More Important Than Taxes?!?

salmonella, e coli, and campylobacter jejuni sneaking into the burritos. (Hard to taste the viruses under all those seasonings, right?) Partly because of these incidents, founder Steve Ells resigned as CEO in late 2017.

In February, Chipotle hired former Taco Bell CEO Brian Niccol to run the company. (Most would agree that moving from Taco bell to Chipotle is a step up: Taco Bell describes their food as "Mexican-inspired," rather than authentic, but some critics pan it as merely "food-inspired.") Last month, Chipotle announced they're moving their headquarters and 400 jobs from Denver to Niccol's hometown of Newport Beach, CA. The move should actually mean less highway time for Niccol, who used to waste 20 soul-crushing minutes commuting to god-forsaken Irvine every day.

So here's where it gets perplexing. Colorado's personal income tax is a flat 4.63%, which seems like a fair price to pay for those 300 days of sunshine per year that civic boosters promise residents. But California has the highest state tax rate in the country — a genuine millionaire's tax of 13.3% on income over the two-comma mark. The recent Tax Cuts and Jobs Act of 2017 makes that top rate even harsher by limiting federal deductions for state taxes to $10,000. 

Logic suggests that any rational business would move the other way. And thousands of companies have fled California, citing taxes and regulations. But California's job growth since 2011 has "easily outstripped" the rest of the country, and the Golden State's economy is growing faster than low-tax states like Texas and Florida.

In 2016, Stanford sociologist Cristobal Young looked at tax returns showing million-dollar incomes over a 13-year period. His study showed that millionaire tax flight is occurring, but "only at the margins of statistical and socioeconomic significance."

What do you think? Would high state taxes be enough to make you move? Or do the quality of your life and breadth of opportunity mean more than mere taxes? Either way, we're here to help you pay less. So call us when you're ready for a plan, and see where your wasted taxes have kept you from visiting!

Manly Men Doing Manly Things in Manly Ways

Back in the early 80s, a group of Democratic legislators decided to room together to cut the cost of staying in Washington for the three nights or so per week that Congress is in session. The motley crew included Representative George Miller of California (owner of the blue-gray house in Southeast DC), Senators Dick Durbin and Chuck Schumer, future Defense Secretary and CIA chief Leon Panetta, and others. We can only imagine whose phone numbers they posted on the refrigerator in a house like that. Pizza delivery? Of course! Liquor guy? Oh yeah. Exterminator? Maybe not a bad idea . . . .

IRS Scuttles Tax Breaks for Pirate Victims

It\'s 1715 in the Caribbean and the Golden Age of Piracy is at its peak. The War of Spanish Succession is over, and thousands of privateers are left without gainful employment. From bases hidden away in the Bahamas, buccaneers like \"Calico\" Jack Rackham, \"Black Sam\" Bellamy, and \"Black Bart\" Roberts gather those sailors under new commands to terrorize the seas. (Edward Teach, better known as Blackbeard, ties burning fuses into his hair to look more fearsome.) While there are never more than a few thousand pirates active at any given time, their legend will live on for centuries. What do you call a pirate with two arms, two legs, and two eyes? Rookie! Historians generally agree that the Golden Age of piracy \"walked the plank\" by 1730. At that point, European nations could deploy their navies to protect merchants, rather than fight each other. But pirates never fully disappeared. And our federal tax code â?? which some foes attack as its own form of piracy â?? may be making recovery even harder for the victims. (We all know auditors wear suits and skirts to the office. But don\'t you think at least a few of them would rather raise revenue by donning a pirate sash, grabbing a cutlass, and swinging from the nearest yardarm?) Does it strike you as odd that the \"Pirates of the Caribbean\" DVD comes with anti-piracy warnings? Last month, the nonprofit group Oceans Beyond Piracy released their 2017 State of Maritime Piracy report. They found 71 pirate attacks in the Caribbean â?? a staggering 163% increase over 2016. 59% involved robberies on yachts, while the rest involved commercial vessels. There were 40 robberies, 17 failed attacks, 13 armed robberies, and 1 hijacking attempt. The pirates made off with $692,000 worth of ship stores and equipment and $257,000 worth of personal effects. Sadly, the report doesn\'t tell us how much of that loot wound up buried in wooden chests or identified on maps with \"X\" marking the spot. Why do pirates read playboy? For the arrrticles! The tax code has always allowed itemized deductions for personal casualty losses, including shipwrecks. However, the Tax Cuts and Jobs Act of 2017 limits those losses to casualties resulting from federally-declared disasters. The new law doesn\'t change the theft-loss rules. But it essentially doubled the standard deductions, which should cut the percentage of taxpayers who itemize from about a third to about a tenth. (Of course, taxpayers who can afford a yacht large enough to attract a pirate\'s attention probably aren\'t suffering from a shortage of tax breaks!) How do pirates talk to each other? With an Aye Phone! Here\'s the good news, matey. You don\'t have to settle for letting the scallywags at the IRS take more of your doubloons than the law allows. And you don\'t need a man-of-war to stop them. You just need a plan! So call us when you\'re ready to pay less, and let us help you make your treasure grow!

Guaranteed Winners

But there's one group we can count on to win big no matter who else loses, and that's the federal, state, and local tax collectors sharing the juice from the new action.

Gambling losses are deductible, but only if you itemize (which eliminates about 90% of taxpayers), and only up to whatever amount of actual winnings you report. That means that if at the end of the year, you're in the black, you'll owe tax on your winnings — but if you're in the red, there's no deduction for your loss. That gives Uncle Sam the perfect "heads I win, tails I don't lose" proposition. (Odds are good that whoever said the only way to win at gambling is to be the house never saw how the IRS rigged the game!)

There's one more quasi-tax worth considering here. Sports leagues like the NFL and NBA are pushing to collect an "integrity fee" equal to 1% of the total amount bet. (Sports books generally collect a 10% commission on winning bets, so 1% of the amount bet equals about 20% of their gross revenue.) The leagues say this compensates them for their intellectual property rights in statistics used in betting. But critics say the integrity fee is more like just a simple shakedown: "Nice place you got here . . . it would be a shame if anything happened to it!"

Here's a proposition we bet you'll like. Bring us your taxes and challenge us to help you pay less. You literally can't lose. Call us today and see how much you're losing — you can't win if you don't play!

She Did It!

Early on Saturday morning, 29 million Americans woke up to take a break from school shootings, Russian collusion, and partisan gridlock to watch a California woman achieve a rare fantasy. The woman in question watched the sun rise as plain old Meghan Markle. But by the time it had set, she had become Her Royal Highness Meghan, Duchess of Sussex. (When she's in Scotland, she's the Countess of Dumbarton. In Ireland, she's the first Baroness of Kilkeel. What did your grandmother-in-law give you on your wedding day?)

Have You Taxed a Ford Lately?

Nobody plans on a freak accident taking out production of a key part. That's why you buy insurance. But there's nothing unexpected or surprising about tax bills. You know the IRS wants a share of your production. So call us when you're ready to plan for that, and be sure to keep a fire extinguisher handy!

Free Agent Scores Spicy Signing Bonus

 Baseball is back in swing, and several teams have already made it clear that they won't be contending for playoff berths. The Cincinnati Reds are leading that sorry pack, the first team to lose 20 games in the season. But the Orioles, White Sox, and Rangers are all nipping at their heels. If any of them are serious about winning this year, it might be time to take a look at signing some free agents. Find an unhappy veteran, steal him away with a big salary and signing bonus, and maybe you'll be at .500 by the All-Star break!

Big corporations with thousands of employees generally prefer playing "Hometown Hero," so long as it suits their business goals. But corporations can play "Free Agent" too. They can even pocket fat signing bonuses when they do it, in the form of rich tax breaks in their new hometowns.

AllianceBernstein is an investment manager supervising $550 billion in assets for institutions, individuals, and mutual fund shareholders. (We're not sure why they spell it as just one word; maybe they just couldn't afford the space.) You'd expect to find that kind of firm in Manhattan. And you'd be right — their current headquarters is a blandly intimidating black-glass slab in midtown. (Fun facts: it's the building Gwen Stacy falls from in the crane scene in Spider Man 3, and it's the office for the fictional law firm in Michael Clayton.)

But life in the big city, including taxes, is pricey. So AllianceBernstein declared free agency to find a new home. Last week, they announced they had picked their new team. They'll be moving 1,050 jobs, including the CEO, legal, marketing, and IT staff, to fast-growing Nashville. (Traders and portfolio managers stay on Wall Street.) Of course they cited lower taxes as a prime reason for their choice.

So how is Tennessee stepping up to the plate? They just passed a new law implementing a "single factor sales apportionment" formula (don't ask) for publicly-traded financial asset managers whose physical presence in the state is larger than their customer base. That new law could add as much as 2% to AllianceBernstein's gross margins. Tennessee also dangles a $5,000/employee "Super Jobs Tax Credit" to companies who create 100 or more new jobs in the state.

Staffers moving from the Big Apple to Music City can certainly expect some culture shock. They'll miss the bright lights, Broadway shows, and Michelin-starred restaurants of Manhattan. (They'll miss the Yankees and Mets, too.) But they'll get to sample Nashville's "Music Row" entertainment scene. And who knows, maybe they'll fall in love with Nashville-style hot fried chicken, a local specialty breaded with spicy cayenne pepper paste and served on slices of white bread with pickle chips. (Then again, maybe they won't.)

But we can be sure that Nashville's newest residents will love their tax savings, too. Tennessee has no state income tax and is phasing out its investment tax. Property taxes are lower than in New York. And housing dollars stretch a lot farther in Nashville, even for those who glam it up in nearby Franklin (the "Greenwich" of Nashville) with the country music superstars. No matter how good the corned beef is back at the Carnegie Deli, it can't hold a candle to the tax-savings "W" AllianceBernstein picks up by going free agent.

What about you? Have you tried Nashville-style hot chicken? Are you a fan or not? Either way, we're pretty sure you'd appreciate a recipe for tasty tax breaks. That's where we come in, of course. So call us if your mouth is watering for savings and we'll see what we can serve you! 

No Business Like Shvo Business

 The lights of Broadway have long shone bright as the show business capital of the United States. (Hollywood may have the movies, but it's just not the same. And Vegas? Puh-leaze.) New York theatres attract millions of visitors and billions of dollars every year. Naturally, sharp New Yorkers have co-opted show business tactics to promote all sorts of unrelated businesses. So now, we have fashion-as-theatre, restaurants-as-theatre, and even real-estate-as-theatre.

Michael Shvo may be the most theatrical real estate guy of all. He started out as a brash Manhattan broker, squiring buyers in a chauffeur-driven limo and trademarking the slogan, "Let's Shvo." He enlisted celebrity designers like Giorgio Armani and musicians like John Legend to help sell showy condos to showy buyers. Now he's reinvented himself as a developer, with current projects designed to make everyone else's projects look like college dormitories, or maybe Soviet-bloc worker collectives.

Shvo is also a noted art collector who favors paintings by Andy Warhol and sculptures by Francoise-Xavier and Claude Lalanne. He paid $14 million to combine two 68th floor condos overlooking Central Park, then stuffed the resulting 4100 square feet full of treasures. (The living room rug is beaver fur.) He dropped another $6 million on an all-white Hamptons house to stuff with more treasures that wouldn't fit in the Manhattan pad. And he's currently developing a 50-acre private island resort in the Bahamas.

So we know that Shvo likes buying showy stuff. It turns out, though, that he doesn't like paying tax on it. Back in 2016, Manhattan District Attorney Cyrus Vance, Jr. indicted Shvo on 28 counts of criminal sales tax fraud. And on April 26, he plead guilty to two of those counts. "Michael Shvo's brand of tax evasion was an art form unto itself," said Vance. "Through ornate ruses — like creating a sham Montana corporation to avoid taxes on a Ferrari — the defendant dodged more than a million dollars in state and local taxes."

Shvo's favorite ornate ruse involved a Cayman Islands company called Shvo Art, Ltd. He told the galleries and auctioneers who sold him art, furniture, and jewelry that he was shipping his purchases to the Caymans, where there would be no tax. Instead, he sent them instead to his Fifth Avenue office or one of his homes.

As for the Ferrari — a 458 Spider that stickers at $230,000 — Shvo set up a Montana LLC to buy it and register it. But he actually drove it in New York, which made it subject to the Empire State's use tax. (Montana has no sales tax and lets LLCs register vehicles, which makes the "Montana license plate scam" a favorite for high-end vehicle buyers. Of course, the rest of the states generally fail to see the humor in that move — California even has a special website for ratting out vehicles with out-of-state plates.)

The guilty plea calls for Shvo to pay $3.5 million in taxes, penalties, and interest. But something tells us he's not particularly worried about his sentencing, scheduled for June 7. After copping his plea, Shvo and his wife, a Turkish actress and model known for her vast collection of one-of-a-kind Barbie dolls (including one dressed by designer Christian Louboutin), left court in a $400,000 Rolls-Royce.

We tell quite a few stories here about celebrities who don't seem to understand the difference between a "tax plan" and a "felony." Sadly, the moral is always the same: you don't have to cheat to pay less. You just have to call us. So what are you waiting for? The curtain is ready to rise on real savings! 

Inventing Tax Records

By 1900BC, the Mesopotamians were levying taxes on everything from livestock to funerals. So someone invented "smuggling." But smuggling didn't always work. The University of Pennsylvania museum includes a letter from a trader cautioning his employee not to play it straight: "Irra's son sent smuggled goods to Pushuken but his smuggled goods were intercepted. The Palace then threw Pushuken in jail! The guards are strong . . . please don't smuggle anything else!"

Five hundred years before the birth of Christ, the center of civilization had shifted northeast to ancient Greece. By then, someone had invented "cash." (Unlike cuneiform, cash is still around. However, if ApplePay and Bitcoin have their way, that won't be true much longer.) Greek society cleverly positioned paying taxes as an ethical obligation, and the richest citizens actually competed to see who could give more. (This tradition survives today, in slightly different form, as today's richest citizens compete to buy themselves Senate seats and governors' mansions.)

Today, of course, we store our tax records on paper or in the cloud. But we're pretty sure you don't want your records to show you paid too much. So pick up the phone to book an appointment, and maybe someday future historians will record your plan to pay less!

Quit Your Whining

By all rights, "Tax Day" ought to be one of our favorite holidays, like "Christmas in April" without the carols, the hype, or the eggnog. That's because eighty percent of us get refunds, averaging $2,782 each in 2017. (When was the last time Santa Claus left three grand in your stocking?) Of course, that means 20% of us are writing checks to the IRS. And if you're among that 20%, we sympathize. We know it hurts. But we're confident it does't hurt nearly as much for you as it does for a "master of the Universe" named John Paulson.

Paulson started his first fund in 1994 with $2 million and one employee. He built a reputation for "event-driven" investing, betting on mergers, acquisitions, proxy fights, and similar opportunities. A decade ago, he made a fortune shorting the U.S. housing market (the same story that author Michale Lewis spotlighted in his book and movie, The Big Short). Paulson earned $15 billion on that trade. By 2011, he managed $38 billion in assets for some of the world's most sophisticated investors.

Naturally, much of that money found its way into Paulson's pocket. He charges a 2% management fee, which is standard for hedge funds. But he also takes 20% of his funds' profits, and that's where the real money is. In 2007, he took $4 billion for himself. In 2010 he outdid himself to take home another $5 billion.

Paulson isn't flashy. He generally avoids the press, and he's not looking to buy himself a Senate seat. But he does seem to enjoy his fortune. He splits his time between a 28,000 square-foot townhouse on Manhattan's East 86th Street, a $49 million Aspen ranch, and a $41.3 million Southampton estate. In 2015, he donated $400 million to put his name over the door at Harvard's school of engineering and applied science.

What does all that have to do with this year's tax bill? Up until 2008, hedge fund managers could defer tax on most gains by simply leaving their money in the fund. But in that year Congress changed the rules and gave them until this year to pay the tax on the gains they had accumulated before that date. So now, time is up. Just how much does he owe? He's looking at stroking a billion-dollar check to the IRS!

(Who are we kidding here? Paulson can't even write a check that size. The most the IRS will take in one draft is $99,999,999. Theoretically, he could write ten of them. But whose handwriting is small enough to fit "Ninety-nine million, nine-hundred ninety-nine thousand, nine hundred ninety-nine dollars and zero cents" on a check in the first place? He'll wire the feds the money and pour himself a really stiff drink.)

Talk Like a Pirate Day

Tis the Season for Last Minute Tax Tips as we move towards the deadline for timely submitting your 2017 Individual taxes (without extension).    These tips are widely available using your friendly or not so friendly google tool and may sometimes be useful.   However, anything done at the last minute is hardly performed well and may not actually best achieve your goals.   If your objective is to not waste money paying taxes you don’t owe, my suggestion is not to wait to the last minute.  You should focus on having a detailed tax plan to tell you what to do, when to do it, how to do it and why.  It should be in writing and refer to the IRS Code, Revenue Procedures and any relevant tax court cases.  I recommend my recent interview with Krystal 93 for your consideration.  

• Take advantage of deductions

• Request an extension to file – does not include an extension to pay

• Be prepared to pay what you owe – or request an installment plan

• Contribute to an IRA

• Don’t panic

The Last Minute Tax Tip season has been around longer than “Talk Like a Pirate Day” – since 2002.  Take a quick view of a last minute tax tips from the forties provided by Bing Crosby, famous movie star and singer of that era.  He recorded the most popular song ever – White Christmas.   https://www.youtube.com/watch?v=pgn9vToEhus

Such a Bore

Everyone has a mental picture of what a tax professional or accountant looks like. Probably pretty boring, right? Dull. Predictable. Not quite smart enough to do useful work, like engineering. Definitely not slick enough for sales. Probably balding and paunchy, bleary-eyed from too many late nights at the office typing numbers into boxes on government forms. But that's not always the case . . . so let's take a look at a couple of fun stories that shatter that stereotype.

First, Dorothy Steel. Dorothy spent decades working as a senior revenue officer for the IRS before retiring on December 7, 1984. But "retirement" must not have suited her as well as she expected, so at age 88, she took up a new pursuit — acting. She started at an Atlanta-area senior center, then worked her way up to TV and short-film roles. In November, 2016, her agent called about a part in some "comic book" movie that would have required her to speak in an African accent. She scoffed and told her agent to pass.

But then she told her grandson about the part. After he picked his jaw up off the floor, he told her that Black Panther would be a big, big deal. "My grandson said to me, 'You're always talking about stepping out on faith. I either want you to man up or shut up,'" Steel told the Washington Post, laughing at the memory.

So Dorothy sent in her audition tape. An hour after producers saw it, they said, "Who is that old lady? We want her." The next day, she had the part. Now millions of fans across the globe have seen the former tax collector as a Tribal Elder advising Wakanda's King T'Challa in Marvel's newest billion-dollar grossing hit.

Next, Scott Foster. Scott's a 36-year-old accountant for Golub Capital, a private lender focused on middle-market and late-stage lending. (Ok, boring.) He played hockey for Western Michigan University and still plays in a local beer league. He's also the Chicago Blackhawks' designated "emergency goalie" — a job that usually means sitting in the press box and eating free food. On March 29, though, goaltender Anton Forsberg hurt himself during practice, and rookie backup Collin Delia hurt himself six minutes into the third period. That meant time for Foster's NHL debut.

Foster killed it during his time in the crease. Donning #90, he played 14 minutes and one second, and stopped all six shots he faced from the visiting Winnipeg Jets. The crowd began chanting "FOS-TER, FOS-TER, FOS-TER" before roaring in applause at the final horn. His teammates awarded him the team belt for player of the game.

Foster's performance may even earn him a new start from the U.S. Hockey League's Chicago Steel. "If Scott can handle itemized deductions as well as he handles a Dustin Byfuglien slap shot, he'll be a great asset," said Steel president Dan Lehv in a press release. "Overall, our starting accountants have been doing a good job for us. But as we all know, anything can happen in the crazy, fast-paced world of accounting. Last year's Academy Awards are a prime example. We couldn't see a guy like Scott Foster misplacing the Best Picture envelope. He seems like a 'no loopholes' kind of guy."

Dorothy Steel and Scott Foster both offer a valuable lesson: it's never too late to start. And that applies to paying less tax, too. So call us when you're ready to save. We promise the savings won't be boring!

Auditors on Deck

Baseball is back, even as some teams are looking at early-season snow days. Little-leaguers across the land are donning gloves and getting ready to watch their favorite big-leaguers take to the field. Stats geeks are prepping spreadsheets to crunch numbers like WAR (Wins Above Replacement), BABIP (Batting Average on Balls in Play), and LWCT (Largest Wad of Chewing Tobacco). And the umpires at the IRS are watching a new pitch that Washington just threw across their plate, too.

Since 1921, code section 1031 has let you exchange property you've held for business or investment without paying tax on your gains. These "like-kind" exchanges usually involve real estate. They also include vehicles and equipment — if an up-and-coming CEO wants to swap his company's tired old Gulfstream IV for a newer, shinier model V, that's cool, too. The IRS has even ruled that "trades of player contracts owned by major league baseball clubs will be considered exchanges of like-kind property."

But last year's Tax Cuts and Jobs Act trimmed the roster on like-kind exchanges to real estate only. And that means some teams may already be behind in the count for taxes they owe on their trades!

Here's the challenge: how exactly do you value a baseball player's contract? The New York Times offered an example when they first reported the problem: last year, the Detroit Tigers sent right-handed starting pitcher Justin Verlander, four years into a six-year, $162 million contract, to the Houston Astros. The Astros sent back 20-year-old outfielder Daz Cameron (now playing for the Single-A Lakeland Flying Tigers), 19-year-old Venezuelan righty Franklin Perez (now playing for the AA Erie Sea Wolves), and 21-year-old catcher Jake Rogers (also playing for the Sea Wolves).

The veteran Verlander is clearly "worth" more. But he's 35, and he can't keep throwing heat forever. So how do you quantify his contract with a number the IRS will accept? Is it the $28 million/year he earns today? (Fun fact: that meant $136,000 per inning last season.) Or is it "some calculation of the total future value Mr. Verlander will bring to the team, minus the total future value it gave up in the prospects it traded away — and possibly adjusted for the amount the team will have to pay Mr. Verlander?"

And Detroit faces a different challenge. How do you assign a "net present value" to an unknown quantity like Perez who isn't even old enough to buy a drink? Any Bull Durham fan can tell you sometimes all it takes is the right coach to turn a prospect into a phenom. But how do you push him into playing his best ball without pushing him into Tommy John surgery? And what if his trip to "the show" lasts just 21 glorious days?

Finally, what about the human cost of all this activity? How do you put a price tag on a 10-year-old Pittsburgh fan's tears when you tell him his beloved Pirates have traded his hero Andrew McCutcheon to the hated San Francisco Giants for a rookie pitcher, a minor-league outfielder, and "$500,000 in international signing bonus allocation," whatever the heck that is?

The Tax Cuts and Jobs Act is full of hanging curveballs like the new like-kind exchange limits. That's why you can't just wait for April 15 to roll around and hope for a "cheese dog" across the plate. So call us when you're ready to take a swing at a plan, and see how much you can save. Don't forget we're here for your teammates, too!

Where Does Cardi's Money Go?

The rapper Cardi B grew up in the South Bronx's Highbridge neighborhood, where the median family income barely tops $27,000. Cardi, born Belcalis Armanzar, couldn't wait to get out. She spent much of her time at her grandmother's home across the Harlem River in Washington Heights. By age 23 she released her debut video and album. Last year she joined the A-list with her hit "Bodak Yellow," where she raps about being rich and arriving at "the club" in a Rolls-Royce Silver Wraith.

Apparently, Cardi really is stacking some nice paper. On March 22, she recorded an angry rant demanding to know where her tax dollars go. "So you know the government is taking 40% of my taxes. And, Uncle Sam, I want to know whatchyou doing with my [gerund favored by rappers] tax money. Because, you know what I'm saying? When you donate, when you donate to a kid from a foreign country, they give you updates of what they're doing with your donation." She complained about rats infesting New York City's subway, and concluded, like any good auditor, "I want receipts."

Cardi does have a point here. If you give to a group like Save the Children, you'll get letters from the child you're helping. It's too bad Cabinet secretaries don't write taxpayers detailing where their dollars go. ("Dear Taxpayer: I write to tell you that I dropped $31,000 for a dining room table and millions more for private jet rides.")

Fortunately for Cardi, it's easy to find exactly where each federal spending dollar goes. (One caveat: it's not entirely accurate to talk about where "tax dollars" go because the government spends almost $1.20 for every dollar it takes in.)

• The biggest chunk — 23 cents out of every dollar — goes to Social Security. Now, Cardi is just 25, so she's probably not spending much time worrying about retirement, but she can take satisfaction knowing at least some of that will make its way back to her grandmother in Manhattan.

• Medicare and other healthcare services take 13 cents each. In fact, more than two-thirds of every tax dollar goes towards various social insurance programs, which also include unemployment compensation, veterans' benefits, and the like.

• National defense takes 15.3 cents out of every dollar. Interest on the national debt eats up six cents more. And education takes another three cents.

• That leaves just six cents out of every dollar to cover everything else. That total includes all the perennial punching bags that budget hawks love to attack, like foreign aid (one penny per tax dollar), the Corporation for Public Broadcasting (1.2 hundredths of a penny), and the much-maligned National Endowment for the Arts (four thousandths of a penny).

We're willing to bet that no matter where your tax dollars go, you'd like to see less of them going there. So don't just criticize like Cardi B. Call us for a plan, and we'll give you something to dance to!

Ooops!

 Back in 1985, a group of ambitious lawmakers set out to reform the federal income tax code. House Ways & Means Chair Dan Rostenkowski introduced the legislation. (This was before he became inmate #25338-016 at the Oxford Federal Correctional Institution.) Congress held dozens of hearings, cast 29 roll call votes, and debated 111 amendments on philosophical questions like Dan Quayle's proposal "to provide that the period during which an individual is in the United States competing in a charitable sporting event shall not be taken into account in determining whether such individual is a resident alien."

Ten months and 18 days later, President Reagan signed the Tax Reform Act of 1986 into law. Two years after that, Congress passed a "technical corrections" bill to fix hundreds of drafting errors that made it into the final text.

Drafting errors and "technical" corrections certainly make tax planning harder. But they don't make it any less important. We can't let the perfect be the enemy of the good. So call us when you're tired of wasting money on taxes you don't have to pay, and let's see if we can show Congress how to do it right. 

IRS Investigates Pot of Gold at End of Rainbow

 St. Patrick's Day is here, and every "Irish for a day" tippler in your social circle will take advantage of this convenient excuse to haul grandma out of the house for a little day-drinking. (It seems unnecessary on a Saturday, but whatever.) Faux-Irish saloons across America are tapping kegs of Guinness, pouring shots of Jameson, and covering their walls and ceilings in every Celtic cliche they can find: the shamrocks, the hats, the green beads, and of course, the leprechaun jealously guarding his pot of gold at the end of the rainbow.

Now, leprechauns are usually pretty happy little fellas. Wouldn't you be happy if you found a pot of gold in some misty bog? But this isn't always true, as you'll see if you look at the University of Notre Dame "Fighting Irish" mascot. Have you ever wondered why that little guy is so hostile? Maybe it's because he just discovered the IRS wants a share of his stash!

Unfortunately for our diminutive Hibernian friend, the tax code has all sorts of special rules to help the IRS dig their hands deeper into his treasure:

• Code Section 61 defines gross income as "all income from whatever source derived." The code does go on to carve out all sorts of exclusions from this broad definition. For example, Section 101 excludes life insurance death benefits and Section 105(b) excludes employer-provided health benefits. Unfortunately, there's no exclusion for pots of gold at the end of the rainbow. (Sounds like the National Organization of Leprechauns needs to hire some better lobbyists!)

• Income received in the form of property is taxed under the rules of Code Section 83(b). Generally, the finder owes tax on the fair market value of property as of the date it's found. In the case of gold, where there's a public market to establish value, our leprechaun takes the average of the highest and lowest quoted trading prices for the yellow metal on the day he finds his treasure. If he finds it on a weekend, he'll need to take the average price for the Friday and Monday bookending the day he finds it.

• Gold is considered a capital asset. This might seem like good news, as gains are generally taxed at preferential rates capped at 20%. However, precious metals are classified as "collectibles," making them subject to special higher rates of up to 28%. Gains on gold are also subject to the 3.8% "net investment income tax" for leprechauns with adjusted gross income above $200,000 (single filers) or $250,000 (if filing jointly with Mrs. Leprechaun).

• Finally, there's a special prohibition against holding gold coins in IRAs or other retirement accounts. This may not sound like a big deal at first. However, Irish folklore holds that leprechauns live for 300 years, which makes saving for retirement especially crucial.

Now, don't go feeling too sorry for your pint-sized prospector. After-tax gold isn't as much fun as pre-tax gold. But it's still better than no gold at all. And with gold currently trading at $1,300 per ounce, there's plenty in the pot to pay for good tax-planning help. Conveniently, that's where we come in. So call us when you're ready to pay less. Don't count on finding a four-leaf clover when you can follow the rainbow to a plan!

Area Man Treats Colleague to Dinner, Drinks

Area Man Treats Colleague to Dinner, Drinks

 The three-martini lunch has a long and mostly honorable history as a deductible business expense. As former President Gerald Ford once said, "Where else can you get an earful, a bellyful, and snootful at the same time?" Ford's successor, famed buzzkill Jimmy Carter, tried (and failed) to cut the deduction from 100% to 50%. The Tax Reform Act of 1986 succeeded in that goal, and today's business diner has probably switched from martinis to white wine. But old habits die hard — check any happening lunch spot and you'll find happy diners eating partly on Uncle Sam's dime.

The rapper-turned-mogul Jay-Z may have 99 problems, but reaching for the check isn't one. Last month, he treated the president of his Roc Nation Sports talent agency, Juan "OG" Perez, to an epic birthday night in Manhattan. The posse started with dinner at Zuma in midtown, where he dropped $13,000. After dinner, he took them uptown to Made in Mexico for $9,000 worth of drinks. And a group of six stragglers finished off the night at Playroom, where the real fun started.

Apparently, Jay-Z and his friends were very thirsty, very generous, or both. The group's bar tab — ticket #48 — included 20 bottles of Ace of Spades brand "gold" champagne at $1,200. Each. Plus 20 bottles of "rose"champagne at $2,500. Each. Plus $6,035 in sales tax (of course). Plus an $11,100 tip. Grand total, $91,135.00. Hear it for New York!

So . . . Jay-Z takes his employee out to dinner. Surely they talked business while they were painting the town. Should Jay-Z stuff his receipt in a shoebox to save for this year's tax return?

For starters, there's a debate brewing over whether business meals are now deductible at all. For 31 years, there was no debate that you could deduct 50% of meals where there was a substantial, bona fide business discussion. The Tax Cuts and Jobs Act clearly eliminates deductions for "associated entertainment" expenses, like golf or a ball game taking place before or after that business discussion. However, some tax professionals read the new law as eliminating the deduction for meals, too.

But even assuming the deduction survives the new law, there's another hurdle to overcome. Code Section 274(k) prohibits deductions "for the expense of any food or beverages unless such expense is not lavish or extravagant under the circumstances." Now, you can argue that if you're Jay-Z, you're expected to make it rain with $74,000 worth of champagne. And if you're talking a glass or two to celebrate signing a big deal, you might even be right. But we can probably assume that even Jay-Z's fans at the IRS would draw the line somewhere well before the 40th bottle.

As for that $11,100 tip . . . sure, it sounds like a baller move. But it's actually just 15% of the pre-tax tab, and pretty stingy for New York! Plenty of celebrities are known for being better tippers. Shaquille O'Neill asks servers to tell him how much they want. And George Clooney routinely leaves servers a 150% surprise. Walter White, of Breaking Bad fame, left a $100 tip for breakfast on his 52nd birthday, although it did turn out to be his last meal.

When was the last time you went out for a really special meal? Was it a birthday, an anniversary, or some other celebration? It probably wasn't deductible. But careful tax planning might keep enough in your pocket to cover your own epic night out. So call us when you're ready to save, and let's see if you can raise a glass of bubbly to the results! 

This Will Make You Love the Income Tax. . .

We Americans have fought with our internal revenue code since 1913. But slicing and dicing income, deductions, and a dizzying array of business and personal credits is hardly the only way that Uncle Sam could raise the money he needs to pay for guns and butter. State and local governments also use sales taxes, payroll taxes, property taxes, excise taxes, and "gross receipts" taxes to fill their hungry coffers, too.

And then there are the more exotic taxes, the kind that sometimes live only in philosophers' heads. The nineteenth-century economist Henry George argued that a land-value tax would raise wages, improve land use, and eliminate taxes on economic activity. More recently, economists and politicians have proposed carbon taxes, consumption taxes, and European-style value-added tax alternatives.

Here's one you probably never considered. Earlier this month, a Duke University philosophy PhD candidate named Erick Sam took a microscope to the concept of an "endowment tax." This is a vaguely Marxist tax on "a person's potential earnings, which can provisionally be thought of as the maximum income a person could earn or could have earned over a given time period." (Yikes!)

Sam opens his paper by asking how we determine a person's "ability" in the first place. He acknowledges that we don't "inhabit a reality where endowment is readily apparent," then goes on to consider standardized test scores, genetic capabilities, and educational achievement as proxies for ability. He even mentions one proposal to impose a "privilege tax" based on the income your parents earned during your childhood!

Now the fun starts. Sam walks us through the utilitarian considerations of an endowment tax, and how it counters the "substitution effect" that income taxes impose on the desire to work. "Distributive considerations are only instrumentally relevant to this calculus, since different distributions will tend to be correlated with distinct aggregate utilities." (Well, duh???) He goes on to address the Kaplowvian argument for endowment taxation as the ideal Haigs-Simon income tax, where "income" equals consumption plus all accretions to wealth over a given period of time. (Huh?) 

Next, he drags us kicking and screaming through a dense swamp of non-utilitarian considerations. These include Shaviro's deontological argument for endowment taxation rooted in the theory of luck egalitarianism, Stark's libertarian challenge to Rawlsian arguments favoring the priority of liberty, Markovits' algorithm for balancing endowment taxation with talent slavery, and Dworkin's auction and insurance scheme for eliminating inequality. (It's ok, we're just as lost as you are.)

After 69 pages, Sam thankfully suggests leaving the whole idea in one of the counterfactual worlds where it might actually work. Here on Earth, though, endowment tax fans face three unpleasant choices: 1) make peace with how it does violence towards liberty, 2) acknowledge that it's both inefficient and unattractive on its own terms, or 3) accept its problems of "talent slavery, counterfactual talent slavery, and servitude to objective standards of rationality." It's enough to make our current tax code sound pretty dreamy!

So . . . we've established that our current tax code may not be the worst way to raise government revenue. But that doesn't mean you have to like how much you pay! So call us when you're ready for some real-world savings, and we promise to explain them in actual English!

Romantic Tax Collectors Love Valentine's Day, Too

It's February, and love is in the air. Restaurants are advertising intimate specials for two. Florists are rolling out the red carpet. And in the greeting card racks across the country, Hallmark's most accomplished poets are debuting their new verse.

We're talking about Valentine's Day, of course. 62% of Americans say they'll celebrate the occasion. (Of course, that means the rest of us will just try to keep our heads down and pretend it's just another blah February day.) But with all those Cupid's arrows flying around, shouldn't the tax man get a little love, too?

The National Retail Federation estimates that Americans will spend $19.6 billion this Valentine's Day. That includes $4.7 billion on jewelry (for the truly lucky ones), $3.7 on going out, $2 billion on flowers (including, naturally, 250 million roses), $1.7 billion on chocolate and candy, $894 million on greeting cards, and $751 million on pets. That's all before we get to the lingerie, champagne, and candles. (Guys, we know you don't care for scented candles. Just think of them as proof that your Valentine trusts you with fire.)

Naturally, all that spending means taxes. The average sales tax rate here in the U.S. is 8.454%, which suggests that state and local governments will collect over $1.5 billion. Of course calculating that tax isn't always as easy as multiplying your purchase amount by the local rate. Some states define candy as "groceries" or "unprepared foods" and tax them at lower rates or exempt them completely. (True love may be pure and simple. Taxes, not so much.)

The real action comes once you and your Valentine get married. For years, the so-called "marriage penalty" has taxed married couples at a higher rate than single filers earning the same combined income. The Tax Cuts and Jobs Act eliminates that penalty for couples earning up to $400,000. But above that amount, it bites hard. Singles don't hit the 37% top tax bracket until $500,000 of taxable income, while joint filers hit it at just $600,000. For a couple earning $500,000 each, that's a difference of $8,000 in total tax — enough to buy a lot of roses!

Of course, there are tax advantages to tying the knot, too. You can make unlimited cash gifts to your spouse. Your estate tax unified credit doubles, to $11.2 million. (Maybe that's why rich old geezers marry younger women . . . yeah, they do it for the tax planning!) You can make twice as much tax-free profit selling your home than if you're single. What's not to love about that?

And if your marriage doesn't go as planned? You can still console yourself with tax-advantaged alimony payments — at least, for agreements finalized before the end of 2018. (You know why divorce is so expensive? Because it's worth it!) You might also get a tax deduction if you donate all the stuff your ex gave you to charity! No sense cluttering up your house with painful memories, right?

Here's something we know you'll love, no matter what your relationship status: keeping more for your sweetheart this holiday. The key to making it work, of course, is planning. So call us when you're ready to pay less tax every day!

Trump's new Tax Code? Are Real Estate Investors screwed?

Is the new tax code going to help or hurt real estate investors? I've heard mix reports on whether we are screwed or not. Larry Stone, CPA will tell us what to expect, and it may not be what you think. Listen to Larry as he tells us what we need to do as investors and if we can take advantage of this bill!

https://icorockies.com/real-estate-investing-podcast/071-trumps-new-tax-code-screwed/