Search found 454 matches

by SeattleCPA
Fri Jun 06, 2014 12:47 pm
Forum: Personal Finance (Not Investing)
Topic: To form an(other) LLC or not
Replies: 4
Views: 764

Re: To form an(other) LLC or not

Sure... E.g., you might choose a different tax treatment for your LLC.

BTW, you can probably set up the LLC yourself... so the only fee you need to pay is the state filing fee.
by SeattleCPA
Fri Jun 06, 2014 7:59 am
Forum: Personal Finance (Not Investing)
Topic: Incorporate? / International Income
Replies: 4
Views: 663

Re: Incorporate? / International Income

[OT comments removed by admin LadyGeek]
by SeattleCPA
Fri Jun 06, 2014 7:52 am
Forum: Personal Finance (Not Investing)
Topic: Best arrangement for two person company (LLC, S-Corp. etc)
Replies: 7
Views: 2499

Re: Best arrangement for two person company (LLC, S-Corp. et

You should sit down with your accountant and have a thorough discussion of this issue. And a tip: Make sure he or she knows you're happy to pay for the consulting time but need some good, solid advice. To give you a little bit of perspective... As you obviously know, your S corp provides an opportunity to save payroll taxes. That's a big deal. Note that it's very possible each owner may be saving $5K or $10K a year in taxes. But as others note, the only mechanism you have to massage the profits going to S corp owners is via salary. Often that's tricky. As noted, with a partnership (or an LLC treated as a partnership) you can pretty much allocate profits in any manner you want as long as the allocations reflect economic substance and aren't ...
by SeattleCPA
Wed Jun 04, 2014 5:46 pm
Forum: Personal Investments
Topic: SEP IRAs
Replies: 6
Views: 1140

Re: SEP IRAs

Spirit Rider wrote:To expand a little on the whys in SeattleCPA's post.

A SEP IRA is an employer contribution only plan. Employees can not make contributions and the percentage of contribution must be the same for all employees (including the owner). One good thing is that SEP IRA accounts typically have no fees.

A SIMPLE IRA allows both employee and employer contributions. The employee 2014 contribution limit is $12K(+ $2500 > 50). However, the employer is required to either match up to 3% of employee contributions (may reduce this to 1% in 2 of 5 years) or a 2% non elective match. SIMPLE IRAs typically have modest fees (hundreds not thousands).

Major lower cost providers are Vanguard, Schwab, and Fidelity.
+1 :happy
by SeattleCPA
Wed Jun 04, 2014 12:46 pm
Forum: Personal Investments
Topic: SEP IRAs
Replies: 6
Views: 1140

Re: SEP IRAs

If you're a one man (or one woman) business, a SEP works great (especially when paired with an S corp)...

But I think you'll find the SEP option pretty impractical if you have other employees.. A Simple-IRA often works better given its very low costs.

BTW, Vanguard offers good low cost SEP and Simple-IRA options. (We use a Vanguard Simple-IRA at my CPA firm for example...)
by SeattleCPA
Tue Jun 03, 2014 9:29 am
Forum: Personal Finance (Not Investing)
Topic: capital gains on land sale?
Replies: 5
Views: 717

Re: capital gains on land sale?

Retread wrote:You would allocate the original cost between the land and building, sometimes based on the assessor's allocation. You would then allocate a portion of the land's basis to the acreage sold.
Bruce
I agreed with retread. :sharebeer
by SeattleCPA
Tue Jun 03, 2014 9:27 am
Forum: Personal Investments
Topic: SEP IRA for Real Estate LLC
Replies: 9
Views: 1580

Re: SEP IRA for Real Estate LLC

I was under the impression that it is very desirable to put real estate in an LLC to limit personal liability. Are you saying that it is not? Are you arguing that direct ownership is preferable? What about lawsuits? I am not a CPA, but I think what he is saying is that for real estate, you want the LLC to be taxed as a partnership, not as an S Corp. You can have the property in an LLC taxed as a partnership... but you don't want to have the LLC taxed as an S corp (in most cases)... BTW, some people do set up a separate "property management" S corp to create some earned income so they can do a pension. But with that structure you'd still have property outside the S corp. Property would probably be inside LLCs treated as disregarde...
by SeattleCPA
Mon Jun 02, 2014 1:35 pm
Forum: Investing - Theory, News & General
Topic: 529? What if they don't go to college
Replies: 70
Views: 8551

Re: 529? What if they don't go to college

My experience is that over 95% of the upper middle class kids went to college and most of them graduate. I would not be surprised if some very high percentage go to college for at least a little while. But what I was referring to are completion rates. Here's a link to study that suggests about 50% of people who start complete a degree... http://chronicle.com/article/New-National-Tally-of-College/135792/ Same study notes that for four year schools, completion rate is 75%... that 75% of the 66% probably gets pretty close to the 43%-ish figure I was using. Sorry I can't find the source for the 43%... if I thought anybody cared, I'd go to effort to bird dog the number.... P.S. My experience BTW matches the data I recall... BTW I work and live ...
by SeattleCPA
Mon Jun 02, 2014 1:30 pm
Forum: Personal Investments
Topic: SEP IRA for Real Estate LLC
Replies: 9
Views: 1580

Re: SEP IRA for Real Estate LLC

thedayisbrave wrote:
SeattleCPA wrote:seriously, it sounds like you've made several mistakes... including violating the eleventh commandment which is "thou shalt not put real estate inside a corporation"...
I'm curious why that is considered a mistake?
If you liquidate the S corp or distribute real estate to a shareholder, you'll have to book a gain on the difference between the FMV and the basis... so bottomline, by putting property in real estate, you create an opportunity where IRS gets to tax a transaction that's merely you moving things around.

BTW, this also means that to avoid tax on what's basically a phantom transaction, you'll need to continue doing the 1120S return as long as you hold the property.
by SeattleCPA
Mon Jun 02, 2014 9:21 am
Forum: Personal Investments
Topic: SEP IRA for Real Estate LLC
Replies: 9
Views: 1580

Re: SEP IRA for Real Estate LLC

You maybe want to find a local accountant to help with this... seriously, it sounds like you've made several mistakes... including violating the eleventh commandment which is "thou shalt not put real estate inside a corporation"...

Also, it probably doesn't make sense to pay the payroll tax hit just so you can get a pension deduction... you're jacking up your tax costs not reducing them.
by SeattleCPA
Mon Jun 02, 2014 9:16 am
Forum: Investing - Theory, News & General
Topic: 529? What if they don't go to college
Replies: 70
Views: 8551

Re: 529? What if they don't go to college

What if your kid decides he doesn't want to go to college . Not something that I am hoping will happen but it could , considering my sons are 6 months and 4 , I can't really ask them their thoughts on the subject . If the older one decides to not go that's not a big issue I just roll it to my younger son . I'd like to have some savings to help them with whatever they decide to do at that point in there life so long as it's constructive , maybe one wants to start a business and skip school . This point is in my experience really important... and a very possible outcome that isn't adequately considered by many people pondering the Sec. 529 option. I think for upper-class, and upper-middle class, college educated parents, etc., the chance tha...
by SeattleCPA
Mon Jun 02, 2014 9:00 am
Forum: Personal Finance (Not Investing)
Topic: Teenagers and a Roth IRA
Replies: 5
Views: 1278

Re: Teenagers and a Roth IRA

I doubt your kids owe a tax return. It sounds like their incomes are below filing thresholds... $20 a weekend for ten or fifteen weekends a year? That's $200 to $300.

BTW, if the kids were over that $400 threshold, yes, they'd owe a tax return with a Schedule C and schedule for the SE tax... But I predict they won't work that much. :D

That earned income does qualify them for an IRA or Roth... And, this situation is one of the few textbook cases where a Roth financially makes sense. I actually have a blog post today that talks about doing this sort of stuff for your kids and grandkids: (Post is here.)
by SeattleCPA
Mon Jun 02, 2014 8:48 am
Forum: Personal Investments
Topic: Advice For An Entrepreneur With Irregular Income
Replies: 9
Views: 1570

Re: Advice For An Entrepreneur With Irregular Income

I doubt, given what you say, that you should be using a Roth-style account. It doesn't look to me (doing quick, back-of-the-envelope calculations) like your marginal rate in retirement will be close to what it is now. Here's a resource you can peek at for more info: only times you should use a Roth Be careful about the 401(k) option... if you think you'll someday add employees, I think you'll find that choice now creates problems then. (Often, a pretty optimal situation is to use a SEP as long as you can and then switch to Simple-IRA when you have other employees to cover.) You probably should be using an S corp (or should have at least carefully considered that option)... the blog linked to earlier provides free incorporation and LLC forma...
by SeattleCPA
Fri May 30, 2014 12:01 pm
Forum: Personal Investments
Topic: Setting Up SEP for 2 person LLC
Replies: 7
Views: 836

Re: Setting Up SEP for 2 person LLC

If you file your federal return using the 1065, your LLC is partnership...

I don't know (don't remember) which questions Vanguard asks if you set up a SEP... I would call and ask. If you don't have any employees (partners are not examples), you should tell them that.

Note: Unlike a 401(k) plan, though, the other employees stuff doesn't change the SEP... I.e., with a SEP, the same plan works for both sole proprietorships with no employees and sole proprietorships with employees... partnerships with only partners working and partnerships with partners and employees working etc
by SeattleCPA
Fri May 30, 2014 9:41 am
Forum: Personal Investments
Topic: SEP IRA question
Replies: 3
Views: 703

Re: SEP IRA question

I have a side hobby business that last year generated about $80K gross. Am I eligible to contribute 25% of this in a SEP IRA in addition to my wife and I maxing out 401ks at our real jobs, and maxing out traditional IRAs? I operate as a sole proprietor for this side business and I have a few contractors who we have doing modest work for us. Thanks. You get no incremental meaningful benefit (because you're already using up the elective deferral for 401(k) accounts) with a solo 401(k)... also, down the road you have extra costs and potential headaches with a solo 401(k). Accordingly, in your case, you want to use a SEP... basically (and slightly rounding), you can use SEP to make a 20% of profits contribution to an IRA... so on $80K of profi...
by SeattleCPA
Fri May 30, 2014 9:36 am
Forum: Personal Investments
Topic: Setting Up SEP for 2 person LLC
Replies: 7
Views: 836

Re: Setting Up SEP for 2 person LLC

The LLC part of this question is sort of irrelevant... you need to know whether the multiple member LLC is taxed as a partnership (the default tax accounting treatment) or as a corporation or subchapter S corporation. If the LLC treated as a partnership, you can do a SEP contribution for "partners" and employees... and for partners, the SEP contribution is basically 20% of the distributive share and guaranteed payments. Probably you don't have guaranteed payments, so SEP contribution is basically 20% of the distributive share. If LLC treated as a corporation (including as an S corporation), you can do a SEP contribution equal to 25% of employees' W-2 wages... including shareholder-employee's wages. Note: To slightly simplify here,...
by SeattleCPA
Thu May 29, 2014 2:57 pm
Forum: Personal Investments
Topic: Roth decision and marignal vs effective tax rate...
Replies: 21
Views: 2762

Re: Roth decision and marignal vs effective tax rate...

Johm221122 wrote:SeatleCPA
Liked your link to your Blog, so many miss the point on this :beer
John
:sharebeer
by SeattleCPA
Wed May 28, 2014 12:17 pm
Forum: Personal Investments
Topic: Roth decision and marignal vs effective tax rate...
Replies: 21
Views: 2762

Re: Roth decision and marignal vs effective tax rate...

Will I be in a higher marginal tax rate in retirement than I will be during my working years? This is a question that nobody can answer with certainty. .... Can I observe that while certainly nobody can answer this question with certainty, for most people, the Roth-style account is a losing proposition. Most people's incomes are lower in retirement... so marginal rates are usually lower. The other thing (and I actually blog about this issue this week here: worst case scenarios for Roth accounts ) is that a handful of very predictable quite likely scenarios means that things work out more poorly in practice than they do in theory: missed years of compounding or contributions, long-term care costs in retirement, a shorter-than-expected life,...
by SeattleCPA
Tue May 27, 2014 12:45 pm
Forum: Personal Investments
Topic: Investing in Real Estate in an IRA account
Replies: 3
Views: 497

Re: Investing in Real Estate in an IRA account

sscritic wrote:And don't forget, any expenses of the real estate have to be paid from within the IRA. If you pay the expenses directly, you could be making an excess contribution.
Good point. And BTW I think you also can't (shouldn't) work on your rental yourself because if you do that for free, you'll also be making a excess contribution...
by SeattleCPA
Tue May 27, 2014 12:38 pm
Forum: Personal Finance (Not Investing)
Topic: Starting a business question
Replies: 36
Views: 3362

Re: Starting a business question

I have started several businesses in my lifetime and have had my own consulting firm for a bit over 20 years. IMO, there are three main skills you need to run a successful consulting business: 01) Financial acumen 02) Marketing ability 03) Subject matter expertise It appears you are deficient in at least one of the three critical areas. 160K is not that much start up capital. If you cannot figure out how to manage that small level of cashflow on your own there is, simply put, something very wrong. I would suggest you start building your referral network why you save up the 160K you believe you need. If your mentor's relationship is as you say he will likely assist you with skill transfer as a subject matter expert or make himself available...
by SeattleCPA
Tue May 27, 2014 12:22 pm
Forum: Personal Investments
Topic: Investing in Real Estate in an IRA account
Replies: 3
Views: 497

Re: Investing in Real Estate in an IRA account

This used to be a much discussed topic before the real estate crash 8 yrs ago or so. Heard an ad on the radio yesterday which piqued my interest. Has anyone here actually ever done the real estate thing in their IRA account? You can do this... and any CPA firm (ours included) will have a number of clients using this gambit. I think it 's problematic for a variety of reasons... but the two big reasons that often are not obvious to people are (1) you lose pretty much all of the tax benefits of real estate once you stick the investment into an IRA and (2) mechanically speaking, having a leveraged illiquid investment inside something like an IRA creates some terrible compliance problems... E.g., your IRA will need to file its own tax return......
by SeattleCPA
Wed May 21, 2014 3:22 pm
Forum: Personal Finance (Not Investing)
Topic: How to decide your number?
Replies: 61
Views: 11774

Re: How to decide your number?

I think an ad hoc approach like Rick Ferri describes is a great start. And ideally the dynamic programming approach (is that what they called it?) that had received some press lately would be best because you can deal with changes in consumption when you're retired.

But a while back, in an another formula-based approach to this question, I built a spreadsheet that lets you calculate a savings amount that lets you evenly allocate your income over the years you work. Here's link to the spreadsheet and the procedures and logic: income allocation spreadsheet and instructions
by SeattleCPA
Tue May 20, 2014 6:03 pm
Forum: Personal Investments
Topic: Tweaking Swenson's Formula
Replies: 5
Views: 1068

Tweaking Swenson's Formula

After I posted a message in a recent thread about David Swensen's asset allocation formula, another boglehead asked me via private message a really good question (I thought)... so it seems fair to repeat question here, give my answer, and then also let anyone else who's interested provide a (better?) answer. The question: If you had a moment, I would like to ask you "why" you have stayed with the TIPS fund considering the 9% loss last year (i.e. high duration) and almost next to nothing in interest income? Presently, I have Total Bond Index in tax free Roth IRA's and Intermediate Term Tax Exempt in taxable. As time goes on, these two bond funds will become our largest holding. I was considering diversifying the bond portion with t...
by SeattleCPA
Tue May 20, 2014 8:57 am
Forum: Personal Investments
Topic: Looking to move from target date fund.
Replies: 17
Views: 1861

Re: Looking to move from target date fund.

Gopherman: Welcome to the Bogleheads Forum! I'm 30 and looking to move my money into something like a 3 fund portfolio that I don't have to actively manage. I have a high risk tolerance. Your Target Date Fund is VERY similar to The Three Fund Portfolio and is easier to manage. There is no need to move. You might exchange to a later date Target Fund containing a 90% stock allocation if you are willing to take more risk in persuit of a higher return. If your portfolio contains both tax-advantaged accounts and a taxable account, The Three Fund Portfolio is better because it lets you put your most tax in-efficient (bond) fund in a tax-advantaged account, and when full, put your tax-efficient stock funds in the taxable account. Best wishes. Tay...
by SeattleCPA
Tue May 20, 2014 8:53 am
Forum: Personal Finance (Not Investing)
Topic: LLC rules [Limited Liability Company]
Replies: 7
Views: 1323

Re: LLC rules [Limited Liability Company]

[OT comments removed by admin LadyGeek]
by SeattleCPA
Fri May 16, 2014 7:56 am
Forum: Investing - Theory, News & General
Topic: David Swensen's Book Unconventional Success
Replies: 34
Views: 5453

Re: David Swensen's Book Unconventional Success

It's been a while since I read Unconventional Success, but I think you're probably thinking about the bonds rather than the portfolio. What Swensen says (okay this is by memory) is that given the purpose of your bonds allocation (safety in a storm), why not dial down the allocation percentage (from a "standard" 40% allocation to a "lighter" 30%) and redirect that money to equities... But then to keep the portfolio risks reasonable, use treasuries rather than corporate bonds for your bonds component. Another way to say the some thing maybe: Bonds are crummy investments over long haul unless things go really bad... but they do nice things in your portfolio... so you want as little as possible an allocation... and to do tha...
by SeattleCPA
Fri May 09, 2014 11:49 am
Forum: Personal Investments
Topic: Opening Solo 401K as Sole Prop, planning to SCorp this year?
Replies: 5
Views: 1015

Re: Opening Solo 401K as Sole Prop, planning to SCorp this y

... and then later in the year incorporate the business into an Scorp or LLC?.. FYI, we give away free, downloadable S corp and LLC kits (ebooks) for any state from our little websites... see here for more info but note that you just need the discount code to get the download for free: free llc kits and free s corporation kits ... Do I have to close the Solo 401K and then open a new one for the corp? I think a new corp electing Sub S status (or a new LLC electing S corp status) will be a new entity and so need a new 401(k) plan... Or at least that's how I understand the rules. (If someone can embarrass me by pointing out that I'm wrong, have at me.) But I would think that if you run the business as an LLC this year and that's the entity th...
by SeattleCPA
Fri May 02, 2014 5:39 pm
Forum: Investing - Theory, News & General
Topic: Starting Business with Capital vs. Investing in Total Market
Replies: 7
Views: 12125

Re: Starting Business with Capital vs. Investing in Total Ma

No comparison between the two. Though I don't dispute (or dispute much of) Taylor's failure statistics, I agree with Hardknocker on this... IMHO you should think about small business ownership or an interest in a professional services partnership or even a portfolio of actively managed real estate properties as being as much like a job as a investment. Maybe more like a job than an investment. Can I share a handful of thoughts and anecdotal nuggets about small business ownership and failure statistics too? 1. Failure rates vary widely by industry. There are categories where people basically don't fail. And then categories where you'll find it pretty tough to *not* fail. (Google on A.C. Cooper to track down scholarly articles on this subjec...
by SeattleCPA
Thu Apr 17, 2014 7:23 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

I don't think the small business track is any more likely to pay off... A lot of accountants won't ever be a partner at Price Waterhouse, and a lot of small business people won't make the top 1% either. You can look up the number of partners at a big firm... and it's probably several thousand... I haven't looked at the PWC website recently enough to remember. But there are I think tens of thousands of solo practice CPA firms who do just fine, enjoy their work, and will accumulate very nice nest eggs if they're good about using something like a SEP. Actually, you know what? That's not strong enough. I know the foregoing to be true. Further, anyone who is interested can confirm by googling on "AICPA MAP survey" Agreed again. Many p...
by SeattleCPA
Wed Apr 16, 2014 8:56 am
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

Bustoff wrote:Wouldn't you suspect that a majority of those in the top 1% got there through bequest ?
The Fed's data has some numbers on this and (from memory) I think inherited wealth isn't that big a percentage.
by SeattleCPA
Wed Apr 16, 2014 8:41 am
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

Most of the relationships to being a top 1% would likely be spurious and not really actionable. Probably a lot of 1% drive BMW's - but it doesn't follow that I will become a 1% by buying a BMW. Actually the data from the IRS syncs pretty tightly with the Millionaire Next Door book... note that the link I gave earlier points to the blog post with several tables of data that pretty strongly suggest this using tables of mean home values, other assets like cars, art, etc, etc. Again, it doesn't prove causation. The authors' research indicated that most of the wealthy don't own luxury import cars like BMWs, or very upscale homes. A conclusion drawn was that they became wealthy in part because they didn't spend their money on luxury items; in ot...
by SeattleCPA
Tue Apr 15, 2014 9:49 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

The link provided by DaleMaley has a quote: The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. I know a lot of these people, and I wouldn't dismiss their achievements as luck. The physician studied very hard in college, and spent an awful lot of money, time and energy working through medical school, residency, etc. Only the very brightest went to the best law schools, and they also spent three years in graduate school before starting their career. Only the very best lawyers earn top 1% money. Same for upper middle management. These people are likely to be engineers from solid undergraduate programs who went to top MBA schools (like the others, investi...
by SeattleCPA
Tue Apr 15, 2014 1:25 pm
Forum: Personal Finance (Not Investing)
Topic: Backdoor Roth IRA Conversion - Worth it for us?
Replies: 8
Views: 1104

Re: Backdoor Roth IRA Conversion - Worth it for us?

You should be able to accumulate several hundred thousands in an IRA and then draw that down without paying federal income taxes in retirement. E.g., if you've got $300K in your IRA and you annuitize that, you'll probably be able to draw that money down without paying *any* tax. (Your standard deduction and personal exemptions will shelter all of the IRA income.) As your income rises, things get a bit trickier because of Social Security benefits getting taxed...but with the 10% rate bracket, you probably can have almost *another* $300K in your IRA and only be very, very lightly taxed. I would think, therefore, that you'd want to do the future value calculations given your existing and planned future saving, see what sort of distribution you...
by SeattleCPA
Tue Apr 15, 2014 1:04 pm
Forum: Personal Investments
Topic: NYTimes: Inexpensive Advice for Index-Fund Investments
Replies: 15
Views: 3366

Re: NYTimes: Inexpensive Advice for Index-Fund Investments

Wagnerjb wrote:
livesoft wrote: Real human beings generally answer one's questions on this forum.
What do you call people who ask the OP if they have searched the internet for the answer? :D
+1 LOL
by SeattleCPA
Tue Apr 15, 2014 12:55 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

Another thread were we should be mindful of survivorship bias. Yes. You might want to add the distinction between correlation and causation. How about "be really really lucky"? Is that actionable? I wonder about the survivorship bias point ... unless by that you truly mean someone living and working a long time. And if you mean that, I absolutely agree. (A great way to build up a nest egg is by adding an extra five or ten years of compounding and contributions... and you can most easily do that if you live and work longer.) But note that the IRS sample isn't really akin to a "sample" of the mutual funds that haven't yet been merged out of existence... it's a big data study of two million plus tax returns. As far as VGis...
by SeattleCPA
Tue Apr 15, 2014 12:36 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

leonard wrote:Most of the relationships to being a top 1% would likely be spurious and not really actionable.

Probably a lot of 1% drive BMW's - but it doesn't follow that I will become a 1% by buying a BMW.
Actually the data from the IRS syncs pretty tightly with the Millionaire Next Door book... note that the link I gave earlier points to the blog post with several tables of data that pretty strongly suggest this using tables of mean home values, other assets like cars, art, etc, etc.
by SeattleCPA
Tue Apr 15, 2014 12:31 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

<snip> Wealth Tier----------------------------------------Count---------Mean Net Worth Under $2 million in gross assets---------------449,000--------$1,046,619 $2 million to $3.5 million in gross assets----1,008,000------$2,593,065 $3.5 million to $5 million in gross asset------364,000--------$4,151,220 $5 million to $10 million in gross assets------286,000--------$6,817,462 $10 million to $20 million in gross asset------116,000-------$13,713,802 $20 million or more in gross assets-------------66,000--------$60,029,379 <snip> There are more with $2-$3.5 million than with under $2 million? The source of the data makes the numbers weird. The thing to keep in mind (or know or whatever) is that IRS data flows out of the estate tax returns whic...
by SeattleCPA
Tue Apr 15, 2014 11:48 am
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

http://economix.blogs.nytimes.com/2012/01/17/measuring-the-top-1-by-wealth-not-income/ gives 8.4 million to be in the top 1%. That is a lot closer to my intuitive feelings as there are just way too many retirees with 300k houses and 1 million dollar portfolios for them all to be in the top 1%. I liked the millionaire next door but I also think the person that pointed out that he measured the bottom of the top was also making a good point. The guy that was making 100k and retires with 2 million dollars is a millionaire but he is going to be living the same 100k lifestyle that he had been doing for the past 40 years when he was working. I would guess that the NY Times uses the Federal Reserve's data in its analysis (see here .) But I think t...
by SeattleCPA
Mon Apr 14, 2014 3:53 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

TimeRunner wrote:Much of this was discussed in The Millionaire Next Door: The Surprising Secrets of America's Wealthy (ISBN 0-671-01520-6), a 1996 book by Thomas J. Stanley and William D. Danko. It's an oldie but a goodie. The local library has a few copies in the system.
Timerunner, I totally agree. Millionaire Next Door is a great book. Every so often, in fact, I actually pull out and reread the book. It seems to me to be such a healthy exercise...

What might also be worth noting here is that at least according to the IRS, Thomas Stanley's millionaire next door is the one-percenter...
by SeattleCPA
Mon Apr 14, 2014 12:16 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Re: Looking at top 1% for actionable insight

SeattleCPA , Bill Gates (part of top 1%) is from your area. Okay not to be a whiner, but that's probably exactly the sort of reply that risks or even justifies the forum leadership shutting down the discussion. BTW, here's an interesting potentially actionable insight that hopefully doesn't... If you look at the IRS's middle wealth tier (which the median one-percenter probably resides in), about 56% of the people hold real estate (probably investment real estate) and the mean value equals $767,580. So apparently this group usually owns or maybe invests in realty in addition to home. That seems to me to be at least interesting... and maybe actionable. FYI here's the excel workbook one needs to cross-tabulate and fiddle with to get such a ca...
by SeattleCPA
Mon Apr 14, 2014 11:21 am
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12253

Looking at top 1% for actionable insight

I understand LadyGeek's recent locking of a thread asking the question "how much is rich?"... That sort of discussion can easily become political. Furthermore, such a discussion can easily lack actionable insight... :( Can I politely make a suggestion though? In the future, perhaps if people carefully self-moderate and the forum leadership provides a bit of leniency, a really useful discussion could result. I share this hope because there really are numerous actionable insights to be gleaned from looking at the top one percent data available from a nonpolitical source like the IRS's personal wealth statistics web pages. Some examples of the sorts of useful, apolitical, actionable insights available in the IRS data follow.... For a...
by SeattleCPA
Wed Apr 09, 2014 12:40 pm
Forum: Personal Investments
Topic: 54 year old new investor with no retirement savings
Replies: 14
Views: 3800

Re: 54 year old new investor with no retirement savings

I would appreciate advice on your opinions as the best way to go forward from here. I think given your modest "age adjusted" savings that you need to focus more on the savings rate than your asset allocation. I .e., no amount of clever "asset allocation" will make up for fact that you've gotten your "income allocation" out of whack. Let me make the logic of this really easy using some rough numbers: Say you plan to work for another fifteen years and will plan for fifteen years of nonworking. If you ignore compound interest and social security, you should allocate 50% of your income to nonworking years via savings. I.e., your savings rate should be 50%. Yikes. BTW, Social Security will hopefully make a big diff...
by SeattleCPA
Sun Apr 06, 2014 9:18 pm
Forum: Personal Finance (Not Investing)
Topic: Going from S-Corp to Sole Proprietor
Replies: 7
Views: 2260

Re: Going from S-Corp to Sole Proprietor

So we work with a lot of S corporations in our CPA practice and I would say you're maybe operating under at least a couple of misconceptions and perhaps missing the big point... First potential misconception: S corporations aren't a legal protection thing... they are tax things. Eligible entities (for the most part regular corporations and limited liability companies) can elect to use the accounting rules contained in Subchapter S of the Internal Revenue Code. So saying an S corp doesn't provide legal protection is, well, sort of nonsensical. What is debatable but would make more sense (if you want to talk about liability) is to say that a corporation or LLC doesn't protect you. But S corporation status has nothing to do with legal liabilit...
by SeattleCPA
Fri Apr 04, 2014 7:16 pm
Forum: Personal Finance (Not Investing)
Topic: Filing a prior tax year that was not required to be filed
Replies: 9
Views: 964

Re: Filing a prior tax year that was not required to be file

I would file past years amended returns if you can... note that a large refund will often trigger an audit. But I don't think your girlfriend is close to that...

Large refund means high five figures... or really more like six figures or seven figures...
by SeattleCPA
Fri Apr 04, 2014 7:11 pm
Forum: Personal Finance (Not Investing)
Topic: business tax
Replies: 10
Views: 959

Re: business tax

If you really want to have access to the same tools and resources that a professional does, you might want to subscribe to a tax library resource...

Something like BNA's Tax Management Portfolios are great at giving you the info you want. (These are pricey but really good... if you read a 200-300 page treatise on some subject, you get great detailed coverage of the subject. BTW, BNA has a bundle price which we've used in our practice...)

Also, I would recommend pretty much anything written (or orginally written) by Boris Bittker. I say this as a writer: His "Federal Income Taxation of Corporations and Shareholders" is really an excellent book.
by SeattleCPA
Wed Apr 02, 2014 3:26 pm
Forum: Personal Finance (Not Investing)
Topic: Deducting Capital Loss from sale of business
Replies: 4
Views: 444

Re: Deducting Capital Loss from sale of business

If you've been getting K-1s over life of business, LLC is treated as partnership or S corporation... and possibly some of your "loss" has already been included in past years' tax returns. Note that this loss may have also been suspended over years if you haven't participated materially in the business. But any stored up loss will get "unlocked" when you dispose of your interest. And if the amount you sell your interest for is less than your basis in that interest (after adjustments of the sort the K-1 identifies), yup, you have a loss that should get reported on your tax return. If you haven't been getting K-1s, LLC is treated as a C corporation and there's a capital loss when you "sell" your shares. Probably B...
by SeattleCPA
Wed Apr 02, 2014 3:13 pm
Forum: Personal Finance (Not Investing)
Topic: Is Our Accountant Over-Charging Us?
Replies: 30
Views: 10214

Re: Is Our Accountant Over-Charging Us?

CPAs, like lawyers, are paid for their time. They are professionals. What do CPAs charge per hour? I'm out of touch on this but probably $100 - $200 hour depending on level? If they spend time researching your problem (and it takes time) to provide an answer then you have to pay. If you don't want to pay, don't ask for advice, research it yourself. For some reason people expect CPAs to work for free or close to it. Does your auto mechanic work for free? Even a simple return will require time to prepare, assemble, file, etc. It is not free. Don't hire a surgeon to put on your band-aid from your paper cut. He will charge you a lot! If you have a simple tax return then do it yourself in a few hours using inexpensive tax software that costs ab...
by SeattleCPA
Mon Mar 31, 2014 8:55 am
Forum: Personal Finance (Not Investing)
Topic: California 1031 Exchange
Replies: 2
Views: 588

Re: California 1031 Exchange

Hello, My parents have lived in the same home for the past 30+ years. They are in the South Bay in Silicon Valley. It is worth $3+million. Capital gains are a real concern should they wish to sell. They are starting to explore the 1031 exchange. Does anyone have any thoughts on this? Appreciate any insights on this. Norcalkenny I would think the Sec. 121 exclusion is probably too good to pass up... That gives your parents the first $500,000 of gain tax free... (note you don't say what the gain is... only that the value is $3,000,000... but I assume they've got a giant gain... like $2M or more... but getting $500K tax free is really good deal.) Another idea (and sorry to be talking about your parent's deaths) is that mom and dad could wait ...