Energy CEO Grant Norwood discusses investments in Oil and Gas, while Yoseph West talks with Steve about challenges facing small businesses.

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, you and I were just talking about energy and about electric cars and about the state of California then as we speak with the power grid being stretched to the max. So I thought it'd be an excellent time to bring in our first guest, Grant Norwood. Grant is CEO of Norwood Energy Corporation, which he'll tell us a little bit about that because that's down in Texas and he's nice enough to join us here. He also handles the day-to-day operations and evaluates oil and gas prospects and minerals. It's a lot.

Steve Moskowitz:

Good old Texas, with no state income taxes.

Grant Norwood:

We love it.

Steve Moskowitz:

I know. It's a bit different here in California with such high income taxes. And so many people in California are moving to your state.

Grant Norwood:

That's true. If you moved over here you'd probably have an easier job.

Steve Moskowitz:

Probably would, but people everywhere need me.

Grant Norwood:

That's true. That's true.

Chip Franklin:

That's true. That's a racket that Congress set up with taxes. What was the 16th Amendment with taxes? What year was that, Steve?

Steve Moskowitz:

Taxes became effect in 1913 and I was not in law practice in 1913. I just want that to be clear. And when the income taxes came in, it came in as a tax on the wealthy. The top tax rate was 6%. And do you know how much income you had to be making in 1913 dollars to hit that top 6% bracket? Half a million bucks.

Chip Franklin:

Wow.

Steve Moskowitz:

In 1913. Do you know how much money half a million dollars was in our dollars in 1913? That's how our income taxes started out. And that's what happens when the government starts off with just a little tax that'll only affect a few people. And look what it is today.

Chip Franklin:

There was a panic of 1913, too. Wasn't that a run on banks? There was a difficult time, right?

Steve Moskowitz:

There have been all kinds of challenges. But again, I'm focusing on the tax. And there there's so many taxes that governments start off with, "Oh, let's vote it in. It's not going to affect you." For example, politicians saying, "Oh, we're going to put this tax on corporations but it won't affect you." Well, of course it will, because corporations say, "Okay, my costs are up, therefore I'll just charge more and consumers pay it." So that's why when people think about a tax, they should think, "Well, wait a minute, this could really affect you. What's the government doing with the money?" And that's one of the many reasons I became a tax attorney.

Chip Franklin:

Speaking of which, taxes in the state of California on gas, this is your belly whip, Grant, make it so much more expensive here to purchase fuel than it does in other states. Well, let's talk about where the price of crude and gas is right now for Americans. It seems to be going down since the last time we talked to you appreciably, especially in the last six weeks. Where are we headed, and how long will it take to get wherever that is?

Grant Norwood:

Well, we have seen the prices fall back just a little bit. I would say that it's a little bit of this renewed Covid fear. We don't really talk about it over here much in the States, but if you kind of read the publications and some of where demand has a little bit of a retracement, it's all coming from Asia primarily. So you've got a little bit of that issue. There hasn't been any new, I guess, tension over in the Middle East. So what was driving it before was just the fairly new information about Ukraine and Russia. And then I think we're about to probably climb back up. So we've gotten over kind of these little, I guess, sensational events that drive it one way or the other. Now it's evident that we're still far behind on supply from where we need to be. So we saw it climb just a little bit, it looked like we were headed to 100. Today we're lower, but I think next week you're going to see it go right back up to if not 100, somewhere in the high nineties.

Steve Moskowitz:

And Chip, the part I look at is from the investor's point of view. Our Congress has given such tremendous benefits to oil and gas. Look about the exemption from Alt Min taxes, look at all the writeoffs with intangibles. And the bottom line is, Congress has so favored the oil and gas industry that for many people it's just a tremendous investment. And besides the investment itself, all the tax benefits that go along with it.

Grant Norwood:

Correct. Correct. And they're buying votes by trying to shame it, but they're supporting it physically by supporting all the tax benefits because they know we need it. They know it's not going anywhere. But hey, it's kind of in vogue to talk about the green initiative and to make it a little bit harder on the oil and gas companies. But the policies and the topics of conversation, they just conflict with each other.

Steve Moskowitz:

Absolutely. And let's take a look here in California for a second, what we were talking about off air.

Grant Norwood:

Yes.

Steve Moskowitz:

Where California says, "Okay, we want to have all these electric cars" and then they say, "Oh, by the way, but don't use your electricity."

Grant Norwood:

Right.

Steve Moskowitz:

So how is that going to work? And oil and gas is so vitally needed. And again, there's a lot of things that are not considered. For example, somebody says, "Well, look. If you have a commute, you can charge up your car while you're at work." And that's fine, but a good thing about oil and gas is gas stations, filling stations, are all over. What about that good parent who's very green conscious that drives the car to work and the car has to charge up for some hours, and then that parent gets a call from the school, "Oh, your kid was injured. We sent them off to the hospital." And the parent wants to go to the hospital, "But wait a minute, the car's not charged up."

And although yes, the car could be out of gas, but if it is, that's five minutes in the filling station, not hours at some charging. So the bottom line is what Congress is really talking about is in the pocketbook, having all these advantages tax wise. So the bottom line is, oil and gas is not only very, very much needed, but also is here to stay and a tremendous investment with all these tax incentives.

Chip Franklin:

Well, aren't a lot of the oil and gas companies investing in the new technology? I remember reading where Exxon, some people may find it ironic, but they're really looking to try to get as green as possible because they know that there is something coming about.

Steve Moskowitz:

It's just like the tobacco companies investing in cannabis. It's you go ahead and you say, "Let's make a good investment." But basically, for all of our lifetimes, oil and gas is alive and well and a tremendous investment.

Grant Norwood:

Right. And just from our end, I'm only got one private equity fund, but from most of my PE back to associates, they're asked to at least have an ESG component somewhere in their portfolio.

Chip Franklin:

What is an ESG component?

Grant Norwood:

It's basically something green in the portfolio, just to make it easy. So what they're doing is tiny investments into it just so they can check the box and get the t-shirt. But they know that's not where the money is. They know it's a loser from an investment standpoint, and it's virtually ineffective if not more detrimental to the environment than actual oil and gas. But just to kind of check the box because if you don't, there might be a mob outside of your building. They're just implementing what little bit they have to.

So I think that the bigger companies are doing that as well. There's so many activists, investors, and they've got such strong followings that it actually helps them just to appease a little bit. And kind of in a market like we're in, where everything's falling except the energy sector, it's kind of your only hedge if you don't want to just pull out the market all together.

Chip Franklin:

What is the status of drilling and new exploration? Where does it stand right now?

Grant Norwood:

I think that we're slowly going to start seeing a resurgence here in the United States. You're not really seeing it anywhere else, and it's lacked for so long that we're far behind. And I think maybe it turns a corner three, four years from now. But let's say they really, really get started three or four years from now. Corners have radiuses, and it takes a long time to make those turns. So depending on what you subscribe to, $150, $200 oil. I personally think over the next six to nine months we might even see $70. But then I think it climbs right back, because there's not really anything to tip the scales and provide enough energy to where we have a low pricing environment again, or even normal pricing environment, it's just gone with the wind.

Chip Franklin:

Steve, does investing in energy generally require a person to be an accredited investor?

Steve Moskowitz:

Yes. Now it also depends. There's some things that are riskier than others.

How much does it cost to raise a child and should anyone with a stock portfolio regularly review for stock loss harvesting potentials.

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:

Hello and welcome to the Practical Tax Broadcast with tax attorney Steve Moskowitz. I'm Chip Franklin. Excited about this week, Steve. There's a lot to talk about. Obviously there's a lot happening in the economy and part of that, I think, is about planning for that. And that brings us to our first guest today. Again, this is a guest that I always like to talk to. Michael Davidson is a financial strategist. And we're going to talk quickly about this new Brookings study that shows it's going to cost over $300,000 a year to raise a kid. That's a lot. And Michael Davidson and from the Wisdom Index is with us here. Good to have you here, Michael. Thank you.

Mike Davidson:

Thank you for having me, Chip.

Chip Franklin:

Steve, obviously, when you hear something like that, does that number shock you? That it costs $300,000 to raise a kid?

Steve Moskowitz:

No, in those numbers it depends on the parents and the kid. Some parents are going to spend way more, some are going to spend way less. We're not even getting into, well, what's the value of having a child emotionally and all the other benefits, or detriments. And we're just talking about the finances and pretty much it depends on somebody's lifestyle. To me that $300,000 number is just about useless. It depends on the individual family.

Chip Franklin:

What's your experience, Michael, with when people come to you and either they just had a kid or they're thinking about having children and they're trying to figure out the road ahead?

Mike Davidson:

Well, Steve, I agree with you a hundred percent. I think that number is a pretty fascinating number. I spent some time looking at the USDA methodology for how they developed the math on what families are spending on their children specifically. And in America right now, families don't do a great job of tracking their expenses in general. And so, specifically what they spend on their kids is a whole nother level of difficulty. But the $300,000 number, well, whether it's 30,000 or a hundred thousand or 3 million or 30 million, having kids requires more than having the dollars. It requires all of your heart and your soul and your time and energy. And I have three children and they are invaluable, but it's tough-

Steve Moskowitz:

And it's such a highly personal decision.

Chip Franklin:

It is. And I want to get into some of the other aspects of this, but upfront, do you think it's a fair question, as a planner, to ask somebody, can you afford to start a family?

Mike Davidson:

I think that every spending plan requires putting things in the right order. And Steve was correct. If you look at the research that the USDA did, the level of income that households had was the single greatest driver on what they spent on their children. And so, you don't have to spend $300,000 to raise a kid. But what's interesting is the order in which Americans spend money. And what I have found is that conventional wisdom is to use a credit card for that spending because we have to get our points. And then what's left over, well, we want to have some money to pay our taxes and our debts. And then there's nothing really left to give or to save.

And if you change the priority, and you do the most important things first, that you give where you're called to give and then you save money second, then you pay your taxes and then you pay whatever short term debts you have and then focus on your long term ones. It's amazing how there's money left over for all the other things and you don't make poor choices with your spending, or as big poor choices. And that's really the key for having margin at the end of the year, and at the end of each month.

Chip Franklin:

Steve, let me ask you a question. Why did Congress put in place tax exemptions for children? And I've interviewed actually advocacy groups that are single people who say that we deserve a break too. What is the reasoning behind that? And has it changed much over the years?

Steve Moskowitz:

The reasoning is very old. And there was a theory that there were at the time, remember this has been in a long time, at the time it came in, most of the country were farmers and they wanted to encourage people to have a lot of children because that was basically inexpensive labor for the farm. So here the government was giving you an incentive. Things have changed. And it's funny, I will never ever forget, once in my life, a gentleman came in with his wife sat down and he asked me if they should have children. And I said, "Well, thanks for asking me, but talk to your wife cause that's such a personal decision." And then you can figure out the spending. And exactly like Michael was saying, is we prioritize. So maybe you don't buy that Lamborghini and you put money away for the kids' education. I mean it can be worked out.

Chip Franklin:

Speaking of that, let's talk about these 529 Plans. And I want to hear from both you. Let me start with you, Steve. The idea that you could start putting money away for your child's education. And I think most states have some version of this, right?

Steve Moskowitz:

Yes. And also that became more generous, because now it used to start at just for college, now you can go ahead and use the money for the child's entire education, even when they're a little kid.

Chip Franklin:

Interesting. Michael, do you run across that in your business too as well? Telling people looking and start putting money away right now, and is that money, by the way, is that tax deductible when I put it away now?

Steve Moskowitz:

It's not that it's tax deductible, but you're not paying taxes on the earnings. So what some people want to do is... And there's a way where you can basically do upfront loading. You want to put in as much as you possibly can, earn as much as you can, and then avoid the taxes and have the money for the child's education.

Chip Franklin:

One last question, and Michael you might know this too. What if the kid wants to go out of state? Does that money follow them to another state school or do they get-

Mike Davidson:

Well, with 529 Plans, they're great vehicles because they let parents do the right thing, which is safe for the future. And college expenses, college has been in the news recently, college debt, expenses have gone up. And so saving in advance for that is a wonderful idea. 529 Plans have really grown all across the country because it's also a revenue for the states. And so almost all 529 Plans, a part of the management fee and the fees and the plan go to the state as a revenue source. So when you're looking at 529 Plans, you have to be very careful about the expenses. But yes, as Steve mentioned, you could do some estate planning and move bigger chunks at a time. I'm in Texas, we don't have a state income tax, but if you're in a state that does-

Steve Moskowitz:

We have enough state income tax here for both states.

Mike Davidson:

Well, I'm assuming, in California, if you fund a 529 Plan that is a California plan, that you do get a little bit of a deduction on your state income tax return. So I'll defer that question to you, Steve.

Steve Moskowitz:

And the bottom line is, what I tell people is, a lot of times people ask me about the tax first. The tax shouldn't be the driver. The driver should be, this is a really good idea for the kids. And again, especially now that you can start off the kids with his or her education, is so vitally important. And also what I would say is, I would have the child participate and say, "Look, mommy and daddy are getting you started, getting the idea of saving, get the idea of education." And then they can participate in it. And depending on the family's economics, it's great if you're dealing with a family that has plenty of money for everything, but what if things are really tight? And when Junior wants something, mommy and daddy have to make the decision, "Should we buy that new toy or should we put the money away for the education?" And I believe if the child is a participant, then he won't be crying, but why he didn't get the toy? Because he can go to college and then get a lot more toys when he or she graduates.

Chip Franklin:

We're listening to Practical Tax with tax attorney Steve Moskowitz and Michael Davidson from the Wisdom Index. Let me ask you this question guys, what about hiring your children to work in your business?

Steve Moskowitz:

Great idea. I'm always talking about that. And what happens is it's not the old thing in the movies, you just put them on the books. No, you can't do that. You pay them the fair market value for services actually performed and then you want to multiply this benefits because now that the kid's working for you, the kid can have a pension. Imagine this, when the kid graduates from college, instead of having tremendous debt that he's wondering how they're going to be paid. He could actually have a very substantial account. And there's a break for mom and dad, when the kid's under age 18, they don't have to pay social security tax on that. That's just a little quirk in the law. And mom and dad get a tax deduction in their tax bracket,

Profit aside, what business goals should drive successful businesses and should you ever consider advising a high school student to attend a trade school over college?

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 again to another edition of Practical Tax with Tax Attorney, Steve Moskowitz. Steve, it's interesting that you talk probably to as many individuals as you do businesses, which is the bigger part of the Moskowitz LLP practice?

Steve Moskowitz:

Both, because we're mostly dealing with business people. But besides dealing with the business, we deal with their taxes personally, and there's such an interrelation. And then usually there's a relation with the spouse, possibly the kids. So, it's not just, "Oh, we'll do the business and they'll do something else," the individual. We look at the whole package, what's best for the business, what's best for the individual.

Chip Franklin:

That's great. I mean, and that brings us to our next guest, is Dr. Jane Gardner. She is a business specialist and a strategist who has been doing this for more than 30 years and nice enough to join us here on Practical Tax. Good to have you here, Dr. Jane.

Jane Gardner:

[inaudible 00:01:17].

Steve Moskowitz:

Hi Jane.

Chip Franklin:

What are some of the guiding principles for business objectives other than profit? I know profit is the one, but what are some of the other ones? And both of you just jump in.

Jane Gardner:

Oh, I'd love to talk about that because it's about people too. We have to put in the people place and I really believe that a lot of CEOs that I'm working with are beginning to do that. And not only to do that, but beginning to see that it increases their profits when they become more caring, more understanding, more valuing of their employees, they work harder, performance goes up.

Chip Franklin:

Steve, you've had hundreds of employees over the years. Do you find that that's part of it with the people that you hire, as well?

Steve Moskowitz:

Absolutely. And one of the things I pride myself on is I have a number of colleagues and we've worked together for over 20 and 25 years and in today's marketplace that says something. I very much believe in the people and, as far as a business goes, of course, profit is super important. But when you care about things like being green, when you care about doing good social things, the irony is not only do you feel better and you're doing a good thing on this earth, the irony is you actually do wind up making more profit. And I see that. And sometimes there have been some individuals that I've dealt with that were in their business for a long time and let's just say that they were a little gruff and they knew how to do something. And I said, "Well, the way you're treating people, do you know why you have nine different assistants during one year? There's a reason for that. They're not lazy or stupid. It's not them. It's you buddy." And-

Jane Gardner:

Oh, Steve. That's a hard one. That's a hard one to come up with, isn't it? It's about you. Oh, whoa.

Steve Moskowitz:

I've been in California for over 30 years, but I moved here from New York City and in New York we were direct. And although people out here have made me nicer and I want to give them credit, and there's colleagues of mine that have taken some of the New York out of me and made me nicer, I still have a lot of New York left in me. And we were direct in New York. In New York, it was, "You looking at me? You got a problem with me?" And then you resolve things directly.

Jane Gardner:

Right, right.

Chip Franklin:

"Talking to me?" Talking about ... Yeah. Let me ask you guys a question.

Steve Moskowitz:

Talking to me?

Chip Franklin:

This wasn't on my list, but you made me think of it. What's the best way to fire someone?

Jane Gardner:

Wow. The best way to fire someone is to have such a great relationship with them that they know it's coming. You better have talked to them about it several different times, written them up, but just let them know they aren't performing. Usually how I teach CEOs to fire someone is to help them find another job.

Chip Franklin:

Steve, you don't seem like, to me, and I've known you for a long time, that you would do that well. You seem that ... I mean I've known many of the people that have worked for you and they all seem happy and driven. Have you had to do that and how hard was it for you?

Steve Moskowitz:

Well, as any business owner, that comes up. Sometimes people don't understand what they're getting into. And in fairness to everybody, sometimes, especially somebody new that hasn't been in the profession or is just out of school, they think they'd like to be a lawyer and then they don't. And what happens? So just like Jane was talking about and you say, "Well, is this for you?" There's some people that are just unhappy doing that and as a responsible employer, somebody needs to be supervised. And if they're doing something wrong you say, "Well, look, you can't do X. You have to do Y." And somebody might say, well, they just did and not only did they not enjoy it, they don't like it, it makes them sick.

There's a lot of medical problems caused by people that are just miserable with their jobs and you're going to be at a job for a long time. And it's not just a firm. So if you don't like being a lawyer and you work for the X law firm and you say, "Well. I'm quitting. I'm going to the Y law firm," chances are a lot of the things you didn't like about the X law firm are going to be in the Y law firm. So you leave that law firm, you go to Z law firm and, say, you do that too and then all of a sudden your resume doesn't look so good because you've had a few jobs in a short period of time.

So the idea, like Jane is saying ... Speaking is so important. Communicating is so important. That's true of all relationships, business, personal, and a lot of times it may sound old fashioned but you sit down with somebody and, "What do you like? What do you dislike? What's for you? What's not for you?"

And, for example, when I started the practice I was a professor and I taught at night while I was building the practice up. And a lot of the students would come to me and say, "I want to be a so and so," whatever it was. And I'd say, "Well, here's the best thing I recommend. As early as you can when you're in school as a part-time job or a summer job, go and work in a firm like that and also talk to as many ... Whatever it is. You want to be an engineer, you want to be a doctor, you want to be an architect, talk to as many architects as you can and find out how they like the job. And if majority say, 'Look, I'm stuck in here because I have a mortgage and bills and a family, but I hate it,' that should be a consideration. And then try it yourself. And if you say, 'Well, I worked in an architectural firm for a summer and I didn't like it.'"

Another thing is expectations about earnings, which you don't want to do. And I've heard parents who have a list of majors that they say they won't pay for and they say any major where you have to learn to say, "Do you want fries with that?" You're just not going to support.

Jane Gardner:

Oh, Steve and Chip, we just have to talk about quiet quitters with this because you mentioned direct and being from New York, I just want to say that the quiet quitters are trying to communicate so indirectly here that it's going to be very ineffective. I just can't see they're getting their message apart.

Chip Franklin:

Yeah, it's interesting to think about.

Steve Moskowitz:

When you talk with somebody, you also take a look at their work performance. So even if they didn't tell you the truth, if a good job is doing X, Y, and Z and you only did X, and even if they lied to you, you'd say, "Well, okay, I'm glad you feel that way, but what about Y and Z? You have to do Y and Z and you didn't do that. So I'll do Y and Z for you this time. Now, for the next client you got to do X, Y, and Z. Well, gee, you only did X. Again, no matter how much you say you love this, obviously you don't." So-

Jane Gardner:

But people just don't make decisions like that, unfortunately. People are emotionally driven.

Steve Moskowitz:

[inaudible 00:08:36].

Jane Gardner:

All of the cross sectional research shows us that we are not rational thinking human beings. We are reactive emotionally and we are irrational first thing out of the bat. And I think that's really what a lot of people are doing with their careers right now. They're emotional, they don't feel good. You just mentioned how much people are unhappy right now in their jobs. It's 70% is the figure.

Chip Franklin:

But what-

Steve Moskowitz:

There's another thing that causes unhappiness too. People get into something, they have no idea that the pay is so low, and then they might love the job but they're miserable because they have to live with 19 roommates because they get paid so low.

Chip Franklin:

Yeah, sure. It's hard.

Steve Moskowitz:

And let's face it, money's important, and even if you love basket weaving, what does a basket weaver earn? And if it's real low income for the rest of your life, do you want to, basically, live in a hovel and never can afford anything and you have two shirts, one's in the laundry and one you're wearing.

The art of financial planning and what is the state of business air travel with aviation expert Mike Hatten.

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.

------------------------- Episode Content ---------------------------

Chip Franklin:

Welcome to Practical Tax, I'm Chip Franklin. This is tax attorney, Steve Moskowitz. Steve, it's interesting when we talk about taxes and finance, is Siri in the United States, is it the same in every state? Are there geographical differences?

Steve Moskowitz:

Oh sure, because a majority of states have their own tax system and different states treat the tax a little differently. So when you're giving tax advice, it's not just Federal IRS, you have to consider the state or the states that you're involved with.

Chip Franklin:

I mean, I know Texas and Florida, they don't have income tax and that's a big decision in a lot of people's moment deciding where to move. And we have a lot of people from California going to Texas, right?

Steve Moskowitz:

Oh, there's a tremendous drain of people out of California now, Chip. And there's a number of states that don't have a state income tax. Of course, the one that we joke about a little bit is Alaska. Alaska has a negative state income tax. They actually pay you to live there. But the joke is, do you want to live in a place where they pay you to live there?

Chip Franklin:

All right. Our next guest is a certified public accountant, a certified fraud examiner, business advisory and virtual CFO solutions. Then I hope I get her last name right, Lydia Desnoyres. Did I get that right, Lydia?

Lydia Desnoyres:

Phenomenal. Spot on, Chip.

Chip Franklin:

Thank you so much for being here.

Lydia Desnoyres:

Thank you.

Chip Franklin:

That's Steve Moskowitz, right above your head.

Steve Moskowitz:

Hi, Lydia.

Lydia Desnoyres:

Hi, Steve.

Steve Moskowitz:

Boy, we probably have a lot to talk about. Before I was a tax attorney, I was a CPA.

Lydia Desnoyres:

Did you go to the dark side or you think you left the dark side?

Steve Moskowitz:

Well, I didn't want have to work as hard as you do, so I became an attorney instead.

Chip Franklin:

All right, so both of you deal with tax strategy. So let's start with this question for both of you. When meeting with a client for the first time, what's your first question? And let me start with you, Lydia.

Lydia Desnoyres:

It depends on when they're calling. If they're calling on April 14th my first question is, have you lost your mind? Just kidding. The first question is, what's your story? What has happened in the past? Do you typically owe? Just to get a feel for how things have been in the past. Once I get to doing the work and then I direct my questions on more planning and strategy for the future. But usually it's a, what's your scenario? What's going on?/p>

Chip Franklin:

Steve?

Steve Moskowitz:

Well, we're very into planning. So what I like to do if somebody calls me on April 14th, I will explain to them an extension is extension of time to file, not an extension of time to pay. And then what I try to explain to the clients is that your tax return should merely be a summarization of a year's worth of tax planning. Because I look at the Fortune 500. And that's why I became a tax attorney because when I went to law school, I already had a bachelor's and master's degree. I was already a practicing CPA doing taxes, but I didn't want to be the person to tell a client, well you can't do this and you can't do that./p>

I looked at the Fortune 500 and I said, how do those giant companies make all that profit and legally not pay taxes? That's what I want to learn how to do and I want to do it for companies a lot smaller than the Fortune 500. So that's why I went to law school. And the bottom line is there is so much here because as we all know, the tax system is a system of incentives to get us to do things that they can't order us to do. That's where tax planning really comes from. So the bottom line was, I'm very, very into that with clients.

And even if somebody calls me on April 14th and we file the extension, even then there's some things we can do. For example, with a lot of the retirement plans, there's over 20 different types, with a lot of them you can set them up, up to the time of filing the return, including extension, which means that most of the time you have to write the check by December 31st year one, to have the deduction in year one. With a lot of the pension plans, you can write the check in year two, set up in year two, and still deduct it in year one.

But there's so much that can be done. So basically what I would say is, I talk to the client, listen to them and also what are their goals? Some people are live life now, other people are retirement, other people, their kids. So even if I was representing twins, they might be identical financially but have very, very different wants and needs. How about you Lydia? How do you do it?

Lydia Desnoyres:

That's spot on in terms of the planning and stuff. Everybody's different, right. I actually had that example where you have two people. One person who referred a coworker, and same role, same salary, same everything. Two different goals, two different outcomes, right. And so it's definitely important to understand what their goals are. There are some people who like big refunds, right, so they're okay with overpaying during the year because to them that's important.

Steve Moskowitz:

Ask them if they'd be willing to make you an interest free loan during the year, you're giving my-

Lydia Desnoyres:

Exactly. Exactly that. You try and have that conversation, again, you have to know your audience, you have to know your clients, right. So I try and tell them, hey look, you're literally just letting the government hold your money interest free. Why not take that, put it into a savings. There's so many other things you can do during the year. But again, some people are just like, well, you know what, I use that as a savings. When I get the refund I pay my property taxes with it. I'm not disciplined enough or whatever the case may be.

Steve Moskowitz:

Disciplined. That's the thing, is because if they took the money they'd spend it. That's it.

Lydia Desnoyres:

Right, exactly. So you got to know your audience. And so then obviously that will lend us itself to a completely different conversation because maybe they need financial planning and financial coaching. But when we're talking about the tax strategy, it's understanding your audience and like you said, having that conversation, that dialogue, understanding their comfort zone, meeting them where they are, right. And then you eventually build that trust, right, and then you can guide them and hopefully they listen and take your advice.

Steve Moskowitz:

Another big thing was are they married or are they planning on changing their marital status.

Lydia Desnoyres:

Exactly.

Chip Franklin:

I'm going to compliment you guys on something and it reminded me of this conversation when I was in college. I had a girlfriend who was majoring in accounting, and I was a math major, but it just was something I could do. I didn't love it. She loved it, but it wasn't the numbers. And it bothered her when people said, you're a numbers person. She goes, I'm a people person. And both of you guys are, both of guys represent yourselves real well. Lydia, I don't know you as well as I know Steve, but Steve has represented himself well over the years and it's helped him because people, they're going to come. I mean, it's like a confessional, right?

Steve Moskowitz:

Oh, absolutely.

Lydia Desnoyres:

Oh, right.

Chip Franklin:

And so people have to trust you. They got to trust, not just your acumen, but you, the essence of you. And I think people forget that about this business, right?

Lydia Desnoyres:

I joke around when I was first in the trenches of tax season, and then I don't do a lot of tax work anymore by the way. But I would joke around when I'm done and collecting my fee, I'm like, all right, only a portion of this was for tax preparation, the rest was for a therapy session, right.

Steve Moskowitz:

Well that's why our license is attorney and counselor at law.

Lydia Desnoyres:

There you go. You see, I don't have that. But sometimes you play therapy. But you develop these relationships. I was reflecting the other day, a client who just told me the other day, she's traveling because her son is getting the white coat ceremony, he's becoming a doctor or just graduated, right. And my response was like, oh my God, were we just taking the driver's education credit for him? And I've never met this kid but that's how you develop these relationships with the whole family.

And it's like, oh my God, we went from getting the credit from him getting his learners permit to the college credits for going to school and then now he's no longer there, now he's graduating and it's like the tax returns tells a story. And so building that relationship and being a people person, that's really part of it. And I caught a little bit of your last talk with your last guest about communication and stuff and simplifying things, right.

Steve Moskowitz:

It's so vitally important.

Lydia Desnoyres:

Right. Right. I've had clients who are like,

What’s the latest in the hotel economy with the owner of 90 yr old Handley in Union Square and the importance of professional coaching in the business world.

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 everybody to Practical Tax with tax attorney Steve Moskowitz. Steve, I want to ask you something before our first guess because it kind of ties in with our guest. As you traveled around the country, did you constantly go back to the same hotel when you were in a city? Was it like one you favored and you just stuck with it?

Steve Moskowitz:

Absolutely.

Chip Franklin:

What were the things that that drew you to that? Because I know that some hotels, they fight for business travel because that's a great thing to have. Others can't really compete in that area and some do both.

Steve Moskowitz:

Well, I hate to admit this, but my number one consideration was a good wifi. It's really important.

Chip Franklin:

I get, yeah. That's funny.

Steve Moskowitz:

I mean, for example, right now we're doing a Zoom and all the business is being done through the internet now. The number one thing is I need a good wifi connection.

Chip Franklin:

You know what mine was, good pillows because I mean I've always had... I've played sports so many years and I'm feeling the pain now. I always wanted a hotel that had good firm pillows as opposed to the ones where they look like a sheep snuck in your room and it was on your bed. There was a lot of things and it's funny, so I traveled forever and I would always pick the same hotels and price didn't matter because I mean that was eight hours that I could just disappear before I had to do any kind of work and everything.

Steve Moskowitz:

Of course, you're only paying for part of the room. The IRS is paying for the other part.

Chip Franklin:

Our first guest is the owner and this is a family-owned business here in San Francisco that has been in this family since 1928 and some incredible stories. Jon Handlery joins us here from the Handlery Hotel in San Francisco. Jon, welcome to Practical Tax with Steve Moskowitz. Hope you're well.

Jon Handlery:

I'm doing well. I hear you Steve on the radio quite often giving tips. Thank you.

Steve Moskowitz:

Thanks very much. Hopefully you heard me doing my broadcasts with Chip.

Jon Handlery:

Yes.

Chip Franklin:

Both of you guys are great on the radio and both of you guys I think are smart to represent your brand, and that's one thing that I've seen all these years in radio is that people want authenticity. They don't need the guy that talks like this. What they want is they want to hear from the people who actually will be delivering the service or product that they have. Both of you guys represent yourselves real well. There's some kissing up, but it's true.

Steve Moskowitz:

Thanks Chip.

Jon Handlery:

Thank you very much.

Chip Franklin:

So Jon, let's talk about, I mean obviously in and since 1928 coming up on a hundred years, not too far down the road-

Steve Moskowitz:

Jon wasn't the one that opened the doors.

Chip Franklin:

No.

Jon Handlery:

No. My grandfather, then my dad, now me, and two of my kids now have followed me into the industry, so fourth generation.

Chip Franklin:

Let me ask you this, Jon, over the years obviously this pandemic had to be a difficult period to get through especially as I mentioned before with business travel down. How did you guys manage it to get through that? I know we're still dealing with the aftereffects and the next few years we will be too, right?

Jon Handlery:

Yeah, we're slowly coming back in San Francisco, which is positive. A lot of domestic visitors, people wanting to get out of the house and things of that nature. Conventions are obviously off because they usually book three, four years out. People that were looking at a convention say for '23 in 2020, they weren't going to book because we didn't know where we were going on this. That's been the challenge. The pandemic was totally different than at least anything I've ever experienced. I came back to work for my father in 1980 and I went through all the ups and downs with the downturn in the economy and things of that nature. You could adjust to that by watching your costs and maybe playing around with the rate to try to entice someone. In April 3rd of 2020, I ended up closing the hotel because we'd already been told two weeks earlier that you couldn't travel. That just changed everything.

Steve Moskowitz:

One of the things that's so tough about the hotel business is you can't save up inventory to sell later. You can't put that in a storeroom someplace. I'll put this guest room in the storeroom and we'll sell it-

Chip Franklin:

It's like a restaurant Steve.

Steve Moskowitz:

Exactly. Once the night is over, the room's gone. There's nothing you do to make up for that.

Jon Handlery:

No, challenging. One of my children who I work with came to me and asked me about three months into it being close, "What would my dad have done?" I said, "I don't know if he would've done anything different because if you're told you cannot travel, there's nothing I could have done." I can cut costs the best I can, but I can't have the hotel open. If you don't have guests then you're going to lose money but you'll lose less.

Chip Franklin:

Well you guys open in the heart of the Great Depression in 1928, right? I mean coming up. It's interesting to see this city and where it is because obviously this is something you share with the other hotel owners and I'm sure you guys talk and everybody's trying to figure out the near future. I agree with you and I think Steve would agree, and probably sees it even more so being a numbers guy, that it is changing. We are growing but people don't realize, as you said, hotels book a couple years out and their convention stuff and convention business is huge. I know that there are people though, and this is one of the things you market to and I love this, is that there's so many people that live in the Bay Area and see if you live in the city that don't come into the city, they say they're from San Francisco but they can't tell you the last time they were in San Francisco. That's a big part of your marketing too, right?

Jon Handlery:

Yeah, it is. We're on the radio to attract that market to try to get people to come to the city and just take a weekend off if nothing else or go see a Giants game or whatever the case may be. I think that's why it's been positive from a domestic standpoint and especially regionally where people who were locked up for whatever it was, a year plus, they do want to get out, they want to get away from their house. By letting them know that there're a lot of things in San Francisco maybe they hadn't seen.

Steve Moskowitz:

What's nice if you stay in your hotel, you can walk to the restaurant, walk back and if somebody should decide to imbibe an adult beverage, they don't have to worry about harming anybody.

Chip Franklin:

Right and from that location, you're an Uber ride from Oracle or AT&T, I forget what they're called now; the Presidio, the Wharf restaurants. When I was there staying at your place in... It's funny, you know who is a huge fan of your place? She's not here today. Liz Frame, who works with Steve, she loves it because she says she goes in there and she feels like she's gone back in time. All the amenities are modern, but it has the feel of a hotel that is part of the city and it's really hard to explain that to people who've never been in there. You both know what I'm talking about. You've been in hotels like that before. I mean, New York has a bunch of them. San Francisco not so much. When I came I stayed at a bunch of different hotels in the city. I've been in your hotel in San Diego. There's a Handlery in what do they call that, Hotel Circle down there. This one was such a great experience because as Steve just mentioned it was so close to stuff.

I want to ask Steve, can I ask you a question about business travel? Every year like many people, I do a long form and I have a lot of travel expenses. Have you ever heard of an audit where they question your business travel and they say, "Well, did you go visit somebody? Did you have fun?"

Steve Moskowitz:

Oh, all the time. That's actually one of the areas where the IRS is suspect. The first thing they do is they take a look. What was the primary purpose of the trip? Was it business? Also, one of the things they pay attention to is where did you go? If you went to a resort area that's going to get... If you had a business trip or two weeks in Honolulu, that's going to be scrutinized in and of itself a lot more than if you had it in Pittsburgh or Detroit.

Chip Franklin:

Interesting.

Steve Moskowitz:

Then it's a whole bunch of things and you have to show the primary purpose is for business. On the other hand, suppose you were there for two weeks and you say you were doing business from Monday through Friday and then you took the weekend off. Can you still deduct the time when you're off Saturday and Sunday? The answer is yes if you show that it wouldn't be practical to fly back to your home, it would make no sense for you to fly from San Francisco to New York on Saturday and then fly back Sunday. So you say, "Well, okay,

The tax advantages and the future of solar and other green technology. Plus, a Security and Fraud specialist offers insights on IRS scammers.

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 again to Practical Tax with tax attorney, Steve Moskowitz. Steve, you're looking good, my friend.

Steve Moskowitz:

Thanks so much, Chip.

Chip Franklin:

Lot to talk about today. And there's a lot going on in the world. One of those really involves us here in California. We have so many days of sunshine, maybe not in the sunset district of San Francisco.

Steve Moskowitz:

It's wonderful here.

Chip Franklin:

The ironically named sunset district, but one of the things that it always blew me away is that we don't have more solar panels on every... Well, I don't know, on every building from San Francisco down to the border with Mexico, and I find it fascinating. And that's one thing we don't have that we should, but maybe there's reasons that I don't know. So we invited our first guest today. He's a green energy expert, and he's here with us. Ali Samana joins us here on the Practical Tax podcast. Ali, thank you so much for being here. Good to have you. And it's really great to be able to talk to somebody that can maybe clear some of this up for us. Happy sunny Friday.

Ali Samana:

Hey, happy Friday to you too. And howdy from Texas. How are you, Chip?

Chip Franklin:

I'm well. I'm glad I'm not in Texas though. It's hot down there.

Steve Moskowitz:

Well, I don't know. Half of California is moving to Texas too.

Chip Franklin:

Yeah. Yeah, if you believe the ads, it seems like it.

Steve Moskowitz:

Every day clients are telling me. Even today, clients are well, we're moving to Texas.

Chip Franklin:

Have you been to Texas, Steve?

Steve Moskowitz:

Many times.

Chip Franklin:

All right. No knocking you Ali. I love California, but I guess everybody has their own.

Steve Moskowitz:

So do I, doesn't mean I can't like Texas too.

Chip Franklin:

Fair enough. Okay. So Ali, let's start with just across the country, and then we can focus in on California. What are the challenges facing the expansion of solar energy in California and across the country?

Ali Samana:

So there are several challenges that are facing the green energy market. So if you imagine where the cell phone technology was about 30 years ago, that's kind of where we are. We have this infrastructure, this very heavy grid infrastructure, and now we're going down to what's called distributor generation. So there's a lot of pushback, number one, from these grid operators, because if everybody just goes off, well, these poles and wires and everything that they've spent billions and billions of dollars on, nobody will really need anymore. California has a unique problem that the country is... California leads a lot, by the way, for the rest of the nation to follow. They're number one in installs year after year. So the problems that they face today, the rest of the country will face in two, five, or 10 years. One of the problems that California faces for example is called the duck curve, and what the duck curve means is you've got all of these solar installs that are producing energy throughout the day.

Normally, your grid operators would see a parabolic curve. They'd see a parabola going back to geometry in high school for usage, as it gets hotter in the day, you use more electricity. Well, as it gets hotter in the day, you produce electricity now, when you have so much solar, so the curve looks like the duct and they just don't know what to do with it because at night you still need energy. Early morning, you still need to pull energy but during the day, there's so much energy being pumped into the grid that it's actually lowering the demand to a point that they just have no idea how to stabilize the grid. So grid stabilization is one of the challenges, which is where storage technology and some of the other new innovative technologies will help. But at least in the short run, that's one of the challenges facing our markets.

Chip Franklin:

What about storing that energy? Tesla and other companies sell these batteries for your home. Are they efficient enough to, I mean, I'm not asking you to support one or another, but do they work? And is it a good idea?

Ali Samana:

So battery technologies have been around a very long time. The battery technology that the DOD uses that our company actually endorses is a chemical called lithium iron phosphate or LiFePO batteries. They actually have the longest charge discharge cycle. When you have to look at with battery and the way that batteries are manufactured is what is the reason that this battery was made. So for example, we all have these handy dandy cell phones. Well, these batteries are made to be charged every day. And then the power is discharged over 10, 12 hours. This is lithium ion. I won't say the names because I don't want to need an attorney when I get sued. So there are...

Chip Franklin:

I got one right here.

Ali Samana:

Exactly. There are companies...

Steve Moskowitz:

Always happy to help.

Ali Samana:

Thank you. There are companies, one of them who you mentioned that use these lithium ion batteries for home purposes, and that's really not a good purpose for them. They won't last as long. They're really not made for that so they're not as efficient. But lithium iron phosphate is the solution at least today for homeowners that want a battery that lasts 15 years, and that does everything that they want it to do.

Chip Franklin:

Steve, what happened to California's strong embrace of solar incentives and California and the federal government? I purchased like 50 of them for my home in 2013, but I've heard a lot of those incentives are gone. Is that accurate?

Steve Moskowitz:

Some of them are on the way out, but we still have some. So the bottom line is we shouldn't ignore that because right now for 2022 and 2023, we still have them. And the other thing too, is you can never tell with the government when credits are going to expire, oftentimes the Congress will say, well, wait a minute, let's go ahead and redo them, put them back in. But right now today, if you install solar, you get a 26% credit. You get a 26% federal tax credit.

Chip Franklin:

Wow. So let me get this straight then. Why wouldn't a state want to encourage solar? I mean, is there downside for PG&E and some of these other electric companies, if more people start using solar? I mean, I know I don't get credit for everything I sent in the grid, and I didn't know this Ali until you told me it's actually creates a problem. Because we're sending too much into the grid, taxing the system. We're all thinking normally that the problem is that we're all sucking in from the grid, but there's a two way street there. It can be another problem. I mean, to me it makes sense that everybody should have solar panels for a little more energy independence, but we're still waiting for the perfect battery. Is that the deal?

Ali Samana:

So one of the things, by the way that you mentioned, so when you do a study of the grid and how solar helps or hurts these electric providers, it actually helps them a lot more than it hurts them. And the reason for that is the most expensive energy that is produced throughout the day is during the daytime. So here in Texas, if you're trading electricity, it can go up to 50 cents a kilowatt hour for these energy buyers to actually purchase energy. And then at night, electricity is free because there's so much wind energy that's being produced. So actually solar installs are supposed to help these electricity providers and these grid operators, which is why there were incentives. I think California has that issue with the duck curve. They just have not engineered a solution for it. I know that there's enough brain power in California to engineer a solution. Maybe wind power, just like we have in Texas might be the answer.

More wind power does more production at night. Coming back to batteries, yes, batteries are a big time solution. The challenge for a lot of these grid operators is that you can go completely off grid with batteries, and now you don't even need to pay that meter tax. So there are some incentives in California if you get batteries, there's specifically for people that are getting batteries, but I don't see them lasting very long because as more and more people get batteries, they're going to be worried that, hey, they may not need us at all anymore. And then again, this grid is just going to be useless.

Chip Franklin:

And of course, Texas, you guys have your own grid. And we saw the problems that had with that snow and ice last year. Steve, I guess when we're talking about the state and investing into the grid, and it's a myriad of issues here, it's not just solar. What about investing in solar, Steve? I mean, do you have clients that are interested in energy or I guess different types of energy investing? I don't even know if you can invest in things like windmills.

Steve Moskowitz:

Oh, sure.

Chip Franklin:

Geothermal and stuff.

Steve Moskowitz:

That's been around for quite a while. And the bottom line is with investing a lot of times, traditionally, people think that the only reason people invest is for a certain amount of money.

Michael Cupps discusses remote working, the four-day workweek and the future of office space. Tenant and Landlord Attorney Todd RothBard talks about Pandemic relief for landlords and tenants and where it’s headed.

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 Practical Tax. I'm Chip Franklin. That is Steve Moskowitz, tax attorney. Steve, this is fascinating where we are right now in the post pandemic world and the remote working and people kind of trickling back in. I know you are making a move for your employees to be better for them and safer and a new location. What's your experience with some of your clients and everybody else? Is remote working going to hang in there or is it starting to go away?

Steve Moskowitz:

Oh, no. Remote working is alive and well and will be with us for the rest of our lives. A lot of people prefer as a matter of fact, I've seen surveys where a lot of employees said, if I can't work remotely for you, I'll work remotely for somebody else. And if you think about it, it makes a lot of sense because how much time do you spend commuting? First of all, you could use that time to work more or to play more, not to mention the cost of commuting, not to mention you go into the office, you're wearing your fancy duds. If you're at home, you're probably in jammies or sweats, not to mention, how about all those people that have kids and are either home to take care of the kids or close to school. If something happens, you can run right to school as opposed to being in the corporate world.

And even if you left, as soon as you got the phone call, it would take you a while to get to the school. So it's an awful lot of advantages. And another thing is that for example, here in San Francisco, a lot of people have left San Francisco and said, well, why should they pay a lot of money for a small, not so hot apartment when they can move to another state, buy a house for what they were paying for rent and also maybe move to a state, doesn't even have an income tax. Not to mention people that say, "Well, I can go to a resort area and work from there." Not to mention all the countries that are saying, "Hey, we'll give you a special visa, come and work in our country. We just like you to stay here and spend some money in our hotels and our restaurants."

Chip Franklin:

I think I read somewhere, Steve, like 75,000 American professionals moved to Barcelona last year and they're working from Barcelona. And many of them from California.

Steve Moskowitz:

Well, talk about moving. If you move to Puerto Rico, you can legally avoid most of your federal taxes.

Chip Franklin:

Well, let's talk a little bit about that with an expert. Michael Cupps is from ActiveOps and these guys, they know this cold and he's nice enough to join us here. Michael, obviously you heard this conversation. It seemed like we were moving towards the possibility of a four-day work week, but then it kind of got flipped with the pandemic where people are working remote. First of all, do you concur with Steve that this is here to stay?

Michael Cupps:

Oh, absolutely. We see it in our customers and they're the biggest banks and insurance companies on the globe. And they're as much as they try, they're not those employees aren't coming back.

Chip Franklin:

That should be good for the business, right? I mean guys, right, it's good for everybody, it seems.

Michael Cupps:

Yeah. Yeah, absolutely. When they actually sit and think about what that can do, whether it's real estate or their access to new employees, that they can go recruit in areas they wouldn't be recruiting before, poaching from a competitor. All of those things are now at their discretion.

Chip Franklin:

There's got to be downsides though. There are psychological downsides, and then of course I would imagine managing remote employees is a new challenge.

Michael Cupps:

It is, and it isn't. We've had customers like Anthem Healthcare, for example. They were remote before the pandemic and they just kind of sailed through the pandemic without change. It comes down to teaching your leaders and teaching your managers how to handle it. It's a different environment. Doesn't mean it's any less productive or more productive. It just means it's different. And some of those managers that grew up going to the office every day, it's tough to get them to see it a different way. So it's important to get those managers retrained and skilled in a way that they now know how to engage the employees the right way.

Chip Franklin:

Do you guys know the story of Anthem and how they grew? This is a company that just changed the way medical billing is done. And they did it by hiring somebody on the sixth level, not on the top, but their whole business plan was the people that really know how to make this stuff work aren't upstairs, they're down on the bottom floor. And they went and they found this woman who was doing all the medical billing and was talking about all the problems with it. And so a few companies started handle it on the efficiency and everything grew from that. It is interesting. I wonder with remote employees, do you get that kind of hey, can I stop and talk to you for a minute? I have an idea. It seems to be that that might be a little bit of a problem as well. And Steve, I'm going to ask you as well, because you have tons of associates. When you don't see them face-to-face, is something lost in that?Let me ask you, Steve first.

Steve Moskowitz:

When you talk about face-to-face, we have Zoom. So it is kind of face-to-face and you have to weigh everything else, advantages and disadvantages, where you can do an awful lot through Zoom. And what about when you have employees on the other side of the world? What about when somebody really can't leave their home for some reason, they have small children. What about all the people that you can do business with now that wouldn't have before? For example, now people really don't mind that you're thousands of miles from them. Everybody's gotten so used to it. A client can calls us from Florida and say, "Hi, Steve. I'd like you to help with my taxes." And doesn't matter that I'm in California.

Chip Franklin:

But I guess it depends on the business, right, Michael?

Michael Cupps:

Yeah. Yeah. Certainly-/p>

Steve Moskowitz:

It also, Chip, could depend on the person, because some people are just happier in their homes. Other people want to go and physically be with somebody. It's a difference between being able to shake hands with somebody or not. But again, even shaking hands today, some people don't believe in doing that anymore.

Chip Franklin:

Well, in the middle of all this, I was a standup comic. I've been since 1980, and I did a comedy show for The Punchline in a Zoom thing like this. Let me tell you, it was unsatisfying to say the least. There are some things, obviously that salespeople will tell you that, medical sales, I got to come in. You got to see it in my hands. I got to talk to you. Those kind of relationships. Let me talk about the four-day work week. Is that dead now because everybody's at home? Are they going to give them a Friday off?

Michael Cupps:

No, it's actually picking up steam again. There was this an experiment going on in the UK with about 700 companies trying it out to see how it plays out. And then there'll be results of that study. It's not complete yet, but it's actually I think catching more steam than it was before the pandemic, mainly because people now realize that they can work flexibly and it doesn't have to be a Friday that everybody gets off. It could be 20% of your work population gets Monday off and the other 20%, Friday, and then Wednesday, et cetera. So with flex schedules the way they are, the way we learn to work from home or work remotely, it actually is more convenient now.

Steve Moskowitz:

And with other things too, like email. In the old days, if you wanted to speak to somebody, you both had to be available at the same time to speak together. Now somebody can send an email at three o'clock in the morning and somebody can answer it at 11 o'clock at night and they've communicated. They didn't have to be together at the same time.

Chip Franklin:

Hopefully you remember to turn the notification off on your iPhone. So it doesn't ding at three in the morning. I get that all the time. What about the financial incentives for a company to go to a four-day work week when they're already remote? Steve, are there some financial incentives there? Obviously you're still paying for health, salary, all the disability, all the stuff, workman's comp, all that stuff. Does it really benefit a corporation to go four days in your mind?

Steve Moskowitz:

The benefit is what are we talking about with employee satisfaction? And somebody says, "You know, boss, I'd really be happier with you and the job if I could work four days a week. I'll work the same number of hours." It depends on the person. Somebody would rather stretch it out and say, "Look, maybe their endurance isn't as great. And they would just rather have five days." Someone say, "Well look, I would rather work four days, 10 hours." And that was always a big thing with people that had a long commute, they'd say, "Wow, I don't have to spend half the day commuting,

Who handles your trust and what happens if the person you appointed leaves or dies? And Has Amazon thrust our country into a depression?

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 addition of Practical Tax with tax attorney, Steve Moskowitz. Let's start with a guest that's in your backyard. That would be Michael Davidson, not only a really smart investor, but he has a lot of ideas, and he's nice enough to join us here. Can we talk about wills and trusts for just a second here, because this confuses a lot of people. Steve, how many people do you think, watching this right now, don't have a will or a trust?

Steve Moskowitz:

A lot of them don't have anything. And another thing is, there's a lot of people that have something that's woefully out of date, and if they don't change it, they're leaving everything they have to someone that they now hate, and they will turn over in their graves if they understand that, so this is something... should always be constantly reviewed. What I tell income tax clients is, "Look, we think about your income taxes all year long, we plan all year long, we file a return once a year, and your estate planning, which involves everything you've worked for in a lifetime, everything that you have, whether you got it yourself or if somebody left it for you, why don't you give that the time and respect it deserves?"

Chip Franklin:

Michael, what's your experience? I mean, have you found that, when you try to sell somebody on getting a trust or a will together, it depends on their age, or are they stubborn, or do they usually go right along with your suggestion?

Michael Davidson:

I think one of the questions that isn't expressed out loud or asked out loud is, is the next steward prepared? And I think for a lot of us and for a lot of our clients, there's some uncertainty around that, and that's even a conversation that couples haven't really processed together. And so, as a result, there is this inaction that takes place as it relates to getting a will done, getting a trust done.

All of us have stuff in our families, and kids, and grandkids, and daughter-in-laws, and son-in-laws, and just that whole dynamic adds this element of uncertainty for the future, and I just think that it's tough for couples to come together and be decisive with that. And so, I really think that the good question to ask is, is the next steward prepared? If they're not, then what needs to happen to get there? And I think walking through that series of questioning, I think can help get an estate plan done.

Chip Franklin:

Obviously, there are going to be different stages of life. I know both of you guys can address this. I mean, people start thinking about some of these things when they get to be 50, and it's too late, in some cases, for financial planning. But a trust and a will, those have to be constantly reviewed, but why? And Steve, let me ask you real quick, what is it about a will that would change, or a trust that would change from when the kid is 25 to when the kid is 35, if it's still just my money that I'm passing along?

Steve Moskowitz:

Laws change, taxes change, wants change, relationships change. For example, what if you have a situation where your son marries or divorces, has a child, has six kids, one of them has special needs, somebody's developing differently than somebody else, somebody has a problem, they have an addiction, or something else? It's like life. Life is a constant series of changes. And a lot of people go through life and they wish, or they think, well, something's in stone. It's not. That's just the way life is. This constantly needs reviewing.

Chip Franklin:

Well, Michael, let me ask you something about when you set up administrators for a trust. Again, it might sound really ignorant here, but it occurred to me that if you set up the administrator and it's the same age as, for example, myself, by the time the trust needs to be administered, they might be as old as I am. Do you change administrators along the way?

Michael Davidson:

Well, generally, we're advisors and money managers, and so we have estate planning attorneys that help us with that, and they're thoughtful enough to ask that question, "Is this person really ready to do that?" And obviously, any good estate plan is going to have successor administrators and trustees and executors, so I think that's a part of the process. And that's another question that a great attorney asks, is, "Does this person have the competency and the ability to administer your estate?"

Chip Franklin:

What about tax laws? You mentioned tax laws change. Are some of these grandfathered in? Like, if I start a trust and a will, based on the assumption that the way the law is now and the law changes, do some states or the feds, do they grandfather that old law into your plan?

Steve Moskowitz:

I'm going to quote what I quoted back when I was a law professor. Law is only that which those in power at the times say it is. Our Congress and their infinite wisdom can do whatever they want to do. And there's so many times when they're even thinking about something, you have to be prepared and saying, "Well, for example, right now, there's a very generous exemption from estate taxes. What if that changes?" Well, you have to be prepared for it. And the reason we'd like to tell our clients about it is you don't want to get a call from your lawyer saying, "Hey, there's a new law coming at midnight tonight. Do you want to make a major change? Hurry up and tell me because we have three hours." These are things that you want to think about, plan, and then say, "Well, if this happens, I'm going to go this way. If that happens, I'm going to go that way."

Chip Franklin:

I like the name of your company, Michael, Wealth Wisdom. And the Wisdom part, I think is really important, especially if people get into their sixties and they start thinking about retirement, and now, we have this incredible inflation that's going to eat, at least, hopefully, for a short period of time, into people's pensions and 401ks and savings.

Steve Moskowitz:

Or as we like to call it, turn them into 201k plans.

Chip Franklin:

Well, here's my question for you. If you were going to go back to work, and we had a discussion about that a few episodes back on Practical Tax, if you were going to go back to work, is it better to go into something where you can file a long form to help abate some of those taxes? This is a question for both of you, but I'll start with you, Michael.

Michael Davidson:

Well, I think going back to work, whether you're currently working or not going back to work, you always... We call it walking in wisdom, and another way to say that is just being... We want to be healthy. One of the best ways that I can have longevity in the future is to do my best to be healthy today.

And it's the same way with finances, and with finances, there's really five things you can do with money. You can give it away, you can save it for the future, you can pay taxes, you can pay down debts quickly, or you can spend it. And as it relates to a tax planning, our recommendation to our clients is to do the giving and the saving first. That generally helps with lowering taxes, and if you can do that and live on and develop a lifestyle that allows for giving and saving when you have income in the future, you're more likely to have a lifestyle that works. And so, it isn't necessarily a tail wagging the dog. We want the dog to wag the tail here.

Steve Moskowitz:

And a lot of times, you can put those together where you do have a charitable interest, but the charitable interest will throw off an income tax benefit. For example, if you do a CRT, charitable remainder trust, and you say that you want to live in this house for the rest of your life and your spouse for the rest of their lives, but when the second of you passes, your house is going to go to the charity of your choice, you get an income tax deduction for that now. And physically, everything is the same. You're living in the house the rest of your life and your spouse's life, but you pay less taxes now because of something that's going to happen after you've passed.

Chip Franklin:

Yeah, amazing stuff. Can we get you back, Michael? I really appreciate it. We had a hard time tracking each other down, but I really appreciate you being here. Thank you so much.

Michael Davidson:

No, anytime. Thank you-

Steve Moskowitz:

Thank you.

Chip Franklin:

Thank again. His website will be at the end of the show, but it's called the wisdomindex.com. And I could use some more wisdom. I-

Steve Moskowitz:

We always use more wisdom.

Chip Franklin:

If it was-/p>

Steve Moskowitz:

Only watch out for the guy who says he doesn't need any because he knows all there is to know. That's the guy I want to avoid.

Having nothing to do with pepper, state and local taxes. Here in California, California does follow a lot of the federal law, but not all of it. There's some laws that are just different in California, and other laws, the state will interpret more strictly. For example, with 1031 exchanges, the state interprets things more strictly. Also, California enacted what's called the clawback rule,

What are both the practical and strategic advantages of financial planning for young children, and how are women CEOs faring in the world of CBD start-ups?

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 yet another edition of Practical Tax, with tax attorney Steve Moskowitz. Steve, you're looking well my friend.

Steve Moskowitz:

As you Chip, thanks so much.

Chip Franklin:

There's a lot to talk about with taxes. I know you see tax implications in almost every human behavior, which makes sense.

Steve Moskowitz:

Of course.

Chip Franklin:

It is, right? Joining us right now, again, this is an interesting guy. Brandon Neely is not only a financial planner, but he's got an interesting niche, and he joins us here on the Practical Tax Show. Brandon, welcome. Say hi to Steve.

Brandon Neely:

Hey Steve, thanks for having me.

Steve Moskowitz:

Hey Brandon, how are you doing?

Brandon Neely:

Good... go ahead.

Chip Franklin:

Let's start right away, if we can, with the whole concept of financial planning, and this goes out to both of you guys. I know that they say, "Start young." Are there any other advantages to starting a financial plan for small children? Maybe Steve, you can also explain why the IRS now wants us to have social security numbers out of the womb. Start with you, Brad.

Steve Moskowitz:

The government likes keeping track of us.

Chip Franklin:

Yeah.

Steve Moskowitz:

As far as doing that, for example, if mom and dad have a business, and they employ their child under the age of 18, they don't have to pay social security taxes on that. That's just a little wrinkle in the law for employing your kids under age 18.

Chip Franklin:

Trump's dad did that, didn't he? If I recall correctly.

Steve Moskowitz:

They take advantage of every law, which we all should.

Chip Franklin:

Right.

Steve Moskowitz:

The other thing is, the banks always have these posters up. If you take a kid, and the day that kid is born, you have an account set up for him, and you make little deposits in there, but regular deposits, by the time that kid has graduated from college, that account can be enormous. Instead of coming out of school saying, "Oh, how am I going to pay all these? That's for my basket weaving classes and these other things," the kid says, "Hey, look at me. I have a big, fat bank account. I can do what I want. I'm not forced to take a job to pay my student loan, and my rent, if mom and dad kick me out."

The bottom line is, and I'd love to say, "I just figured this out, get your pencils out," but the financial people over and over and over again have said that if you have a small amount... but regular, that's the trick. It's like exercise. It's got to be regular. There'd be a tremendous amount here, then we can get into, how do we invest the funds, and how much is conservative, and how much is aggressive? I won't even get into that part.

Not to mention Chip, I'm always preaching about the benefits of companies having pension plans. How much more if the kid comes to work for mom and dad, and they say, "As part of being an employee here, now you're entitled to the pension plan." It's just tremendous savings. To me, that's a no brainer.

Chip Franklin:

Brandon, you've obviously been dealing with this a lot, too. What's your take?

Brandon Neely:

I agree with him. It's not about rate of return, it's about volume. The more volume that you can put into something, the better. The power for me is thinking through, how am I doing that volume from the early age, and not just looking at, am I making this rate of return over here, or here? It's all one wallet, so how does all of this play with each other, to help you go where you want to go? That's why. I think, being that strategist versus just a planner, a planner oftentimes is, how can I get as much for you in the market? Whereas, a strategist, for me as a cash flow management strategist, I want to look at all the pictures.

I'm a caretaker of my mother-in-law. I have a life insurance policy for her, making sure that there is long-term care needs, or any of that stuff, and she's going to pass that on to me. I do this thing called infinite banking. I have some policies that I use for businesses. I think about taxes all the time, whenever I'm designing these things.

Steve Moskowitz:

My favorites.

Brandon Neely:

Always thinking about taxes. My hope is that I always have a tax problem, because I'm growing my money, and I'm growing my wealth, not shrinking. I was going to say, my mother-in-law bought a policy on my son, who is four years old. I'm already thinking about future his name, I'm not going to tell you his name, because I don't put it on there, but he has an adulting fund.

Chip Franklin:

Wow. Let me ask you this: as we grow and mature, and we decide on the type of income that we're going to seek, a lot of people want to have their own business, it's been the American dream. Obviously, that dream can turn into a nightmare. You owned a coffee shop. Let me ask you, and then Steve, part of this, both of you, what small mistakes did you make Brandon? What are the common ones people make Steve, and how can they avoid them? We'll start with you Brandon, with the coffee shop.

Brandon Neely:

How long do you got? When you go into any entrepreneurship or business ownership, most of the time you have to have some idealism to go into it, especially if you don't have a rich relative or anything like that to help you go ahead. I didn't have a rich uncle that gave me a loan. I had to take on debt to do that, and that was a challenge for me. We were idealistic. We started a coffee shop of all things. The way in which money, how much money can go through your hands is insane. I will tell you, and I'm on a tax podcast, I swear to God, I felt like Uncle Sam made more money than me. Every time I did a transaction, I'm like, "Holy crap, I'm writing checks to this guy who doesn't even show up to work, ever."

Steve Moskowitz:

He'll show up if you don't give him the checks.

Brandon Neely:

I know, and I was like, "All right, he'll come and arrest me if I don't pay him, but, he doesn't actually-"

Steve Moskowitz:

It probably wouldn't be an arrest initially, but they would start seizing things.

Brandon Neely:

Right.

Steve Moskowitz:

Your bank account and other things.

Brandon Neely:

Not that they'd have much to seize, at that point.

Chip Franklin:

Steve, obviously, you've had hundreds if not thousands of different clients that have their own businesses. My brother-in-law was in the restaurant business, and they were really successful, but they worked, honestly, 18, 19 hours a day for 20 years.

Steve Moskowitz:

Why did they only work part-time Chip?

Chip Franklin:

Exactly. He used to tell me that every new restaurant, they ended up having 12 of them, but every new restaurant put all the others on the line. If that failed, the whole thing went down.

Steve Moskowitz:

Absolutely. One of the things that I tell people that are thinking about going into business, I said, "If you're married, or you have a partner, you've got to talk to them. When you switch from being an employee with a quitting time to being a business owner, there is no quitting time When you're a business owner. Be prepared for that to have a major effect on your personal relationships, to the point where some of them are going to break up if they're not strong enough." A business is like a baby. It's a child, it's living, it's screaming, it's demanding, and its needs come first. Your baby eats first, and if there's not enough food to go around, you go hungry, but you feed the baby. What happens a lot of times with a small business, like Brandon was saying, you take everything you have, you can borrow, you put it in the business, and you may have also borrowed money from your parents, or friends, or the bank, whatever, and it is a constant struggle, and you don't get time off.

In your business, a lot of times, at least initially, or for a long time into it, you're talking about a 24/7 commitment. I wasn't kidding about, before you do it, have a chat with your significant other, because your significant other might not like sitting at home by themselves while you're closing up the restaurant, and talking to some customer, and some employee, and ordering something. It's a major thing. Now, the reason that you stand to make so much more by being a business owner than being an employee is to make up for all the risk that you take, and all the hours, and everything else. These are all basic principles. The risk reward/principle, the more risk you take, the more reward you can get.

The bottom line is, I know it's everybody's dream, because everybody looks at a business and says, "Look at the boss. He makes all the money and I do all the work. I sure wish I was the boss." A lot of times, what the employee doesn't understand is, if the boss makes a million dollars a day in gross revenue, and his expenses are a million dollars and a penny, he's going to come up with that penny. They don't realize that. Again, I'm a business owner, and I have been for over 30 years, and for me, that's the right thing. That's my personality, business owner. You have to make sure that's the right personality,

Anchor Funding CEO Kevin Lyons joins Steve to discuss the interest rate hikes and explore both investment and tax opportunities during this technical recession.

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.

------------------------- Episode Content ---------------------------

Chip Franklin:

Welcome to another edition of Practical Tax with tax attorney Steve Moskowitz. Steve, there's been a lot in the news recently about interest rates and refis and how that's affecting the country, the industry, and everything that goes along that. I remember in the past, people say, well, interest rates are high people tend to, instead of sell, they do repairs and additions and upkeep and stuff. But I don't know where we are right now with that number. If it's a number that we're going to see smooth out soon, will Powell do that? Or will we continue down this road? Joining us right now is Kevin Lyons. Kevin is the CEO of Anchor Funding and old friend of mine. I've known Kevin for a long time, and he's nice enough to join us here with Steve Moskowitz on Practical Tax. Kevin, hello.

Steve Moskowitz:

He doesn't look very old, Chip.

Chip Franklin:

Your right.

Kevin Lyons:

Thanks Steve.

Chip Franklin:

Hi you Kevin. How are you?

Kevin Lyons:

Good guys. How are you?

Steve Moskowitz:

Great.

Chip Franklin:

Good. Let's just jump right into this. We've known each other a long time and we've spoken over the last 15 years and we've seen interest rates go up and down. Let's talk about where we are right now. And how do you feel people responding to the higher interest rates? Again, those of us who live in the '70s like Steve and I, they don't seem that high. But how are people responding to you right now when you're talking about everything from new mortgages to refis?

Kevin Lyons:

Well, we've had a really good run the last few years. So everyone's taken advantage of incredibly low interest rates. But if you look at interest rates over the course of time and you guys obviously remember, and so do I, and any viewers watching. Rates in the '80s and '90s and early 2000s were a lot higher. So when you go from rates in the-

Steve Moskowitz:

I remember in the 20% bracket.

Kevin Lyons:

Yeah, exactly. When you got 15% and 10%, that was a good rate. So the sticker shock that's come into play is rates in the twos and threes suddenly becoming fives and almost as high as 6%. So anytime you get that, you're going to get a change of scenery and the scenery's changed. However, it looks pretty good for the long term.

Chip Franklin:

Yeah. We're both all in California, all three of us. And here's something that always occurred to me. So people might put off buying because the rate went up a little bit, but the housing market doesn't seem to be slowing down at all and it's continuing to move. Does it make sense to still buy at a little bit higher rate to offset the increase in the value in cost of homes as they go forward?

Kevin Lyons:

That's a very interesting question, and we have that conversation pretty much daily. My personal opinion is yes. And the reason I say that is, and this is obviously my two cents, the Fed has done a really good job of raising rates really quickly, in fact, there's a three quarter point high coming up shortly and another half a percent in November, they've taken such extreme measures in such a short period of time that ultimately they're going to have to take the opposite path. When they take the opposite path and start dropping interest rates, home demand is high. I mean, there is still a huge amount of demand. COVID has changed the landscape. So people are working from home. So this idea of working in the same city is gone. You can work anywhere in the nation now. So home demand is shot up. So we're seeing crazy high coming down to busy. And what we're expecting in the next year or two is as soon as the Fed does decide to drop interest rate, these home prices are going to continue over the course of time to go up. Your home is your best investment. So you wait now, granted, you may get a lower interest rate in a year or two, but the chances of getting a better home value in my opinion are diminished.

Chip Franklin:

I bought a home in '79 at a huge double digit rate, and we sold it 25 years later with a 300% increase in value. It was outside of DC, but nonetheless. I mean, it's all relative to where you live and the money you earn and the taxes you pay, depending on what part of the country you're in. To me, I was an intriguing question is what's going up quicker, the interest rate which we know abates and drops eventually, but other than the bubble we had in '08 which was really not about the housing market, as much as it was about just bad banks and bad practices. It seems to me that that's a really good way to go.

But I mentioned this at the top, Kevin, but Steve, let me ask you this before that though. So if I took money out of my home for repairs, the equity that I have in my home, and I'll ask the second part of this is how do you recognize equity, real equity, Kevin? But the first question is that interest that I borrow on that is that still tax deductible? Because I remember a point it was 100% deductible.

Steve Moskowitz:

So, that's changed. It used to be 100% deductible no matter what you did with the money. Then they put a cap on it at a mill. Then the cap came down to three quarters of a mill. And what a lot of people don't realize is if you refi, you only get to deduct the interest on the money that you used to repair the house or get a bigger house or an addition. And they even took away the extra 100 grand for a credit line. So the bottom line is, yeah, they take a look at it. So when people refi say, okay, it's real important, again, keeping records because I was a CPA before I was an tax attorney. Because what happened is some people, most people don't separate it, they just take it and the government says, well you paid off some credit cards and you made some improvements, government takes the position that since you can't say which is which that used the money from the house for the credit cards no deduction for you.

So what you want to do is you say, okay, you're very specifically put it in separate accounts and say, all right, this money that I took out the house I use it for improvements, that's tax deductible. And there's another trick too. It's the Voss case. The IRS always said that the limit was per house. Mr. Voss bought a house with his girlfriend and Mr. Voss said, well, okay, I get a 750 and my girlfriend gets a 750 and the IRS said, oh no, no, Mr. Voss, it's 750 a house. The tax court said, no, no, Mr. Voss is correct. It's 750 per taxpayer. So one of the tricks here, suppose boyfriend and girlfriend buy a house [inaudible 00:06:54] common. If they got married, they could only deduct 750. If they live together without marriage, they could deduct a mill and a half.

So again, the minute you ask me something, having spent my life in this, it's, oh, well wait a minute. The way to do that is this. It's kind of like why the Fortune 500 doesn't pay any taxes because they have an army of people like me saying, oh wait, wait, wait, wait, don't do it that way, do it this way. And the last thing you want to hear from your lawyer is, oh, too bad, you did it that way [inaudible 00:07:26]-

Chip Franklin:

That's tax attorney, Steve Moskowitz. Kevin Lyons is with us here. Kevin, how do you know what's real equity and what is just a bit of a spike in the market?

Kevin Lyons:

I think equity's equity. So when you get your house valued through an appraisal and that's what an appraisal believes your house is worth and you look at what you owe versus what it's worth. That's your current equity position at the time. So in regards to a spike in the market, yeah, I mean we had borrowers coming to us over the last year who wanted to borrow up to 80%, in some instances 85% of their property values. They can go up to 90 with VA. And our advice to them has always been, just understand that once you take this cash out refi, you got to live with this mortgage. So if there's ever a downtick in rates and you want to refi down the road, you may not have as much equity as you need.

So I think we always tend to heed to the side of conservatism. We like to see people getting up to 70% loan to value, maybe 75, always giving themself a 5% buffer in case of emergency or when they want to refi. So we definitely have a lot of equity right now. Are we going to see a big diminish in it? No. As I mentioned earlier, I don't think property values are taking a dive. And you mentioned as well, there's nothing to put them in that direction. There's no bad mortgages out there that are pulling the market down. So real equity is, in my opinion, what your house appraises for and perceived equity is just be careful and don't overdo it.

Steve Moskowitz:

Also, the thing I would throw in, it depends an awful lot on what do you plan to do with the money?

Kevin Lyons:

Correct.

Steve Moskowitz:

You say you're going to take money out of the house and go on a wonderful vacation, maybe that's not such a great idea. On the other hand, if you say, look, I have a really solid business idea but it needs some cash. In that case,