Tax Loopholes The Rich Use To Pay Zero Taxes w/ Tom Wheelwright

How many of you pay taxes? Raise your hand. Okay, a few of you out there, how many, if you had the choice legally to not pay taxes, would rather not pay taxes, Raise your hand. Even more. That's really interesting.

How many of you.

Know somebody that you suspect doesn't pay their fair share of taxes because they cheat? Raise your hand. Oh, and then all of them go up. I got it. So I want to thank particularly Ryan Moran, capitalism.com, the whole team here. Can we give them a big round of applause, please?

I mean, what a great event, right? Great event, great people, great speakers. Jeff was fabulous. And as they all are, just a little bit about myself. I grew up in the heart of Mormonism, Salt Lake City, Utah, Literally, the very heart of Mormonism. And so When I was 19 years old, I was expected to spend two years of my life serving a mission, which I did very, actually very gladly was happy to do so. And it was pretty interesting because, you know, my buddies in high school, we were all thinking, because Salt Lake, right, everybody's Mormon, right? Almost. And so we're all talking about where we want to go. And, you know, people say, well, you know, I'd really like to go to South America. They're so warm and friendly. Or, you know, I want to go to, you know, Sweden with those beautiful blondes, or, you know, so forth. And they sent me to Paris, and Paris is my favorite place on earth. It's absolutely beautiful. It's also probably the least likely place that you're going to sell Mormonism to Catholics. First week I'm there, somebody slugs me and said, very not politely, no, thanks. What I learned there, though, is what every entrepreneur has to learn first. I learned all about rejection.

Right? How many here have learned about rejection? Being an entrepreneur, right? If you can't take rejection, you might as well stop right now, go back and get a job. So from that two years experience which taught me so much about.

Selling Mormonism to Catholics and working with people, I spent the next two years getting my degree in accounting from the University of Utah and Bachelor's of Accounting. And then I went to the University of Texas, where I got my Masters of Tax in accounting. The University of Texas, Hookham Horns. Yes, out there. And from there, I spent the next seven years with a small accounting firm called Ernst and Young, one of the largest firms in the world, including three years in their national tax office. Now, I was there the last time we had major tax reform, which was 1986. And.

That'S a very interesting time. And what I Did there was, I actually helped write the manuals and the courses to teach the CPAs around the country how to explain the law. Then from there I went, I moved to Phoenix. In the Phoenix office was in charge of the real estate tax practice in Phoenix. And from there I went into a Fortune 500 company where I was the in house tax advisor and got very proficient in the state and local area. Sales tax became a very big specialty of mine. And so Arizona State University came to me and asked if I would create a course on multi state income and sales tax which I taught for the next 14 years. Once I left the Fortune 500 company, I had a short stint in another CPA firm that did not go so well. That was not a good fit. And after seven months actually I was fired. I was Price Waterhouse. And.

Once you've been fired, you get to think a lot about what do I really want. And what I decided was I really loved working with entrepreneurs because I saw entrepreneurship as a path to freedom, right? No more bosses, nobody telling you what to do. And that path to, I saw it as that path to freedom. And I wanted to work with people who wanted that path. So I decided to start a CPA firm. I started from scratch and I wanted to start one that would bring really high level tax advice to the entrepreneur. Because the big accounting firms, which we're now at the final four now, right? Ernst and Young and that group no longer, after.

The 1990s, no longer served the entrepreneur. They were focused very much on the big Fortune 500 and Fortune 1000 companies. So from there, so I started the CPA firm. We grew into a firm that was an international firm worldwide. And we were serving clients in all 50 states and in 30 countries. And I decided, we talked about, we decided we need to get bigger because there are more people out there that we need to serve. So we began developing a network of CPA firms which is now under the brand of wealthability. And so we have a network of tax free wealth advisors around the US right now. Now the last few years, as Ryan alluded to, I've spent a lot of time with my friend Robert Kiyosaki and we travel around the world. We were in Australia last year.

Three different cities and we were in South Africa. And this next year we're in Europe and in Asia. And it's really fascinating because the audiences are always, they're always fantastic. Just like here in Dallas, just like in Austin last year, the audiences are fantastic. Something will happen every single time, every single time, without question. And it will happen here. Somebody will come up to me at the end, and they'll say, you know what? What you and Robert teach is great. Only you can't do that here.

And it doesn't matter if we're in Moscow, whether we're in San Francisco, or whether we're in Dallas, Texas, somebody is going to say that. So my question for you is, how many of you would be willing to entertain the idea for the next 45 minutes that you actually can do that here? Raise your hand. Great. That's awesome. So here's the thing. As Ryan said.

I look at taxes a little differently. And it's not that I look at it differently. It's just that when I look at what the government does, I look at, okay, what is the government asking us to do in the tax law? And what they're saying is, look, we have one line that says all income is taxable unless we say it isn't. And then there's another line that says, no expenses are deductible unless we say they are. And then we have some charts and tables telling us how much tax to pay. That's about 30 pages. The tax law is over 6,000 pages. So the rest of the tax law is a series of incentives to get you to do what the government wants you to do. Now, here's the raw fact. Everyone in this room that's paying taxes has a partner. And your partner is the US Government and the state government.

The question is.

What does that partner want you to do, and how are they going to reward you for that behavior? The reality is, today, with this new tax law, which is what we're going to talk about today, with this new tax law, if you are paying any kind of serious taxes, you are doing it wrong.

This last tax law completely changes the landscape of taxes. If you are paying serious taxes, then you are doing it wrong. And I'm talking about legally, you are doing it wrong. You can choose. You can pay high taxes, and the government's fine with that, or you can do what the government asks us to do, partner with the government and pay low taxes. And they're fine with that, too. It works like this now.

And this is a massive change in the way the tax law works.

If you take the money that you make in your business.

And you reinvest it to produce.

More goods and services and build your business, guess what? You will pay zero tax.

If you are in business and you reinvest in your business.

Every dollar you reinvest in your business is now deductible it didn't used to be that way. It's now deductible. We'll give you some very important examples in a minute here. If you invest your money, if you turn it and invest in real estate, no longer will you have to pay tax because you'll get an immediate deduction for that investment in real estate.

If you invest your money in commodities.

Like oil and gas, I'm not talking about gold and silver. They're not really commodities. So you don't use. I'm not talking about, sorry, gold and silver. You. You don't use them up. I'm talking about commodities like oil and gas and coal and. And clean energy and farming and so forth. If you do that, no tax.

If you invest in.

Paper.

It'S kind of over here because you get some. Because you're facilitating production. But here's an interesting one. You can still invest in charity.

And you get a full deduction.

But if you take your money and over here, you use it.

For personal purposes. If you use it for personal purposes, it's taxed. But it's only the money you use for personal purposes that's taxed if you do it the right way. Let me show you a different way to look at it.

Okay? Two financial statements. Income.

Expense.

Assets and liabilities. What most people do when they make money, the money comes in.

And it goes out, they spend it, and what happens is they're taxed.

What business owners typically do is they take some of that money that comes in.

And they put it back in the business. And if you do that, it's tax free.

And that's been the case for a long time. But what's changed is.

Now if you take your income, your income comes in and you put it into an asset in your business, in your real estate, in your farm, in your whatever, your ranch, and then comes back here to produce income that's also tax free. Now, this is new stuff. When we learn. We don't learn very well when we just listen to people. Okay, that's. There was a professor named Dale who did a study back in 1969, said we only retain about 10% of what we read and about 20% of what we hear. But we'll retain up to 70% if we explain it to somebody. So take one minute and turn to somebody next to you and explain what you just heard. Ready? Go.

Okay, let's turn to your neighbor. Give them a high five. Say you're smart.

Okay, we can do this again. Everybody turn to your neighbor. Give them a high five. That's this, right? Say you're smart, give yourselves a round of applause. Good job.

So the question is, well, how is this even relevant to my business? Let me ask you a question. How many of you in this audience have a business where you have inventory? Raise your hand. How many of you have been frustrated because when you put that money in an inventory, that inventory is not deductible? Raise your hand. That changed with this new tax law.

That right there, that change will be, is enough for many of you that you will pay no tax in 2018 if you make this change properly.

Is that good? Okay, how many think would like to know how to do that? Raise your hand. So I'm going to tell you how to do that in just one minute. Anybody here own any investment real estate? Raise your hand. Okay. Now it used to be that when you bought investment real estate and whether it was for your business or whether it was for rental property, but when you did it, you had to deduct that over a really long period of time, like 27 and a half years, up to 39 years.

Which is like, you know, somewhere between 2 and 4% a year. Right? How many would rather have their money now.

Under this new law, because it's now a consumption tax? Under this new law, if you invest in real estate.

The very first year, you should be able to get a deduction of up to 25 to 30% of the purchase price of that real estate.

Put this in perspective. You go out and buy a building for two million dollars.

You put 25% down, which is.

$500,000, right. On a two million dollar building.

And you get a 30% deduction. You put $500,000 in the bank, puts a million five in and you get a deduction for up to $600,000 the first year.

That's the new law if applied properly. Okay, used to be you go out and buy it truck, an SUV, etc. You could deduct up to $25,000 your first year. Now if it's used 100% in your business, you get to deduct the entire thing. Again, has to be used 100% in your business. So there's ways to do that. Okay, how many would like to deduct their car in the first year? Because it's all about, what we know about business is it's all about cash flow. And the fastest way to put money in your pocket, the fastest way to increase your cash flow is by reducing an expense. And what's your biggest expense? Taxes. And it's the easiest one to reduce. So let's start.

We want some actionable items. Who'd like some actionable items here today? Okay. So it's great to be inspired. I love that. I want something I can actually do. Right. So let's talk about depreciation. And the term is. So when you go to an accountant, the term is bonus depreciation. Bonus depreciation. So here's how bonus depreciation works.

Let's start with a building. Now, it used to be bonus depreciation only applied to brand new equipment. What changed is now it applies to used equipment. But when you look around this auditorium here, you look. Well, there's no equipment here. But yes, there is. There are chandeliers, there's carpet, there's window coverings. There's the stage. All of this is equipment. When you go outside, there's landscaping, there's outdoor lighting. All of that is equipment and equipment. Now.

The depreciation rate is 100%.

So what we have to do is we have to determine how much is equipment that we're going to get bonus depreciation on. The way we do that is something called a cost.

Segregation. And all we're going to do is we're going to hire an engineer and a cpa and they're going to go out and they're going to measure and they're going to determine that there are four things that you bought when you bought that real estate. The first thing you bought was land, and the depreciation rate on that is 0%.

The second thing you bought was the building, and the depreciation rate on that is anywhere from 2.5 to 3.6%.

The third thing you bought.

Was improvements.

And that used to be deductible at about 5% a year, and now it's 100%.

And then the other thing you bought was you bought all the contents.

Now deductible at 100%.

On average. On average. When you do that professional cost segregation, which is required to do. The IRS requires it. When you add these together, it's going to be somewhere between 20 and 30% of your purchase price.

So take a minute. Explain bonus depreciation to your neighbor. Ready? Go. Whether you understand or not, just do it.

All right, let's start to wrap up.

Thank your neighbor. Give your neighbor a high five. Say you're smart.

We're going to try that one more time. Turn your neighbor, give him a high five. Say you're smart.

Give yourselves a round of applause.

If you're wondering why we do Things like turn to your neighbor and give them a high five and say you're smart. It's because education, learning requires energy. What does it require? Energy. What does it require? Energy. So anything we can do to increase our energy is going to increase our learning and our understanding. So very important. That's part of why we have a discussion. Just want you to understand why we do these things. Now, question, what's content? Anything that adds to a building that.

The building could function without.

So could the building function without carpet? Yep. Could the building function without window shades and window coverings? Yep. Could it function without light, overhead, regular lights like this? Yep, it could. Could it function without cabinets? If you're a residential? Sure. Could it operate without. Could it function without ceiling fans? Yes, it could. So anything that just adds to the function, that does it isn't an essential part of the building functioning as a building. Okay, and then the question is, what are land improvements? Land improvements, by the way.

Include parking, covered parking.

Not a parking structure, but covered parking. It includes outdoor lighting, includes all of your landscaping. So if you have a building for your business or you're investing in real estate, your depreciation should have just skyrocketed under the new law. Okay? Now, this is for buildings that you purchased, equipment you purchased after September of 2017. So you can still do a cost segregation for buildings you bought before that, but you'll get the old rates. Okay. It's still worthwhile, by the way. Okay, that's a cost segregation. Now that's just real estate. Now think about your car. I'm in here. Like nice cars. Anybody here like nice cars? I love cars. I love cars. Okay? I mean, really love cars. So it used to be the amount of deduction we got for a car was, like, tiny, so nobody really cared too much about it. But what happened is, with this new law is a. If you buy an SUV or a truck that's over 6,000 pounds.

As long as you choose 100% for business, you get to deduct 100% of the cost, even if the bank financed 100% of the cost. So you put zero down on a $60,000 truck and you get a $60,000 deduction. How many think that's awesome, but only if it's 100% business. Now the question is, what's business use of a car? Right. How do I know it's business? The number one thing that you can do to increase the business use of your car is to have a home office.

It's the number one thing you can Do. Let me ask you a question. Anybody here, just by a show of hands, ever been told not to take a deduction, raise your hand. By a tax preparer, tax advisor. Anybody else, you're told not to take a deduction, raise your hand. Wow. Not very many. How many for you was that the home office? Right. And here's why. Because 25 years ago.

It was a red flag. 25 years ago it was a red flag. And here's what happens in my profession. This is why we created this network. Here's what happens in my profession. The young people come in and who trains them? The old guys. And the old guys were trained by older guys.

So there's this institutional memory of home office is bad. Home office has not been bad since 1996.

The law completely changed in 1997.

Here's the other question. If they told you not to take it, they say that it's a red flag because you might get audited. What does that tell you about your tax preparer? Who are they afraid of? They're afraid of the irs. But let's think about this.

You come out of school from a good school and you're an accounting major and you decide, I'm going to go get a job. And you go, well, let's see. I could go get a job where people love me and I'm always the hero. That would be like a CPA firm, right? Or I could get a job where every one of my clients hates the ground I walk on. Every one of my clients can't stand to see me. They never want to talk to me.

Seriously. Worse than being a proctologist, that's an IRS agent. They have a tough job, but guess what? Typically not the top of their class. So if you're a CPA or your tax preparer is afraid of the irs, who's a C student.

Just think about that.

So here's why home office is so important. Your first trip of the day is a non deductible commute. Even if you're going to go see a client or your real estate, your last trip home from a client or real estate or an office is a non deductible commute. The IRS says it's in there, by the way. It's in their instructions. If you look it up. If you have a home office and you go to your home office every morning and you come back to your home office and you do work in your home office before you go, and you do work at your home office when you come back, guess how long Your commute is 30ft.

For most of you. That would convert your automobile expense. It would double how much you get to deduct because the first trip and that last trip is so big. On top of that, you can have two offices. You can have an office where you meet with clients and an office where you do your administrative work at home. So you don't have to just have one office. Okay? Now, that's vehicles. So any equipment, by the way, any equipment's always been deductible. So any equipment's deductible. But what's interesting is not only did they.

Do bonus depreciation in this last tax law, but they did one other thing that I think was pretty sensational.

How many of you have a business that over the past three years, has averaged gross receipts less than $25 million? Raise your hand. I would expect most of us here, right? Most people here under $25 million. If you do, the law changed. And under this new law.

You no longer.

Have to keep track of your inventory.

Under this new law. Here's how it works. Now, you're gonna have to follow this. Okay? You okay with this? Can we actually give you the rules so that you can go back to that accountant who's telling you can't do this here and tell them. Here's how you do it. How many would like to be able to tell their accountant, you can do that, right? So I'm gonna give you the rules. So the first rule is you have to be under $25 million of gross receipts. That's rule number one. We'll write this up.

Okay? That's gross. Okay? That's gross sales under 25 million. Number two.

You must.

Elect to be on the cash method of accounting.

So there's two major types of accounting. You don't need to know much about this. You just need to know there's accrual and there's cash. All right?

And if you're doing cash, but you keep inventory, that's called a hybrid. Okay? That's a hybrid method. There's accrual and there's cash. It used to be that if you were over $10 million of sales, you had to be on the accrual basis, which meant that you had to pick up your receivables and income when you sold it, not when you collected it. And you got to deduct your expenses when you signed the contract, not when you actually pay for it. But what I find is most businesses.

Pay their bills faster than they get paid. How many people pay their bills Faster than they get paid. That's most businesses because, you know, I mean, if you're, if you're, let's say you're a pharmacy and you, you know, you're getting paid from insurance company or you're, you know, you've got a big, big customer or the government or anybody and they're paying you over, you know, 30 days or 90 days. So you had to be on the accrual basis. Now they just changed that, moved that, they moved it from 10 million to 25 million. So now if you're under 25 million, average of the last three years for all your companies, you can be on the cash basis.

And that by itself for some of you, because you've got big receivables, will be a huge change. And by the way, it's automatic if you file the right form. I'm going to give you the form in just a second. Okay? Now before we go on, take one minute and discuss rule number one. Rule number two. Ready, go.

All right, let's start to wrap up.

Turn to your neighbor, get my five, say you're smart.

Once again, turn to your neighbor. I get my five, say you're smart.

There you go. Give yourselves a round of applause. All right.

How many are starting to get the idea that maybe there's a lot to this? Raise your hand. How many agree now with me that you do not want to do this by yourself? Raise your hand. Okay, this is like that commercial, you know, where they do the fancy driving. They say closed course, don't do this at home by yourself. That's what this is. Okay? But there are team members out there that will help you do this. What I want you to understand, and what you have to understand is you're the only one who can change your taxes. You're it. You're it. If you want to change your tax, you have to change your facts. And I can't change your facts for you. You can change your facts for you and I can tell you what facts to change, but you still have to change the facts. So you still have to have a basic understanding and have the right team members. Jeff talked about team right. If you're doing it by yourself, you're doing it wrong. If you're doing it by yourself, you're doing it wrong. So rule number two, you must be on the cash method. Rule number three.

And this one's a little bizarre, okay?

But it is what it is.

You have to elect to treat your inventory as.

Non incidental materials and supplies. You can only do that if you're under 25 million, you can only do that if you're on the cash method. But you can elect to treat your inventory as non incidental materials and supplies. And so far, you explain this to your tax preparer, your tax advisor, they're all going to go, that's fine, but that still doesn't make it deductible. And that is correct. That does not make it deductible. There's one more step you have to do.

You have to make an election on your tax return. That's called a de minimis election, which allows you to deduct anything under.

Any item that you buy that's under $2,500. How many of you have inventory where a good portion or all of your inventory, the items cost less than $2,500. Raise your hand.

Less than $2,500. So if you're a car dealer, you're out, right? But if you're an Amazon retailer, chances are every single one of your items costs less than $2,500, which means that inventory that's sitting on your shelf as of December 31, 2018, with these proper elections is fully deductible in 2018.

Yeah. Take a minute and discuss that. Go.

All right, let's start to wrap up.

Thank your neighbor. Turn to your neighbor, give him high five, say you're smart.

Give yourselves a round of applause. Good job.

How many of you just paid for your trip to capcon?

Many times over. Right now there are three things your accountant must do in order for this to happen. And if they don't do any of them, you get none of it.

Am I clear? Am I clear?

They must do everyone.

There is a Form 3115.

And they must file it with two different provisions in it. They must file the cash method and they must file the non incidental materials and supplies. Those are two different changes in accounting method. Two different ones. Your accountant must do that. If they do not do that, you lose.

Number three, they must make.

The de minimis election. If they don't.

You'Ve accomplished nothing.

Because you're still going to capitalize everything. It's just capitalized as non incidental materials and supplies instead of capitalized as inventory, which by the way, has the same effect as inventory.

But if you make this election, all of a sudden.

Those items are deductible.

That is not a form number. That's an election that you make on the tax return. Okay? By the way, for your tax preparer, it should be a box. They check on Their computer software, okay? There's a box. They check. It's a de minimis election. That's what it's called. It's the $25 de minimis election. This is the form 3115. All right? It's all there, 3115. So you gotta do that now. I wanna go back. Is that good? I mean, is that. Is that pretty fun to be able. How many like the idea of deducting everything, all their inventory?

So here's what's fascinating to me. So the press, the entire year has been saying this is not really a tax reduction. How many heard that in the press, right? This isn't a tax reduction. Do you know if you make under $100,000, family of four. Your taxes went down by 75% this year. 75%. Now, if you're between 100 and 400, you may have gone up. You may have gone down. You probably went down a little. Unless you're a business owner. And if you're a business owner or a professional investor, guess what?

Your taxes. It should. You do it right over the next three, four years, your taxes should go away. I'll give you an example.

I have a doctor who came to me. The guy does over a million dollars a year in net from his practice. He's a doctor going, well, he's a professional. He can't possibly get all these deductions. First year.

Reduced his tax liability by 40%.

This year, another 40%. In three years, he will be tax free.

Every one of you should be doing that. How many would rather be tax free? Raise your hand.

That's what's possible under this new law. Now, there's one thing I didn't talk about in bonus depreciation. That is kind of exciting for a lot of people here. Anybody here have a website? Raise your hand. Good. I'm hoping that all of them went up.

Leave that up for a minute. Some of you are still writing that stuff.

Bonus depreciation includes.

Software.

Software is included in bonus depreciation. So here's the key. If your website is more than a brochure and rises to the level of software, which is, by the way, a very technically defined term by the irs. Okay? Not something we do in a seminar. If it rises to the level of software because of the functions it performs on the website.

It is subject to bonus depreciation, which means how much is deductible?

100% in the year you incur the expenses. The year you buy the website, the year you buy. Not the Website. The software. So if you're buying software, if you're buying a website or you're going to do some kind of software, by the way, the double's in the details. And you must have your CPA review that contract very carefully to make sure that it is indeed software. That's another bonus. Depreciation. How many think that that might reduce your taxes a little bit this year? I mean, you guys have already reduced your taxes to zero. So I can just stop, right?

How many would like some more tax reduction? Anybody? Okay. How many would like to never pay tax on the business when they sell it? How many plan to sell your business down the road? How many of your game plan is to build it up and big capital gain down the road? How many would like to not pay 24, 20 to 25% on that gain? How about zero? Would zero be good? Would zero be best?

So I'm going to show you how to do it. Zero. No matter how your company is currently formed.

There is an amazing rule that has very little known. That's called.

Section 1202. Now, this is just the code section in the Internal Revenue Code that gives us this provision. And this law has been around for decades, but nobody's ever used it. And the reason nobody's ever used it is because in order to do this, you must have a C Corporation. And the C corporation tax used to be.

35%.

Which we know is no longer 35%. How much is it? 21%.

However, if you're reinvesting all of your money in your business. What did we just learn? What's the tax rate? Zero. The tax rate is zero. So if you're taking a little bit of salary out, you're going to pay tax on that little bit of salary, but the rest of it is going back in the company. So your tax rate is zero. While you're building the company.

How many of you were formed as something other than a C corp? Raise your hand. Probably an S corporation, maybe a partnership.

Ryan's paying attention right now because a year ago I did a little webinar with him. And we did not know at the time whether we could convert an S corp to a C corp. But I'm going to show you how to do it right now and have it qualify. Good. Everybody want to see that? It's a little magic trick, but it's pretty easy. Here you go.

Here's you.

And you have your S Corporation. Here.

You'Re going, wait a minute, I'm an S Corporation. And it has to be Originally issued stock to qualify for section 1202, which by the way, if you have 1202 stock and you hold that stock for five years, at the end of the five years you can sell it and is taxed free, no capital gains. Okay? People will tell you there's a 10 million dollar limit. I will show you. I could show you don't have time today, but I could show you how to multiply that 10 million 100 times so it's really forever. All right, so it's not just a 10 million dollar limit, but you've got this tax free event. If you hold it for five years then. But you had to be originally a C corporation. So the question is, how do I deal with that? It's pretty easy.

I just form a C Corporation, have my S Corporation form a C Corporation. And all I'm going to do is drop my assets.

Down there in exchange for stock of the C corporation. And now what do I have? I have original issued C Corporation stock. And I know that's a lot to take in. So take a minute. Whether you understand it or not, explain it to your neighbor. Ready? Go.

Okay, let's start to wrap up.

Thank your neighbor, Turn to your neighbor, give him high five, say you're smart.

And give yourselves a round of applause. Good job. Excellent.

So how many think this maybe just sounds too good to be true?

It does sound too good to be true.

Fortunately, it's true.

Now here's a very important fact.

The amount of the gain that is tax free is the difference between the value the day you form the C corporation and the day you sell it. So if your company right now is worth $10 million and you sell it for $25 million five years from now, $15 million is tax free. $10 million is still taxable. Now there's a ways to deal with that, but not through section 1202. So it's the increase in value that you're going to get. So how many can see that you want to do this as soon as possible? Raise your hand. This is one of the most important planning opportunities that you have in your business. Most of you raised your hand saying that your plan is to sell your business.

For a big win down the road. Do you have to sell all of the business? No, you can sell a portion of the business. You have to hold this C Corporation for how many years? Five years. You got to hold this for five years and then you can do this. But there's some magic here because I want to walk you through the life cycle here of your business.

Come back here.

What did we just get through talking about?

If you take your money and reinvest it in your business, do you pay tax? No. If you take your money and buy.

I don't know, real estate, equipment, inventory.

Do you pay tax when you buy on that money that you bought the real estate, the equipment or the inventory, do you pay tax now? No. So there's no tax on that. So the whole life cycle of your business, should you be paying tax?

No. And once your life cycle of your business is to a point that you sell it.

Now you have a very big smile because you paid no tax while you were building your business and you pay no tax when you sell your business. And that is why we refer to this as tax free wealth. This is not tax deferred wealth.

How many of you ever heard of this idea called a 401k, raise your hand. Seriously. That's it. How many of you heard 401k, raise your hand. Seriously. Dumbest idea ever.

Think about what happens in a 401?

Who controls the amount of money you put in the government? Who controls what you can invest in the government? Who controls how much you can take out the government? Who controls when you take it out the government? Who controls how much tax you pay when you take it out the government? Why would you ever do something that is completely and entirely controlled by the government if you can build a business tax free?

So that's why capitalism.com is so important. Because we're talking about doing what the government wants us to do. The government wants us to build tax free wealth. There's not one thing in this book.

That is not sanctioned and approved and endorsed by the government. Not one. Okay. How many like the idea of sleeping at night? Raise your hand. Okay. Yeah, me too. And guess what? When I sign your tax return, what I'm saying is, under penalties of perjury.

Based on the information you gave me, this return is true and accurate. So when you decide that you're gonna cheat on your taxes and you go to prison, I go with you. And my number one goal in life is not to be somebody's girlfriend.

Number one.

So far, so good.

So I'm not going to go to prison with you. The idea is that the government wants you to do these things. Does this look like maybe the government would like you.

To invest in equipment? Does it look like the government wants you to invest in real estate? Does it look like the government wants you.

To build your inventory?

So we've gone from an income tax to a Consumption tax. And it gets better.

Let's say you decide, look, I'm not going to do section 1202. I'm going to stay an S corporation.

And I want to continue to get that tax at my personal rates because I really want to take the money out of my business. But here's what happens. Let's walk through this. There's one more tax benefit under this new law. Let's say that you net a million dollars.

And then you decide, look, I'm going to reinvest $600,000 into my business, either inventory, equipment, or otherwise.

Now, my taxable income.

It appears.

Is $400,000.

However, because you made that money in your business and not as an employee.

You get to now subtract out.

20%.

Just because the government said so.

It's so that small business owners can compete with big business owners. Big business owners got a reduction to 21%. Said, look, we want the small business owners to get a reduction. So we're going to give a 20% off, and you're going to be taxed.

On $320,000.

Unless you're an accountant or a lawyer or a doctor, and then you don't get this benefit. Okay? But you guys who are Amazon retailers, you guys who have. Who have regular, you know, retail businesses, you all qualify. In fact, actually, the IRS was very generous in their regulations on this. This is called the 20% pass through deduction or qualified business income deduction. There's different names for it, but this is the reality of what happens. You get to 400,000 and you're only taxed on 80% of it. There's all sorts of little rules on it. They're not that difficult. They're not that difficult if your CPA has done a little reading in the law, okay? But take one minute and.

Explain to each other what happened here, where the only thing you're being taxed on is the money that you took out of the business, and then only on 80% of it. Ready? Go.

All right, let's wrap up. Thank you, neighbor. Give them a high five. Say you're smart.

Give yourselves a round of applause.

Come on, give yourselves a round of applause. Good job. You just an hour on taxes. Give yourselves a round of applause. That's awesome. Good job.

Now, there's one more piece here.

How many of you think that there may be some details you have to pay attention to here?

Like a lot of details you have to pay attention to, Right?

So how many of you here have heard something new that they, in the last hour that they had not heard before.

Ask yourselves why?

And I. This is my challenge, okay? This is what gets me up in the morning. Because all you out there that just raised your hand, you heard something new because your accountant didn't tell you this.

You heard something new because your accountant didn't tell you this. And some of you may have outgrown your accountant. So what we've done at my company, wealthability is, as I mentioned before, is we created this network of CPAs. So go ahead and put that slide up.

And this network of CPAs, this is what I do for a living now, other than talking to you people, is I work with, I train other CPA firms and we have a network. We have about 10 CPA firms right now, and we used to only have one CPA firm. And we could only handle this really high end client, okay? And I know some of you are really high end clients, but we could only hide, really, that this really high end. Now what we have is we have a full range, okay? We have a range from just the beginner entrepreneur somebody might want to call, if you might call yourself a wantrepreneur, right? You're just getting into it. You're just starting your Amazon business, you're just starting your online business. You're just starting, okay? All the way up to the Robert Kiyosakis of the world, okay? So we have this big range. And this is what I do. This is what I do, is I train CPAs on how to develop a tax strategy. Now.

Let me explain just a minute about the difference between a tax strategy and tax planning.

How many of you ever played checkers? Raise your hand. It's a fun game for kids, isn't it? It's a fun little game. It's kind of quick. It's easy. Rules are easy. Black, red. That's it, right? Jump. You're out. King me.

How many in your businesses would rather play chess? Raise your hand. How many would rather have actually be willing to look four or five moves? How many of you in business have learned that in this conference today that you need to look four or five moves down the road? Raise your hand. You have to. Otherwise you're never going to be able to get where you want to go. How. How in the world. How in the world will you get where you want to go if you don't know where you're going and you don't know how to get there? My favorite character in literature is the Cheshire Cat in Alice in Wonderland. Y' all remember Cheshire Cat? Cheshire Cat. Alice comes up to this fork in the road and the Cheshire cat asked, and she asked the cat, which road should I take? And the Cheshire cat says.

Where are you going? She goes, I don't know. And he goes, then doesn't much matter which road you take, does it? And that's the challenge in our businesses and in building wealth. If we do not know where we're going, it doesn't matter. Pay the tax. Don't do this stuff. This is chess, folks. This is not checkers. This is highly complex stuff that I've made. Just giving you a really simple version of. And you're going, wow, this is the simple version. Exactly. So what we want to do is if you're interested in just learning what's the difference between that tax strategy and planning. If you'd like a team member who actually understands this stuff, just go ahead and you can do it right now. Don't even take a picture. Just get out your phones, text right now. CAP2019. You can do it. I know you guys all know how to use your cell phone. It's like this, okay? This is your cell phone, right? We get out, we text right here. Message, right? CAP2019 to 480-470-418-0480, 4704-704-180 so if that's something that would be helpful to you. The reason I do this is because the number one question I get is. And it's the number one question I've gotten here and the number one question I'm going to get when we're done tonight and when I'm signing books in the VIP lounge. Okay, because you all got my copy of my book, right? So when I'm signing books, number question I'm going to get is, where do I find somebody who knows how to do this? Because their CPA doesn't know how. And so that's why I get up in the morning so that I can help prepare CPAs for to know how to do this. So I want to thank you all very much. You're an amazing audience. Tax free wealth. Don't pay them. Do it legally. Thank you.

Is that all right? How do you make taxes fun? Is that all right?

How you make taxes exciting? I have no idea.