Mike, it’s great to have you on the show.
Thanks. It’s great to be here.
How did you get into this whole thing around tax minimization and using special kinds of investments to reduce taxes for high-wealth individuals? That sounds pretty specialized.
I started in finance twenty-some-odd years ago and I realize that everybody needs a niche, especially when we started focusing on a lot of real estate transactions. I was introduced to something called 1031 Exchanges, which are a great way to continuously defer your taxes every time you sell a piece of property and buy another one. I realized that nobody likes paying taxes but the more money you have, the more taxes you pay and the less you want to pay taxes. The best way to get more and more high net worth clients is to have a niche around saving them tax. It became something that I learned a lot about 1031 Exchanges and saw what a great resource they can be. I saw how it helped us attract a lot of clients. I was always on the lookout for new and innovative tax strategies that a lot of people weren’t using to differentiate myself.
Let’s differentiate for our audience what tax minimization is. There are only two ways to do it. One is to defer tax and the other is to reduce your liability. Can you put a few strategies into each of the two buckets? 1031 Exchange is where you buy a house and then you buy another house to replace the house that you bought and you sell it. You would have had a capital gain, but you defer that capital gain because you bought another house. I’m way oversimplifying I’m sure, but that’s my understanding of a 1031 Exchange and that’s a deferral strategy for reducing tax. That’s not a way to permanently reduce that tax. You still have the liability. You buy yourself some time.
The one good thing for your heirs is there’s an old saying in the 1031 business called swap until you drop because you can continue to do exchanges your entire life. When you do pass on, your heirs get a stepped-up cost basis. If you never sell and you continue to exchange in your lifetime, then you’ve permanently deferred the taxes because your heirs get a stepped-up basis at the time of death. If you ever want to sell that property and do something else with the money, then you just deferred it. You eventually have to pay that tax liability.
A stepped-up basis sounds like a foreign language. Let’s explain for our audience what is a basis. Why do we need to know what our basis is and what are the implications of that? For example, when you start a business and then you eventually sell that business, the basis is a big thing you need to know about. If you buy a business and then sell that business later, the basis affects how much tax you’re going to pay, right?
Exactly. Your basis is your cost basis. It’s what you paid for the business or everything that you invested in that business you started. If you were to purchase a business and continue to invest a significant amount of money in that business, that all goes towards your basis or reducing your basis. When you sell that property or business your tax burden is calculated, you’re going to take what you sold it for, subtract it with your cost basis, what you laid out for the business and the difference is what you’re going to pay tax on. What I referred to as a stepped-up basis means, let’s say you bought your first building for $1 million. Over the course of your life, you bought and sold multiple buildings. 40, 50 years later you pass on and it’s worth $20 million. If you sold that prior to your death, you would have had a $90 million taxable event. If you passed on, your heirs would get a stepped-up basis meaning that they would calculate what the value of that property is at the time of your death. That’s now their basis. If it was $20 million, that $19 million in tax liability is not their liability anymore. Whereas if you had sold that property for that $20 million, you would have had to pay that tax whereas now your heirs’ new basis is $20 million. If they sold it the next day for $20 million, they’d pay no tax. Let’s say they held it for another ten years and it went to $25 million, then they would only pay tax on the $5 million additional gains since you passed on.
That’s a good deal. The only downside I can see is that you end up dying for your heirs. How do you reduce tax permanently? That’s a deferral strategy, which I guess is permanent if you swap until you drop. Let’s say that we wanted to reduce tax liability and not just defer it, what would be some examples of that?
There are a few things that people use. One is something called the captive insurance company where you self-insure certain risk associated with your business. You have to be a business owner to do it. Decent-sized businesses, instead of continuing to pay insurance premiums, they can set up their own captive insurance company to self-insure certain risks and that can allow for significant tax deductions against your income. Sometimes people use oil and gas strategies where in order to promote domestic drilling, the government’s allowed for what are called intangible drilling costs that can be subtracted from your actual income. Usually, those are about 80% or 90% of the investment that you put in. You still need the investment to do well to recoup the money at risk. It’s only a certain portion of the investment that reduces your income.
Lastly, there’s a transaction that we work on. We put some real estate transactions together that have the option to file something called a conservation easement. The government back in the ‘60s was worried about the overdevelopment of the country. They were trying to figure out a way to get people to maintain a land that they own, that they had the right to develop. That could have made them a lot of money developing but get them to hold onto that land and not develop it. In exchange for that, they allowed for some pretty significant tax benefits. Where the tax code is written, it’s 170(A), 170(H). If you can’t sleep and you want to put yourself to sleep, you can read pages and pages of tax code that talks all about this. What it essentially allows for is you can figure out all the money that you would have made over the next ten, fifteen, twenty years developing a piece of property and you can get an appraisal for the net present value.
It’s a discount for what that money would be worth in today’s dollars if you were to donate the ability to develop that property. In exchange for that, the government allows for a good-sized tax break because it has to be something substantial, something worthwhile for you not to develop that land. What we’ll see a lot of times are somewhere around a four to five to one-tax deduction versus an investment in a property. If you had a $100,000 investment, it could generate a $400,000 or $500,000 charitable contribution, which according to current tax laws, you can reduce up to 50% of your adjusted gross income from a non-cash charitable contribution which is what this would be. Let’s say you had $1 million income. Let’s say you are in California. You could pay about $500,000 in taxes. Let’s say there was a four to one deduction, you would invest $125,000 and get a $500,000 tax deduction. Instead of paying tax on $1 million, you’d pay tax on $500,000. You’d save about $250,000 in taxes in that example.
What’s the limit here? Can you get $10 million tax credit for doing conservation easements? Do you have billionaires who use this strategy and essentially donate tens of millions of dollars to this conservation easement strategy?
Yes, it’s been on the tax code since the ‘80s and initially, there were a lot of billionaires who did most of those transactions. You did see some of them in the hundreds of millions of dollars in tax deductions. You can carry forward for up to fifteen years, so even if you didn’t make $200 million and you get a $100 million tax deduction, you could spread it out over the coming years even if you’re a billionaire. We’ve definitely seen some very large transactions. That’s only about the last thirteen years or so that people will have what are called syndicated transactions which will be investments that have the option to file the easement where there’ll be a pool of investors together who will buy an LLC who owns the property. Then they will make the decision whether they want to develop the property or file the conservation easement to take advantage of that charitable contributions should they elect to file the easement.
Can you buy a tract of land and then develop some of it, protect some of it and get a conservation easement on half of it?
You could. Let’s say it’s a booming housing market and there are many houses sold every year. You had a big piece of land that you could develop 1,000 houses on and you could easily sell those 1,000 houses over the next five years into the market. If you were to develop 500 of those houses and file the easement on that piece of property where you could have developed the other 500, then it should be able to work. If there was only a capacity for 500 homes, you couldn’t say, “I’m going to develop 500 and file an easement on 500,” because the market couldn’t sustain that. The plan that you put together is a very important piece. If you decide to file that easement, you’ve got to make sure that if you had decided to develop that property that it was a legitimate feasible profitable plan.
You can’t buy a property that has no potential for development and then claim this big conservation easement on it.
The property needs to have wetlands and wildlife as well as development potential. You have to meet both sides of that, that you have significant upside as well as the reason for conserving that property.
It’s not just if you have a nice piece of property and it either has the potential for development or it has wetlands on it or some wildlife. You need both wildlife and wetlands. Let’s say you’re in the middle of the country in Iowa and there are no wetlands there. It’s just lots of fields and trees. There is no conservation easement potential there.
You need the water also.1031 Exchanges are a great way to continuously defer your taxes every time you sell a piece of property and buy another one. Click To Tweet
You have to provide something like a business plan that shows, “This is the development potential. This is how much I could possibly make by developing all this land and that’s what I’m going to forego by conserving it.”
There’s a risk on something like this. If you get the partnership or LLC who owns that land was audited, you have to make sure that you’re ready to fight that audit. If you just said, “There was a bunch of houses around me. I thought I could develop it, so I just came up with this number and figured that’s what I could discount a little bit. That’s what I used for this number,” that’s not going to work. You have to make sure that all your i’s are dotted, your T’s are crossed, and you have a significant plan. We recommend two qualified appraisals.
You have to dot your i’s and cross your T’s. Make sure that everything is all buttoned up so that if you do get audited, you’re not going to be found liable for something that you were not expecting. Let’s jump back to some of these other strategies and get further clarification on them. Then we’ll talk more about conservation easements because I do have more questions. Let’s take oil and gas as another strategy.
On oil and gas, let’s say you had a $100,000 investment. Most of them from what I’ve seen in the past, you’ve got about a 90% write-off for what you invested. You get a $90,000 write-off. You’d save about $45,000 in taxes on a $100,000 investment. You’d still have $55,000 at risk in that scenario. You’d have to make sure that those oil wells are going to be drilled and drilled well and produce a good amount of oil. Otherwise, you could still end up losing money. You’ve got to tax break to save you some of your tax money now but if you end up losing your investment later on, it doesn’t help much.
I’ve heard that there have been oil wells drilled that were dry and they didn’t return anything. If you bet everything on one particular oil well and it comes up dry, you’ve lost all your money.
That’s what I’ve seen. A lot of companies will drill a multitude of wells in one investment. This way, it spreads the risk. They usually do what are called developmental wells versus what is called wildcatting or exploratory wells. Where the wildcatting wells, if you hit one, you’ll make five, ten plus times your money, but the chances of hitting are very slim as well. Whereas a developmental well, there’s a very high possibility of finding oil, returns will be less but you’re getting that tax break, so people will make that tradeoff. As long as there are a lot of wells being drilled, except if you have oil prices get hit hard like what has happened in recent years. We had oil $100 plus, it drops to $30, $40. Even if you hit oil, they’re not able to sell it in a lot of markets. You have that risk as well. Even if you do hit oil, oil is a very volatile market, you have to factor that risk in as well.
Rule number one in investing according to Warren Buffett is don’t lose money. This is a little bit risky and maybe potentially a lot riskier depending on how many wells this is going to be distributed over like diversity and spreading out of your risk. If you make a wrong investment here, you could lose $55,000 out of $100,000. The $45,000, you get as a tax break but then the rest of it goes right down the tubes.
You have to be careful. They have to find that oil and then they hope that oil prices don’t get hit hard.
How have oil prices been over the last couple of years?
They had that big spike up to $100 change and then they dropped down to $25, $30. They’re back to probably $50 or $60 if I had a guess. I don’t follow the oil market much.
You don’t have any money in oil and gas?
WTI crude is currently $66.97.
That is still decent. If you look back in 2015, it dipped under $30 for a while there. It’s gone up but it went from $30 to up to $50, back down to $40 and then it’s done well for the last year and a half. It looks like it’s gone from $40 up to $70 area with not too many big moves down. What’s in store now who knows? $70 is a decently high price if you look at the overall long-term prices. That’s a decent price for it except for a couple of those times we were over $100. If you invest in something today and now it’s at $70 and it goes to $40, it’s not the greatest situation for you. You’re in a flipside too if it goes to $100 and you drill those oils based on costs. It’s $70 and it went to $100, you’ll make a lot more money. There’s a lot more potential upside because it’s an actual investment. It’s not just a tax deferral strategy, it’s a planned investment to make money.
This is different from investing in the stock market or investing in oil futures. You could invest in WTI and you could bet even against oil prices and say, “I’m going a short WTI and I’m going to do some futures trading.” This is something where you could stand to lose a lot of money if you call it wrong. It’s not like you get tax benefits from this like you do when you invest in the actual oil wells.
If you’re going to invest in oil, if you find a good operator who really knows how to drill because of those tax breaks. It can be better than just going in trying to trade futures unless you’re a very good trader.
Let’s talk about investing in the stock market because many people are doing that. What are the tax implications there? There’s not a lot of tax benefit and investing in the stock market. I guess you could invest in a 401(k) and you get mutual funds. Mutual funds audience, be sure to read the Phil Town episode where we talked about rule number one in investing, don’t lose money. The Warren Buffett approach to investing and how mutual fund managers are not your friends and their incentives are not aligned with yours. If you invest in the stock market or want to invest in the stock market, read the Phil Town episode. Let’s talk about the 401(k) and also IRAs and Roth IRAs. Is that something that is an important strategy? Is that something that we’re going to need to augment with something like oil and gas or conservation easements or 1031 Exchanges?
401(k)s and IRAs are definitely great strategies to defer taxes. Roth IRA is even better because you can pay the tax upfront and then never pay taxes on that money again so now it can grow tax-free forever. Roth is a great strategy. People even convert their IRAs to Roth and then sometimes use an oil and gas or a conservation easement to mitigate some of those taxes that they pay. That they would have otherwise paid by converting from a traditional IRA to a Roth IRA.
IRA stands for an individual retirement account. If you’re working for a big company and they have a 401(k), you’re going to use that instead of having an IRA.
Unless if you’re self-employed, you’ll set up your own potential simple IRA or SEP IRA. If you have an employer that has a 401(k) plan, that’s usually what you’re going to do.401(k)s and IRAs are definitely great strategies to defer taxes. Roth IRA is even better because you can pay the tax upfront and then never pay taxes on that money again. Click To Tweet
There’s this thing called a Self-directed IRA where you can call the shots on where the funds get invested. You could use that money to buy some property for example or invest in oil wells in Texas or something instead of just going with the stock market.
Self-directed IRAs are pretty versatile that way. You can buy properties and you might get the oil wells, you might not want to do something that has big tax benefit inside the IRA because you’d be losing that tax benefit inside there.
This is why you need a very skilled tax professional to help you with your strategy. Don’t just read this and implement it. That would be a bad idea.
Before you do anything, you want to make sure you talk to someone, especially when you’re dealing with tax stuff or any investment you want to get some good advice. Anything especially with taxes, you want to talk to your CPA or tax attorney, someone that you can trust around it that can really dive into this strategy for you. There are sophisticated things that you want to make sure you understand all the moving parts. We spend a lot of time educating CPAs and attorneys. We do a lot of webinars where we look for CPE and CLE credits for continuing education for attorneys and CPAs. We educate them on conservation easements. A lot of people don’t know about these specific strategies. We always want to make sure we’re educating everybody, both the investors as well as their advisers.
I’d imagine that most CPAs that you would go to off the street wouldn’t know what a conservation easement is maybe. They wouldn’t know how to utilize that as a tax minimization strategy.
I’d say probably 80%, they might have had an experience where a client did a conservation. He’s been on one of their properties by chance but other than that, most haven’t. It doesn’t take anything away from them, it’s just a very niche strategy. It gives us the opportunity to educate a lot of people on it as well, which is a great thing.
Speaking of niche strategies, there’s one I learned from friends in the Tony Robbins’ Platinum Partnership, which is how you and I met David Evette. I learned about a company called Living Wealth, but they weren’t called that before when I met them. They were Alpha and Omega Financial Services and they created infinite banking structures for high wealth individuals. You told me about this company that they utilize a certain life insurance policy, one where it’s a mutual life insurance company. Meaning that the profits go to the policyholders and not to shareholders. The typical insurance company is owned by shareholders and the profits get distributed to them. If it’s a mutual insurance company, the profits get distributed to the policyholders and that’s the insurance company you want to deal with. It’s a certain whole life insurance policy that you purchase and you front load that with all this money.
You use what’s called a paid-up additions rider, PUA. You fund this with a lot of cash initially and then it becomes this money machine that compounds interest over time. It’s after-tax like a Roth IRA. Then you can take loans against your life insurance policy and you can have your death benefit pay with the loans back. You don’t have to pay it back, but you don’t take the cash out as distributions. You take it out as a loan. You can loan your business money, you can loan your friends and family money to buy cars, to buy real estate as long as you are protecting yourself by getting collateral and all that. You don’t want to be naïve. People run into problems and they can’t pay back the loans. You need to have a contingency plan. If you keep the money in motion and you charge market rates for interest, then you’re even feeding that money machine even faster. It grows even faster than if you just let money sit in the account. It’s an amazing strategy. Have you heard of it before?
There’s the permanent life insurance. There’s IUL, which is indexed universal life policies where you can do this. You can invest the money and you can also borrow your own money out. You have to be careful that you structure these policies that it would be paid back. You reduce the death benefit and it gets paid back at that as long as you don’t take out too much money. Some people use them to fund their retirement if it works out correctly. You can put all that money in and then you’re borrowing your own money out and you don’t have to pay it back. Now you have to pay tax on all those gains. If you double the money you put in, you’ve now taken it out. Use it for your retirement and not have to pay tax on it. There are a lot of moving parts and a lot of things have to work. The investments inside it have to work also. If it does, it can be another powerful strategy to have more money when you’re in retirement without having to pay taxes.
Personally, I fell in love with that strategy. I did a ton of research on it and then I ended up working with the Alpha and Omega Financial Services, which became Living Wealth. The funny story about that is I’m the one who got them to change their brand name. Once you start a policy you can’t increase the size of it. If you’re going to put $5,000 a month away into this policy, most of that as paid up additions rider, then it drops down over time, but you get a certain amount of death benefits. You can’t just change it midstream. It’s in place now. It’s for that amount of money and then you start another policy. If you are doing well and you get tons of extra money to put away, then you start out another policy. The founder of that company now called Living Wealth, I worked with him. That guy, Ray Poteet, has been on this show. It was a fabulous episode. He has over 80 policies on himself and family members. A lot of policies just on him and then family members, key employees and that stuff. This is not legal advice or financial advice or anything like that.
My understanding of it is that if you have a vested interest in that living person and their success in life and so forth, like if they’re an employee, it would be a detriment if they passed away, then you can insure them. You’re the beneficiary and they’re the insured. You can use that as a vehicle, use the paid-up additions rider to put a whole bunch of money initially. Then pull back after four years and then you continue to pay but less into that policy. Then you open up new policies with that extra money that is no longer needed in the paid-up additions rider. I probably butchered that explanation a lot because this isn’t my area of expertise, but I knew enough to hire the right people who then became clients and did the rebrand. We did a bunch of SEOs and launched a podcast. I came up with the name of it, Dollars and Nonsense. I was pleased that they were willing to rebrand the company. The website URL used to be AOFSUSA.com. I was like, “This is a terrible URL.” Do you have infinite banking in place or is that something that you are contemplating?
I have an IUL policy on myself also. I did it with the plans of using it from my kid’s college education instead of doing a 529 plan. The stock market is crazy and the IUL policies put a floor on. If the market drops 50% that year, you still make 2% but if it goes up 50%, you only make 12% or 13%. You’re capped on the upside, but you can’t lose on the downside. With how crazy the market’s been, I was comfortable doing that and the fact that you can pull that money out. Essentially, you can borrow that money out tax-free.
What does IUL stand for?
Indexed Universal Life. You get to invest in the stock market indexes, but you have no risk if the stock market goes down. You have your cake and eat it too, just not too much cake. You can have the 50% upside. If you look back historically, if you don’t have any of the 50% downsides, you don’t need the 50% upsides either. If you’re in that range of 2% to 12% or 13% whatever it was, you’re in a pretty good shape.
I have a minimum return rate of 4% with my infinite banking. The insurance company will pay at least 4% but it’s not much more than that. Maybe it’s 4.5% or something like that 5%. In a good year, it’s not a crazy amount of money. You can use that money when you take the loans out. You can use those loan proceeds to fund further investments, like if you want to buy real estate with it. You keep the money in motion, which is very important.
There are a lot to get a lot of great tools out there, just a lot of people don’t know about them. You have to look and have the right people, the right advisers around you.
You and I met at Tony Robbins’ Platinum Partnership or Plat and that’s also how I ended up finding out about the infinite banking and all that. Are you still a Plat member?
No, I’m not. I’ve got two little kids at home, so I travel much for business as it is. I try not to be away if I don’t have a business meeting.
That’s fair enough. I’m not a Plat either anymore. I was for three years from 2010 to 2013. It’s all-consuming. I was gone maybe half the year, maybe a quarter. It was just the Plat events plus all the public Tony Robbins events that you could go to for free like Date with Destiny, Life Mastery, Wealth Mastery, Business Mastery, Unleash the Power Within. I went to everything, sometimes even if it was overseas like Unleash the Power Within in Sydney, I went to that. I’ve probably done five Unleash the Power Withins, three Date with Destinys and Business Mastery three or four times. I spoke at two of those times at Business Mastery, which was amazing to be on Tony’s stage talking about SEO. It was huge for me. I’ve got a bunch of business out of it. Have you done Leadership?
I didn’t do Leadership.You have to make sure that all your i’s are dotted, your t's are crossed, and you have a significant plan. Click To Tweet
It’s a good one.
I did a lot of trips myself. It was great. It was such a life-changing experience for me. It opened me up to many things and many areas of my life. It’s one of the greatest things I’ve ever done for myself.
What was the most impactful Plat trip for you?
The India trip. I joined Plat purely for business reasons and then I went to India and had this absolutely amazing experience. I started meditating. Now I meditate an hour, sometimes an hour and a half a day. It’s become a major part of my life and it changed the way I think. It slowed me down so much, it’s been amazing. If it wasn’t for that Plat trip, I never would have done it.
That particular Plat trip was life-changing. It was heart opening and mind-expanding. It was incredible. There was one particular Oneness blessing that I was given by the monks. For our audience who don’t know what a Oneness blessing is, it’s a Deeksha. That’s a Sanskrit word, Deeksha. It’s putting your hands on somebody’s head and giving them a blessing. If somebody is trained on how to do this, they can zap you with a lot of energy. This one monk touched me and I felt at peace and connected to the creator. It’s almost indescribable. I went outside afterward feeling connected to the fabric of creation and I remember looking at the grass outside. It was the most brilliant technicolor looking green I’ve ever seen in my life. It was incredible. It shifted me. I went from agnostic to being spiritual and I’ve never looked back. I’m a different person now than I was prior to 2012 because of that one trip.
I had a similar experience too. That was the big day of blessing. I remember we worked through a whole lot that day. They had us going through all these processes and it was Umaji who gave us that blessing. I had that same thing. I remember going outside. I remember sitting there and there was this force field around me protecting me from anything. I felt good like nothing could bother me. Anything I thought of that could stress me out that I was ever afraid of, anything in life, I was like, “It’s all good. It’s all exactly how it should be.” I’m in this amazing space and it was life-changing for me as well.
It was Umaji who gave me that Deeksha that changed everything for me. I had Deekshas before. I’d had Deekshas at Date with Destiny, I had Deekshas on other Plat trips like when we went to Jerusalem and in Cairo when we were on the rooftop of the Mamilla Hotel in Jerusalem in the Old City. They did a Oneness blessing. It felt good but it didn’t suddenly inspire the connection to the creator and belief in God. That’s another thing too. I learned at that particular Plat trip to India that the divine is an experience, not a belief. It’s profound and it sounds good when you hear it but when you experience what the creator is and you get enveloped by that, it’s indescribable. A belief is a poor substitute for the experience.
That consciousness level is above the mind. A belief is something that’s just in the human mind. It’s funny that you say that because it clarified that for me. Growing up, they said that God is beyond human understanding, beyond human comprehension. Then you understand when you’re at that elevated level of consciousness, you can’t even put it into words because it’s not a belief or a thought because it’s above thought. You’re in that space of consciousness where it’s got to be experiential. It’s not a thought. It’s exactly the same.
Are you doing TM on a daily basis or VM, Transcendental meditation or Vedic meditation or some other branch of the Oneness meditation? What are you doing on a daily basis for an hour?
I do Kriya. There was this amazing book called Autobiography of a Yogi that I recommend to everybody. I sent digital copies of that book to hundreds of people now. It’s the story of Paramhansa Yogananda. He came to the US in 1920 and in 1920, he had this amazing reception. Many people started meditating and were interested in what he was teaching. He was an amazing soul. There are ten million followers across the world who follow his organization called Self-Realization Fellowship. I was introduced to that book years ago. I read that book and I had this immediate connection with Yogananda. I started following the lessons and the meditation. They’re the most advanced meditation, which is what he used to do every day. It’s called Kriya yoga. That’s what I do every day. It’s amazing. I get up usually around [5:00] AM, [5:30] AM and when I’m done with my meditation, I’m in this full space.
Do you know that the book, Autobiography of a Yogi, was Steve Jobs’ favorite book?
Yes. From what I hear, it was the only book in his iPad when he died. I don’t know, but that’s the rumor. He left instructions at his funeral to give a hard copy of that book to everybody who attended.
He would give copies of that book away to everybody that came to visit him and he’d given away many copies in his lifetime of that particular book more than any other.
It’s an amazing book. I would highly recommend it to anybody who has not picked it up yet. It’s a great book.
There’s also a documentary about Yogananda called Awake. It’s good. I enjoyed that.
I did too. He had this incredible energy about him that if you watch the movie or read the book, you can feel it.
The Self-Realization Fellowship, if you’re in Southern California there’s a beautiful location in Pacific Palisades. It’s very close to me. I’m in Santa Monica, so I can go hang out there and there are beautiful views of the ocean and these beautiful gardens. It’s a wonderful place to meditate or hang out and read a book or take a nap.
There’s another one in Encinitas also, a much smaller one but they have a meditation garden there that is right on the cliffs, right in the ocean too. Every time I’m down there, I meditate in those meditation gardens. I’m going to be in San Diego. One of those days I will be down at those meditation gardens meditating.
You’re also working with a guru currently.
I found a living guru who is just amazing. Her name is Guruji Sri Sri Poonamji. She has an ashram down in Florida in Clearwater. It’s been amazing to interact with somebody on a personal one-on-one level like that. I’ve never had an experience like that with the time that I’ve had to spend with her.
Do you go down to Florida on a regular basis?
She’s in Singapore but we have phone calls where we work. We have a class that we do and we work with her every week. I get to work on a lot of my patterns and help along that path. I feel very blessed to have that opportunity.
A living guru for those who are not very familiar with Hinduism and how that works, if somebody is a living guru, they have a whole lot of followers. They share a lot of wisdom and they have a certain energy about them that is very powerful like what I described when I got touched by that monk in India on the Plat trip. Being in their presence conveys a lot of energy without them even touching you. Is that a good explanation or the starting point of an explanation?
It is. The first time I met her, I spent hours and hours for two days with her, the better part of two days just sitting and interacting with her and talking. I realized afterward that the conversation wasn’t the important part, it was the energetic exchange is what did much more. Until you experience stuff like this, it’s hard to explain. When you’re dealing with these energetic fields and different levels of consciousness, it’s always hard to put into words. If you’ve never experienced any of them, it’s very hard to wrap your head around it because it’s outside your head. That’s the whole point of all of this, is to get out of our own heads. We know in the Eastern philosophy there’s the ego and the higher self. When you’re in that ego which is being in your mind, your mind is in control. You can’t see these things or experience them but once you go, the mind loses some of that hold on us. We’re in our true selves which is the natural state we’re supposed to be and you can actually experience these things. It opens up the amazing things like you and I have experienced.
Your guru happens to also be the guru of Dave Vanhoose and Amanda Holmes, Chet Holmes’ daughter. I’m sure there are other people in our shared network that we both know that are following this particular guru in Florida and now in Singapore. I first heard about her through Dave Vanhoose who I just had on my other show on Marketing Speak, which was a great episode on how to sell from the stage, how to be a more powerful speaker because he’s got Speaking Empire, his company. It’s a good episode. Any other famous people that I may know that are followers of this guru?
I don’t know if there’s anyone else. She doesn’t have a lot of followers. We’re working on buying some land and building some retreat centers so people can come and experience these energies and experience time with Guruji. Go through some of the processes to help experience these other states of consciousness and help clear patterns and live happier healthier lives.
Have you heard of Amma, The Hugging Saint?
Yes, lately. Her name has been coming out. This has got to be the third or fourth time that her name has come up. I have talked to people who had some amazing experiences. They said when she hugs you, it’s like the greatest hug you could ever get from a mom that’s absolutely amazing.
Some people get healing from it. Some people get this sense of comfort and connection with their creator. Everybody’s experience is different. I’ve gotten two different hugs from her. I’ve also gotten my mantra from Amma. She’s an amazing person like a living saint. She has hugged millions of people. It hurts her back to give these many hugs, but she keeps doing it. She’s relentless. She goes like an Energizer Bunny, on and on giving people hugs and then giving them mantras. It’s a big deal to give a mantra to somebody if you’re like a living saint. According to the Hindu religion, you are then tied to the person’s dharma or their karma or their moksha. My limited understanding is that she has given up nirvana for herself because every single one of her devotees, followers, people who have gotten the mantras from her have to elevate as well in order for her to finally escape that cycle of life, death and rebirth. Does that seem right to you?
I don’t know that about her. She would be taking on the karma of her devotees.
That was explained to me that she is okay with forgoing her own escaping that cycle because she wanted to help all these people.
With all the craziness going on in this world now, it’s very heartening to see people like her and having access to Guruji. There are a lot of amazing things going on also and some very good energies that are all here to help people. It’s very good to see that and hear these stories also.
It’s not all bad news in the world. We’re coming to a time of mass enlightenment because if we don’t, I don’t think the planet will survive or at least we as a species won’t. Some consciousness shift is imminent. I do believe that. I have a ton of faith that that’s coming and there are a lot of people who are starting to catalyze the movement. People like Amma, people like Guruji and Sri Bhagavan. Sri Bhagavan, I got to meet him once. We didn’t get to touch or anything but a bunch of us Platinum Partners met him. Were you at that meeting as well?
I remember he blessed us all with his hands above us.
It’s amazing to have those kinds of experiences and our audience can get those kinds of experiences too. It’s not just for the elite. You can go to Amma.org. That’s the website for Amma. Find where she’s coming to a city near you. She regularly comes to Los Angeles. When she does, if I’m in town, I go and wait in line for hours to get a hug from her and it’s totally worth it. She goes to New York City. She goes all over the world. I don’t know how she does it, how she has the energy for all this. She’s pretty old.
The Divine Bliss is Guruji’s organization, DivineBlissInternational.org. If anybody’s interested in going there, we’re starting to do more things to bring her energies to people.
Let’s talk about what people should do to prepare for the end of the tax year, which is coming fast. The clock is ticking, and you don’t want to start doing your tax planning for the 2018 tax year at the end of the year. We’re into November now. Realistically, how much time do we need to get stuff in place? What things should we put in place?
If your tax burden is going to be more than you’d like it to be, you can definitely look around to see if there are any opportunities with conservation easement options to see if that might be the right strategy to mitigate some of those taxes. You definitely want to start looking into that process now because you want to give yourself time to do due diligence. To have your CPA look at it and make sure you understand that and still have time to get by.
Realistically, it’s going to take a few weeks to do your due diligence, to brief the CPA that you work with, to make sure they’re comfortable with and that this is a viable strategy that is totally legit. They’re going to have to go over the tax code, 170(H) and 170(A). Make sure that it qualifies. Time is of the essence. If they wanted to work with you and your company, how does it work? You find these large tracts of land that are wetlands with wildlife on them that could be developed for a lot of money but they’re not going to be. Then you bring them to the potential investors.
We buy large tracts of land and we will subdivide those pieces. Then on each offering, we’ll make available to the investors. They’ll be investing the LLC who owns that property and then they get to vote. We’ll give them the mining plan, which is about 400 pages that outlines everything that we anticipate that we could make by developing that land. Then we’ll also have an easement appraisal, so they can evaluate. There’ll be the exact amount of what the appraisers feel the charitable contribution would be, so they can evaluate and say, “When we vote for the development plan and we want the development plan to go through, is that the best option or do we want to take advantage of the tax benefit?” We want to vote for the green option and then once we get 51% of votes in one direction, that’s what the members would have. That’s what would be filed. That’s what the members would elect which would be if there was 51% for the conservation easement. The conservation easements need to be filed and they would get the charitable contribution, somewhere in that four to five to one range for the investment.
It sounds a little bit complex, but I get it.
That’s why we walk people through the process. We make sure we understand their situation first. Then if it makes sense and they’re qualified and they’re comfortable, then we can explain the opportunity. Then get them all the information we have and then they can review it and get to their tax professionals. We did the continuing education for accountants and attorneys. We have a recording of those webinars so we can send that. It’s about an hour long and that covers everything. It’s myself, one of my attorneys, and my in-house CPA. We go through everything for 30 minutes and then we have 25 minutes of questions from a bunch of CPA and attorneys. We send that recording out as well. Their CPA can listen to that, pretty much get most of their questions answered and then we can do a call with them afterward.
What’s the website and how would we best get in touch with you if we wanted to work with you?
Thank you, Mike. This is illuminating. We’re going to help some people save some money hopefully, take some action and start doing some tax planning before December 30th.
Thank you much for having me. I had a great time.
Thank you. For the audience, we’ll catch you on the next episode.
- Keystone National Properties
- Phil Town – previous episode
- Platinum Partnership
- Living Wealth
- Ray Poteet – previous episode
- Autobiography of a Yogi
- Paramhansa Yogananda
- Self-Realization Fellowship
- Guruji Sri Sri Poonamji
- Dave Vanhoose – previous episode of Marketing Speak
- Speaking Empire
Your Checklist of Actions to Take
☑ Make sure that I am aware of what my cost basis is when I invest in a business. Every financial decision I have after that will affect my taxes when I sell my property.
☑ Consider starting a captive insurance company. Instead of paying insurance premiums, I can set up my own to self-insure some risks. This will allow a significant tax deduction against my income.
☑ Don’t just buy a property especially if I have a plan to file conservation easement to reduce my tax. Mike states that a property must have wetlands, wildlife and development potential.
☑ Get two qualified appraisals should I opt for a conservation easement. Do my due diligence so I will not be held liable for things unexpected when an audit comes.
☑ Don’t lose money in investing as what Warren Buffett says. Investing in oil and gas might be another strategy but mitigate the risk by finding a good and trusted operator.
☑ Explore different options to defer taxes. Take advantage of 401(k)s and Roth IRA. Roth IRA allows you to pay the tax upfront and then never pay taxes on that money again so now it can grow tax-free forever.
☑ Consult with a tax expert before diving into any strategies. Find someone I trust and knowledgeable enough to guide me.
☑ Be equipped with knowledge about mutual funds and rules in investing. Revisit Get Yourself Optimized’s episode with Phil Town where they dove deep into this topic.
☑ Understand how different insurance policies work and identify which one will work best for my goals.
☑ Constantly look for opportunities that will keep my money moving. Use it to take loans out or fund additional investments. The important thing is doesn’t get stuck with only one source.
About Mike Packman
Michael Packman is the founder of Keystone National Properties. Packman began his career more than 20 years ago in the finance industry. During the first chapter of his career, Packman quickly rose through the ranks of the first firm he worked for, becoming the youngest Vice President in the firm’s history. Additionally, Packman oversaw the Long Island region for the brokerage arm of a major international financial firm. In 2003, Packman formed his own diversified financial company. After the downturn, real estate, especially 1031 exchanges, became a major focus. The company grew to a very well-respected advisory firm in the space and led to a successful exit from the business. Packman is Chairman of the C-Suite Network Specialty Tax Council, which focuses on innovative strategies to reduce or defer taxes. Packman’s entrepreneurial endeavors now also include co-founding Bundlefi, a financial technology start-up where he serves as Vice-Chairman. Packman frequently speaks at family office events both large and small as well as some of the nationally recognized business and real estate conferences. Packman is the 1031 expert contributor for the New York Real Estate Journal and has been featured in the Real Deal. Packman is a well-respected leader in his community who throughout the years has served on several advisory and non-profit boards.