to deal with
77:58
turnover that when the unit’s empty
78:01
getting it turned over and getting other
78:03
people in do you have some limits on
78:04
that just thinking right now
78:06
how this might apply to you because if
78:09
you can show partial suspension you’re
78:11
in like Flynn if you can’t show that
78:13
here’s what you have to show you have to
78:15
show that your gross receipts declined
78:18
by more than 50%
78:20
this quarter compared to the same
78:22
quarter in 2019 your gross receipts
78:25
declined by 50% or more this quarter or
78:29
next quarter or the third quarter or the
78:32
fourth quarter compared to the same
78:35
quarter in 2019 I think a lot of you are
78:37
gonna have a problem showing that I
78:39
think a lot of you have had declines in
78:40
gross receipts but not that much unless
78:42
what you’re into Airbnb the Airbnb
78:46
people are getting absolutely crushed
78:48
they can probably show 50% or more
78:51
decline normal landlords probably are
78:54
not going to show that kind of decline
78:56
now your other businesses might for
78:58
example restaurants oh my god they’re
79:00
getting crushed they’re gonna show the
79:02
50 percent decline so you got a show
79:05
partial suspension due to a lockdown or
79:08
similar order or you got to show a 50
79:11
percent decline in gross receipts
79:13
compared to the same quarter last
79:15
year that’s bad times if you’ve got bad
79:18
times in any of your businesses so maybe
79:21
one business doesn’t qualify but this
79:24
other one over here does maybe my rental
79:27
properties don’t qualify but my
79:29
management company does this is by
79:33
business if you have bad times and you
79:38
kept the employees you need to be
79:40
thinking about getting five grand per
79:42
employee that can add up rather nicely
79:45
so there’s the math kind of what I
79:48
already explained but in a PowerPoint
79:50
slide no dock loan here’s what they’re
79:56
saying the payroll taxes you owe the
79:59
government if you have employees you are
80:03
allowed to keep those and the payroll
80:06
company will tell you how much I’m not
80:08
going to get into the actual math and
80:09
numbers because they’re gonna run it
80:11
through a spreadsheet or an algorithm
80:12
like that you can keep some of the
80:15
payroll tax and pay it two years down
80:20
the road it’s a document free
80:24
interest-free loan the government is
80:27
saying instead of paying over payroll
80:29
tax we’re going to let you keep some of
80:31
it and you pay that back two years down
80:34
the road but as you see in red down at
80:37
the bottom do not pay this late do not
80:41
pay this late owing the government
80:44
payroll taxes is worse than owing the
80:47
Russian mafia money right the government
80:51
has special power much more than with
80:54
income tax they have special powers to
80:56
come after payroll taxes you do not want
80:59
to be on the wrong end of that power so
81:02
if you’re gonna take this money you’re
81:04
so you’re dealing with a loan shark you
81:07
better pay it back on time do not fiddle
81:10
around with that I think that’s my last
81:12
one yeah so guys here was the purpose of
81:16
the call unlike a lot of people out
81:19
there I did not spend a lot of time on
81:21
PPP or idle because you’ve already read
81:23
about it and heard about
81:25
a million different places plus the law
81:27
be new tomorrow funding comes back up
81:31
make sure you’re on top of that with
81:33
record-keeping but my experience has
81:35
been in the last two weeks most of you
81:38
have gotten pretty familiar with that
81:39
but I’m willing to bet in fact some of
81:42
my hosts you tell me I’ll bet you I told
81:45
you some stuff you didn’t know some of
81:48
this payroll tax stuff that commercial
81:50
depreciation break to give some examples
81:53
most of the people I talk to about these
81:56
things had no idea that that money was
81:59
out there this is more subtle and it’s
82:02
not being advertised and that is why I
82:05
wanted to focus on it for you tonight so
82:07
hopefully you found this useful we could
82:09
do a little bit of QA and then I’m gonna
82:12
go drink more and pass out so right now
82:14
I shall drink moderately such that I not
82:17
slur the answers to the questions and
82:19
then afterwards we’ll get a little
82:21
sloppy all right so I guess for those of
82:28
you with questions let’s um go ahead and
82:30
type them in the chat and then maybe I
82:31
can read them out for the people
82:32
watching but I got to go with John so I
82:35
suppose maybe I get to ask – the first
82:38
question is and I think I actually saw
82:39
someone ask the same question if you
82:42
have a net loss right let’s just use
82:44
examples in 2019 your real estate
82:46
professional actually said I’ll say 2018
82:48
so 2018 your real estate professional
82:50
you have losses you can carry them
82:53
forward that we know that now we can
82:55
carry it also back five years so now if
82:58
in 2014 just to use example a person
83:01
paid $50,000 of taxes now but they did
83:06
not qualify as a real estate
83:07
professional at the time
83:09
is that true yeah so let’s do an example
83:13
you generated a hundred thousand dollar
83:15
loss in 2018 if you choose to carry back
83:17
five years the carry back would be the
83:20
2013 for which year did you have to be
83:23
the real estate professional 2018
83:25
because here’s what happens
83:26
nice in 2018 you have a potentially
83:30
passive loss before a passive loss can
83:34
become a net operating loss so those are
83:36
important terms I’ve
83:37
a passive loss a passive loss cannot
83:41
become a net operating loss unless I’m a
83:45
real estate professional in most cases
83:47
there are some other exceptions but they
83:49
pretty rare anymore real estate
83:52
professionals the big relevant one being
83:54
a real estate professional converts your
83:57
passive loss into a net operating loss
84:00
now once you’re converted into a net
84:02
operating loss it’s a net operating loss
84:05
so what every mirror you apply it to
84:08
it’s not passive it applies so it’s
84:11
almost like a big loophole for someone
84:13
that just became a real estate
84:14
professional now they can go back oh
84:16
that’s huge
84:16
okay invited not to toot my own horn but
84:21
there is a saying among lawyers he who
84:24
to death his own horn not he shall never
84:27
have his horn Tooting and so leave my
84:30
horn no that’s huge I mean I know for
84:34
those either for those that don’t
84:35
realize that that was massive I think
84:37
for certain people the next question oh
84:39
no wait yes wait let me toot my horn did
84:44
you notice how effortlessly I answered
84:46
that question no I did I saw that I was
84:48
it I took that as green light you know I
84:50
have to go um we’re gonna call me a
84:53
little bit yeah guys when it comes to
84:55
real estate investors I am most familiar
84:58
with my faeces next question that at
85:05
least that I had kind of go through this
85:06
so maybe the $5,000 at the very end that
85:10
you’re kind of talking about right with
85:12
I just blinged out for basically if you
85:15
have a you know you have a business that
85:17
had some sort of impact right that we
85:19
talked about at the end does that also
85:20
work for the case where you’re not do
85:22
you’re not doing people see you’re doing
85:23
just to keep one that’s pat you know and
85:25
you aren’t you you’re not an employee
85:27
but you are an employee right if that
85:29
makes sense you know so the trader
85:31
business would get the credit and
85:33
collect the money so let’s say if that
85:36
pays a bunch of people and it files w-2s
85:38
the partnership itself collecting the
85:41
money from the government so then really
85:43
in that example so we do a lot of
85:44
syndications right I’ll just say about
85:46
an apartment 1 million million are
85:49
purchased I guess that’s even irrelevant
85:50
Simonton investors right arguably that’s
85:53
a trade or business like you mentioned
85:54
hey let’s say we what’s that
85:56
oh yeah that’s a trick then look that’s
85:59
a traitor bit to us and let’s do we
86:00
didn’t get the PvP in that case right
86:02
takes he said it doesn’t count if he got
86:04
the PPP arguably in that case we can get
86:06
five thousand per investor right no four
86:09
employees in that case it has to be an
86:11
employee Oh mad l’s maybe my question so
86:14
so okay but if I have if I have a
86:16
business which is just me and a friend
86:17
no employees that doesn’t count
86:19
yeah so for the sick leave and family
86:23
leave if you have a business with no
86:25
employees the self-employed owners can
86:29
still get the credit if you had a
86:32
business with no employees is
86:33
self-employed owner you just call
86:34
yourself a self-employed owner because
86:35
you for purposes of the sick leave and
86:38
family leave credit non employee
86:42
self-employed people count as employees
86:45
for the trade or business if it’s for
86:50
the five grand credit it’s got to be a
86:51
w-2 employee
86:52
okay here’s typically where this matters
86:57
for the most part the syndications I see
87:02
don’t tend to have employees sometimes
87:04
they will like if they’re big enough and
87:06
they have something they’re sitting and
87:07
operating they might actually have for
87:09
example a property manager on-site
87:12
janitorial staff on site that are
87:14
actually w-2 sometimes it’s 1099
87:17
sometimes it’s w-2 where we tend to see
87:20
the employees is that the management
87:22
company level usually there’s a separate
87:23
management company that is the operator
87:26
for liability purposes and tax purposes
87:28
and that’s where all the w-2s are at
87:30
those are the ones that are going to get
87:31
the benefit okay okay but it totally
87:34
doesn’t work for the person that has
87:36
their own rentals inside of their own
87:37
LLC w-2s here’s how we can create W
87:43
gonna be careful right little hogs get
87:45
fat big pigs get slaughtered so I had
87:48
some people when I present this
87:49
information or like oh well I’m gonna
87:52
hire my children as employees and my
87:54
cousin and my dog and my grandmother and
87:56
everyone’s getting paid 50 grand I think
87:58
how it came double up with that right
88:00
that’s that’s done on the other hand
88:04
for any reason you have an s-corporation
88:05
that could be a management company it
88:08
could be a flipping business it could be
88:10
a side business that provides services
88:11
and you’re the sole employee or even if
88:15
you’re not the sole employee you never
88:17
put yourself on w-2 do you know that the
88:20
law requires if you have an S
88:22
corporation that the owner get a w-2 it
88:24
is required so even if you have not done
88:27
it in prior years it’s required in fact
88:29
we amended some 2019 returns added
88:33
people on there as employees so they
88:34
would qualify for the PPP and I think it
88:37
was legit I don’t normally like
88:38
retroactively stuff like that you got to
88:40
be very careful when you do that but in
88:42
this case I have a ton of law of IRS
88:45
case law that says if I have an S
88:47
corporation I must pay myself a w-2 and
88:51
the amount of salary must be reasonable
88:56
not too low but reasonable well I just
88:58
want to follow the law right so I better
89:02
go amend and pay myself a salary and if
89:05
it happens that I get some tax credits
89:06
for that salary yeah interesting
89:15
who else has questions okay I’ll read
89:18
one here we go if I have a w-2 job and
89:21
had passive losses carried forward in
89:23
2018 and 2019 as a passive investor in
89:26
syndication I can amend my taxes no cuz
89:32
hold on one second okay she’s still
89:36
wandering around I’m good we’re very
89:38
mindful of the location of the chilean
89:40
right so the question was if I had
89:44
passive losses from a a syndication so I
89:47
couldn’t the loss is never converted to
89:50
net operating losses see what you want
89:51
is a net operating loss but if you’re
89:54
not a real estate professional and you
89:55
get lost as pass-through from a
89:56
syndication they’re going to be passive
89:59
and so they’d have to they never get
90:01
converted like you said earlier yeah
90:02
they sit on your return so they don’t
90:04
help you until what I mean so how do we
90:07
deal with passive losses we either try
90:09
to get you to be a real estate
90:09
professional which for a lot of you is
90:11
not possible give you an example
90:14
theoretically my dear sweet wife who’s
90:17
sitting right here
90:18
he got me violent like could be a real
90:21
estate professional which back when I
90:23
was in the US and actually paying tax on
90:25
my tax practice would have been a good
90:27
thing had she been a real estate
90:29
professional because then we could have
90:31
bought rentals that broke even on
90:32
cashflow had depreciation losses use
90:35
those losses against my law practice
90:36
income and that would have been awesome
90:38
tax planning unfortunately it would have
90:41
been horrible life planning as in I’d
90:43
like to keep mine I love my wife I would
90:46
die for her except for when I want to
90:47
strangle her she and I cannot do
90:49
business together I could never have her
90:51
run real estate that would not work and
90:54
so there are life issues that keep us
90:57
from doing things that make a lot of
90:58
sense for tax reasons so what’s the
91:01
other approach I have to generate a
91:03
passive income generator a pig I have to
91:06
invest in things that generate passive
91:07
income and there are ways to engineer
91:10
that I want to generate passive income
91:13
so that now my passive losses have
91:16
something I can use them against as
91:19
opposed to them just sitting on my
91:21
return and then maybe a related question
91:27
to if you are going to go back all right
91:30
I think so if you’re gonna amend your 20
91:32
let the example we talked about earlier
91:33
right 20 18 you’re going back to 2013 if
91:36
you’re gonna amend the 2013 taxes what
91:39
do they require in terms of you know if
91:41
you’ve already essentially throw it away
91:43
all that paperwork right what’s the risk
91:45
of them essentially saying you know what
91:46
we want to Rihanna you for 2013 maybes
91:49
the question right you’re reopening the
91:51
year and you amend a 13 return you’re
91:55
reopening the statute of limitations you
91:58
know why do you throw things away ever
92:01
first of all you just just tax guy 101
92:05
everything gets scanned the IRS will
92:08
accept a scanned copy of anything as an
92:10
original and there’s actually a Revenue
92:13
Ruling that says that so if your IRS
92:14
agent says no that’s wrong then you
92:16
correct them which is always fun so you
92:19
scan everything second you save it in 40
92:22
different places for redundancy because
92:23
they don’t care why you lost the records
92:25
they just care that you lost them and
92:26
then why would you go back and delete
92:28
that that actually takes effort and has
92:31
you know there are so many things that
92:33
down the road could matter I’ll give you
92:35
an example statute of limitations for
92:37
most of you is three to six years
92:38
depending on the nature of the issue but
92:40
how can they look at something thirty
92:42
years later well let’s say you sell a
92:43
building 30 years later and they want
92:45
you to prove how much you paid for it
92:46
that Honeywell had one would be useful
92:48
from 30 years ago rights just keep
92:51
everything consistent but then the
92:54
answer the question it does reopen just
92:55
that year for how long three to six
92:58
years technically okay hey John I got a
93:05
question you were mentioning back when
93:08
you were saying that you could take out
93:10
a hundred thousand dollars if you
93:11
qualify a person under a certain
93:14
condition out of your 401k and you’d
93:18
have three years to be able to pay that
93:20
back
93:21
and then if we said if you didn’t pay it
93:24
back you would have is it another three
93:26
years after that that that that you
93:30
would be paying the taxes on it oh okay
93:32
so it’s either/or right so I pull one
93:34
hundred min from my IRA or my 401k is a
93:37
distribution I have three years to pay
93:39
it back if I do that it’s treated as if
93:43
I never took the money out to begin with
93:44
ever so it’s basically a loan if I don’t
93:50
pay it back within three years now I’m
93:52
taxed on it but I have three years to
93:55
pay it back but it’s the initial three
93:56
years so let’s say I take out the 100
93:58
grand and 2020 it turns out in 2023 I
94:03
got it all paid back by then I don’t
94:06
know any tax and they still haven’t told
94:08
us how to implement that in other words
94:09
did we say we owe tax in 2020 and then
94:13
amend 2020 if it turns out we don’t know
94:15
or do we say to the government we think
94:18
we’re gonna put the money back therefore
94:20
we don’t want to pay tax in 2020 but if
94:22
it turns out we owe we’ll come back in a
94:24
min 20 20 to pay the tax we don’t know
94:26
the government hasn’t figured that out
94:27
yet so if you pay the money back within
94:30
three years no tax if you don’t pay it
94:33
back within three years you had three
94:36
years rate ibly 2020 2021 2022 to pay
94:40
the tax on the distribution I say okay
94:44
and that’s all within that that’s in
94:47
addition to you can borrow from a 401k
94:50
so you can take a distribution and you
94:54
can borrow so you can theoretically pull
94:57
200 grand out of it and the hundred
95:00
grand that was a distribution could end
95:02
up being treated like a loan if you pay
95:05
it back so functionally you can
95:08
structure it to borrow 200 from your IRA
95:10
or sorry your 401k thank you what else
95:19
you guys know before I go indulge and
95:22
the remainder of the liqueurs I’m a mug
95:24
instead of a damn little shot glass yeah
95:27
I want to keep you too long John I
95:29
definitely appreciate you taking the
95:30
time I know it’s been what an hour and a
95:31
half so I’ll try it will wrap it I’m
95:33
able do two more questions and call it
95:35
in okay cool nice thing you guys can
95:38
edit out the part where I dropped come
95:41
on you missed out on stuff we were
95:42
saying while you’re gone all right let’s
95:46
see so next question from Sam is there a
95:50
rule of thumb for paying yourself salary
95:52
I think you mentioned that earlier but
95:54
basically it has to be something that
95:56
makes sense for the profession that
95:57
you’re gonna yeah reasonable okay what
96:01
would you have to pay someone else to do
96:02
what you’re doing next question if you
96:07
don’t pay back 401k withdrawn and then
96:09
become real estate professional saved by
96:10
year three now can be eligible for more
96:13
tax favorable events well that’s why
96:15
that’s way too generic because the 401 K
96:18
withdraw and the real estate
96:19
professional status really have nothing
96:21
to do with each other any tax credit
96:30
your command for w2 and passive
96:32
investors oh man
96:33
that’s probably more generic than the
96:34
other one yeah oh my god that’s that’s a
96:36
whole nother two-hour webinar
96:37
hey do you guys mind if I do a very
96:39
quick shameless self promo like 30 said
96:41
I was gonna definitely let you say John
96:44
I mean rapping – please let everyone
96:45
know what you do what your strengths are
96:47
how to get ahold of you how to reach out
96:48
I know you have under an email here but
96:50
please share whatever you’d like this
96:53
has been super informative very valuable
96:56
I definitely learned a lot so thank you
96:57
for that
96:58
guys we said I want to buy a and I want
97:01
to buy a book or a course from you John
97:02
what do you got we’re revamping stuff so
97:06
I’m doing a seminar here in Puerto Rico
97:09
in June when I assume everyone will be
97:11
healthy again and we’re also streaming
97:13
it we did that last time we do them
97:15
twice a year here in Puerto Rico here’s
97:17
how we structure them we do five hours a
97:19
day because in Puerto Rico from about
97:21
two o’clock onward everyone wants to
97:23
smoke cigars and drink rum and they
97:24
don’t want to listen to taxes even when
97:26
it’s humorously and brilliantly done so
97:30
typically we start at 8:00 in the
97:31
morning and go in till 1:00 and then
97:33
everybody goes out to drink and eat and
97:34
have fun so it’s five hour days but
97:37
what’s the key a five hour day is enough
97:39
to be able to write off the whole day
97:40
for travel meals entertainment etc and
97:45
we do it five days Wednesday Thursday
97:48
Friday Monday Tuesday so you’re here for
97:51
a whole week why do we do that we did it
97:54
on purpose the tax rule is the weekend
97:57
counts as business days even if you do
97:59
no business as long as it’s cheaper to
98:02
stay where you’re at than it is to fly
98:04
home so we intentionally start the
98:06
seminar Wednesday and end on a Tuesday
98:09
so that the weekend you’re kind of stuck
98:10
here which is horrible so that you can
98:12
go to the beaches or the rainforests or
98:15
the bioluminescent Bay or the rum
98:17
distillery or whatever and then we get
98:20
into we focus on self directed it’s
98:23
probably half of it self-directed IRAs
98:24
401ks we get into sophisticated tax
98:28
planning techniques for example we’ll
98:29
get into opportunities zones we’ll get
98:32
into of course the cost segregation
98:33
studies which i think is pretty basic
98:35
it’s sort of the bottom and
98:36
sophisticated and a lot of other types
98:39
of things and then we spend one day on
98:41
entity structuring and asset protection
98:43
we sell periodically I do webinars I do
98:47
a regular webinar series once a month
98:49
you can look at that it’s all at that
98:50
website I are a lawyer calm and it links
98:53
to a different website because I have
98:54
real estate tax law calm I are a lawyer
98:57
calm they link to what is the one it
99:00
links to now I always forget tax
99:02
reduction lawyer calm you can see the
99:04
stuff we sell there there’s a bunch of
99:06
basically programs courses etc we also
99:11
do consulting
99:12
what’s the good and bad news about
99:14
consulting with me I like disclosure a
99:15
just in case you missed it I’m not
99:17
sensitive I don’t do political
99:19
correctness and I have very little
99:20
tolerance for whining and BS so if I’ve
99:22
offended you on this call it’s even
99:24
worse when you’re paying me just want to
99:27
be totally you know straight up about
99:28
that understand what you’re getting um
99:30
what’s the good news about dealing with
99:32
my firm we’re small you deal with me
99:34
directly I review all returns and on the
99:37
planning work I’m involved what’s the
99:40
bad news I’m in high demand there’s one
99:42
of me I’m busy so do you have to
99:44
sometimes wait yeah typically it’s a two
99:46
to three week waiting period to talk to
99:48
me unless what there’s a triage issue
99:50
it’s rare most of the stuff you guys
99:52
need me to do can wait two or three
99:54
weeks you may not want to you have to
99:56
decide if you’re willing to do it or not
99:58
I’m worth it of course I’m biased but we
100:01
do triage what what and with tax
100:04
planning when is something usually a
100:06
rushed a legitimate rush as opposed to a
100:08
BS real estate investor thinks it’s a
100:11
rush but it really isn’t um typically we
100:13
found two things are a rush audits which
100:16
really aren’t as much of a rush as you
100:18
think because when you find out you’re
100:19
getting audited I just call the IRS and
100:22
tell them we’ll talk to you in 30 days
100:23
and then we start preparing for the
100:25
audit and in 30 days I may call them
100:27
back and say yeah we’re gonna need
100:29
another 30 days and sometimes they say
100:31
no you can’t have it and then I go yeah
100:36
right anyway we’re gonna have another 30
100:38
days and then they’re like no you can’t
100:40
have it I’m like or what what are you
100:42
gonna do kind of like takes me back to
100:44
my hometown of Youngstown you know what
100:46
are you gonna do what’s gonna happen to
100:49
me well we’re gonna end the audit now
100:52
you want your supervisor won’t let you
100:55
we need more time we’re gathering
100:56
materials you’ll bloody well wait now
100:58
you don’t want to push that any harder
101:00
than you have to I like to keep my
101:02
powder dry and not push the agents until
101:04
later in the audit I’d rather not push
101:06
him in the beginning because you know
101:08
you’re using up gunpowder I don’t like
101:09
to do that but I can what’s the truly
101:12
urgent item from you guys what is truly
101:14
something that if you call my office
101:16
probably will get you to the front of
101:18
the list you have a closing and there
101:21
are tax issues that could screw up the
101:23
closing and if the closing doesn’t
101:25
happen on
101:26
time you lose the deal okay that will
101:28
get me on the phone pretty quick usually
101:30
it involves IRA or 401 KS but sometimes
101:33
it will involve 1030 ones or installment
101:36
sales it could involve all kinds of
101:39
stuff but that’s really if you think
101:40
about it most of what we do in terms of
101:43
planning doing tax work for people if
101:46
it’s done today or a month from now it
101:48
doesn’t really make a difference but I
101:49
do want to be upfront I’m in demand I’m
101:52
very good at what I do
101:53
and sometimes you have to wait and I’m
101:56
crotchety and I’m evil and I have a
101:58
lousy attitude and I get away with it
102:01
because I’m good at what I could do so
102:02
if any of that is a turn-off to you just
102:05
go hire someone else it’s a big country
102:07
there are plenty of other people that’s
102:10
it
102:10
that was this that was the spiel that’s
102:15
it that’s how you would play this is how
102:17
you attract people like yeah this is me
102:19
in a good mood kind of mellow had my
102:21
shot of rum I love a man much
102:25
appreciated thank you so much for being
102:27
here smartest man in the room glad glad
102:30
to do it hope we saved you guys some
102:31
money hope we gave you some stuff you
102:33
never heard of hope you go and dig and
102:35
implement and keep what belongs to you
102:38
because unlike what the prior president
102:41
said he didn’t build that you did you
102:45
deserve to keep every freaking nickel
102:47
that we can legally and ethically
102:49
squeeze go get him thank you so much mr.
102:53
John higher the third very informative
102:57
anyone watching this live or any of our
103:00
recordings reach out to John if you need
103:02
any type of tax legal advice he is
103:05
definitely the man I recommend someone
103:07
I’ve known for three or four years much
103:09
love much thank you for gracing us with
103:12
your presence my friend take care
103:14
awesome let’s end this thing and thank
103:17
you so much everybody for tuning in we
103:19
will see you in two weeks from now topic
103:22
we will launch here in the next day or
103:24
two and we will be launching more
103:27
information on the mastermind let’s go
103:29
let’s grow let’s crush it let’s win
103:30
together Multi Family Master’s 2020 is a
103:34
great year let’s take full advantage of
103:35
it thank you all thanks everybody
103:39
take care