Tool for Battling Coming Inflation February 19, 2009
Posted by Jeff Nabers in Money, Personal Enjoyment, Personal Productivity, real estate, Self Directed IRA/401k.Tags: alternative asset, alternative investment, bail, bailout, bernanke, building, congress, currency, debasement, economy, fed, federal reserve, fiat, fiscal, government, inflaiton, ira, ira llc, monetary, obama, out, paulson, policy, responsibility, rubino, schiff, self directed, solo, Solo 401k, stimulus, strategies, strategy, tax, tool, treasury, wealth
1 comment so far
If you’ve been following my blog, you know that I take great interest in understanding money. Why every single human who uses money on a regular basis doesn’t also share this interest is beyond me.
With trillions of dollars created by actions of Congress, the Federal Reserve, and the Treasury Department, the concern for coming inflation can only spread. This video explains why tax deferred investment vehicles are the best tool for battling inflation and can possibly even (more…)
I.O.U.S.A viewing this weekend on CNN January 9, 2009
Posted by Jeff Nabers in Health, Money, Personal Enjoyment, Personal Productivity, real estate, Self Directed IRA/401k.Tags: austrian, bailout, bank, banking, banks, bernanke, buffett, chairman, cnn, corporate, currency, david walker, debt, dollar, economics, economist, economy, fed, federal reserve, fiat, fiscal, franctional reserve, government, greenspan, i.o.u.s.a., mises, Money, nation, national, obama, responsibility, school, social security, sovereign, sovereignty, stimulus, tax, wall street
1 comment so far
CNN to Broadcast I.O.U.S.A. | Obama Foresees Trillion-Dollar
Deficits |
A Bipartisan Plea for Fiscal Responsibility | The Government We
Deserve
CNN to Broadcast I.O.U.S.A.
The public has spoken, and we’ve listened. In response to demand
for information about our country’s financial challenges, CNN/U.S.
will air the broadcast premiere of the acclaimed documentary
I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on
Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary
will be an unscripted panel discussion with policy leaders about
various economic solutions currently under consideration.
This exclusive televised event will air only on CNN, and will be
hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s
Your $$$$$, the network’s weekend business roundtable program.
Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will
engage a distinguished group of panelists, including Pete
Peterson, Chairman of the Peter G. Peterson Foundation and former
U.S. Commerce Secretary; Dave Walker, President and CEO of the
Peter G. Peterson Foundation and former U.S. Comptroller General;
Alice Rivlin, noted economist and former Director of the Office of
Management and Budget; and Bill Bradley, a Managing Director of
Allen & Company and former U.S. Senator and Democratic
presidential candidate, in discussions about issues raised in the
film and their ties to current economic events.
Learn more about the film at www.IOUSAtheMovie.com. And be sure to
spread the word about the U.S. broadcast premiere!
Obama Foresees Trillion-Dollar Deficits
CNNMoney.com reported on Tuesday that when President-elect Barack
Obama takes office on January 20, he’ll inherit an economy deeper
in debt than ever.
Obama commented on the unprecedented deficit, saying, (more…)
Who will bail out the government? October 1, 2008
Posted by Jeff Nabers in Money, Personal Enjoyment, Self Directed IRA/401k.Tags: 401k, bail out, bailout, citizens, corruption, crisis, debale, economy, fed, federal reserve, finance, global government, government, inflation, invest, investing, ira, lobbying, mortgage, new world order, one world government, solo, Solo 401k, tax, taxpayers, wall street
add a comment
Although the House rejected the recent $700 billion bailout, there is plenty of bailing out that has already happened, and there is more to come. Already:
- $80 billion injected into failed AIG
- IndyMac bank taken over by FDIC
- Bank of America bought Merrill Lynch for $50 billion – 70% over its September 12 closing price
- Bear Sterns was bought by JP Morgan Chase for $1.2 billion and the Fed then loaned JP Morgan Chase $29 billion (without recourse) to ensure that JP Morgan Chase didn’t actually have to suffer the consequences of buying a failed bank
- Washington Mutual failed – it is the largest bank failure in American history. In 2007, its share price was $45. By the time it was sold to JP Morgan Chase, it’s share price was 16 cents. The CEO stepped down on September 8, 2008 and a new CEO received a $7.5 million sign-on bonus. 17 days later, he received an $11.6 million severance package as WAMU filed for bankruptcy.
- Bank of America has become the nation’s largest mortgage lender by purchasing Countrywide & Interfirst
Hundreds of billions of dollars have already been injected into the system as seen on this timeline. It’s been happening every couple of months – 5, 10, or 20 billion dollars at a time. That kind of help hasn’t helped enough, and the $700 billion bailout is a sign that zeros will soon be added to the bailouts, and they will total in the trillions of dollars.
What happens to a company that gets bailed out?
- It becomes either under the control of whoever provided the money; and/or
- It becomes indebted to whoever provided the money.
How will our government pay for this?
Firstly, it’s important to understand that (more…)
Prohibited Transactions Guide Book – 50 Free Copies September 22, 2008
Posted by Jeff Nabers in Self Directed IRA/401k.Tags: 401k, alternative assets, compliance, investing, ira, irc, irs, jeff, legal, nabers, planning, prohibited transaction, real estate, self directed, solo, Solo 401k, tax
13 comments
I’ve written a comprehensive guide book on prohibited transactions. These will be available for sale soon for $39 + $5 shipping. I’m making 50 copies available completely free of charge on a first come first serve basis.
If you’d like one of these 50 free copies, please email your name & shipping address to:
specialoffer3 [at symbol] nabersgroup [dotcom]
This blog has been viewed over 20,000 times since April, so act fast ;-)
### Update – October 3, 2008
We have (more…)
Where to form your LLC for virtual or foreign business activities September 17, 2008
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 401k, invest, investment, ira, limited liability company, llc, nevada, nexus, NV, OR, oregon, ownership, real estate, self directed, solo, Solo 401k, strategy, tax, tennesee, TN, WY, wyoming
9 comments
When you form an LLC (or Corporation), it is registered and created at the state level. You can choose to form an LLC in any state, regardless of your state of residency.
Nexus
When you have business activity that clearly occurs in a specific state, you are said to have “nexus” in that state. If your LLC has nexus in a state, it will probably need to register itself in that state and pay any applicable taxes for doing business there. An LLC is a pass-through entity, meaning it is designed to have zero taxation because income taxes are paid by the LLC owner(s) on their tax return. Unfortunately, some states have created franchise and/or excise taxes that can be costly.
Virtual Businesses
If you are starting an internet business (or any other business that doesn’t create nexus in a specific state) you can choose to form your LLC in a state (more…)
Unrelated Business Income Tax – UBIT for Solo 401(k) & IRA accounts June 26, 2008
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 401k, ira, leverage, mortgage, real estate, self directed, tax, taxation, taxes, UBIT, UBTI, UDFI, unrelated business income tax, unrelated business taxable income, unrelated debt financed income
41 comments
If you talk to the average CPA, he’ll tell you that UBIT is the boogeyman and is to be avoided… always. Discussing this topic with an above average CPA (such as Eric Wikstrom of Integrated Wealth Strategies) yields different advice.
The Two Types of UBIT
- Triggered from a trade or business – if a tax exempt entity (such as an IRA or 401k) owns a trade or business, the income of that business is taxed at trust rates (i.e. very high tax rates). Both IRA & Solo 401k accounts are subject to this type of UBIT.
- Triggered from ownership of leveraged real estate – if a tax exempt entity (including IRA) owns real estate leveraged with a mortgage loan, the portion of that income attributable to the mortgage loan is taxed at trust rates. This type of UBIT is specifically referred to as UDFI – Unrelated Debt Financed Income. Solo 401k accounts & other qualified plans are exempt from UDFI.
Trust tax rates are very high, so it might make sense to avoid Type 1 UBIT at all costs. On the other hand, a close examination of UDFI tends to revoke its “boogeyman” status.
The reason UDFI isn’t a detrimental cost is that non-recourse mortgage loans (the only type an IRA/401k can legally obtain) are typically only offered at a 65% loan-to-value maximum. So this means that the UDFI tax is only payable on up to 65% of the property’s net income. (That’s right – net income. You do get to deduct depreciation and other expenses before paying UDFI tax).
Let’s examine a simple comparison of the taxes payable on net real estate income with 50% leverage: (more…)
Self Directed IRA/401k vs. 1031 and other conventional RE tax strategies June 24, 2008
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 1031, 401k, defer, depreciation, exchange, gain, income, invest, investing, investment, investor, ira inflation, like kind, performance, real estate, retirement account, self directed, strategies, tax, taxes
4 comments
Conventional Tax Strategies for Real Estate
Many real estate investors boast of their tax strategy as involving one or more of the following:
Depreciation – This is a tax concept where the property owner pretends that his property is decreasing in value. For residential real estate, it assumes that the property’s improvements will become worthless over 27.5 years. In commercial real estate, the calculation is for 39 years. During each year of property ownership, the owner can take that year’s pro rata depreciation as if it is a loss against the income of the property… which reduces the taxable income of the property, thus reducing the amount of taxes due. Upon future sale of the property, depreciation normally must be “recaptured” which means that there is no more pretending, and the taxes on the truly realized gains must be paid anyways.
Cash out Refi – This is where the owner of the property will refinance the mortgage. The new loan will have a higher balance than the old one, resulting in “cash out”. Because this is just borrowing, it is not a taxable event. Upon future sale of the property, however, taxes will normally be due on the actual gains anyways.
1031 Exchange – Upon the sale of real property, the gains can be deferred if they are used to purchase property of “like kind” within a certain time period. It goes something like this:
- Sell Property A
- Have a “qualified intermediary” receive the proceeds of the sale
- Replacement property (“Property B“) must be identified in writing within 45 days of the sale of Property A
- Property B must be purchased (closed) within 180 days of the sale of Property A
- Property B must be of equal or greater value to Property A
- Both properties must be “like kind”. For instance if Property A was U.S. real estate, Property B must also be U.S. real estate.
So, savvy real estate investors often (more…)
Landlording your IRA LLC’s properties – Is it allowed? May 30, 2008
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 401k, checkbook control, code, condo, dol, exemption, house, investment, ira, ira llc, irs, landlord, landlording, llc, prohibited transaction, property, real estate, regulation, repair, self directed, tax, taxes, treasury
7 comments
A question I get all the time is “Can I personally mow the lawn, maintain, and/or repair properties owned by my IRA LLC?” My answer is “No” which usually creates the response “But another company said I could.”
First, let’s summarize that the accountholder/participant of a retirement plan generally can’t have a transaction between themselves and their retirement plan. This includes the furnishing of services, sale of property, lending of money, and extension of credit between a plan and disqualified person (such as the accountholder). Next, let’s establish that active landlording means mowing the lawn, repairing, and fixing up properties, while passive landlording means collecting rent, paying mortgages/taxes/insurance, and contracting out the more active tasks to non-disqualified-persons. So is active landlording allowed? No, and I’ll provide two answers – the technical and the layman’s.
The Technical Answer
The argument for why active landlording for your IRA LLC’s property is not a prohibited transaction goes something like this…
As a general rule, the Internal Revenue Code provides (more…)
Penalty Free Early Distributions May 23, 2008
Posted by Jeff Nabers in Money, Personal Enjoyment, Self Directed IRA/401k.Tags: 10%, 1099, 1099-R, 401k, administrator, custodian, distribution, early, investment, ira, penalty, retirement, self directed, tax
2 comments
Probably one of the must unknown facets of retirement planning is that you can distribute before age 59 ½ for any reason without paying the extra 10% early distribution tax. How?
Substantially Equal Periodic Payments
- Set a distribution schedule calculated using IRS tables
- The schedule must have regular payments of a certain consistent amount.
- You must make receive these distributions from your retirement account either until you reach age 59 ½ or for a 5 year period… whichever is longer.
Internal Revenue Code Section 72(t) is where the extra 10% tax for “early distributions” (before age 59 ½) is imposed. However, if you read on to IRC 72(t)(2)(A)(iv) it is explained that the 10% tax is not applicable to any distribution that is part of a series of Substantially Equal Periodic Payments – or SEPP for short.
To give you an idea of how this works using calculations from IRS life expectancy tables, let’s examine a fictional case study with round numbers for simplicity:
Jared is considering early retirement at age 45, and over the years he has grown his IRA to an asset value of $2,000,000. He isn’t sure whether he wants to completely retire, work part time, pursue a career change, or start a new business. Let’s take a look at his options… (more…)
Feedburner Subscribe
