401: Tax and Legal Questions? | What you should do.

But okay, so you're getting divorced. Should I finalize the divorce before opening up an LLC and buying a truck or vice versa? Can she take half of my company?

Yeah, they need a consultation. I don't know where you're going with that, Eric. You don't want to build money in an ESA for retirement. You can't. It's for education only. You cannot convert from a coverdell to a 529. Welcome everybody, to this week's episode of the Main Street Business podcast. Your favorite episode on a regular basis. And that's the open forum. My name is Mark Kohler. I'm here with Matt Sorenson. Matt, welcome to the show. Are you welcome? Do I welcome you to the show?

I guess. I mean, thank you for welcoming me. I like to be welcomed.

Yeah, we're glad you're here.

I am too. I love this show too, because we got all your awesome questions. We got some weird ones that might be kind of fun and we got some just kind of run of the mill stuff that everybody should know. So we're gonna be hitting those questions. Remember, you get to Main street business, submit your questions there on the website. We'll be pulling many from the site itself. So this is the people's show, guys. This is your show. We talk about what you want to talk about.

So good stuff. Well, without any further ado, we're going to dive right into it. We'll save all of our little antics and stories of life's experience. I've got a good one from Austin. It's a good life. Yeah, a little intermission. Funny story. It was quite embarrassing. Okay, well, we just, for those who didn't know, we just finished our real estate tax summit in Austin about 10 days ago and two days of intense strategies. Just anything related to real estate in the tax realm. Those recordings, I understand, are almost up. Like I just heard from James, like any day now. So anybody who wants to buy those recordings and watch them, they'll be very affordable. Two full days of content that you'll be able to watch.

Yeah, it was life changing. Like, wow, the people there, I mean, it was good.

We got some good feedback. It was good. Okay. Do you have a question you want to go with first or if not, I've got one right here.

Let's start. Weird since we were in Austin.

Okay.

And this is a question from someone in Texas. So, you know, just keeping it weird as they do in Austin, I guess. This is from Jonathan. I'm not, I'm going to leave his last name out. I'M going to save you from that, Jonathan. He said, I started a career in trucking and have leased a truck and started researching LLC for my endeavors simultaneously. I am strange. Thanks for adding that in.

They're at least pointing out that this question is odd. Okay.

They're like, where's where I'm going? Okay.

All right.

Should I finalize the divorce? Okay. I don't know where that came from, but okay, so you're getting divorced. Should I finalize the divorce before opening up an LLC and buying a truck or vice versa? Also, can she take half of my company? Plus, my grandfather left me 100k tied in probate. Can I put that in the LLC to keep it away from her mouthful?

Wow. Yeah, they need a consultation, but maybe we could answer one piece of that. You want to answer?

I'm just gonna chip away at a couple things.

Okay.

Jonathan, if you're going through a divorce right now, starting a business is going to be complicated, to say the least. All the certainty that you want to have in owning this thing while you're going through divorce, you got to work it out in your divorce before you put too much time, effort, and more money into this thing. So now, if you already have this trucking business in process and you don't have a prenuptial agreement or postnuptial agreement, this is going to be an asset, an issue in your divorce. So this is something you're going to need to be talking to your divorce attorney about. If you do not have one, make sure you have one that knows what the heck they're doing, that's worked with people that are business owners. So this is going to be an issue. Now, let me take away a couple of misconceptions here. Putting assets in an LLC is not going to keep it away from a spouse. Just be like, could I just drop this 100k into an LLC? No, that. That's not going to keep it away from a spouse. That's not what the LLCs are used for. You may want to do that for asset protection from creditors or other reasons or it's using to start a business. But dropping money into an llc, don't. That. That's not asset protection from a. From a spouse. It's going to get divided up in. In a divorce decree, just like cash in a bank account.

Yeah, I would just throw this out to. If you're. It sounds like you're already in the divorce process because you said, should I finalize the divorce before opening up an llc? That's tough. You know, we know what it's like going through a divorce, and we have so many clients we help through this situation. So first, our heart goes out to you. It's hard. Anybody in a divorce, you really are kind of in limbo financially during that period. And I like what Matt said. You don't want to be moving things around in a unique, weird way to hide anything from a spouse. And usually you want to kind of wait on any new business ventures. Really focus on getting the divorce wrapped up now. Maybe one of those divorce battles that's going to last several years and it's ugly. Then your divorce attorney will guide you through what you should do moving forward to. Maybe sometimes you can get a financial separation sooner than the divorce is final. I don't know if there's kids involved and things like that, but deal with your divorce. That's my take from this whole email. Focus on that. Get a settlement. Get into mediation as quickly as you can. I don't know where your divorce situation lies right now, but be careful hiding things or starting new businesses or investing in things until the divorce is finished.

And if you move it to an llc, you need to tell them you did that in the process.

Yeah, you can't hide that. Okay, got a question from Eric. This is off the website mainstreetbusinesspodcast.com or mainstreetbusiness.com, we have both URLs feed to the same spot. And they. Eric submitted a question just reminding all of you, you can do the same. He says, we got different categories. And so this is a junior member post. We got this new. I don't know what junior member. I don't either means, but we got more advanced members, junior members or whatever. Okay. He says, love the podcast. Still waiting for Matt to wear his cowboy hat. Maybe he gets a big belt buckle this year. Ooh, he does have a big belt buckle. He wore it to Austin.

Yeah. If you were in Austin, you saw I was rocking this belt buckle two days straight.

Yep.

I mean, I felt pretty cool with the belt buckle. Although I will say someone came up to me and said, did you win that belt buckle or did you buy it? And I'm like, it was a gift. This is. Mark gave it to me.

I think a gift was a good answer.

It was good because I felt like I didn't just, you know, buy this. Yeah.

It was a gift.

Like, it was a gift for Moon.

Yeah.

But I came back and I spoke in Phoenix, like, the next day, and I was, like, dying to wear that belt buckle. And I just felt like it's just kind of a.

Has a place.

Yeah, it's got a place. Yeah, it's like when in Rome.

But this belt buckle was so big. Matt's still going to the chiropractor. So I just want to point that out. Now he says, please comment on converting ESA to 529. Now what do you. And he puts in parentheses ESA assets self directed, not Wall street to a 529. Now let's put this in context for everybody. He's saying, I want to convert my Coverdell, which is an educational savings account, goes by different terms, same thing, and move it to a 529. Does this mean we have to self direct what we know best in our 529? Oh, no. Does it mean we can or do you have to convert Mark's cows to cash and then convert to 529? All right, well, some of you may know I bought some cows in my health savings account. It was a pretty cool project. But here's the thing. You cannot convert from a coverdell to a 529. You would pay penalties and tax to pull the money out of a Coverdell to get it to a 529. And frankly, I don't know why you'd want to get it to a 529. If you want to just take your Coverdell and form an LLC and buy Wall street products, you can, if you don't want to self direct any longer, just use your Coverdell to buy some of those Wall street assets by forming an llc. We even have a crypto ESA and we have a brokerage option at directed IRA for your ESA if you want to implement that. So you can get the same bang for your buck from an investment standpoint of a 529 by just leaving the money in the ESA and you can't even move it anyway. But then Eric takes it to another level regarding excess funds in their Coverdell. I believe they're talking about. Eric's talking about, he says assume no debt and I do not want to transfer to relatives. So he's got excess funds and an esa. Why not just max out withdrawal for many years until child has income in child's name. So you just have the 10% penalty and do it under the standard deduction. There appears to be. This appears to be another way to build wealth with minimum tax or let it ride and compound. Well, everybody, this is an interesting question that Eric poses. So let's say you've got a Coverdell education Savings account. You've earmarked it for your one child and your one child says, screw college. And remember that withdrawals include trade schools, junior colleges, even private school for secondary education when they're in high school or junior high. So there's a lot of options there to get money out of the esa. But let's say in Eric's situation, my kid is not going to use the Coverdell. What do I do? Well, do you have other children that might, or do you have other relatives that you could transfer the benefit to? And if they say, and Eric kind of alludes to it, I don't want to give it to a relative. And it sounds like there's no other children. So he says, well, I'm just going to start withdrawing it because it's in the child's name as the beneficiary. So you're going to withdraw in the child's name and just give him the money. You're going to pay a 10% penalty plus tax. And if they're under the standard deduction, I guess you could avoid some federal tax. Got to know what state you're in. We don't know what the standard deduction is in the state where you're at, so that's one way you could drain it. I may even encourage you, though, to say, let's let it compound for a future grandchild. I don't know if you plan to, you know, if your kids are on that track where you're like, oh, I'm going to have grandkids in five or 10 years, well, then let your ESA grow for a grandchildren. But the last statement is this appears to be another way to build wealth with minimal tax. I don't know where you're going with that, Eric. You don't want to build money in an ESA for retirement. You can't. It's for education only. And it's for the education of your kids or some relatives or some grandkids. Other than that, I guess you could start draining it with 10% penalty in tax slowly but surely, or let it compound for a future grandchild. I, I would recommend a consultation with one of my tax lawyers to really zero in on how much money's in there and what you want, because you just should have a plan. You want to have a plan for this. I agree with that.

I don't think the plan should be overfund it and don't worry about it and then just worry about penalties on

getting it back out or withdrawing it. There's got to find a happy Medium there somewhere. Okay, what do you got?

All right, I got a great question from Marcus from Michigan. He says me and three others started a YouTube channel. What would be the best way to proceed? Example, a trust or LLC to make the most out of the tax write offs so we all benefit. All right, Marcus, what I would recommend doing is an LLC do not do a trust. LLCs are awesome for partnerships. Now you may know if you've watched our podcast, you know, you've been following the show, you know we like S corporations for operating businesses where you're getting ordinary income. Well, this is what a YouTube channel is. The income you're going to get from, from Google, from, from YouTube. If you get your subscriptions up and you get all the views and everything, the ad revenue, like that's ordinary income, you're going to pay self employment tax on that. But since you're in a partnership scenario with three other people where you're all going in on this together and maybe it's equal shares, maybe it's different percentages, I don't know. But an LLC is going to be the best entity that can be the one where you're going to run the income, pay all the joint expenses. You're going to have an operating agreement that functions as like your partnership agreement. But in the LLC speak it's called an operating agreement. But in the operating agreement you want to say who's supposed to do what, like what's your job, what's your role? You know, is anyone putting in money? Do we equally put in money? Is there a work partner and cash partners? Like define that out in the operating agreement so everyone's accountable to it and for their ownership stakeholders. And then what you can do next is let's say this LLC partnership is making money and you guys are making a few hundred grand a year through this thing. Well, you might each want to opt to include your own S corporation instead of yourself. So if you guys are each 25% partners in this thing, maybe you exchange your 25% share out for your S corp. Or maybe you already have an S corp for other business reasons, for other income you get. Just start with your S corp from the beginning anyways. So that's where I start. Use the llc. Don't go down the trust route. Trusts are for estate planning. We're not doing trusts for businesses. Check out the llc.

Yeah, like it. One thing they said in that question, that's odd. Sorry, I don't mean to be offensive when you say odd. Make the most out of the tax, write Offs, save, benefit.

So we all benefit.

So we all benefit. Well, Matt talked about having separate entities for each of you. The thing that's kind of surprising here, I'm going to be blunt, is when he says, max out the tax write offs when you're invested. Started a YouTube channel. I don't know how many tax write offs you're really going to have. I mean, maybe you're talking about studio equipment and all that. The person that paid for it. Or if you all threw in money and then you bought some equipment. A YouTube channel isn't like you're buying a restaurant with a lot of expenses or employees or I would not be chasing a YouTube channel for tax write offs is another thing I'm getting at. I think you're going to have a bigger issue of how do I minimize the tax on my share of the profit. That'd be a way I'd phrase it, Marcus. Let me restate that. How do I structure this to get the best write offs for myself to offset the income I'm going to generate from this YouTube channel? Don't think of the YouTube channel as a tax write off. Yeah, that's going to create income or else you're in the wrong partnership.

But it does get messy when people partner up and do businesses. And it's like, well, I spent the money and how did we track this? Did we even have a set of books? How do I get some of the expenses and write offs? How do you get the income if we made money? You know, a lot of people don't think this through and then they're finally into their doing their taxes, like, oh, crap. How do we do this? Well, the partnership to the llc, you have a partnership return that claims the total income, the total expenses, and. And each of you get a K1 with your share of the profit or loss based on how you guys net it out. So, and that's clean. It's how you're supposed to do it. It makes it simple for each individual person to be able to do their own 1040. But you also have a company return for all of you together for your joint effort in this joint business.

That's what it's built for. Yeah, I like it. Okay, we didn't ever. We never addressed this Thailand question, did we? So. Okay, I like this. All right. So parallel.

I'll let you wade into Thailand.

Parallela Tech. AX Tech. Anyway, says I'm 69, live in Thailand, expenses 14 grand a year. Okay, let's just stop there. I love that first point. We have a Lot of clients that are like, you know what the cost of living in the United States, I barely have enough income to get by. What do I do? And we have clients that sell their home and go live on the open road and do the full time RV strategy. People that sometimes move to Mexico and other third not and other countries south of Mexico, third world countries that have a lower cost of living. Thailand being one of those. And so this gentleman, it looks like from the way he's phrased this, is 69, living in Thailand on 14 grand a year. He probably has a maid, lives on a mountain. It's like, it's probably pretty cool, you know. So if you want to live in Thailand affordably, this guy's figured it out and he says, I have basically a million dollars in assets, 500 grand in Thailand, 500 grand in the US and I have a subchapter S corporation in Florida that brings me in 100k a year in profit. So maybe he's doing consulting or something. But, but he goes, I pay myself 1.6k. I don't know if he means, I think he meant 16 grand a year, not 100, but 1.6k would mean $1600. Which leaves a lot of cash handy. I pay around 5k a year in taxes. I haven't got an IRA or SEP. Should I max out a Roth? Wow, okay, so you made a lot of assumptions and doing things that I would want to discuss. The first thing is anybody out there. If you're making 100 grand a year in profit out of an S corporation in Florida or any state, and you're only paying yourself 16 grand or 1,600 a year, that's way too low of payroll. You're going to have a problem with the irs. So I would first adjust your payroll amount. Number two, you say you only pay around five grand a year in taxes. I guess you're doing the expat foreign tax credit. You know, there's some strategies when you're not living in the U.S. to minimize your tax in the U.S. but I'm a little surprised you're only paying five grand in taxes when you make 100 grand a year here in the U.S. and at 69, you've probably already elected to take Social Security. So something's unique on your tax bill as well. I would get a review of that from someone, but in the end, parallel acts tech says, I haven't got an IRA or sep. Should I max out a Roth? So let me address this for everybody. You may think with this person being 69 years old doing a Roth is too late. It's not. We see clients all the time in their 60s and 70s start a Roth. And I think it could be a great strategy. In fact, if you were making 100 grand a year and your cost of living in Thailand is only 14 grand a year, I'd probably even say go to a Roth 401K. The reason why I like the Roth, Even at age 69, if you don't have any Roth in your life within five years, that Roth is a tax free atm. So if you're putting money into that roth for just five years, now you're 74 and you're doing a Roth 401K or regular Roth, you could easily have 50 grand or more sitting in that Roth. And now anything you make on that is tax free and you can pull out anytime you want for anything you want. So I would say open up a Roth for $100 immediately. Go to our website directed ira.com and open up a Roth. Because the clock ticks the minute you open the Roth. Not the money that goes in, it ticks on the formation date. So form a Roth immediately. Then I would do a tax consultation with one of our tax lawyers, get a review, assess your payroll amount. I don't know how you're paying so little in taxes. And let's get a Roth going. Don't f around with the SEP. SEPs are a pain in the butt. Stay away from that. But I would look at a solo 401k. We have a special next month on solo 401s. Look at a Roth, you're only 69. Hey, that's the new 59. I mean, you're going to have another 10 to 15 years in you. I would get a Roth going right away and fund the hell out of it because five years from now it's tax free.

Yeah. Now the Roth ira, keep in mind you can contribute to that at any age. If you have earned income, you're 99 years old, you can still be throwing money into a Roth ira. And that was changed in the law a few years ago. So some of you, like, man, I thought once you reach 70 and a half or 72, you can't put money in a Roth IRA. Now, the Roth 401K, like Mark said, if you do the solo K, you get another three years at that. Because once you hit 72, you have to start taking RMD from a Roth 401K. Now, some people might say, yeah, Matt, but there's an exception. If you're still working. Yeah, that's true, but that exception does not apply to owners of the business. 5% or more. So with the solo K, where you own the business and you're still working, you, you still have to do that RMD, even on a Roth 401K. But you could have three years of contributions into the Roth 401K and then just roll it out to the Roth IRA later. We love that strategy. If you're trying to avoid RMD as you're getting older, but keep doing the Roth ira. Like Mark said, I love that you still got income. I mean, what else can you do with the money? You might as well put it in the most tax efficient vehicle possible, a Roth ira. Okay, I'm going to hit New Mexico's question. New Mexico says, love the show. Basic question here about email and phone numbers says, I do all the important things to make my multifamily LLC official. This is good because this is a lot of things you guys should be doing. So pay attention here. He or she, whoever this is, says, I have all my leases in the business name. I do all the business filings. I have an operating agreement, I have separate bank accounts. I have an annual meeting, I have an ein. I have my membership certificate, my taxes. I changed the deed of the property LLC's name. All the utilities are in the business name. And we do this in our LLC to show that it's not a, quote, alter ego of us. And that's a legal word that creditor plaintiffs lawyers will use to blow through an LLC to say, you don't treat it like an llc, it's the alter ego of you personally because it's the alter ego of you personally. We want you to be personally liable for this thing that just happened on this rental property. Now, as a landlord, you want to avoid that, right? The whole purpose of the LLC is if something happens on the property, you want them to sue the llc, and they can get the llc, but they can't come after you personally. So you've got to do all those things, have the property in the LLC's name, have a separate bank account, treat this like a separate business. If you want separate liability protection. All right, now he gets to a super technical point of do I need to have separate email addresses and phone numbers for the LLC so I can communicate with tenants and people? No, I have never seen that raised in any of the cases. I do not think that is critical. You may want to do it just to manage that communication separately. And frankly, I don't like giving my cell phone number to tenants or my personal numbers to tenants. You may do it with property managers and such, but again then you're one step removed from the tenant anyway. But I wouldn't stress too much about from a legal standpoint and this alter ego issue on email and phone numbers.

Wow. Good one, good one. And I want to compliment that client for really doing all the little things. When I wrote my book on asset protection, everybody was like, okay, you're going to set up a entity in the Isle of Man and you're going to go offshore and do this and you're going to set up this irrevocable trust. No, you know what? 90% of asset protection is just doing the easy little things and just boom, boom, boom, boom. And that really gives you the asset protection again, nine times out of ten. Yeah. So want to compliment the Kalina? Okay, this is a really fun question and I kind of fun at the beginning and end. Nuwanda, New Wanda. What's that from? What movie? And I'll give you a hint. His first line is, oh, Captain, my Captain.

Oh, I mean, well, that's the one with Robin Williams. Robin Williams, he's dead teacher. Oh, Dead Poets Society.

Dead Poet Society.

Okay. When I heard Nuanda, I was thinking about Napoleon Dynamite.

There you go.

Rwanda, I think.

Yeah. LaFonda La Fonda. There we go.

Thanks for the suggestion.

Give Tristan a little shout out there. Okay. All right. So Nuanda was in a nickname in the Dead Poet Society says, oh, Captain, my Captain. Hello, fellas. I appreciate you both and the show. Regardless of which one of you is the funniest parenthesis. Team Matt. So he's on Team Matt says. Currently my wife and I have separately owned LLCs of our own. Hers is in retail, mine is in insurance. Okay. I am diy, DIY by nature and have come into a hard to pass multi use commercial property which will be held in a series llc. That'll be my third llc. So he said, my wife has an llc, I have an LLC for insurance, and I'm going to open a third LLC for my multi use commercial property. So far we love a new Wanda. I will be doing the renovation on the property myself and I will be starting a contracting LLC to do so for protection, I will dabble in some side work. That's LLC number four now right there. I don't know, Newanda, if I go down the path of a fourth llc, I'd really like to try to use your insurance LLC with maybe a DBA or something like that. You May say, I don't want to commingle any of this with my insurance llc. Okay. And you definitely don't want to go out and do contract work with your multi use llc. So I can see where you're thinking number four, but that's a lot. Okay, so he says, next, I am able to offer a unique service that goes hand in hand with contracting. This would be available to homeowners, businesses and contractors. I could offer it through the contracting LLC number four. However, I would like to have a separate name for that service. The LLCs are a lot to manage, hence what I was alluding to earlier. But once we obtain the commercial property, I will be graciously bowing out and calling your office. He's like, I gotta I get some help. So he's DIY in nature, but I love that he determined his limits here. And he's like, I need a little legal support here. He says, for the unique service quote unquote. That could be the. Could the contracting business establish a separate business name? That seems separate. These waters are getting muddy. And you provide some clarity, please. P.S. i lied about Team Matt. Said I didn't want Matt to feel left out. Mark, you take the cake. Sorry, I had to read it.

That's why Mark read this question.

Yeah, I did. I read this question to Wanda.

He tried to trick me at the beginning to do the question, and I read all the way to the end and I said, hard pass, hard pass, hard pass.

I was like, hard take, hard take. Okay, all right, okay. So now here's a funny thing about Nuanda's question. When he forms his fourth llc, he wants to actually do two or three different businesses out of it, and I'll throw out three Newanda. Who knows what'll come down the road. I would like most of my clients to use a generic name for their LLC whenever they see this train coming. If they see that they're gonna be doing online sales, affiliate marketing, sales on Etsy, drywall, blah, blah, blah. You're gonna be doing all these things. Set up a company called Kohler Enterprises, you know, whatever your last name is, Nuanda Enterprises. Make it very generic. And then you can set up DBAs doing business as names owned by that LLC. So you could market different names, you could set up different trademarks. If you were going national, you could set up different URLs on GoDaddy so you can have multiple businesses under that 4th LLC and brand those names of those different businesses through DBAs, trademarks and URLs. And at the bottom it would say owned and operated by Dewanda Enterprises, you know, so you do not go down a fifth LLC route. Absolutely not. Fourth 4 LLC is based on your example is plenty. And use that 4th LLC to run multiple operations.

Yeah.

Love it. Love it. Now, I will say, if you have an S corporation situation going on where you're making 30 or 40 grand or more in your insurance LLC, let the insurance LLC that may already be taxed as an S corp, let it own number 4 LLC, not number 3. That's a series for your rental, but the number 4 LLC, have it be a wholly owned subsidiary of your insurance S Corp. Llc. And then do the name thing. No one needs to know that the parent company at the end of the day is an S corp that does insurance. You can provide all the asset protection by going back to the last question Matt fielded and just respecting the veil of each llc. And that could save a lot in tax reporting and save taxes down the road, too. Yeah.

For any of you that have that 40,000 of net income, you should be doing the S corp. This is the left side of the trifecta operations, ordinary income side. If you're doing multiple business activities, we eventually want that to flow into an S corp at the end of the day and then down to you to be paid. So maybe you got 10,000, 20,000 here. Maybe you're a partner in another LLC with some other people. You know, let's say the YouTube guys from the last question that have the four partners. Okay, well, I'm throwing my S corp in there. Oh, I got this thing I do 100%, you know, like. Like Nuanda here, who's got all these other things that. That he's doing. If it's operational business, let it flow into the S corp at some point if there's enough income to do it. So then, of course, I love that you're keeping things separate, knowing you're putting the rental properties in separate entities. All right, let me hit question here from Jonah from Washington, says, hi, guys, riding from Seattle. I set up a trust with.

I just want to point out Jonah is the son and Sleepless in Seattle.

Oh, you know, I did not know that.

Yeah, so that was Jonah. Okay, so I don't know, again, could be a subtle little connection here, you know, But Matt and I are movie buffs. We do movie reviews and critiques and movie critics on the weekends. So I love Sleepless in Seattle. Meg Ryan, oh, she was so adorable while she went down the plastic.

That was the highlight of Meg Ryan's years.

She Was great.

Yeah.

I feel bad about her plastic surgery stuff, but she was just incredible in that Jonah flew all the way to New York City to meet Meg Ryan and bring the family together.

That was Tom Hanks. Character's name was Jonah.

No, the little boy. He flew out to New York to go meet her, and Tom Hanks caught up and then they met at the Empire State Building at the top. And then there was the song and oh, you cry. I mean, this is a total chick

flick, but I always get you've got mail on Sleepless in Seattle confused.

True. Fair enough.

I always mix those two.

Yeah, that's a good one, Jonah. Son of. Okay, there we go.

Fun fact, guys. Look at all this stuff you're learning today listening to this podcast. Okay? All right, Jonah. Real person in Washington says, I set up a trust with KKOS a few months ago and going through the process of transferring assets into said trust, I've arrived at my Roth ira and I'm curious how I should proceed. I'm seeing articles online about stretching the IRA and other information about RMDs. I was under the impression that Roths had no RMDs. All right, great question, Jonas. So Roth IRAs have no RMD. RMD is required minimum distributions. You can hit 72 and you can keep investing that thing. Don't have to pull money out. There is no rmd. But I love this question about your trust in your estate plan. Because we're assuming you're going to die, right? That's why you're doing a trust and estate plan and you're worried about, well, who's the beneficiary when I die, who gets my Roth ira? Now generally we like to list your spouse if you have one, and then your trust second. And your trust may also list your spouse's beneficiary and then your kids after that if you have some, in varying percentages depending on how many kids you got or your situation. But let's say you pass away and leave your Roth IRA to a child, one of your children, who's probably an adult by then. Now they will inherit this Roth IRA, but there is still a 10 year rule now on stretching. Now careful what you're googling, because the rules have changed in the last few years and even literally last month the IRS came out on guidance they gave six months ago and said, ah, we're not sure what the heck we're doing on RMDs when people die in their Roth IRAs. So things have been shifting on this. So if you got Confused. Jonah, you are not alone. Let me just say the whole financial services industry is so confused on this. So let me try and break it down for everyone. If you pass away right now and someone inherits your Roth IRA, they have 10 years to where they got to pull the money out. So that gets to get stretched out for 10 years. It's still a Roth IRA. It's an inherited Roth IRA. But at the end of 10 years, that thing's got to fully come out. Now the confusion has been the IRS came out and said, well, if you were at the age 72 when you died, the person that inherited that account, they have to start taking RMD over 1 over 10, you know, 1/10 of that every 10 years so they don't get a wait and keep investing it. And then at year 10 take a whole distribution. Well, everyone thought that there's a bill that got passed a year or two ago. Everyone else thought, oh, fine haired Roth IRA, I get 10 years, I can do whatever the heck I want with it. But at the end of 10, I just got to distribute the whole thing. The IRS came in and muddied the waters on this on some guidance that they're now kind of pulling back on and they're saying, we're reexamining this, we'll let you know. Either way you do it, we're going to let you get away with it. Frankly, right now there's going to be relief if the IRS has assessed people penalties. So just know if you're looking at this right now. I know, Jonah, it's super confusing, but when you pass, there's going to be a 10 year window. Just know that, that it's still going to get stretched out. It's awesome for your kids to inherit that. Let the thing keep growing for 10 years. I mean they could double that Roth ira in a 10 year window and double the amount that they get a pull out and take totally tax free. So, so that's what to be thinking about. List your spouse first in general, because they can receive it as a spousal ira, which is not inherited. It just becomes a Roth IRA in their name. And then your trust second, if you do have a trust. So that's what I do on your beneficiary. And I hope that explains the super confusing current status of a stretch ira.

I love it. Matt reaching out to Jonah in Seattle, calling in and it's confusing. Jonah, when your mom dies and your dad's lonely and you're looking for that right mix in your family, it's Confusing, Jonah. But hang in there, Keep listening to talk radio at night, and you'll be okay. Now. Okay, I'm going to Josh Cleave 02. He says, I've invested. This is a great question. I've invested crypto into a legally traded hedge fund company. Well, I'm glad he went with legally legally rather than an illegal traded hedge fund.

Whenever a hedge fund represents themselves as legal.

Red flag, red flag. Yeah, but he's invested into a legally traded hedge fund company, okay? They have a master account where they manage my funds. However, I have an account set up by them, so kind of a side account where I can see my investment in dollars, even though it's technically still in crypto. And I can choose to withdraw my investment or continue to grow it. The company trades daily and provides me a profit based every week. Fridays between 2 to 4% a week. Wow. We love what he's doing. Right? I can then take the profit I earned and move it over to my current trading balance to grow my account and compound my investment. Okay, all right, that's great. We're happy for you. Josh, you're killing it. Then he says, next paragraph. I do have the option to withdraw any amount of my investment. The company would send the crypto from their E wallet they used to my E wallet. So this sounds like a third transfer. So he's invested in a hedge fund. The hedge fund can kick out money every week to a separate account. And then the third thing, he says, I have an option where I can just drain it out of the hedge fund altogether. And once I get I request my amount, it goes to my E wallet. Okay? And then he goes, and then I can change my crypto back to dollars if I want. Fine, Last paragraph. My question is, if I am not the one physically trading every week. I haven't pulled out any returns I've made, and I continue to reinvest the money in my trading balance that the company manages. Will I be responsible for reporting those transactions to the irs? You know, Josh, I hate to say this. I don't know. I need more info from you because here's why. And I'm going to do my best here. Let's take Josh at face value. He said, I invested in a hedge fund. Later he says, well, they invest my money for me. See, those are two different things. A hedge fund says, give us your money, just like Microsoft. You're going to buy Microsoft. And Microsoft is really. It's a company. Hedge funds are companies. And you're going to put your money with Microsoft and they're going to go out and sell computers and Apple watch or not Apple watches, sorry. They're gonna sell computers and then send you back profit. And you can leave it in Microsoft or you can take your money anytime you want. If you have truly invested in a hedge fund, whatever the hell they're doing that's on them to report, and they're just gonna give you a statement of how much you made in total every week or every month or every year. You're gonna get a typically a 1099 div. Or 1099 int. Or a 1099 or you're going to

get a K1 typically. Because in the hedge fund you'll get a K1.

That's right. I apologize. You're going to get a K1 if it's a pass through hedge fund, which I would assume so. So let me back up. I'm sorry, you're going to. I jumped to option two. Option one is if you really invested in a hedge fund, you're part owner in their company and you're going to get a K1 and it's going to summarize all the transactions they did. However, halfway through your message here, I start to feel like they're not a hedge fund, they're a brokerage. They're taking your money and they're managing it for you. And then they're like, do you want to take it this week or do you want to leave it or do you want to put it in this account? We're just managing it for you. That's not a hedge fund, That's a brokerage, for lack of a better word.

Investment management.

Investment management company. And that's where you may have thought they're illegally, I don't know. So if you're using a company that's trading your account for you, they're broker, they're a broker dealer, and I hope they're legally formed and they're managing your money. Now you're going to get a 1099 and they're going to give you a full report of all the transactions they did on your behalf. And yes, you have to report that you didn't invest in a hedge fund, you're having a company invest your money for you. So, Josh, hopefully that answers your question. You may have a blend of both of them. You've invested in the hedge fund and they're kicking out money into a separate account that they're managing for you. Now you're going to get a K1 for the hedge fund and a 1099 for the investments they're managing for you. So you could be getting both. I would make sure, Josh, you meet with your accountant right away, meet with them and go, here's what's going on this year, and here's what I think they're doing or not doing and really drill down on it. You don't want to just put your head in the sand and not understand. Are they really going to give me a K1? Are they really just managing my money? Did I really invest in their company that's going to kick out profit through a K1? There's a difference. So any of the tax lawyers at our office could definitely explain this once they get some of your statements and see what you're doing and give you some guidance and the reason why you want to find out now, Josh. So you could do some tax planning. Yeah, we don't know what you're actually going to get at the end of the year. There might be some opportunity here for tax planning. There may not be. You don't know because you're kind of in this weird area, and I think you've got a company managing your money for you. I don't think you really invested in a hedge fund. I think you got a company manager money is what I see. And you got crypto involved. And it sounds like a pancake swap or something fun here that you're doing, but I don't know. We'll see. All right, one last question.

Yeah. Okay, my last question. This is from Joanne in California. Says, hi, Mark and Matt. Lately you've been mentioning stock losses in relation to taxes. Yeah. The stock market's been down, so people have had losses. Turns out, same in crypto. And so people have been doing some tax loss, harvesting. Right. Selling, realizing the loss and then maybe using it to offset some gains or maybe some future gains. The question from Joanne, though, is if a stock drops to zero or otherwise absolutely has no value, is that a recordable loss for taxes, or does the stock actually need to be sold before it reached that point? Okay, good question, Joanne. So in order for you to get a loss on a stock, you actually have to realize the loss, so you have to actually sell the stock. Now, if the company went bankrupt, went out of business in some fashion, you can record and realize the loss and claim it at zero. Like maybe you've invested in Bernie Madoff's fund or something. You know, I mean, there's nothing to sell.

Yeah, it went away.

Maybe you got something back in the lawsuit. You got pennies back. You know, five, five years later that you can pick back up as income. But, but generally, if this is really a company that has gone under, bankrupt, out of business, whatever, you can write it off as a total loss and realize that loss on your taxes and use it to offset other capital gains you might have.

Cool. I want to add to this. Let's think of Voyager too. Voyager is a exchange for cryptocurrency that is in bankruptcy and they're going to try to salvage something. But it's the same type of thing. Let's say. Now this would be interesting. I'm going to quiz you, Matt. Let's say I had 50 grand of crypto. It was worth 50 grand and it was sitting in Voyager.

Yeah.

Market dropped. Voyager goes bankrupt. I never see my crypto again. Can I write off my 50 grand?

You never see your crypto again. Yeah.

Voyager. I lost my crypto. Voyager went bankrupt. I had no USD at Voyager. I just lost the crypto. Voyager. Now there may be a bailout. I'm not alluding that. That's the facts. With Voyager's bankruptcy, there's a hedge fund billionaire that's coming in to maybe buy out some of those assets. So you might get some of your money back. But let's just assume you don't. This whoever.

Yeah.

Brokerage lose. You had 50 grand of crypto and it went bankrupt.

Yeah.

And you, you can't sell it. It's gone.

Yeah.

Now this is a trick question. So I'm gonna. You get to Write off your 50 grand.

Okay. Yeah. How are you gonna do it? Because here's like for Voyager, the people that lost money in Voyager were staking. They gave their money up and loaned the money. Technically. Okay. And said, hey, we are going to give you our crypto in exchange for yield back. You're not just holding our crypto as custody. Like if we were at Coinbase or at Gemini or some other place that serves as custodial purposes. We decided to lend you money because we went to Voyager because we wanted all this amazing yield you were talking about.

About.

So they actually, this is kind of like they loan crypto that they're not going to get back.

Okay, so I lost my 50 grand. Do I get a write off the 50 grand?

Say yes, but I don't know.

Okay. I'm going to say, yeah, I would say it's, I think it's a loss and it's. You're going to write it off as a capital loss. But here's the trick. I don't get to write off 50 grand, I get to write off my basis in the fifty grand and which

it could be good actually, depending on where crypto is at now and when you bought it could be bad depending on, you know.

Yeah, yeah. A lot of people think I lost the stock, it's at zero. So I get a write off or I lost this crypto, it's at zero or it's gone. You would think you would want. Well, you would want to write off what it was worth when you lost it, but it's not what you worth, it's what you bought it for. So if you bought all that crypto for 10 grand, it was worth 50 and you're pissed you can't access it. That 50 is grand. Well, I guess in a way you lost 50, but you really only get to write off your basis what you spent to get it. Now if there was some staking along the way and you claim some income, that basis could go up. But you've got, you got to look at your basis, people, not just what was lost, fair market value wise. You know, my house burnt down, my rental burnt down. It was worth 500 grand. Yeah, but what'd you pay for it? 300 grand. Well, you had to write off 300 grand. You don't get to write off the fair market value. You get to write off your basis. I think they have a capital loss. I was just pulling up a little diagram here. I did this on a live last week for any of you that are experiencing some capital losses, passive losses, real estate losses, rental losses, we want to use those and we want to create a smoothie. Why don't we just blend them all together and get this beautiful little smoothie that I get to write off on my return. That's not always the case. These are apples, oranges and bananas. So if you can get to my YouTube channel, Mark J. Kohler, and look at the video I just did a week ago on capital losses strategies for the market crash. And I share some slides that are really interesting and I think any of you that are facing losses in crypto or stock, you. You want to watch that video, it's going to be really helpful.

Love it.

Okay, so what happened in Austin? Can I tell you? So, yeah, yeah. I'll just say this to any of

you listening, you know, Austin's in Austin, stays in Austin.

No, not really.

Okay.

All right. But for those of you that wanted some real good tax and legal advice, I think we're done with that. This is just a quick example of my travels gone bad. So So I fly into Austin the night before, and it was the last flight of the day. And any of you that fly, that's dangerous.

You're rolling the dice by picking that one.

Yeah. You roll into this airport, there's always a time change. There's no restaurants open in the airport. You get to the hotel, they don't have anything. You're trying to eat it. So it's the worst. I hate being the last flight of the day going in because I'm hungry. I came from a time zone, and so I get off the plane, and I was up front. I got, luckily bumped, based on all the miles I had fly. I got bumped up. So I was in first class. And I get off the plane. I'm the first one. I'm blazing through the airport. It's just like, there's a guy over there with a mop and a broom, and we're the last plane coming into Austin. So I'm walking through the airport, even the lights are dimmed, and there's about 80 people behind me that are going to be coming. They're right on my table. Yeah. Yeah. So I hit the bathroom, and I'm. I'm coming. I'm. I'm. There's like, 80 people right on my tail. And I'm hungry. And I see the cupcake dispensary for sprinkles. Have you seen those? I've seen those. Yeah.

I just saw them at the airport coming back from Vegas.

It says.

It says loaded daily, or it's like, yeah, every day.

It's. Yeah, it tasted great. Okay, I'll just build a spoiler alert.

So you got one?

I got a cupcake, but it paid. I had to pay a price. So beyond just the cost. So I walk up, I'm like, oh, that cupcake is beckoning me. I'm gonna get a milk somewhere on the way back. I'm gonna take this cupcake to my hotel room. This will be good.

Can I interrupt with a fun fact? Just. We'll go to, like, lunch or dinner or breakfast. Mark, like, gets a glass of milk. The servers are like, milk.

What are you, four years old?

Is your kid coming later?

I love milk.

Can I get a glass of milk? Eva puts ice in it. Sometimes you take cold milk with ice.

It's like 2% cold.

It's like ice.

It's a trick. It's a trick. I've mastered the cold milk.

You like what you like.

That's okay. Yeah.

Okay.

You farmers out there, you know what I'm saying?

Okay, so you got the cupcake? What?

Well, okay, so I go up to the little machine and people, these are really.

Is there a line yet? By the time you go to the bathroom.

Okay.

Still made it.

Yeah. No one was like, I'm gonna go for the cupcake. It was just me, you know, so. But I'm ahead of the crowd.

You're a lone soldier.

I'm a lone soldier. I go to my little cupcake dispensary. It's high tech. It's really cool. It's like, you know, it's gonna give me my cupcake. I scan my apple pay. I'm like, stoked. Choose. I went with chocolate and chocolate frosting. Ooh. I mean, double chocolate, double chocolate, chocolate, chocolate, chocolate on chocolate. And I was stoked.

Milk. I would go with milk with that too.

Would you?

Chocolate milk. I get you.

Yeah. It would be good, right? So I hit the little button I want, you know, B3. Send me my cupcake. This thing lights up like a carnival. I love sprinkles. I mean, lights are going off. I feel like I just hit, like the thousand dollar lottery in Vegas. Like, bing, bing, bing, bing, bing, bing. This thing's just lighting up like a. Like a carnival. It's like, I love sprinkles. And I mean, it's echoing through the air as if I wasn't going to be shamed by everybody's like, you're going to eat a cupcake this late at night? You know, you really should be having a salad. I'm stuck singing the song I Love Spring. It would not shut up. I'd like, just give me my damn cupcake. It's like the whole time, it's just singing. I'm looking over my shoulder and everybody's just cringing. Ooh, ouch. Oh. All 80 people. I'm just taking the shit.

All the judgment, they're already coming by just bad decisions over there. They're like, I'm better than that guy. I'm stronger than this guy over here. He's going, double chocolate.

All these people wearing Lululemon, they're like, like, obviously you don't know how to eat properly at night. And I'm like, come on, just give me my cupcake. As soon as it comes out, I grab it and just walked into the crowd. And I'm like, no one saw that, but they did. So I just warn you, any of you, if you want the sprinkles, cupcake, you're gonna pay the price. You're gonna.

You just gotta own it. You gotta just own it and be like, you want one everybody else.

Yeah. You know what you do? You find a little kid walking by at a picture, you go, can I buy your child a cupcake?

Just can you come stand by me for like 30 seconds so it looks

like, can you take the heat for me on this? I'll buy you a cupcake. Just take the. Take one for the team, for me anyway. So. Yeah, but all right, the cupcake was good. I just want to throw that out. Okay. Well, do you want to take us out?

Yeah. Well, Austin was sweet. So glad that you got a cupcake out of it. The recordings are going to be up, by the way, real estate tax summit.com if you want to catch the recording. We had so much great real estate tax strategy. Mark and I spoke, had some other great speakers of course. So get a real estate tax summit.com and open forum. Guys, get your questions in mainstreetbusiness.com we want to get your questions. It's the people show. We talk about what you want to talk about and get over there of course to the website to learn more about what's going on. Sign up for our newsletter, give us a five star review, a thumbs up, a kudos, whatever. And Nuanda, it's okay that you're team Mark. I just want to close out with that and let you know it's okay. I mean, I love them too. Thank you.

Thank you. I appreciate that. Thank you, man.

We'll be back next week. Until then, stay calm.

We'll cut it out for calm, I guess. Right on.

That is my.

We'll see you next week.