51dnv9taxjlI received an ARC from Jason Navallo, author of American Dream: Interviews with Industry-Leading Professionals. As I suspect with most personal financial bloggers, I get an above average number of requests to review books in advance. Most get put to the side for a later reading, if I get to them at all. American Dream caught my eye because Navello asked politely if I would review the book and he provided a small amount of background in the initial email.

What intrigued me from the beginning is the interview format with six very successful professionals from a variety of unrelated fields. I am a sucker for success stories so I made time to read the book. It blew my mind! American Dream is not a long book which is a good thing because I could not put it down. Navallo used a simple format with each professional. He started by asking each professional interviewed to providing some background on their early life and how they came to lead in the industry they are in. Depending on the path the interview took, he would explore unique characteristics to each professional’s path to success. He ended each interview by asking about their belief in the Power of Attraction, favorite quotes, favorite books, best lesson in life, the key to success, and if they believed the American Dream was dead. The answers surprised me.

Meet the Professionals

Six professionals were interviewed: four men, two women. The interviews begin with Peter Mallouk, the president and chief investment officer of Creative Planning, a firm that manages over $20 billion. Part of this interview branched into investment advice. Readers of this blog will find Mallouk’s interview a great way to start American Dream as it applies to all our personal lives. And, of course, investment planning and personal finance largely overlap.

The next interviewee is Ben Caballero. I know a lot of you people around here love owning real estate. Want to get excited? Caballero sold 2,491 homes worth over $1 billion in 2015 alone! I refuse to break my calculator out and figure how much that is each day; it is too awesome to get my arms around. To top it off, Caballero has over 20,000 lifetime sales worth in excess of $6 billion! Caballero shares his story of how he became such a massive producer. I bet you will be as glued as I was to his story.

Then we turn to B.J. Armstrong. To say Armstrong enjoys basketball is like saying I might like an ice cream. Yes, I like ice cream! Armstrong’s interview is unique in the group. The entire interview is like a pep talk from one of the greatest coaches of all time. He is a passionate and powerful motivator. His style of speaking is also unique. He uses repetition in a way that drills the message into your brain. An intelligent and hard working man you want to read.

Shelly Sun is the first of two women interviewed. Sun is the CEO of Bright Star Care ®. Of all the interviews this one has the lowest tone as you would expect from the leader of a healthcare staffing company. After the first three interviews it was nice to know you could reach massive levels of success without being so high-strung.

I was surprised to see Scott Gerber on the list. From my tax practice I know how profitable bars can be, but this guy takes it to a level I never saw before. All the perceptions of what bar ownership means goes out the window. Gerber runs Gerber Group like a business, the way it should be. Gerber Group currently has 14 venues with somewhere around $50 million in annual sales. How is your tavern doing? You might want to read what Gerber has to say.

Finally, we end with Liz Elting. Elting is in the communications business and the co-founder of TransPerfect. She started her business in 1992 and now revenues exceed half a billion dollars annually! Her business translates languages for legal firms and corporate customers. Her path to an uber-successful, world leading firm is different from most. She is well traveled and saw large parts of the world at a young age.

Different Paths to the Same Endgame

Predicting the path taken to achieve success is impossible as the six successful business leaders listed above attest. Their backgrounds are varied. None inherited a massive nest egg or already viable business; they did it all on their own.

Even their answers to what they considered success varied. Armstrong said he doesn’t need goals while Elting said she is “incredibly goal-oriented”, keeping both long and short-term goals in written form. Some focused on the numbers while Shelly Sun talked a lot about relationships with people they care for.

The one thing throughout the book is how motivational it was. I wanted to get up and get something done with the turn of each page. Everyone interviewed is hyper-productive; they get a lot done in a short period of time and use the extra time to take it to the next level. These professionals filled me with excitement.

41n165ofh7l-_sy346_The American Dream

At a time when we hear how America has lost its touch or businesses can’t grow or pay their employees more, we see six people who are doing it in a massive way. Business is hard on a good day. These people do it on a scale we reserve for a select few household names like Steve Jobs, Bill Gates, Elon Musk, or Warren Buffett. For every Elon Musk making the news, a hundred more unsung heroes are doing that and more, building a better American and a greater future. It is about people and these six professionals make that point clear.

Each offered different quotes to live by, and books they would recommend you read. The path to success was different for each and both men and women made the list. Hard work and long hours were a common thread with each one, but all also noted they cut their hours after the initial start-up phase of their company and now have a more balanced life with family, friends, and community.

The most humbling part of this book is the answer each gave to the question: Is the American Dream dead? They all answered no, without a doubt. And I agree. Our best days are in front of us. We have only begun to do great things.

This is why I heartily recommend you purchase and read American Dream: Interviews with Industry-Leading Professionals by: Jason Navallo. The book just came out on Amazon as an e-book. It currently lists at $.99 and free on Kindle Unlimited, affordable for everyone and worth a thousand times more. I assume the price will increase in the near future, but should still be an awesome value. I hope you gain as much value as I did from the wise words of the leading professionals in this book.

20573038010_490c18fa3f_bBefore you fire up your email to insult my mother’s choice to have children (or congratulate my good taste), here me out. This blog is devoid of politics, trust me. What I share in this post is in no way indicative of who I support for POTUS. This blog is about personal finance, financial independence, lifestyle, and TAXES. Check the top of the page; it is clear as day.

The latest news comes from Trump’s 1995 tax return. I could care less that some people think he is a good businessman who lost $916 million in one year. What bothers me is the mental morons calling Trump’s actions “genius”. Wrong! Or Trump calling his actions “brilliant”. Wrong! By the end of this post I will show you how The Donald threw away $300 million in cash. His accountant should be flayed, quartered, and beheaded for his incompetence. If Donald Trump knew how badly he screwed up on his tax return he would be spitting nails.


I did not see the tax return published in the New York Times. My only information is third party comments in the news. Using such information calls my intelligence into question. But it will provide an awesome example of how we can use the tax code to really save and make money.

This is what looks like happened. Trump started several companies that filed for bankruptcy. He structured these companies as sub chapter S corporations so all the gains and losses flowed to his personal tax return. That is the first problem.

The structure of these businesses are probably why the IRS is auditing him. Deductions exceeded his revenue causes a net operating loss (NOL). This is not unusual. In a simplified way, it means his taxable income dropped below zero due to the business loss on his personal tax return.

NOLs currently are carried back two years and forward twenty. Back in 1995 it was slightly different. (If memory serves, back in 1995, NOLs had to be used in 18 years; three years carried back and 15 forward after the NOL was created. Don’t quote me on that. I’m writing at home without the help of tax guides from 1995.) (I verified the info.) Under current tax law, Trump needed almost a billion dollars in income from 1996 to 2015 or the NOL would expire unused.

The IRS is probably looking at the NOL because the NOL must be reduced by the amount discharged in bankruptcy court. You don’t get to double dip. If Trump tried to ram certain gains through on his tax return prior to the NOL expiring and if he did not reduce the NOL by the amount of debt discharged the IRS has solid footing to audit.

Lost Opportunity

Let’s not belabor the point. We will assume Trump had a real $916 million NOL back in 1995. Because he set the companies up as S corporations, the gains and losses ended up on his personal tax return (pass-through on Schedule K-1 from the company to Page 2 of Schedule E on his personal tax return). This is really bad. On his personal tax return, the NOL must be used by year 18 or it is cancelled and is worthless.

The problem starts with the structure. If Trump organized his businesses as regular corporations, also known as a C corporation, the NOLs would have remained with those corporations. We talked about the tax benefits of S corporations on this blog in the past. My recommendations remain correct for small business owners. For large businesses, like Trump Airlines where I suspect a large part of the NOL originated, the regular corporation is better. There are a lot of reasons why, but we will only focus on the NOL.

C corporations with a NOL have a valuable asset. If another corporation buys the company with a NOL, the acquiring company can use the NOL to offset their taxable income. Since Trump is in New York I will use an estimate of 40% combined federal and state tax rate for C corporations for easy figuring. A $916 million NOL could save an acquiring corporation over $350 million in taxes! If Trump had structured the deal correctly he would have recouped $250 – $300 million from a company willing to buy solely on the value of the NOL, without consideration for any remaining assets, goodwill, or client base.

Time value of money says selling the NOL for cash now beats tax breaks spread over 18 years. The tax breaks will only help if he has income. An acquiring corporation with plenty of profits are sure to benefit sooner than Trump could himself without risk of a partially cancelled NOL. Also, cash in hand is worth more than a possible tax benefit. The risk is shifted to the buyer when the business with the NOL is sold.

Of course, the IRS is fully aware people like the Wealthy Accountant know how this stuff works, even if Trump and his accountants don’t. Section 382 of the Internal Revenue Code (IRC) limits this little trick if 50% or more of a company with a NOL changes ownership. Since the buyer will acquire 100% of Trump’s company with a NOL, the acquiring company will use a formula to determine the amount of NOL they can use each year.

The bottom line is if Trump structured the deal properly he could have cashed in big-time due to the NOL. Big NOLs have value which can increase the amount of money the acquired company’s shareholders get. The best possible outcome would have been $300 million to Trump back in 1995. It is more accurate to say Trump would likely have received closer to $150 million. I guess if you are really rich, $150 million isn’t enough to worry about. It would make a difference for me if anyone cares.

29168164412_de376a7e62_bProblems and Solutions

But WA, you said in the past we should have an S corporation for our business. I did and I am correct. I never thought Trump would read my blog and think he is a small business.

Donald worried if he had a profit as a C corporation he would pay more tax. Wrong! General Electric generates billions in profits annually and frequently pays few to no income taxes in the U.S. Trump is so small compared to GE I could handle his whole tax situation myself with one helper. (No kidding! I’d have to quit everything else I do to get the work done, but it is possible.)

Here are a few things Trump could have done if he did it my way. When he had a profit in his C corporation he could use a tax inversion to funnel U.S. profits to a low tax country for usage of the Trump brand. Another neat trick is using the foreign tax credit with the partially tax-free nature of dividends received by a regular corporation. For example: A U.S. C corporation excludes 70% of dividends received from another corporation if they own less than 20% of the stock, a common occurrence. If the C corporation owns British Petroleum it gets the foreign tax credit and the dividend exclusion, a legal form of double dipping. Several years ago a public company used this strategy to reduce its federal taxes to zero and was taken to Tax Court by the IRS. The IRS lost.

A Lesson in Business

Trump is not a good businessman in my opinion; he threw away a couple hundred million due to stupidity. He inherited a sizable amount of wealth and left the bank holding the bag when things soured on business deals; that is where he got his wealth. Trump is good at protecting himself. When it comes to taxes he screws himself more than the IRS ever will. If he played it fast and lose, the IRS will tear him a new one in audit when it never should have been an issue. If he paid me to advise him he wouldn’t have to worry about the NOL; he would have cashed his check twenty years ago.

And no, Donald, I am not accepting new clients.

IMG_20160727_091802When you read the Stoics and personal finance blogs in the vein I write you quickly learn the goal in life is happiness. Money, retirement, and financial independence are all cash words we use to make our case about happiness. Saving and investing a large portion of our income building a solid nest egg allows for less work and more happiness.

Then I wonder if there is more. I’m a happy guy no matter where I am. I am content with what I have; I have all I need or want. Happiness is a state of mind. Anyone can be happy any time they choose to do so. All you need to do is learn your happiness triggers and then trigger them.

But what about enjoyment? How do we trigger enjoyment? If happiness is something we choose to be, can we also choose to enjoy? These are interesting questions I want to explore.

Harvesting Good Feelings

When I am not working my business or writing this blog, I farm. Since I am already happy, farming does not create happiness or make me happier. Happiness is not a matter of degrees. Either you are happy or you are not. I enjoy farming. Working with the animals gives me pleasure.

Take a distasteful job on the farm: cleaning the chickens. Chickens make a mess and it stinks. Cleaning the chickens is a job I don’t volunteer for; I do it because it needs doing. Cleaning the chicken coop has no effect on my happiness; I am happy and will remain happy even while doing the distasteful job.

You can learn to enjoy something if you allow yourself the pleasure. (How do you like that play on words?) Hard work brings me pleasure because I know it is healthy for me. Cleaning the chicken area is actually something I enjoy once I get going. There is a satisfaction to seeing the area get cleaner with each push of the shovel.

It is hard to see the difference and why it matters in such a case. Maybe we need another example.

The First Cut is the Deepest

Five years ago I worked so hard I busted a gut. Actually, I twisted wrong and caused a hernia. It was small, but painful. After careful consideration I decided it was time to go under the knife.

As the anesthesiologist put me under I was the happiest man on earth. Since I have two hands I can say, “On the other hand I did not enjoy the idea of surgery.” There was no pleasure in having a painful hernia nor did I enjoy the idea of surgery. However, through the whole process I was always happy. In my mind life is always good. The alternative, death, not so much.

Learning to Enjoy

Happiness is easier because you can choose to be happy anywhere at any time for any reason. Learning to enjoy a process or your position in life takes some effort. Like cleaning the chickens, I learned to enjoy the work. Sure it stunk to high heaven and the work is hard. But there was a reward at the end (actually, a reward as I worked); the chicken coop got better, cleaner with each shovel of stuff removed. And I enjoy watching the chickens jumping around with glee at their new, cleaner surroundings. After it is over I get to enjoy a nice hot shower.

Learning to enjoy process is one of the fundamental keys to success. Just because you reach financial independence or land your ideal job does not mean things are all roses all day, every day. There will be mundane jobs you don’t want to do. Imagine starting a business you always wanted. The business grows and is wildly profitable. You are happy! Then the day comes when you need to fire an employee. I know this from personal experience. I remain a happy individual who happens to not enjoy firing employees. It does not have to be a traumatic event. It can be a learning experience you learn to tolerate.

Using the Difference to Grow

By now you should understand the difference between happiness and enjoyment. This provides an opportunity to grow. You are happy as long as you can say, “I have enough.” A young person dying of an incurable disease can still find happiness knowing they have enough because they have a life to lose, a life where they experienced and lived.

Finding enjoyment in distasteful tasks can turn a negative into pleasure. One thing I hate with a passion is flying. It’s not the plane or the up in the air thing; it’s the airport. What a waste of precious human life. In January I am speaking in Florida at Camp Mustache SE. I love standing in front of a crowd and sharing ideas. I already feel anxiety over flying there.

If I am going to teach and share ideas I may as well apply them to myself. (Physician, heal thyself.) How can I learn to enter an airport and feel less anxiety? Is there a way I can turn the traveling part of traveling into pleasure and enjoyment? There is! I could focus on the endgame where I have the awesome opportunity to meet great people and share. Problem with that is I still need to go home. After the endgame comes the Ick! part. More airports.

Here is my solution. We will see if it works in January. The airport and time on the plane is something I consider wasted. I read, of course, but it is harder for me to read in such settings. I also tend to fall asleep if I read sitting for a long period, so my normal reading style is up, down, and all around. (I see no one is surprised who knows me.) At home I have sound cancelling headphones. I’ll bring them with me this trip to see if I read better. I will also write during this time. I never write while in airports or on a plane. This time I will. I can write anywhere for some reason.

IMAG0227The final piece of the puzzle includes my Stoic training. I’ve preached Stoic principles in the past. Now it is time for me to use the training. By letting go and accepting the situation I can relax and enjoy a good book, a quiet nap, or some writing time (probably all three). If I find a way to close the door while in the airport and on the plane I will feel the time was wisely spent. In normal life that is the kind of thing I enjoy immensely.

What about You?

You should always be happy, even during challenging times. Pleasure has many meanings and some things are out of our control and unpleasant. What brings you enjoyment? How can you turn distasteful tasks enjoyable?

The Stoics taught negative visualization where you sit back, close your eyes, and imagine the worst that can happen. When you open your eyes you realize how lucky you are because none of these things have occurred. Seneca practiced poverty once per month by dressing in old clothes; he was a very visible Roman statesman and an advisor to emperor Nero. He realized the worst that could happen to him was not all that bad.

Even the end of life can be enjoyed. All you need to do is commit to the experience; you only get one shot at it. By ending worry about dying you allow yourself the pleasure, the enjoyment of living the process of dying. It sounds crazy until you accept there is nothing you or anyone else can do about it. We will all die. How you die is up to you. Enjoy it.

img_20161002_101217The debate rages on over renting versus buying a home. Location determines the correct course of action; buying in one city might be a wise financial move, whereas, renting could be better two states over or even across town. Within the same city the best financial course can be different over time.

The debate of buy versus rent is heavily discussed with home buying because of the huge investment. At the end of each discussion someone always says they prefer owning (or renting) so the “best” financial move is not always the course chosen.

What surprises me is how the discussion never moves to other major purchases. Automobiles, for example, are a major investment and are significantly worse expenditures because the car will go down in value, whereas, real estate tends to rise in value, following inflation trends.

Buying a new car might be a good idea with all the current incentives and, in some cases, massive tax credits for electric vehicles. In the cases involving vehicles with tax credits you need to consider your personal tax situation. Generally, tax credits of this kind are non-refundable, meaning you need a tax liability to reduce before the tax credit has value. State credits also play strongly into the decision. For the rest of us, purchasing a car should not be a simple “yes, I need one” decision.
A Tale of Two Employees

Let me introduce you to two employees in my office who saved thousands of dollars and untold grief due to a minor consultation with The Wealthy Accountant, aka, the boss. We will start with Tabatha. (She recently was married so give her a shout-out next time you see her.) Earlier this summer she had a road trip vacation planned with her fiancé and family. She owns an old Jeep perfect for getting around town, but not reliable for long trips. The mileage sucks and the vehicle is old. The limited miles driven locally make a newer vehicle a poor financial decision unless the Jeep dies.

The scramble was on to find a vehicle for their vacation. At first she considered upgrading to a newer vehicle with the higher insurance and depreciation costs involved. For a 21 year old woman, the goal is to keep expenses low and pack as much away into investments as possible. A newer vehicle would be contrary to her plan.

The conversation around the office did not include your favorite accountant until I overheard my team discussing the issue during a break. With my usual finesse I interjected my opinion.

My argument: Buying a newer car will cost $200 or more per month in payments or lost opportunity cost, and insurance will be more expensive. You only need the newer car for two weeks.

My suggestion: Rent a vehicle for two weeks and pay for it with your credit card.

My reasoning: Since Tabatha will need a loan on a newer vehicle she will be required to carry more insurance than necessary. By renting, the car will be delivered to her home and if the car breaks down along the way, you call the rental company and have them bring you a new car. No repair costs, no depreciating vehicle, no oil changes. Only fill it with gas and you are ready to go. I had two additional recommendations. Check with you regular car insurance to verify your car insurance extends to the rented vehicle and check with the credit card company to learn how much auto coverage is automatically included if you pay for the rental with the card. This negates the need for insurance at the rental company.

Tabatha rented the car for just over $200 per week and had no problems. She was able to get a larger vehicle so they could travel with fewer cars (her fiancé’s parents also drove their car) and carry more supplies (food, so they did not eat out as often). Insurance was covered at no additional cost by the credit card company.

Dawn of a New Day

Last month another employee, Dawn, had a similar situation. Her car was fine for around town, but the transmission is touchy and a long trip could leave her stranded. Around town a car issue means a quick call to a friend or family member. On the road it is a major problem! Dawn recalled the Tabatha situation and asked my opinion. It was the same. Her one-week vacation included a $200 car rental fee without the risk of her personal car dying. She doesn’t need another bill and a forced vehicle purchase is not in the cards.

Why Own a Car?

The story of Tabatha and Dawn started me thinking about auto ownership. When does it make sense to own a car? I live in a rural area. A car is a necessity to get anywhere. The same applies to the open areas of the American West. But living in town is a different story. Living close to work is ideal and should be a goal. By living close to work, most of your driving needs disappear; a bike or walking handle that.

The few times you need a car in town are handled cheaper in two ways: Uber and a rental car. One-time, across town trips are relatively cheap using Uber. Longer trips should utilize a rental car. Now the decision is when do you own a car versus renting.

Is there ever a time when renting a car full-time is cheaper than owning a car? I am talking about never owning a car, but having a rental car in your driveway every day. Let’s run an example to find the breakpoint.


To find the breakpoint where renting a car every day is cheaper than owning, we need to figure the full cost of car ownership. I tend to buy used vehicles and run them for forever and a day. I like to buy cars a few years old when a large part of the depreciation is off, but the car still has plenty of life in her. To keep this simple I will use a $20,000 vehicle for our example. I understand you can get a used car for a lot less, even a two year old one. The math is for illustration purposes only.

Car: We need to make some assumptions when we consider the cost of the car. For our example we will assume you paid $20,000 for the car and in five years you want to upgrade to a newer car. The value of the car in five years is $7,000. Monthly cost of depreciation: ($20,000 – $7,000)/60 = $216 (I rounded down.)

Insurance: Insurance costs are all over the map and depend on where you live. I am going to use $100 per month.

Fancy Old Car (5878919049)Repair/Maintenance: This includes brakes ($400), oil changes ($750), and tires ($850). We will include some miscellaneous maintenance (light bulbs, windshield wipers, et cetera) of ($500). The costs listed in parentheses are the five year cost. Monthly miscellaneous auto costs are: ($400+$750+$850+$500)/60 months = $41 rounded down again.

Our example considers no bank loan on the car. We also will assume your rental car is paid by a credit card that includes insurance and pays 2% cash back.

The breakeven point for renting a car over owning in the above example is: $216+$100+$41 = $357 per month.

Renting the same car for $400 per month covers all repair issues, upfront cash or a bank loan, insurance from the credit card company, and $8 cash back from the credit card. The rental company can swap out cars every so often to handle oil changes, regular maintenance, and car washes. If there is ever a problem you call the rental company.

Renting is still more expensive and renting a car for $400 per month might not work, but the example illustrates the thought process before we move forward.

Where It Will Work

There are two situations where the above example will work. If you are buying a new car every few years the depreciation costs are higher. Also, in certain areas insurance costs can be very high and could change the formula radically. Loan interest is also a consideration if you don’t pay cash for the auto purchase.

Swapping full-time auto ownership with a rental car probably does not work. But, what if you are retired or semi-retired? If you drive only a few times a month, Uber probably is cheaper and you get the driver for free. Renting a car (or truck if you have a project) for periodic travel needs makes renting a viable option.

My goal is not to convince you to rent a car over owning. I want you to consider additional options that are better financial choices when spending your hard earned money. Today’s discussion covered cars, but you can easily use the template offered on any major purchase. Building a deck requires tools you may only use once. Borrowing or renting is a lot smarter than buying in those cases. My final recommendation: Always bring a calculator. Your phone already has one built in.