Thursday, April 23, 2009

Using Twitter Effectively and Efficiently - On Auto Pilot

Understanding Twitter
I spent a lot of time really trying to understand how to effectively and efficiently take advantage of Twitter. How could I really get Twitter to direct more visitors to my website and The Exeter Learning Institute? Why would someone just click on a link that I posted through Twitter.

I understood part of it, but the rest just stumped me. I kept asking the question, why would someone spend so much time using Twitter? It seemed like such a drain on my time and resources, but I stuck with it.

Twitter On Auto Pilot
I stumbled upon a link to a video - through Twitter of course - that explained everything. How Twitter works, what was effective and why, and most importantly, how to do it automatically so that I didn't have to work that hard at Twitter anymore. It was Twitter on Auto Pilot!

Increased Followers; Increased Website Traffic
The video actually had a sales pitch, too. They were selling his product that would really help put Twitter on Auto Pilot. I intended to listen and then exit with out buying, but I ended up purchasing the program for under $30.00.

I figured that less than $30.00 was worth the risk. I'm now adding 400 to 500 followers each day and I'm making a little money on the side by reselling his system. The amount of time that the system saved me by really figuring out Twitter was worth the price tag alone.

Friday, April 17, 2009

Next Wealth & Legacy Seminar

Wealth & Legacy Seminar Series™
April 29, 2009
7:30 AM to 10:30 AM
San Diego, California
  • Investing in turbulent times: increasing returns while lowering volatility
  • Asset protection: Protecting your wealth from ‘in-laws, outlaws, creditors and predators’
  • Handling turbulence in the family: Family Councils to resolve conflict and create vision
R.J. Kelly, MSFS, ChFCFounder & PresidentWealth Legacy Group

Chris L. Meacham, CPA
President & Chief Executive OfficerCornerstone Wealth Management

What, if anything, is the appropriate investment strategy during these turbulent times, including investment strategies that provide financial peace of mind, investment opportunities arising from the ashes of a burned out economy, and volatility is a good thing if used properly

Nancy G. Henderson
PartnerHenderson, Caverly, Pum & Charney LLP

Asset Protection planning is not unethical and it is definitely not just for the very rich. For business owners planning with legal steps, not only protects your business from hazards, it protects you and your family, your partners and other co-owners, your employees, your vendors, and your customers.

Barry Graff, Ph.D.
Family Business Systems

Family-owned and closely held businesses face unique challenges with succession planning, organizational and leadership development, and communication and conflict resolution. Family councils and meetings educate members about the challenges, assist in resolving outstanding issues, and help families communicate effectively.

Spotlight on Legacy
Mike Mellace
CEO and Founder
Mama Mellace Old World Treats, and the Mama Mellace Foundation

Few products have experienced the success that Mama Mellace's Old World Treats have seen over the past few years. They have grown from a small San Diego-based retail operation to providing wholesale distribution coast to coast. They have also been doing much in giving back to the less fortunate:…..

Thursday, April 09, 2009

More Good Economic News: Economy No Longer In Free Fall

You don't have to look hard and long today to find an economist making this claim. We certainly see it each day. There is movement, and there are signs that the economy, markets and people are beginning to loosen up a bit. In fact, we continue to see slight increases in our transaction count each month since the first of the year.

Here is a quote from the Kiplinger Washington Letter:

"The economy may no longer be in free fall, and a
bottom could be in sight. Manufacturing, retail sales and housing are
showing slight improvement. The stimulus will bring more gains this
summer, but the job market is still suffering."

Wednesday, April 08, 2009

Tax Legislation Update: Estate Taxes and Gift Taxes

Estate Taxes going Away? Never!
You may have heard that the Estate Tax or Inheritance Tax goes away in 2010. We have long said that this will never happen and that Congress will act and change this before the estate tax goes away in 2010. There are many reasons why it will never happen, but here are a couple.

Income Tax Short Fall; Budget Deficit
First, the United States Government can absolutely not afford to eliminate the estate tax right now given the huge income tax short fall and corresponding Federal and state budget deficits that we are facing today. So, Congress must act now and eliminate the sunset provision for the estate tax before it goes away in 2010.

Step-up In Cost Basis
Second, if the estate tax were to go away, so would the "step-up" in cost basis on property that was inherited. Taxpayers would actually owe more in taxes if this happens. The concept of a step-up in cost basis can be confusing, so let me try to explain it.

Let's assume that your parents bought property years ago for $100,000.00. The same property is worth $1,000,000 today. It has a capital gain of $900,000.00. Your parents now die. The value of this property ($1,000,000.00) is included in the total value of their estate for estate tax (inheritance tax) purposes, which means that the value is used to calculate any estate taxes that their estate would owe.

You then inherit the property. The question is what is YOUR cost basis in the property now that you have inherited it? Your cost basis is stepped up to the value of the property at the date of death or $1,000,000.00 because that value was included in their estate and used to compute any estate tax. It has already been taxed through your parents estate, so you cost basis starts all over. You could sell the property for $1,000,000.00 the next day and pay absolutely no capital gain taxes.

The Buzz On Capitol Hill
So, now you have the background and why we think the estate tax will not go away in 2010. So, let's back this position up with the buzz on the street.

Senator Max Baucus (D-MT), who is the top tax policy maker on the hill, has introduced legislation that gives us a good idea at where Congress is headed. It will most definitely change in some form before it is ultimately passed by both the Senate and the House of Representatives, but it does provide some insight for those taxpayers that must start planning now.

Basic Estate Taxes and Gift Taxes (As Proposed)
Senator Max Baucus wants some significant changes to the estate tax and gift tax codes. The basic estate tax and gift tax exemption would be fixed at $3,500,000.00 beginning in 2010, and then would be indexed to inflation and adjusted accordingly after that. The gift tax exemption is currently at $1,000,000.00, so this is a hefty increase if it gets bumped to $3,500,000.00. You could gift up to $3,500,000.00 without paying a gift tax.

The estate tax rate would be capped at 45%. This is the current rate, so no change there. This way the estate tax and gift tax exemptions would be tied together again at $3,500,000.00.

There would also be some easing for married couples. The amount of unused exemption could be carried over to the surviving spouse and used upon their death. These changes mill simplify many areas within estate, gift and charitable planning.

We will now have to sit back and wait to see what the final legislative action looks like.

Tuesday, April 07, 2009

More Good Economic News: Goldman Sachs Economic Update Conference Call

I logged in to an economic update conference call hosted by Goldman Sachs & Company this morning. They, too, are saying that they see indications that the market is beginning to halt the broad and steep decline.

There will still be some declines in certain segments of the economy and there will still be some bad news over the next few months, but that the worst is behind us and we can start to rebuild.

We've been seeing the same thing. Our 1031 exchange business has been picking up ever so slightly and we are receiving a lot more inquiries across the board.

Thursday, April 02, 2009

Expanding on 1031 Exchange Solutions When a Partnership is Involved

This is our third blog post in our continuing mini-series of blog posts revolving around the challenges and planning problems that crop up when property that investors intend to sell and defer the payment of their capital gain taxes is owned inside of a general partnership or limited partnership.

You might want to read the blog posts in order so that they make more sense. The first blog post
introduces the issues involved. We will begin with this blog post to delve into the various solutions available to investors/partners when they are confronted with this challenge.

Be Proactive
The first and most important piece of advice that I can offer real estate investors is to be proactive when you own property through an entity, whether it be a limited liability company with multiple investors, general partnership, limited partnership, corporation, Title Holding Trust, or other type of entity. The majority of challenges that arrive based on entity issues can be solved given sufficient time to work through the problem.

Evaluate All Options
There are numerous solutions to most entity related problems as outlined in my second blog post in this series. You should review each options with your legal and tax counsel prior to moving forward to ensure that you select the solution that is most appropriate for you. The various solutions will involve varying degrees of risk and you need to fully understand all of your options before you proceed.

The Safest Solution
O.K. I took the easiest one first, which is to change absolutely nothing. Keep the entity in place and continue to hold the real estate in the same entity.

The property would be listed and sold through the same entity and then the replacement property would be acquired by/in the same entity. Nothing changes, and therefore there is no risk. You would structure, report and complete your 1031 exchange using the existing entity.

The problem here is that most of the time the co-investors do not want to stay together and the operation is going to be wound down and the entity is going to be dissolved. So, while this is the safest solution, it is usually not an option.

The Next Best Option
When the safest solution is just not a solution, we look to the next best option, which is generally the 'drop and swap' strategy.

Drop and swap is a clever way of describing the strategy where the property is "dropped" out of the entity (i.e. the property is deeded out of the entity into the individual investors' names), held for a period of time (generally recommended at a minimum of 24 months in order to demonstrate the individual investors' intent to hold the property as an investment), and then "swapped" (i.e. 1031 exchanged) at the investor level. This allows each individual investor to determine the best strategy for them and the entity can be dissolved.

The investor must be extremely careful here. Deeding property out of certain types of entities can trigger other income tax problems, so always review the structures with your tax advisor before proceeding.

I will address the rest of the strategies in my next blog post of this mini-series shortly, so stay tuned.

Wednesday, April 01, 2009

1031 Exchange Solutions When Property Owned in a Partnership (Partnership Interests)

I started a brief mini-series of blog posts regarding the problems encountered by real estate investors when property that they intend to sell is owned by a general partnership or limited partnership. You might want to read the blog posts in order so that they make more sense.

The first blog post describes the complex income tax planning issues involved when a taxpayer is selling real property that is owned in a general partnership or limited partnership. Partnership ownership can significantly complicate any 1031 exchange strategy.

Strategies for Partnership Issues in a 1031 Exchange
There are a number of income tax planning strategies or structures that can be put into place that may solve the problems described in my last post. The best strategies that are virtually full proof ideally require 24 months to plan and implement in order to structure a safe 1031 tax deferred exchange transaction, and the rest will have various degrees of risk involved.

The various strategies and structures include, but are not limited to, the following, which will be discussed in greater detail in future posts:
  • Maintain partnership intact and stay together for 1031 exchange purposes
  • Drop and Swap (1031 exchange at the partner's level)
  • Swap and Drop (1031 exchange at the partnership's level)
  • Set-up subsidiary single member limited liability companies (SMLLCs)
  • Structuring an installment sale note to buy out one or more of the partners
  • Using Section 704(b), which involves special allocation of boot to certain partner(s)
There are many variations of the tax planning strategies and structured that I have briefly mentioned above. I will delve into great detail in future posts.

Property Owned Through a Partnership Can Complicate a 1031 Exchange

Partnerships Were the Entity of Choice
Real property investors who acquired real estate during the 1960s, 1970s and into the 1980s often set-up a general partnership or limited partnership in order to acquire and own the real property when multiple investors were involved. The general partnership (GP) or limited partnership (LP) were the entities of choice.

Today Partnerships Can Be a Problem
The general partnership or limited partnership made a lot of sense back then when multiple real estate investors were involved buying property together, especially since limited liability companies (LLCs) had not made their debut yet.

However, today, general partnerships and limited partnerships can be a significant problem when investors are trying to dispose of real estate that is owned in a partnership.

Real Property vs. Personal Property Interest
The issue is actually quite simple, but can become very complex. The real estate investor does not really own an interest in real estate. He or she owns a general or limited partnership interest in the general or limited partnership. The partnership interest is a personal property interest; it is not a real property interest. The partnership actually owns the real estate, and this is where the problem lies.

Sale of Property Held in a Partnership
The property is actually owned by the general or limited partnership. The partnership is the owner/taxpayer. Therefore, the partnership is the seller of the real property when the property is sold (not the investors/partners).

Partnership Can Complete a 1031 Exchange
The investors/partners merely receive a distribution of the cash proceeds from the partnership upon the closing of the sale transaction. The investor/partners did not sell an interest in real estate; the partnership did. So, the partnership can structure and complete a 1031 exchange and acquire replacement investment property. The replacement property must be acquired and owned by the partnership.

Partners Do Not Want To Stay together
The problem that is quite common today is that most of the investors/partners no longer want to stay together and want to terminate the partnership upon sale of the property and each go their separate ways. This creates a complex problem for those investors/partners that want to complete a 1031 exchange. It requires advanced tax planning because the investors/partners do not own an interest in real estate.

You might be sweating a little bit right now if you own property in a general or limited partnership, but don't panic yet. There are solutions to this problem. Generally, the safest solutions need about 24 months in order to implement them correctly and be able to complete a 1031 tax deferred exchange. There are other solutions that may work and will carry some degree of risk, but are viable options when you do not have 24 months to plan ahead.

I will be discussing these various options in my next few blog posts, so stay tuned.