JOHN HYRE INTERVIEW – Tax Benefits of Investing in Real Estate

Welcome to the Next Level Income show. I'm Chris Larson.

And I'm Caleb Welborn.

And here we help you take your income, your investments and your life to the next level. Today's special guest for tax season is John Heyer. John Hire is an attorney, an accountant, and also a real estate investor. He's worked at two large accounting firms. He's also worked as a tax counsel for a Fortune 500 company. And for the last 13 years, he's run both an accounting practice and a tax law practice. John's written three home study courses. He's written numerous articles. He's a frequent speaker on taxation of real estate and IRAs. I saw John through a real estate webinar a little over a year ago, and today we're excited to have John on for this special tax episode. So in our book, Next Level Income, we discuss a lot of the tax benefits of owning real estate. And today we have a treat where John's going to dive deeper into some of these updates on the new tax law. John, welcome.

Glad to be here. Thanks for having me.

Absolutely. So we were talking before the show about how you're looking at moving to Puerto Rico for some of the tax benefits. Kind of walk us through your story, man. You have a really entertaining story, really interesting. Tell us how you got to where you are today.

All right. So I started off working corporate, and that didn't go well because people would say stuff like, john, what do you think? And then I would tell them, and evidently it was not what I was supposed to say. So I do a lot better as an entrepreneur. So what I ended up doing back when the Internet was new and there was one big website, if you all remember, CRE Online.

Yeah, I read 20 years ago, I.

Started posting there on the theory that if you give, you'll get. And so I just started researching taxation of real estate. Remember, this was when the Internet was new and accountants were local and you didn't have specialized people that all they did was real estate. That was really the beginning of that trend. So I got on that website, posted like crazy. Bill Bronchik asked me to co host the legal Forum with him, which kind of got me known. And then Bill saw me speak somewhere and said, dude, you need to be up on stage selling stuff. And to encourage me, he said, you're coming to my event and you're going to have to have something to sell. And remember, I was still a corporate guy and was taking precious vacation to write the course and all that, but I ended up leaving and Doing three things. I had clients because there were so many real estate investors, smaller to medium people that couldn't find good help. I was out there selling the courses and I was also doing Lonnie deals, buying mobile homes cheap and selling them on financing. Of course, all I told my parents was as I'm quitting my corporate job at a Fortune 500 company to sell trailers. They were not amused.

I read Lonnie's book too, man. Yeah. What do you say? Buy wholesale, finance retail. Is that what he said?

Yeah, yeah, yeah, yeah, he was. Or the way he would put it is you buy trailers and sell manufactured housing.

That's a good way to put it.

So now the practice is doing great. It's virtual. So we have clients all over the country. Basically, if someone can be on this call, they can be a client. So we're moving to Puerto Rico. We're waiting. We're in process now. My wife is all motherly and won't let me abandon the 18 year old. I have a daughter who grabbed. My youngest daughter, graduates high school in May and I think she's an adult and we should just go to Puerto Rico and she can handle it. It's good for her. But mom is all, you know, wait till she's in college to abandon her. So here's the reason we're moving to Puerto Rico. We're getting our tax rate, federal, state and local. Combined, our tax rate will be about 6% flat. Wow. We have a house in old San Juan. I don't know if you've ever been there on a cruise. It's gorgeous. It's a beautiful place. There are a lot of neat people. The networking there is insane because the people who are going there the way I am, it's a real Darwinian thing. You have to make decent money to make it worthwhile and have the guts to move. Add to it. It's a beautiful island and I really like the people. They are aggressively friendly. Like you will be my friend. Okay, so we're in the process of the move. It's part time until the end of May, full time from June onwards.

Awesome, John. Yeah. And for the listeners that are listening now, wait till the end because John's going to tell you how you can write off your entire spring break to Puerto Rico at the end of the show.

Absolutely.

And Puerto Rico's beautiful. I've been there as well. And you mentioned before the show a few noteworthy people who are also making this move. Would you mind going in depth a bit about that?

So John Malden's there. He just moved there. In addition to writing great content, he has this awesome free newsletter that you really should be reading. I follow it for economics. And he's a great filter. The problem with the Net is too many people out there, too much information, and you need someone to cut through and tell you that you need their judgment. What should I read? He's a great filter. Harry Dent is there. Paulson the billionaire is there. And there are other people somewhat lesser known. Oh, what's the big libertarian guy? That is old. He's a tax protester type of guy into gold. What is his name? It'll hit me.

Not Ron Paul. I know who you're talking about, but I thought you'd know that. Caleb.

Yeah, I thought I should know that.

I'm getting old and I forget names, including my own, but it'll hit me. But he's a big libertarian Gold bug. Does a webinar podcast constantly. His old man was really into tax protesting. He's there. Real big guy.

Interesting. Well, we'll. Yeah, we'll put Malden's newsletter. We'll put our book and resources you want in the show notes as well. John so if anybody's listening and wants that, because I agree. I like Malden stuff as well. Harry Dent's one of the reasons that I got into the medical device field over 15 years ago. And then ultimately demographics were why we started investing in apartments. So have a lot of respect for all those guys. Yeah, it's interesting that they're moving there too. So we got to take a trip to Puerto Rico.

Caleb Absolutely. I think some of our listeners might be considering moving there after this interview as well. I mean, I already am. So in Chris's book, he talks quite a bit about the tax benefits that come with real estate. Could being the expert on it, could you go into a little bit more in depth on that?

Well, first, any business that you run, there are going to be tax benefits that you don't get from a W2. Right. A W2 is the worst possible way to be taxed. There's just not much we can do for you. The system is designed to nail you. So just having a business where you can write off meals, travel, vacation, things like that is useful. And then add to it that with real estate, the depreciation on the real estate is a huge one. Now, there are complex rules. If we lived in a rational world, I'd be unemployed or doing something socially productive because we wouldn't have the tax system that we do. But we have this system and it's complicated. Bottom line is this. With rental properties, to name one example, if you're depreciating them aggressively, you can generate huge losses on paper. Now you have to qualify to take those losses. It's not as simple as it sounds, but there are opportunities there. Add to it that when you sell real estate, if you hold it more than a year, if it's a capital asset. So this doesn't apply to flips. Flips are treated like inventory, like cocaine, right? I'm selling cocaine, I'm flipping houses. They're taxed exactly the same way. Right. There's no difference in the taxation, except I think with the flips, you can't write off the guns because it's a little harder to justify. But with regard to rentals, things that you hold, what's a capital asset for tax purposes, it's something you hold for the production of income like rent or interest, or for appreciation. When you sell that kind of asset after having held it for more than a year, you pay capital gains rates which are much lower than normal rates. You can also 1031 do like kind exchanges until you die, which is. Dying is awesome. Tax planning. People are always a pain about, oh, John, I don't wanna die. But in terms of the tax planning, you're eventually gonna die. So at least we might as well plan ahead. And there's more. But that's just the beginning. The smattering of. Oh, and let me add one more. The self directed IRAs. Yes, I love. I mean, deductions are not an issue if you're not taxed on the income to begin with. So in particular, Roth 401ks, Roth IRAs, Health Savings Accounts as a vehicle for real estate investment are amazing. That's just, I mean, I could go on for about a half hour, but that might be a bit more than you really want.

Well, John, I mean you said, we talked about this when we spoke about a month ago and you said let's do a whole show on the ira. So we'll have another show after this one and we'll dive a little bit deeper into that for listeners coming up.

All right.

Yeah. So, John, I want to get into updates on the new tax law, but you talked about some of the benefits of depreciation. One of the things that we do in the multifamily space is cost segregation analysis. You might talk about like, you can talk about what that is if you'd like, but kind of when it makes sense and when it doesn't, because I know it makes Sense for certain types of real estate, but others it does not.

So it makes sense if you qualify to use the losses. What happens with cost segregation and the new tax law changed it? One of the huge changes in the new tax law is this. Land improvements and personal property can now be written off 100% in year one. What's a land improvement? Anything on a rental property that's outdoors, not itself, a separate structure that God did not put there. So once again, outdoors, not itself a separate structure that God did not put there. Sidewalks, fences, sewer, parking lots, that landscaping. Right. From the Monty Python shrubbery. Right, landscaping. That's all land improvements that can be written off in year one. The entire cost. Personal property, that's anything a tenant could steal without using. Power tools, furniture, appliances, window type treatments, ceiling fans, most carpeting if it's tacked down, as opposed to glued down, etc. That can all be written off in year one. So what's the benefit? Well, would you rather take a write off now or a little, little, little teeny bit every year for 27 years? Well, the present value says take the write offs now. So that's a new aspect of the tax, the new tax law. This is better than the normal what we had before in terms of cost segregation. But for whom does it make sense? One of two people. You either have enough rental income that even after the cost segregation you're still going to show net income just less, or you qualify to take passive losses on your tax return. Your income is either below 150 grand or if it's over 150, you or your spouse is what's called a real estate professional. And without going into hyper dull detail, essentially one of you is full time in real estate and pretty close to full time as a landlord specifically. So it's an insane benefit. What we've seen people do, people who've depreciated old buildings out and are showing huge cash flow and paid them off. So they don't have interest deductions, they don't have depreciation deductions. They go buy something new, generate this huge deduction. And by new, I mean new to them. It doesn't have to be a new build.

That's a great point. We've had investors ask that, well, wait, what happens when the building's 40 years old and you run out of depreciation?

Well, a. Thank God you're still alive and it's not your kid's problem if you're talking to us about it. Right? A little gratitude people. Right?

Yeah.

I mean Seriously, we have so many people who are always so negative about everything and everyone's so angry at each other. And it's like we live in the best place in time in history.

Thank you for that.

Yeah, you run out of depreciation after 40 years, 27 years, whatever, congratulations. Right. There are a couple of things you can do. What a lot of people do is they just keep expanding, generating more deductions until they die. And then again, that's great tax planning because the assets all get stepped up whatever their fair market value is. The kids inheritance at fair market value basis so they could sell the next day with no gain. The idea is to keep the game going until you kick off and leave the IRS with the bill. Maybe the last thing you do is you die is like.

Got to love the time value of money. Could you go into a little bit more detail on the effects that using this properly, the effects it has on.

The returns, if you qualify to take the loss. I mean, let's think this through. The rule of thumb I use, and it's just a rule of thumb to help you estimate things, 15% write off in year one and probably about a 4% write off in subsequent years. So if you buy a property for 100 grand, you're probably writing off 15 grand in year one and then 4% of the remaining 85 grand for the next 27 years. So do the math on that as a deduction. And again, it's real easy if you have enough rental net income. So enough net income from other rentals, if you have that and this doesn't drop it to zero, you can take the deduction. There's no question. Now if it drops you below zero, we get into some more complicated rules. If your adjusted gross income, that's the number at the bottom of page one of your 1040 is 150 or over, you're really only going to benefit from the losses. Currently they don't go away, you just accumulate them and sit on them. If you don't qualify to take them today, that's the so called passive loss if you're a real estate professional, which means you spend at least 50% of your professional time on real estate, minimum 750 hours a year. And a certain amount of time, we use 500 hours a year, so 10 hours a week, hands on landlording, and that's you or your spouse. So once again, at least 50% of your working time in real estate. And you got to track it. The government doesn't trust or believe you and we don't trust or believe them. So it balances out. It's fair.

Exactly.

Fair enough.

750 hour a year minimum.

Yep.

And I would say there are different tests, but the one we use as a rule of thumb is 10 hours a week, hands on landlording.

That's 15 hours a week, 10 hours landlording. So we have a lot of professionals, John. They're doctors, they're some of our lawyers. Others are entrepreneurs and their spouses maybe don't work. Or I say that a lot of them, their first job is taking care of their families, especially if you're a doctor on call. But I have a friend and his wife is a real estate professional. So this would apply to somebody like that, it sounds like.

And that's typically how we see it, where if it's a busy professional, the spouse does it and there's politics there. Right. I wish my spouse could be a real estate professional. Tax wise, that would be great. I'd go buy a bunch of properties that break even on cash flow so I'm not losing real money and the depreciation would be a huge loss. But my wife, she's Latin, and, and that's really about Latin. Wives, they're. They're very passionate, which is very good when they're happy. But what you don't want to hear is, I will kill you.

And so I got a buddy that's listening and he's gonna east shake. He's shaking his head up and down. I can't mention his name, though, because she might come after me.

Yeah, no, you don't want them mad. So my wife is an artist and a swirling vortex of chaos, and I love her and I would die for her, but working together with her is just not cut out to happen. So we don't do the real estate professional thing because even though tax wise, it's a great idea, marriage wise or mortality wise, really, it's not.

I'm gonna have to take a second here and take a breath after that one. So, John, tell me. We went into cost segregation, the 15, 4%. You said something about 10 minutes, five, 10 minutes ago, that the new tax law, you can push more of that forward. What else are you seeing in the new tax law that people should note that are listening, whether they're investors or entrepreneurs. What's something else that happened? There was. I was on like a two hour webinar with you. So it's ton of stuff, but what would you really say? Hey, this is something that people need to wake up and pay attention to.

Okay, first off the pass through deduction is huge. It's 20% deduction against any pass through businesses. Shouldn't say any. Most pass through businesses income. What's a pass through business? If you run your business through anything but a C corporation and certain kinds of trusts, it's going to be a pass through. So the question becomes next, is it a trade or business? And that is a term of art. It's a definition that's very gray and nuanced. Let me cut to the chase with rentals. Rental properties are considered a trader business if they're not triple net leased. If they're triple net leased, that can be a problem. Now I have to look at the details and see because words mean different things to different people. Remember that movie the Princess Bride? Yes. That word you don't sink. That word means what you think it means. It's similar. Triple net lease means different things for different people. But the bottom line is this. There has to be a certain amount of activity level for the rentals to be a trade or business. But if you own more than one unit and it's not triple net lease, then it's probably a trader business. Don't listen to your accountants on this. Most CPAs are clueless. They will tell you that your rental properties are passive and are not a trader business. Those two words have nothing to do with each other. The concept of trader business is under code section162. The concept of passive is under code section469. They have nothing to do with each other. Right. Nothing. It's like a Clinton and the truth or Trump and fact checking. There's no connection. Right.

You said this wouldn't be PC.

John.

I love it.

Yes. This is awesome.

Sorry, you said this wouldn't be PC. I love it.

Yeah, same here.

So no, most investors aren't communists. And if you're listening to this to save taxes and you vote for socialism, to heck with you. You're a hypocrite. You voted to raise the taxes. How about you pay them?

There we go. Or pay them. You can write a check voluntarily, right?

Yeah.

Oh yeah. Yeah. Tell us. Show us. Show us how much you care and how compassionate you are. Show us. Pretend we're in Missouri. It's the show me state.

So John, you said, you said like don't listen to your cpa. So what? What types of real estate have you invested in? Why? Why should our listeners listen to you over their CPA when it comes to real estate and some of these things?

Okay, couple thoughts here on this particular Issue anyway, don't listen to the cpa. And I want to rewind if we have time to other new tax law savings because that pass through deduction is a big one. But there's. Yeah, it depends on the CPA. Here's the thing. CPAs, I'm both an accountant and a lawyer. And here's the difference in personality, and it's a generalization. So of course there are exceptions, but in general, CPAs will say, show us where the law permits it and we'll allow you to do it. A lawyer says, show me where the law forbids it. If you can't do that, we're doing it. And so it's a difference in mentality and you have to measure it against the cost. What happens if I get caught? What happens if I'm wrong? You want to stay in the good gray, right? I'm very aggressive. I like good gray. If the law is unclear, I'm going to interpret it in my favor. But if the law is clear, if it's black and white or it's only a tiny bit gray, then I recommend you follow the law. And the problem with a lot of CPAs, a is mentality. What's the definition of an extroverted CPA? He looks at your shoes when he's talking to you instead of his shoes. My other issue with CPAs and a lot of lawyers, they don't do their research. They bill all this money per hour and they're so focused on billable hours and they spend all this time billing. I bill 400 an hour and I'm worth every nickel. In fact, I shouldn't raise it. That's really an insult to me. I should charge me. I charge others more. Why? I do my homework. I fly to D.C. i go to the tax court, and I pull the entire tax case. Not just the decision, but a shopping cart full of briefs of lawyers, arguments from the irs. Is it valuable to know what the IRS lawyer's thinking on a real estate case? Yeah, his arguments are in there. I pull the cross examination, I pull the transcripts, I pull the tax returns that were at issue, et cetera. What's the bottom line to deserve to be Bill? The way professionals bill, you got to do your homework. And a lot of them don't do it. So that's why you should listen to me. I do my homework and I do it off the clock. You don't see that part. And I enjoy it. Let me add to it that I also invest in real estate. I'm changing my strategy some I tried to do too many things and didn't do all of them very well. I read a book called the One Thing that a Good Friend Gave Me and it really got me focused back on my practice. So I'm changing my real estate investment to be fair. But I've dealt directly with contractors and tenants. Most of what we have done is low income, either mobile home parks or inner city stuff. I'm very good at buying because of my client base. I mean, I have hundreds and hundreds of clients. Almost all of them are some sort of real estate investor or self directed IRA investor and usually both. And so I get deal flow. Deal flow comes across my desk whether or not I want it. And so I get to pick and choose. I'm very good at picking deals. Everything after that I'm no good at. I don't have the time. I'm a terrible manager. I'm horrible as a manager of real estate. And so we've learned the hard way, you know, I shouldn't be allowed to do that. It interferes with the practice and I'm not good at doing it. But have I done it? Yeah, I've dealt with contractors and tenants and buying and all the things that you guys deal with. So here's the deal. Unlike a lot of professionals, I understand your real world issues and I give you advice that only makes sense, both tax wise but also real world wise. Lot of great tax advice out there that makes no practical sense in the real world.

Yeah, no, I mean, I can vouch for you, John, when I listen to your webinar. You get it, you understand. I mean, we started out, my partner Peter Cannell and I, in residential and did private lending, hard money lending you're familiar with. Invested through IRAs before we end up in multifamily. Same thing. We came to the same conclusion. You did focus on one thing, do it well. And there's a lot of great ways to make money out there. So the fact that you can understand all the different areas that people may be involved in and address that, I think, especially when it comes to real estate and the new laws. Again, I saw the value in your webinar and I can vouch for it on that.

Yeah, absolutely. And it sounds like you had a lot of the same pain points as a lot of the people who choose to work with Canal Capital Partners. I mean, they're high income earning professionals and a lot of the time they get into single family stuff just like Chris and Pete did, and then realize, you know, you don't want to be Getting calls about toilets at three in.

The morning or on your honeymoon, blow your brains out. Yeah, it gets old.

Ceiling red today. I feel like painting the ceiling red. Too much tenant damage.

That's hilarious. Yeah, it's like whenever you can be a limited partner and not have to deal with all that, then it's truly passive.

You know, it's funny you mentioned that's exactly what we're headed for. Get this. So my landlord in Puerto Rico is buying Section 8 properties there. He has a fund. Here's his buying criteria. And this is no secret, I'm not going to say his name, but I'm not spilling the beans here. He's very open about this. His buying criteria for buying section 8 there. And he buys small complexes. He will pay up to three times gross rent, total rehab, cost, everything, all in. And the trick is, Puerto Rico is a totally different place. It's a real learning curve to get to know how to deal with. You think contractors are bad in the U.S. i mean, it's a whole different world there. And so he's figured out the system and he's killing it. And part of the reason he can get properties that cheap is he doesn't have a lot of competition to buy in. Rational people don't want to buy in that market unless they know it really well. So I'm looking to invest with that guy. Why? I saw his books.

Hang on one second. You need a drink or anything?

Yeah, I'm going to get some.

You mentioned a drink on your webinar. You're like, I'm going to have a drink here. I think I poured myself a whiskey that night.

Outstanding. Hey, taxes and alcohol go well together.

So my. Yeah, A couple years ago, my CPA and. You guys should talk. He goes, chris, what do you. What number you prepared to hear today? And I was like, what? And he goes, you want a drink? That was before he told me. I was like, all right, Brett. I said, I need to. That was. That was when I left my W2 job that year I left, I was like, I can't do this anymore. So, yeah, it was ridiculous.

Have a seat, man. Have a seat. And a drink. That's a bad sign.

Yeah.

He gives you a syringe. If he gives you a syringe and does this with his arm, that's really bad.

Yeah, I'm lucky because I'm surrounded by some awesome people like Chris and Brett, who are giving me good advice early on when I'm younger. So I'm pretty.

That is something, let me tell you. What? That's valuable because when it comes to law, I pretty much self mentored and it works, but it's painful.

Yeah. Caleb and I met. I had a developmental cycling team that he ended up racing on. And Caleb's 15 years younger than me. So when we started this show, you know, the ideas were helping. We're helping millennials and people that are getting started, John. So I think when that cre. I was at a. You weren't ever down in Atlanta for one of their courses down there by chance, were you?

Who is it?

Bronchick.

Oh, cre. Oh, yeah. I used to talk at their stuff. I was down there all the time.

Yeah, because I. I may have seen you down there. I used to drive down. That would have been like early 2000s. Early 2000s. Yeah. Yeah.

Time did fly on us. Wow.

Yeah. It's crazy.

John, I love that you're not shy about talking about your views on government taxation. Someone say freedom, all that. So can you tell us one of your favorite IRS stories? Because one thing I loved on your website was you have fighting the IRS as being your favorite thing to do.

Oh, I love it. I like standing up to bullies, and I don't like. So you had. I don't like socialism. I believe in freedom, unlike a certain president. I think you did build that, and so I want to help you keep it. So here's my favorite story. We had a client who bought properties subject to the underlying mortgage. So he would just essentially an informal assumption of the mortgage, take the property over. He got a notice that his interest was disallowed because the 1099s didn't match. And to make a long story, this part of the story short, we went to tax court, and two minutes, and I mean literally two minutes before the trial was going to start, the IRS goes, yeah, just kidding. We concede completely. He can deduct all the interest. We really just kind of wanted to see if you had the stones to go all the way. I mean, it was. It was funny to watch, so. And it didn't cost him a ton. I mean, that point, it was about $300,000 in interest. And I think I charged him like six grand. But the clock was really going to start running once the trial started. That's where it gets busy. So next year, he gets the same notice. And I mean, word for word, the same, just a different number. So he thinks kind of rationally that he can handle it. He calls the irs this auditor from hell. The older the auditor, if they'd been there a Long time. They didn't get the Memo back in 98 that the IRS changed. They used to be able to do a lot more. For those who say Republicans and Democrats are the same and they're more alike than I would care for, but they're not the same. The Republicans reformed the IRS in 1998 and changed the rules. A lot of the older auditors never got the memo. And I had one of those. And it was funny. She was so instigant. She would not so recalcitrant. She just would not listen to anything I had to say. And I finally told the client, our job is to get past her as fast as possible. Me arguing with her, which is what most lawyers would have done, Run the clock, argue, even though they know it's going nowhere, look good in front of their client. I told my client, this is a waste of time. We're not going to change her mind. So here's what we need to do. We need to get this to end. She's going to write a letter saying, you owe $3 trillion. Don't just take a Quaalude. Be calm. It's all good. We're going to go to tax court and get the same result we did last time, and we're going to get it really quick. We're not going to have to go to trial because we even told the woman. Here's the number of the IRS lawyer who conceded the case. Here's the number of the appeals agent who advised him to concede, you have no case. She wouldn't listen. So I wrote her a letter saying she told us that subject to's were illegal and it scared the crap out of the client. So I wrote her a letter saying, listen, it's not your job to give an opinion on legality. If you think we've done something illegal, call the FBI, make a referral. Your job is to determine did we report the right amount of income and did we take proper deductions. For example, if my client were a crack dealer. He's not. This is subjunctive. But if he were a crack dealer. It's not your job to opine on crack dealing. We don't care what you think. Your job is to decide. Did he report all of his little dimebags, his cash sales and are guns bling and bad music Tax deductible expenses for a drug dealer. That's it. That's your job. Do your job. And I put that in writing. I mean what I just said.

Wow.

Including the drug dealer part and the bling. And the bad music. I put that in writing and sent it to her and her supervisor. So strangely, the audit ended right away and she said we owed a million dollars. And then we went to tax court and the appeals agent who got it immediately conceded the whole case and apologized for the hassle. That was the end of the. It was much cheaper to do that than keep arguing with the agent. She was just that close minded and really full of herself in terms of power. Thank God that we still have. It's dying. You mentioned freedom. Freedom is a lack of coercion, of appeals, of redress. We still have a tax court that specializes in dealing with the irs. And you have rights and you can fight them. And thank God for that because let me tell you what, I've been to places where once their version of the IRS says you owe, you owe, that's it, you're done.

Yeah, they say, well, maybe I just say it, but generally those who want to be in power are not the people you actually want in power.

Yep. That goes back to Greek philosophy. I forget which one that was. Was it Plato, Aristotle or Socrates? That sounds like something Socrates would have said. The guy who wants power the most is the last one who should have it.

I think Ayn Rand said it too, in Atlas Shows.

Oh, Ayn Rand said a lot of very interesting things. Yes.

Oh man. So John, if you could go back and give yourself advice, you're just talking about how you had to kind of self mentor. So if you go back when you were 25 years old and give yourself some advice, what would it be?

A couple things. Think bigger. I grew up with a very Walmart middle class, Midwestern steel town mentality. I didn't value myself enough for a long time. So go bigger. Value yourself, delegate sooner. What would the tax advice be that I give myself back then? Good Lord, start a Roth IRA sooner. Start a Roth IRA and do a Mitt Romney.

Yeah, yeah, you said, how did Mitt get. What's he got like 100 million in his Roth?

Yeah, it's in his traditional, so it's only deferred. So he's not perfect. He did a good job though. He has it in a SEP. He was putting about 25 grand a year in a sep and depending on when you take a snapshot of the value, 20 to 100 mil. Fair market value. My research tells me that it was either options or a carried interest. And it's the type of stuff you wouldn't get away with today. I mean Romney was so ahead of his time. The IRS didn't even know people were doing it and that they should audit it, much less what to do. If they did audit, that's how far ahead he was. But now they've kind of caught up.

Yeah, no, I love that you said that with the Roth. So my boys are seven and nine actually in a week. So we just started their Roth IRAs for them in 2018.

And they make sure to file a personal return for them every year.

We do.

Roth IRA does not start until you file a 1040.

Okay, I'll be sure. I'll double check on that. But yeah, they clean, they do some modeling and some different things and.

Oh, we'll have to talk about that.

Yeah, they're little. They're little entrepreneurs, man.

So, yeah, the entrepreneurial part's good. Modeling is a flimsy basis of income. You got to pay them to actually do stuff.

Right, Right.

Yep.

Well, we got. They do a lot of stuff. They do a lot of stuff. And they got a little jump rope business. Caleb knows about that. So, yeah, buying ropes bulk from China, assembling them over here, got branding them and selling them at the gym. So, yeah, they got a bunch of little. Yeah, yeah, yeah. So we're trying to, we're trying to teach them the, you know, the art of being an entrepreneur early and the value of it. So we love it, man.

Like Bill Murray says, teach them how taxes work. Take 30 or 40% of it.

I like it. I like it.

That's awesome. So some of our listeners might be wondering from what Chris mentioned earlier, how to write off the entire spring break to Puerto Rico. Could you go into that a bit?

Yeah, you can write off seminars in nice places. And the best place to write off things, there's a special break for areas that are outside of the United States, but in what's called the North American area. So seminars, for example, in Mexico, Puerto Rico, are easier to write off. We're doing a week long seminar. The way we do it is five hours a day because you entrepreneurs are add as hell. So we try to keep it short so that you're still awake. Also, the government wants to see at least four hours a day, and we don't want to cut it that close. That's why we do five. They want to see four hours a day so you can write off the hotel, the flight, the meals. And then what we do is we structure it so you have a few days off. An off day is considered a business day that you can write off if it's cheaper to stay than it is to leave and come back. And trust me, we structure it to make sure of it. So for example, the weekend, even though you're off looking at El Yunque, the jungle, or going to the beach or going to the rum factory, it's considered a business day because it's cheaper to stay in Puerto Rico for the next class day than it is to fly back home. So bottom line, we're covering self directed IRAs, we're covering entities and asset protection and we're covering the new tax law five hours a day for five days in mid April. You guys okay if I mentioned the website?

Oh yeah, please go ahead.

Anything you want.

Yeah. How can people get ahold of you, John?

Or check the website goes under two names. It links to the same place. For now they're supposed to be different, but I've just been too busy. So. Realestate tax law.com realestatetaxlaw.com and IRA lawyer.com IRA lawyer.com if you go there, you'll see about that particular week long seminar and we'll do more of those during the year. So it's a nice way to get to Puerto Rico to write things off and to learn something.

I'm glad we had you on because I've been looking to go to Puerto Rico here for over a year and now I have two good reasons to get down there. One, surfing. Well, three if you count the rum, I guess.

Yeah. Let me throw a few things in there for you. If you come visit your lawyer and have two separate meetings for at least four hours and one minute a day. So it is eight hours. So if you have enough tax planning to justify eight hours, which probably you do, especially if we're looking at doing some things with IRAs, you can write the trip off to see the lawyer. And if you bracket reasonably like a meeting on one day and another meeting four days later, you should be able to write off the in between days. So I'm having interestingly enough, because right now I'm transitioning from Columbus, Ohio. I have more clients come to my office. Even though the practice is virtual. I have more clients visit me already in Puerto Rico than in Columbus, Ohio. I wonder why that is.

That is awesome.

And the surfing in Rincon, Puerto Rico is world famous.

Yeah? Oh yeah, absolutely. Well John, we'll be sure we're going to link all the stuff you talked about in the show notes. So listeners, you can go to next level income.com nextlevelincome.com you can get a free copy of our book. You can find John's website, you can find out more about the trip to Puerto Rico or the spring break seminar, as well as the other resources he talked about. And look back here in a few weeks, you're going to see a second show by John that we're going to specialize in IRAs and how you can maximize using your IRAs for both investment as well for your business planning.

Awesome. Thank you all for joining us today. And thanks, John, for being on the show.

Thanks for having me.

Appreciate it.