How do startups navigate the integration of technology with old world business models, and how do you know when it's a good time to invest in real estate.

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

Welcome to another edition of Practical Tax with tax attorney Steve Moskowitz. Steve, as you always say, there's so many ways you can look at a subject and somehow taxes creep in there. And this is one of those cases today, I think that when we look at it, our first guest is a leader in training and business development, but it gets even more interesting. Listen to this. He was a Yale grad and a grad from Columbia Business School. He also was a closer drafted in 2008 by the Detroit Tigers, a major league baseball coach.

Anyway, interesting stuff. After baseball, he was an intelligence officer for the Department of Defense. He co-founded a thing called Block Party, which changed the way tailgating partnerships are developed in division one colleges and got a direct commission into the US Navy as a reserve intelligence officer, where he currently serves as a lieutenant. But we're talking to him today because he moved back to New York City after the pandemic and started OneRange, which is an early stage workforce development tech company. That's a big intro. And his name is Steve Gilman. He's here with us on Practical Tax. Steve, thanks for being here.

Steve Gilman:

Hey, thanks for having me. Happy Friday.

Chip Franklin:

First of all, thank you for your service.

Steve Gilman:

Indeed.

Chip Franklin:

Yeah, really indeed. It's interesting too that I wonder if any of the acumen that you've picked up in the intelligence areas of your service have paid off in business?

Steve Gilman:

Yeah, I'd hope so. But I'm finding new ways every day to translate some of the skills. Intelligence is specifically interesting within the military and civilian world, because you meet a diverse group of individuals with diverse thoughts. So a lot of what we're doing has to do with cross-functional teams, getting different ideas into different stages and then doing a lot of analysis, which plays into every day, every little piece of what I do in the business world.

Chip Franklin:

Sounds a little bit like what you do as well, Steve. I mean, obviously analysis is a big part of it.

Steve Moskowitz:

Thank you.

Chip Franklin:

Yeah. Well, let me ask you both this question, before we get into the details here. What is the future of work as we see it today? Let me start with you, Steve.

Steve Moskowitz:

Work has a lot of aspects to it. There's obviously the business aspect, the personal aspect. This is the personal society. That's what a lot of people don't realize and they think of work just as the business part. They don't realize how much socializing goes on. They don't realize how much it's all part of your life. And a lot of times when people retire, they find out they're so empty because all their social contacts are gone. And a lot of people, if they identify themselves through their work, they just feel empty. And a lot of times healthy people, when they retire, they start becoming ill because there's just no purpose for them anymore. So there's an awful lot to work. Plus, besides making money, there's a lot of good you can do in the world.

Chip Franklin:

Mr. Gilman, since you're both Steve, Steve one Steve and Steve two, when you look at the future of work and everything from learning and development and where that's headed, do you see a lesson we've learned, I guess, in the last two years from working remotely and having to deal with... It's kind of conversations we're all having right now?

Steve Gilman:

Yeah, I do. I think over the past 10 to 15 years, we've seen this huge spike, especially with knowledge workers and the use of software and technology and the information age where people can be really productive with a few clicks of a button if they're doing the right thing. I think over the past two years, it's been accelerated. And we've been separated, so technology's become more of a mainstream instance. There's also been new technologies in the market. Most of the trends that we see as it pertains to future of work have to do with companies better empowering their people and the managers at the working level, the engineers, the sales, the marketing, and throughout. And so we've seen a rise in technology that allows them to do what they need better, easier, and more distributed than ever. So the future of work is kind of up for definition, but it definitely looks like flexibility, empowerment, technology at the core of what everyone does.

Chip Franklin:

Well, here in the Bay Area, obviously we're just a few miles from Silicon Valley, and you look at all the startups, and it's a question I've been meaning to ask you for a long time, Steve, what percentage of startup costs are tax deductible? In other words, if I'm kind of meandering trying to figure out exactly what my product is and who my customer is, and I take a left here and a right there, but come back to where I want to be, ultimately, are those little forays into the examination of who I am? Are they tax-

Steve Moskowitz:

Oh, lawyers' answer. It depends because ultimately, yes, you can deduct all of them, but the real question is can you deduct them all in the initial year or do you have to amortize them over a period of years? And that is an answer that's a lot longer than we'd have time for today.

Chip Franklin:

Well, I mean, I've thought of this over the years of all the different software I've purchased and the new software technology gives back to your bailiwick, Steve, and how they affect strategies. Many times it'll affect you in a way that says, that's not for me. So again, back to you Steve. If I for example, bought QuickBooks and I realized, "Eh, I'm not going to use this." It doesn't really work for me, it's still a deduction and you take that and multiply it by a thousand for an investment, does that same still apply? Or is that a nuanced answer as well?

Steve Moskowitz:

Well, again, you take a look at the totality of the business and it depends what's going to be best for you. But you have to make a determination. Is this something... And there's a lot of things where we actually have to make a determination, can we deduct it all this year or do we have to do it over a period of years? And if it's a period of years period.

Chip Franklin:

Steve, have you noticed that some of the new strategies involving new technology, do they mirror the old business model or is there something brand new in here?

Steve Gilman:

For me, when it comes to strategies and how we're doing some of the tax deductions or the business models that are put out there now? Because-

Chip Franklin:

The whole. Yeah.

Steve Gilman:

So, and I'll marry this into how a startup thinks about it. So you mentioned a little bit of my background. This is my second company, This is pure technology, we provide software. The first three, four years of a software company's life. This goes for everyone on the east coast, west coast, and anyone in between, is worried about cash flow, trying to get customer payments up front, doing whatever they can to defer. The books only mean so much. I can't say this too much in front of a tax attorney, but only mean so much because you do manage out of a bank account, which is different than they teach you in business school. So even if I'm given a huge discount on software to pay upfront for a year, every founder, anybody in charge of the books at a pure startup is going to be looking to spread out those payments over time, even if it's a little more, right? Because it's getting-

Steve Moskowitz:

Well, what you just said is very practical.

Steve Gilman:

Yeah. And so when it comes to taxes, right, my answer is always going to be, "Please Steve, let me know what's the best for my books to keep money in the bank for now, because I need to live to realize the benefit of any amortization."

Chip Franklin:

Yeah.

Steve Moskowitz:

And that's why we even call this Practical Tax because we can cite chapter and verse from the books, but well wait a minute, this is somebody's life and your spouse's life and your kid's life, and how do you want to live and what do you want to do? And your kid doesn't want to hear it, if they want the latest something for school and you say, "Well wait a minute, I could save taxes if," so the idea is planning not just for the dollars, but how do you want to live? And if you had a twin sibling and you were identical in all respects financially, what we did could be very different because your goals could be very different.

Steve Gilman:

I'll give the example, you mentioned QuickBooks. Every startup company grabs QuickBooks, right? It integrates with everything, for the most part. The amount that QuickBooks has to give you as a discount for an annual payment upfront is continuing to grow. It's probably 50% right now, right? Pay us 50% of what you would normally pay over the next course of a year for us to take your money up front. And that might continue to increase just cause everybody's used to the pure SAS model of spreading out payments, cutting things off if you need to.

Chip Franklin:

Well,