The No-B.S. Guide to Building Real Wealth in Your Self-Directed IRA or Solo 401k
I’ve written a comprehensive guide book on prohibited transactions. These will be available for sale soon for $39 + $5 shipping. I’m making 50 copies available completely free of charge on a first come first serve basis.
If you’d like one of these 50 free copies, please email your name & shipping address to:
specialoffer3 [at symbol] nabersgroup [dotcom]
This blog has been viewed over 20,000 times since April, so act fast 
### Update – October 3, 2008
We have [Read more...]
When you form an LLC (or Corporation), it is registered and created at the state level. You can choose to form an LLC in any state, regardless of your state of residency.
When you have business activity that clearly occurs in a specific state, you are said to have “nexus” in that state. If your LLC has nexus in a state, it will probably need to register itself in that state and pay any applicable taxes for doing business there. An LLC is a pass-through entity, meaning it is designed to have zero taxation because income taxes are paid by the LLC owner(s) on their tax return. Unfortunately, some states have created franchise and/or excise taxes that can be costly.
If you are starting an internet business (or any other business that doesn’t create nexus in a specific state) you can choose to form your LLC in a state [Read more...]
If you talk to the average CPA, he’ll tell you that UBIT is the boogeyman and is to be avoided… always. Discussing this topic with an above average CPA (such as Eric Wikstrom of Integrated Wealth Strategies) yields different advice.
Trust tax rates are very high, so it might make sense to avoid Type 1 UBIT at all costs. On the other hand, a close examination of UDFI tends to revoke its “boogeyman” status.
The reason UDFI isn’t a detrimental cost is that non-recourse mortgage loans (the only type an IRA/401k can legally obtain) are typically only offered at a 65% loan-to-value maximum. So this means that the UDFI tax is only payable on up to 65% of the property’s net income. (That’s right – net income. You do get to deduct depreciation and other expenses before paying UDFI tax).
Let’s examine a simple comparison of the taxes payable on net real estate income with 50% leverage: [Read more...]
Many real estate investors boast of their tax strategy as involving one or more of the following:
Depreciation – This is a tax concept where the property owner pretends that his property is decreasing in value. For residential real estate, it assumes that the property’s improvements will become worthless over 27.5 years. In commercial real estate, the calculation is for 39 years. During each year of property ownership, the owner can take that year’s pro rata depreciation as if it is a loss against the income of the property… which reduces the taxable income of the property, thus reducing the amount of taxes due. Upon future sale of the property, depreciation normally must be “recaptured” which means that there is no more pretending, and the taxes on the truly realized gains must be paid anyways.
Cash out Refi – This is where the owner of the property will refinance the mortgage. The new loan will have a higher balance than the old one, resulting in “cash out”. Because this is just borrowing, it is not a taxable event. Upon future sale of the property, however, taxes will normally be due on the actual gains anyways.
1031 Exchange – Upon the sale of real property, the gains can be deferred if they are used to purchase property of “like kind” within a certain time period. It goes something like this:
- Property B must be of equal or greater value to Property A
- Both properties must be “like kind”. For instance if Property A was U.S. real estate, Property B must also be U.S. real estate.
So, savvy real estate investors often [Read more...]
