Lean In Through The Last Half Of The Year

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"It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something." - Franklin D Roosevelt

If you measure your key metrics you can manage the performance of your business, AND you can see problems well in advance of when they might show up in revenue or profit figures.

Each and every business has key performance metrics [Key Performance Indicators (KPI's)], some of which are common to other businesses, some are industry-specific, and some companies create their own KPI's.

These sort of things are our bread and butter, when working with small businesses tax pro.

Do you need help?

Financial metrics are often common to all businesses. Some examples include:<
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State Tax Revenue Collection and How It Might Affect YOUR Wallet

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"A man should always consider how much he has more than he wants." -Joseph Addison 

The financial picture for the various states in our nation is a mishmash of various revenue sources (and expenses). 

Unlike, say, the federal government, the states cannot print money. So, they are forced to go hunting for it. And they get it from a few primary sources: sales tax (based on purchases/consumption), income tax (individual and business taxes based on income), property tax and "other" taxes like the tax on fishing licenses, driver's licenses and a lot of other smaller items.  

And the most volatile -- and COVID-affected -- of these sources is ye olde income tax. Sales tax has obviously tak
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The Risks of Hard Money Lending: Part 3 of 3

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In Parts 1 and 2, we explained that loaning your own money could be a licensed or regulated activity. We also explained that loaning other people’s money for a fee is always a licensed activity. The other risk I see is when investors are doing these loans without the proper protections. Here is a good checklist to follow.

  1. Confirm the licensing issues for the kinds of loans you or your pocket lenders are making.
  2. Be competent at valuating the property and do so yourself. Do not rely on the borrower’s numbers. Learn loan-to-value!
  3. Always use a well-prepared promissory note (loan document). I see many that are not sufficient. You should have one drafted by an attorney, not a title company.
  4. Always secure the loan with a trust deed (mortgage). ALWAYS!
  5. Always run the loan through a title company or attorney’s office that confirms the recording of the trust deed in the appropriate position! The biggest fraud in real e
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The Risks of Hard Money Lending: Part 2 of 3

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In Part 1 we defined various types of loans and mortgages, which you should read if you haven’t. Be clear that making a closed-end, first position loan for the purchase of real estate is a licensed activity. This is where a lot of investors are taking a big risk.

This is because many investors are loaning funds without understanding the licensing issues. And many others are getting friends and family to loan them money. This can put your Uncle Joe or Aunt May at risk as well. While there may be arguments or exemptions that permit making these loans, there are arguments that it requires a mortgage originators license! The Division has broad authority over these kinds of loans!

Just because there are arguments in your favor, does not mean you will be successful if you—or your lenders—are investigated by the Division. If they deem that you have engaged in mortgage loan origination, the fines can be very steep. Before you engage in making or getting these loans from others, you should truly understand the rules and risks, and how to structure these loans correctly. That is beyond a blog post. You should consult an attorney.

In the above examples, I have assumed that the lender earning the interest is loaning his own money. There is a big difference if you are loaning other people’s money in which you make a fee or spread. What you’re doing now is “connecti
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Which Stimulus Payments Are Taxable (and Which Aren't)

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"Oh, my friend, it's not what they take away from you that counts. It's what you do with what you have left." - Hubert Humphrey

As difficult as it might be right now, let's project forward to next year.

Let's cross our fingers and believe that we all get through this donkey of a year that is 2020.

Maybe you have a business that clung to life, and you're headed towards recovery in 2021. You took the PPP, or perhaps the EIDL (or both). Or perhaps you had to take unemployment for a period of time, but are slowly (but surely) getting back on your feet. The economic stimulus checks helped.

But then ... taxes are due.

Uh oh.

W
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The Risks of Hard Money Lending: Part 1 of 3

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Over the last year, I have seen a dramatic rise in “hard money” lending not only among investors, but by friends and family of investors. Almost all are doing so without understanding there are rules and risks with lending. To understand these rules and risks, we’ll start with defining lending terms.

Private lending is any loan between a borrower and a non-institutional lender. This could be a loan from your father for the purchase of a car or education. Private loans can be unsecured or secured on things like vehicles, personal property or inventory. Private loans are generally not regulated.

Hard money lending is a private loan that is secured on a hard asset like real estate through a trust deed. Also, these loans are often referred to as “mortgage” loans. Mortgage loans are regulated. And may require a license to provide!

A closed-end mortgage is a loan for a fixed principal amount that is paid down, like most mortgages you think of. An open-end mortgage has no fixed principal. A HELOC is an example of an open-e
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Trusts and Real Estate, Part 4 of 4: The Asset Protection Trust

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The asset protection trust is more accurately called the Domestic Asset Protection Trust or “DAPT.” It is a highly protective, irrevocable trust and less than 20 states even allow them. Utah is one of the! Assets owned by this kind of trust can be protected from lawsuits, debt collection, judgments, bankruptcies and even divorce.

This is a different kind of trust than the family trust. In the family trust, you leave your assets to beneficiaries, like your children. In the DAPT, you actually leave the assets to yourself as beneficiary! That means they are still your assets; but they receive the protection as if you’ve already given them to someone else. That’s the key difference. However, it’s not for everyone.

First, this is a complicated and detailed trust. It’s usually more expensive to create and maintain than the other two types of trusts. Second, while you do have access to the income from trust assets, you cannot take “regular” distributions. So, if you need that income to live on and pay monthly bills, you can’t put those assets in this trust. There are also restrictions
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Frustration Is High Right Now

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I've written a fair amount over the past few weeks about all of the specific provisions in the CARES Act, related to economic stimulus checks, various tax savings strategies, financial implications, and then some.

And I will continue to be covering these topics in the weeks ahead.

But today I want to address you around this particular social moment we're in right now.

Yes, I'm a tax professional -- I'm not a counselor, religious leader or a psychiatrist, obviously -- but in the course of the last couple months, I have had the privilege to speak with MANY people about their finances, their mindset, and how they are responding to all of this.

Because you can pick your problem -- there are PLENTY all
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Trusts and Real Estate, Part 3 of 4: The Family Living Trust

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The family trust is to most common type of trust used in the United States. Most people have at least heard of this kind of trust and many have created one. The first thing I want to say is that EVERYONE needs a family trust! Whether you’re single or married, with or without children, or have small or large estate, you need a family trust.

The family trust is the core of your overall family protection plan because it is designed to own, control and allocate your assets after you die. Without a trust, your estate will end up in probate even if you have a will. Probate is an expensive, public court process. It typically costs more than a family trust. Your estate and property become public information. And the court will end up dictating who receives your assets.

Most family trusts come in an estate plan package of documents. You’ll get a “pour-over will” that works in coordination with the trust, powers-of-attorney and the health care directive. This last document is also called the “living” will that provides end-of-life instructions to family and doctors in the event you’re on l
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