The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

Financial Literacy and Prudence

Remove ads while supporting the Unscripted philosophy...become an INSIDER.

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
30,784
113,444
3,751
Fountain Hills, AZ
Here's a rare example from the trenches of modern "spend-now, worry-about-it-later" America...congratulations to the gentleman who will receive the windfall.

And the question for Diane is .... is this treated as capital gains if he sells for $1mm? Basis is the cost of the ticket to the ball game and Southeby's auction fees?
 

Don't like ads? Remove them while supporting the forum. Subscribe.

  • Thread starter
  • Admin
  • #2

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
30,784
113,444
3,751
Fountain Hills, AZ
I love that Lamborghini has moved into the mindset of most .... to be the affluent italian sports car of choice, surpassing Ferrari (for all your Ferrari lovers out there ... I can't resist making note of this sidebar) Awww... :nopity:
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
211
49
Yes, it's capital gains, but it's either short-term or long-term, depending on when he sells it. If he holds it for 1 year + 1 day, we're looking at long-term capital gains. That's generally taxed at 15% federal max.

BUT if he's subject to AMT (alternative minimum tax), and I think he will be, it's taxed at 28%.

How about if he donates his highly appreciated asset to a charitable remainder trust, lets the trust sell it (no tax there) and invests 100% of the proceeds from the sale into some type of cash flowing asset? The income from the trust will go to him (and be taxable), but he's got a charitable deduction to offset at least some of the income. Upon his death, the charity gets the corpus (principal) of the trust. So, he does good too.

Don't you love this game? (And I don't mean baseball)
 
  • Thread starter
  • Admin
  • #4

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
30,784
113,444
3,751
Fountain Hills, AZ
Yes, it's capital gains, but it's either short-term or long-term, depending on when he sells it. If he holds it for 1 year + 1 day, we're looking at long-term capital gains. That's generally taxed at 15% federal max.

BUT if he's subject to AMT (alternative minimum tax), and I think he will be, it's taxed at 28%.

How about if he donates his highly appreciated asset to a charitable remainder trust, lets the trust sell it (no tax there) and invests 100% of the proceeds from the sale into some type of cash flowing asset? The income from the trust will go to him (and be taxable), but he's got a charitable deduction to offset at least some of the income. Upon his death, the charity gets the corpus (principal) of the trust. So, he does good too.

Don't you love this game? (And I don't mean baseball)

Great info .... so if the trust sells the ball for $1m then proceeds to buy an apartment building which cash flows $5K/mo, he gets $5K/mo taxable at his marginal rates -- but what is his charity deduction in aggregate? $1m? Is that amortized over a X period of time from year to year?

Don't you love this game? (And I don't mean baseball)

I just wrote a $140K check to the US Treasury .... so the quick answer is NO. I hate the fricken game because I always lose it. :smxD:
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
211
49
Great info .... so if the trust sells the ball for $1m then proceeds to buy an apartment building which cash flows $5K/mo, he gets $5K/mo taxable at his marginal rates -- but what is his charity deduction in aggregate? $1m? Is that amortized over a X period of time from year to year?

The charitable remainder trust is a great way to handle appreciated property sales. So, if the ball sells for $1 m, the entire $1 m gets invested. I'd hope for closer to $8K per month cash flow since you'd likely be free and clear on the building. At any rate, yes, that all can be distributed to you. You get a charitable deduction based on the value of the ball. There is one catch though - your charitable donation each year is most likely limited (unless you have a bunch other income) to the amount of your income and it can only roll forward for 5 years.

But contrast that with Plan B: Sell the ball and assume you'll pay capital gains tax, only to find out it's really AMT - so write a check for $280,000, leaving you $720,000 left over to invest with.

Plan A: Charitable Remainder Trust $1 mill invested at 10%, $8,000 per month + charitable donation deduction for first 5 years.

Plan B: $720,000 invested at 10%, $6,000 per month, fully taxable

There is a downside - you have removed an asset from your estate. In Plan B, your heirs could inherit whatever is left when you die. In Plan A, a charity receives what's left when you die (hence the name Charitable "Remainder")

On your personal tax stuff - sorry about that. I've been thinking about your situation after reading your SUCCESS STORY. I'm guessing you have a lot of IP, which for the future could be used in a good tax strategy. I'll think about it and start a thread maybe this weekend on using IP to pay less tax.

BTW I still haven't done my personal returns for 2006. So, if anyone is freaking out about not doing theirs yet...just know that all the CPAs usually file at the 11th hour. Less chance of audit.
 

FT1

New Contributor
Aug 15, 2007
157
10
21
I love that Lamborghini has moved into the mindset of most .... to be the affluent italian sports car of choice, surpassing Ferrari (for all your Ferrari lovers out there ... I can't resist making note of this sidebar) Awww... :nopity:
:eusa_naughty:

:smxE:

:tdown:
 

AroundTheWorld

Be in the Moment
Speedway Pass
Jul 24, 2007
2,909
1,897
550
.
Diane,

What happens to the depreciation on the building?

This sounds like a great alternative when you can't 1031.
 
  • Thread starter
  • Admin
  • #8

MJ DeMarco

Administrator
Staff member
EPIC CONTRIBUTOR
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 23, 2007
30,784
113,444
3,751
Fountain Hills, AZ
BTW I still haven't done my personal returns for 2006. So, if anyone is freaking out about not doing theirs yet...just know that all the CPAs usually file at the 11th hour. Less chance of audit.

Neither have I -- my CPA just finished my business returns and the personal won't get done for another 30 days. If only we can defer estimated taxes like this!!

Great info Diane. Speed+
 

Wolfgang5150

New Contributor
Aug 15, 2007
70
12
12
52
Orchard Park, NY
FYI - There was a great story here about the kid who caught the ball. (BuffaloNews.com) He was a college student at the Univeristy of Buffalo and was travelling to Australia with a friend. They had a long layover in SF, so they bought bleacher tickets to the game. He was wearing NY Mets gear - the crowd was razzing him the whole game. Guess he got the last laugh.......
Kevin S.
Orchard Park, NY
 

Wolfgang5150

New Contributor
Aug 15, 2007
70
12
12
52
Orchard Park, NY
follow-up. The ball just sold for $752K.............
SAN FRANCISCO (AP) — Barry Bonds' record-breaking 756th home run ball was auctioned Saturday for $752,467, well more than the estimates by memorabilia experts.
Home run No. 755, the ball that tied the record, also auctioned for $186,750, including the bid and fee, according to Sotheby's/SCP Auctions.

Not too bad for a trip to the ballpark...............
Kevin
 

Sponsored Offers

  • Sticky
MARKETPLACE Fox Web School "Legend" Group Coaching Program 2020
Great post @Fox, very much appreciated! How can I reach out to you? I sent you a PM a while...
  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
Hey @Lex DeVille ! Having some issues with the NOREGRETS code? Udemy thinks it has expired...
  • Sticky
MARKETPLACE Grow Your Business With a Book (An Unorthodox Marketing Strategy That Built One of the Largest...
Are you looking for a new, lesser-known but potentially very lucrative source of leads to your...
  • Sticky
FEATURED! Introducing... WEALTH EXPO$ED, A Short Story By MJ DeMarco
I read it yesterday, looks like a nice introduction for reading TFM or Unscripted. ; ) Also...
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Just got off the phone with @LightHouse. Having just a 45 minute conversation with him has...
  • Sticky
MARKETPLACE Kill Bigger Incubator
@Kak Thanks for the reply. Whats interesting is that I have an idea that's been cooking which...



Forum Sponsor

sponsor

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom