YOU BUY COMMERCIAL REAL ESTATE FOR INCOME TAX BENEFITS…

PART III…

Growing up as a kid in New York, I was never the athlete and always the last person picked for the team. As an adult, I took up golf, and I was really terrible at it. But it got me out in the fresh air and got me exercise, which is always good for us. I also love being with friends, and I always had a wonderful time playing. I live in the San Fernando Valley just Northwest of downtown Los Angeles, and I had a friend who lived in a lovely city 70 miles away called Santa Barbara. He was an excellent golfer, and we would play together often; he put up with the fact that for every shot that he hit, I had to hit 3 to catch up with him.

He also had friends in Santa Barbara with whom I became friendly, and we all would play golf together from time to time. And you know how much business is done on the golf course while playing golf, so we will discuss different things during the golf round. One day, one of the friends complained that his father was very ill and needed expensive medical treatment even though he did not have long to live. His Dad was going to have to sell his house to pay the medical bills, but there would be a lot of income taxes that would have to be paid because the house appreciated a substantial amount over the years. His Dad lived in this house for many, many years.

So, being the practicing Certified Public Accountant that I was and being creative and an income tax expert, I came up with a solution. I said that his Dad should mortgage the house; there was a lot of equity, and he should use that money to pay the medical bills. After his Dad passed away, he was going to inherit the house. But, the basis that he would have when he became the owner of the house was the FAIR MARKET VALUE AT THE DATE OF DEATH. So, when his Dad passed away, he would get ownership of the house, and he could sell it immediately; there would be absolutely no gain or loss on the sale, and, therefore, no one would pay a penny of income taxes on the gain.

Another thing was that his Dad’s estate was under the limits to pay Inheritance Taxes, so there were no Inheritance Taxes either. So, there would be absolutely no income taxes, capital gains taxes, or inheritance taxes to be paid at all. Guess who paid for my lunch!!!

Just think how much I could have charged him for that advice. Just think how much money I saved him in income taxes that he ended up with after his Dad passed away. But why do that to someone in his situation? While I was a practicing Certified Public Accountant, if a client did not become a friend after doing two income tax returns for them, I would fire them. I work very hard and think about all of the things that I can do for a client from all sorts of different angles, and my mind never stops. And, If I am going to work that hard for my clients, I want to like them, and I want a true friendship. This fellow and I were friendly, and it was a bad situation for him, losing his Dad, and I did not want to pour salt into the wound.

By the way, this scenario works for all real estate and many other assets upon someone's death. The assets that the decedent owned before death pass on to the heirs at FAIR MARKET VALUE at the date of death.

My partner, Fred Sams, is amazed at all of my stories, like this one. I once got an EXTRA $560,000 for a client when I helped him sell his company. There is no one else in the whole world who could have pulled that off as I did. I could have charged my client between $25,000 and $50,000 for doing that. He paid for dinner that night. We had a relationship and a friendship that was wonderful, and I was just pleased that I could do that for him, and I was really excited that I was able to pull this off at all.

When I say that the client and the relationship come first, I REALLY MEAN IT!!!

First, that is not me playing golf in the picture. I never looked that good after a swing.

Second, this is Labor Day Weekend. I hope that all of you have a wonderful time playing golf, being with friends and family, or just chilling out. This is the first big weekend of College Football, and I know what I will be doing. Be safe, and I will see you again next week!!!