Dave's Blog

Roth Conversions 2010 – Important considerations

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 10 Nov 2009 13:05:13 -0600

The magic day for Roth IRA Conversion is quickly approaching - January 1, 2010. This will usher in a whole new era for investing in Roth IRAs. Currently, if you have adjusted gross income of greater than $100,000, you cannot convert your Roth IRA to a Traditional IRA. Effective January 1^st, the law will allow everyone, no matter what your income is, to convert to a Roth IRA.

The benefit of converting lies in the fact that distributions from a Roth are tax free versus taxable in a Traditional IRA. From an investment stand point, a better decision would be to convert appreciating assets.

If you are considering making a conversion, there are several factors that must be considered.

1. Value of the asset being converted – Based on current market condition it might be an excellent time to do a conversion. When you do a conversion to a Roth, you do have to pay regular tax based on the current value. If you own a piece of land, this might the time to do the conversion because most values are down. If you own gold, you might want to hold off because gold prices are at all time high. As noted above, you will have to pay income tax on the converted amount but you are not subject to IRA early distribution penalties of 10%.

2. Do you have the money to pay the tax on the conversion? Typically you do not want to use IRA conversion money to pay the tax. It is best to use personal funds so that all tax sheltered retirement money can continue to grow tax free.

3. What will your income be in the year of conversion? If you know that your income will be down in 2010 that might be a better year to convert versus future years when the income is greater. When you do a conversion you are still taxed but try to do a conversion when in a lower tax bracket.

Finally any Roth Conversion in 2010 will let you defer the tax payment for two years. This is a special onetime tax law change. The way it works is, if you do a conversion in 2010, you will report no income in 2010, half the conversion amount as income in 2011 and the other half in 2012. That means the final tax payment could be delayed until April of 2013.

Please consult your tax advisor before doing a Roth Conversion. Everyone has a unique tax situation so please take the time to learn the learn the law and understand these changes.

Dave Owens, CPA, CES, is the managing member of Entrust Freedom, LLC. If you have any questions about this article and would like more information please feel free to contact the author. Dave can be contacted atowens@entrustfreedom.com or 239-333-1031. Dave has been a practicing tax accountant for over 20 years.

The Rule of 72 – What the Heck is it!

Dave Owens (Entrust Freedom IRA and 1031) — Thu, 23 Jul 2009 07:59:14 -0500

How do we make our financial decisions? Why do we invest the way we do and what is the benefit? I think the current economy has put a cold dose of reality in every type of investor. Many of us now realize that when our parents were harping on hard work and telling us what the world used to be like, they were not kidding. Oh my gosh, did I say my parents were right?

Building wealth is a long term process and it is a ton of work. I think technology has helped us lose sight of how long it actually takes to build wealth. The internet gives us instant access to so much information. We can invest in stocks and watch them all day long, or have an email sent to us every hour telling us how the market is doing. Today, I repositioned my portfolio only to look at it at lunch and find out it was down already. Why did I look?

This is where an old Math formula could never be more important. It is called the Rule of 72 and it should be one of the first things you learn when starting to invest. The Rule of 72 is a math formula used to project how fast you can double your money based on a certain rate of return.

The formula is very easy and it is very useful to understand how powerful compound interest really is. If we divide 72 by our projected rate of return, we find out how long it will take us to double our money.

Let's go through a simple example. Assume I want to buy a rental house and I determine that with rental cash flow and market appreciation, I will get a 6% rate of return. I divided 72 by 6, and it tells me it will take 12 years to double my original investment (72 /6 = 12).

Now let's assume you are in the highest tax bracket and Uncle Sam is going to tax 1/3 of your annual gain, so after you pay your taxes, your return is only 4% annually. Now let us apply The Rule of 72; 72 divided by 4% return and the answer is 18 years. Taxes or unexpected costs can quickly derail project profits or wealth.

That is why it is important to understand investing and all the options available. There are some great tax strategies available and they can be a great opportunity for everyone. Some of the most popular strategies that help defer or eliminate taxes are 1031 Exchanges and Self-Directed IRAs. By taking advantage of these strategies, your returns can be maximized by reducing taxes and helping the investor increase their returns sooner. Self-Directed IRAs are a great opportunity for investors to use retirement funds to by real estate and other alternative assets. The benefit is that no gains inside the IRA account are taxable until withdrawn. This can lead to tremendous amount of wealth being accumulated in the retirement account. The other option for real estate investors is a 1031 exchange. 1031 allows you to sell your investment real estate (please note this is non-IRA property) and pay no federal or state capital gain taxes on the transaction as long as you buy a new piece of investment real estate within the guidelines. Both strategies can be a huge benefit to savvy investors. Please consult your tax advisor for specific details regarding your situation and if you qualify.

The funny thing about the Rule of 72 is that the number we need to actually double our money is not 72, but 69.3. The Rule of 72 is actually an estimate, and I think they thought no one would believe The Rule of 69.3, so somewhere along the line it was rounded up because it is so much easier to divide into 72.

If you want to know how long it will take you to triple your money, it is actually The Rule of 110. For Example, 110 divided by an 11% rate of return, would mean it would take 10 years to triple your money.

While none of us want to be math wizards, it is important to understand the basics or variables of wealth building. In the long run it is will be well worth as grow your dreams.

Dave Owens, CPA, CES, is the managing member of Entrust Freedom, LLC. If you have any questions about this article and would like more information please feel free to contact the author. Dave can be contacted at owens@entrustfreedom.com or 239-333-1031. Dave has been a practicing tax accountant for over 20 years.

Golden IRA

Dave Owens (Entrust Freedom IRA and 1031) — Wed, 08 Jul 2009 11:57:23 -0500

This spring it might have been an investment fad, now it is serious investments strategy, buying gold in your IRA. This can be a well positioned move for many retirement accounts that are looking for security and stability in the coming years. As we hear the term "Second Stimulus" being loosely floated to the public, fears of inflation grasp every economist. In this scenario the economics lesson is simple, if you print too much money, it becomes devalued and tangible assets, like real estate and gold, will go up in value.

Gold can be held in IRAs and most retirement accounts in many different ways. Some of the most common ways to hold Gold include:

•1. Gold Bar or Bullion

•2. Gold Certificates

•3. Gold Money

•4. Gold Mutual Funds

Owning gold bars is easy accomplished through a Self-Directed IRA. The IRA owner is in complete control of their investments. Typically the IRA owner directs their administrator to purchase the Gold through a prearrange purchase with the dealer that the client chooses. The gold is usually held at a large company called a depository. The depository will guarantee security of the gold. There are several large depositories throughout the United States. The depositories will charge a fee to store the gold and the nice part is that most depositories will not commingle your gold. When you would like to sell your gold the depository will sell the gold and transfer the currency back to your IRA, it is a very smooth transaction. Entrust is one the leading administrators of Gold IRAs in the country.

The argument is commonly made that holding gold in a mutual funds is the best way. While it can be easy to purchase gold and silver this way, it is not the cheapest. When you buy in a fund, the investor is at the mercy of the fund manager and has no control over their fees or expenses inside the fund. The goal is preservation of principle and keeping costs down, this is not the case with a gold mutual fund.

While the Gold is used throughout this article, any precious metal can be held in an IRA, the most common include, silver, platinum and palladium. All have they own risk and specific guidelines and constraints. While holding actual gold is common and easy, Silver is not typically held outright because of the weight and inconvenience. The author can vouch for this last statement.

If you would like more information on purchasing Gold in your IRA, please feel free to contact Entrust Freedom at www.entrustgoldira.com or calling 239-839-1031 x212. Entrust will be happy to send you a complete packet that outlines all the steps in purchasing the gold and other alternative assets including real estate.

Dave Owens, CPA is the Managing Member of Entrust Freedom, LLC. Entrust is the largest IRA Administrator in the United States. Please feel free to contact Dave with questions at 239-333-1031 or owens@entrustfreedom.com

Self Directed IRAs are ‘Reagan-esque’

Dave Owens (Entrust Freedom IRA and 1031) — Wed, 17 Jun 2009 12:54:52 -0500

Concentrated power has always been the enemy of liberty. - President Ronald Reagan

I don't want to be political, but I can feel a change in our Nation and it struck me how it applies to what I do for a living. I have discovered Politics will never make you friends or clients - I will keep the political commentary brief. Whether we like it or not, the society we live in is changing dramatically or at least our view of society is. On the front page of USA Today, June 17^th, they noted a story about an agency that is being created by the current Administration from the Office of Consumer Finance. The article stresses how consumers need financial protection; Big Business has made some major mistakes that have cost us all financially.

For example, giving a credit card to every college student (90% of whom don't have jobs) was probably not Citibank's best move. Every time I go to a Florida Gator football game and I see the credit card companies giving out a free Gator T-Shirt if you sign up for a card, I am amazed by the number of students and non-students lined up to get a free T-shirt. Either they have no clothes or they are really hurting with the economy the way it is; that same shirt is $7 at the corner vendor.

By creating this new department, what we are doing is saying that consumers don't need to think or take responsibility for their financial actions. Uncle Sam will save them and the new department will only cost 100 Billion Dollars per year to run. It would probably be cheaper to send the money to everyone that does not want to take responsibility for their financial actions. As a society, we have decided that consumers don't want to read the fine print, so the Government will do it for them. I am sure Former President Reagan turned over in his grave at thought of this new agency. God rest his soul.

Government does not solve problems; it subsidizes them. - President Ronald Reagan

One of the things our government has done right is to allow for Self-Directed Retirement Accounts. The spirit of Former President Reagan lives in Self-Direction. Self-Direction is independence, free thinking, control and most of all risk-taking. This is your retirement and it is your responsibility.

Self-Direction allows investors to buy alternative assets like real estate, private notes and mortgages, private LLCs, hedge funds, small community bank stock and gold. What is more American than an investment in gold? You can also buy more traditional assets like stocks and bonds with a Self-Directed IRA. With Self-Direction you must do the research, read the fine print and decide what is best for you.

I think the government does not realize that most of us want to take risks; it is in our nature, we are Americans. If some individuals don't want to read the fine print on their mutual fund statement and find out they are getting charged an 8% load fee a year, they need the suffer the consequences. They do have options with Self-Direction.

Thank you President Reagan for your inspiration and the opportunity you gave us to think for ourselves and control our own lives.

Government's first duty is to protect the people, not run their lives. - President Ronald Reagan

Dave Owens, CPA, CES is the managing member of Entrust Freedom. Please feel free to contact him at 239-333-1031 or owens@entrustfreedom.com.

The Return of the Real Estate Flipper!!!

Dave Owens (Entrust Freedom IRA and 1031) — Thu, 07 May 2009 12:57:21 -0500

There was nothing better than being a Real Estate Flipper in 2004 and 2005. The Flippers would buy a piece of property today and literally sell it for a 10, 20, 30% return in a matter of days, weeks or months. These returns were unheard of in market history. We should have all known. The interesting things was, the Flippers were not a small group, there were thousands of these “investors” involved in transactions throughout the country.

Unfortunately if you were holding a property around mid 2006, your pumpkin came due and you turned in to a Flopper. Floppers got upside down on properties. Also many Floppers did not have the financial means to carry the properties resulting in the enormous foreclosure numbers we have today.

But do not despair; the Flippers are back in the 2009 real estate market. Real Estate is making history again, this time for large price decrease. Cookie cutter real estate developments throughout Florida have seen price decrease as much as 60%. Markets in Las Vegas, Chicago, and California have seen similar price decrease. It is to note prices in metro areas that actually produce jobs have not seen the huge price decrease as have the speculative or vacation areas.

So here they come in full force, the Flippers are making their come back. With depressed prices, investors are buying property from sellers that must get out at bargain prices. The savvy investor can find tremendous deals. The nice part is that these properties have solid fundamentals that make investing a good move at these low prices. Cash flows on rentals make sense again and investment ratios are inline to make decent returns. With appreciation on the horizon, we see clients buying real estate in their Self Directed IRA. Assets inside a Self Directed IRA are tax free when sold guaranteeing additional funds are available for the next investment, not paid away as taxes.

At the Lee County Court house in Florida, on average there are 10 foreclosure specialist on any given day, that number the last month has jumped to over a 100 investors bidding on properties. The typical strategy of the foreclosure specialist was to buy the property so low and then quickly put it on the market for a price that was usually the lowest in a neighborhood to guarantee a quick sale. There have been so many foreclosures flooding the courthouse that smart buyers have figured out the deals. The effect is that now that demand is up, prices are not at rock bottom levels the are increasing because of the competition at the foreclosure auction. We are starting to see the signs of prices leveling off and actually increasing because of the demand.

Flippers need to be smarter than last time. The highest price was only price that was accepted for a Flipper to sell in 2005, now they are notching their price just below the market to guarantee a quick sale. Flippers will always be around; this time there will be a lot less. In parting, next time my barber or waiter tells me what they are flipping real estate; I will run home and make sure I that I am selling.

Dave Owens is a CPA that specializes in Self-Directed IRAs and 1031 exchanges. Please feel free to call him at 239-333-1031 or email him at owens@1031company.com.

Oldie But a Goodie - Real Estate is Taking Off

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 28 Apr 2009 19:15:04 -0500

What's old is new again. When I started promoting Self-Direction about 10 years ago, real estate was the only asset we talked about. Real Estate IRAs is all that anyone wanted to know about back then. In the Florida Entrust Territory, over 50% of the purchases in retirement accounts where Real Estate.

Guess who is making a comeback. Other popular investments in Self-Dircted IRAs are private notes, LLCs, bank stock, managed commodities and even Gold. Real Estate is flexing its muscle and growing in popularity daily. The real estate boom of 2005 has cause maybe one of the greatest real estate depressions of all time. Real Estate is very affordable and now it is a great investment again.

Prices are dropping to levels not seen in 10 years. In Southwest Florida, Gulf access canal homes, built in 2005, are selling for less than $150,000 and duplexes in Cape Coral are selling for $40,000. These are great investment opportunities.

Add the stock market crash of the Fall 2008, investors are turning to Self-Directed IRAs and purchasing real estate to diversify and solidify their investments.

How does one get started purchasing real estate in an IRA? Opening a Self-Directed IRA is easy. Download the forms at www.entrustfreedom.com. The application is three pages long. Now that the account is open, the account must be funded. Typically the most popular way to fund an IRA account is to transfer from an existing IRA account. This transfer can take about 2 weeks. There are ways to speed this up if up if necessary. The other two ways fund an account is an annual contribution, or a rollover from a 401k.

Now that the account is funded, you will need to find the investment. It is important to know with Self-Directed Accounts, to make money, you must find investments, the administrator cannot sell you investments. If you are working with a realtor, the contract for your real estate will be titled in the name of your Administrator, with our company it is Entrust Freedom for the benefit of John Doe IRA #12345 for example. After the contract is accepted, Entrust will work with the closing agent to purchase the asset in the name of your retirement account. Title will be the same as the contract.

All income and expenses associated with the real estate now belong to the IRA. If rent is recieved it must be deposted to the IRA account. All expenses must be paid by the IRA account, for example property taxes, and insurance.

The neat thing about Self Directed IRAs, All Real Estate can qualify to be purchased in an IRA. The most common examples are rental properties including houses and condominiums, vacant land, commercial land, fixer uppers, and foreign properties. If you dont have enough money in your account you can also purchase a percentage of the real estate as tenants in common with a partner purchasing the difference.

This is just a brief overview of Real Estate IRAs. Please feel free to email me at mail@entrustfreedom.com or call me at 239.333.1031. Have a great day!

Gold is Hot!!!

Dave Owens (Entrust Freedom IRA and 1031) — Fri, 27 Mar 2009 15:15:18 -0500

I always get questions about what the hot investments are today? Precious metals including gold are at the top of the list right now. Many clients have told me that with the current spending of the federal government, inflation is a real concern. Tangible assets like Gold and Real Estate become more valuable during inflationary times.

Buying Gold in an IRA is easy. Entrust has streamlined procedure to that make it easy. The client is free to choose the storage location but many choose the Delaware Depository.

If you would like more information on how to buy Gold or other precious metals in your IRA, please send me an email or call and I would glad to forward you some information.

Dave Owens, CPA, CES, is the managing member of Entrust Freedom, LLC and can be contacted at owens@entrustfreedom.com or 239-333-1031. The Entrust Group is an national administrator of Self Directed Retirement Plans.

Bernie's Mess - Deducting Tax Losses from "Ponzi" Schemes

Dave Owens (Entrust Freedom IRA and 1031) — Mon, 23 Mar 2009 09:29:06 -0500

Now that Bernie is in the poky and we all feel a lot safer, how do investors treat their losses for tax purposes. The IRS has recently released two Revenue Rulings to help. This ruling applies to all “ponzi” losses not just Bernie’s mess.

The IRS released Rev. Rul. 2009-9 addressing the tax treatment of "Ponzi" scheme losses, and Rev. Proc. 2009-20 which provides safe harbor options for deducting these losses. This is a safe harbor rule, which mean it is not law just guidance. The guidance is welcome relief to the thousands of investors who have lost money in the Bernard Madoff scandal and others who have incurred similar Ponzi scheme losses.

The revenue ruling states that the losses are considered theft losses not subject to casualty loss limitations under §165(h) or the itemized deduction limits under §67 and §68. The rulings will allow the losses against ordinary income and goes so fare that it even allows an NOL generated by Ponzi losses to be treated as sole proprietorship losses potentially eligible to be carried back 3, 4, or 5 years under the business tax breaks enacted by the American Recovery and Reinvestment Act of 2009. This is good news that the losses are not treated as capital losses because they would only be eligible for a maximum deduction of $3,000 a years until the losses are used up.

The safe harbor options under Rev. Proc. 2009-20 allow a 95% deductible loss for investors with no potential third-party recovery or a 75% deductible loss for investors with potential third-party recoveries. The investor may have additional losses or income in later years depending on actual recoveries. The returns in those years would reflect the actual loss and be reported accordingly.

This ruling my also apply to the 1031 exchange industry where several qualified intermediary companies lost client’s proceeds while held in escrow.

Banks & Tarp Money - Get rid of it? It depends

Dave Owens (Entrust Freedom IRA and 1031) — Mon, 16 Mar 2009 17:31:12 -0500

As we all know last fall thousands of banks rushed out for Tarp Money. Unfortunately for them the rules on what to do with it were not clear and the Federal Government have change rules as the months have passed. While it might have been cheap money, many banks found out they either did not need it or did not want it once the rules had changed.

Last week there were a slew of banks that wanted to pay the TARP money back. The money was not free at a minimum the banks had to pay 5% for the money. They have found in this economy making 5% can be difficult. So as the bank prepared to give the money back, as of this blog, March 16, 2009, they found out that they cannot just give the money back. Northern Trust took 1.6 Billion in Tarp funds and now the US Treasury will not just accept it back. Talk about a prepayment penalty?

The dally interest expense for Northern Trust is approximately $219,000 per day! What a great deal for Uncle Sam! While the idea of TARP can be debated until the cows come home, will someone at the top wake up fixed this problem ASAP. In one week since Northern Trust has tried to "give" the money back, it has cost them over $1,400,000 in Interest Expense. Tick...Tick... Tick... Did you know that if the banks pay income tax at the rate of 35% (which I would assume Northern Trust does), the federal government has just lost $536,000+ in tax revenue this week, by not allowing Northern Trust to repay the Tarp Loans.

It is not all bad news for the government because they get the money one way or another, taxes or interest? While TARP may not been the best idea, the US Treasury loaned out $350 Billion. If my math is right at 5% interest, $1.4 Billion a month in Interest income is paid to the government. TARP may be the best revenue raiser we have?

Who does not want our Country's economy to recover as soon as possible? But typical government bureaucracy that will not let the bank repay these loans is just WRONG? TARP - Love it or hate, we are living it..

Dave Owens, CPA, CES, is managing member of Entrust Freedom, Entrust is the largest self-direct administrator in the United States. To contact Dave please feel free to email him at owens@entrustfreedom.com or call him at 239-333-1031 x203.

Interesting Trend in Self Direction

Dave Owens (Entrust Freedom IRA and 1031) — Wed, 11 Mar 2009 20:09:10 -0500

The nice thing about Self Directed IRAs is that you can buy almost any type of asset. Most Self Directed Administrators (the ones that I know) specialize in Nontraditional Assets (Real Estate, Notes, LLC and other private investments). For the first time, we have seen a unique trend. In the last month, we have had an influx of client leave their money managers and move the stock and bond investments to a Self-Directed Account. With a self directed retirement account you have complete control.

Suprisingly the reasoning was all the same, they were two fold, first of all with the market at record lows and many losing money, most investors believe that at these price, they can make as good decisions as their money managers and buy their own stocks (and to be honest, they dont have to pay the 1% fee to the broker) Second, a lot of Self Directed Investors are control freaks, and they all want to consolidate and hold their money in one retirement account.

At Entrust we hold our brokerage accounts typically in this manner, Entrust as Administrator will open a discount brokerage account for the client (clients choice). We will move the client cash in to the account as directed, and then give the client full trading authority. The client can buy and trade online with their account. If the client has stocks or mutual funds that they currently own do not want to sell we, there are certain discount brokers that will allow us to transfer securities inkind, so the client can keep the same lot.

If you would like more information on how to open a brokerage account in a Self Directred IRA, please feel free call me at 239-333-1031 or email me at owens@entrustfreedom.com. Have a great day.

Dave Owens, CPA, CES is the managing member of Entrust Freedom.

Wake Up, You don’t have a Job

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 27 Jan 2009 15:42:51 -0600

The numbers are staggering on how many Americans have lost their job in the last year. The Department of labor reported 2.6 Million; the ripple effect will be felt for years. The question is asked, what happened to your 401k, who is watching that money. A CBS News study reported that more thany half of the displaced workers leave their money in control of their former company. There are options for displaced workers. Use this opportunity to reevaluate make the best of the situation.

Unfortunately most 401ks have a canned set of mutual funds to invest in with few alternatives.

Option 1 – Take Control and move your money to a Self Directed IRA. Workers that have been laid off can perform a 401k rollover. This is a nontaxable event. Choose a company with unlimited options and low fees. Entrust is the largest Self-Directed Office in the United States. It is important to know that 401k rollovers should be segregated and not moved to an existing IRA.

Option 2 – Leave the Money in the account – This employer has just asked you to leave and you are going to leave them with one of your largest financial assets. While this might sound like a bad idea, you will be shocked how many people do this. I am always amazed when I talk to clients about where their retirement money is located and they will tell me they left a job several years ago and have not looked at it since. Please do option 1. Don’t leave the fox in charge of the hen house.

Option 3 – Take the Cash, - Bad Idea. If you cash out your plan, the IRS will withhold 20% for federal taxes and you could be subject to a 10% penalty for early withdrawal if you are under 59 ½. Plus there could be state tax consequences. Unless you are in dire straits, please consult your tax advisor before going this route so you know all the tax ramifications.

Option 4 – Move it to your new jobs 401k – This IS not a bad if your new employer has a good plan. While this is not a bad idea, you will still be limited to the choices that the plan offers. Most standard 401ks will not allow you to self directed and there will only be a family of mutual funds to choose. Be sure to ask if there is a provision in the plan that will allow you to Self Directed part of your retirement assets.

These are serious choices. When you leave employment, just as you will be proactive in looking for a new job, you need to be proactive in taking control of your retirement assets. Spend that extra time and contact the trustee of your former employer and take control with a Self Directed IRA.

Dave Owens is a CPA that specializes in retirement taxes and 1031 exchanges. Please feel free to call him at 239-333-1031 or email him at owens@1031company.com.

Yes -Real Estate Investments are becoming hotter than ever

Dave Owens (Entrust Freedom IRA and 1031) — Mon, 19 Jan 2009 20:08:01 -0600

Whether you believe it or not, Real Estate is the catalyst that drives our economy. Where I live in Southwest Florida, real estate is going gang busters again in terms of sales. This is good for a struggling economy, because new home purchase require new furniture and more importantly repairs and remodeling which will help invigorate the battered building industry.

For investment real estate now is the time buy, the prices accurately reflect the going rents and properties can cash flow nicely again. It continues to be a buyer's market no matter how you find d these properties via short sales or just great deals. Unfortunately there are many displaced families that need rentals, this will fill vacancy and keep the rental market strong. This trend will continue throughout the country.

The hidden gems that I am surprised more investor have not embraced are forecloses and the purchase of tax certificates. Investors know that the money is made on the purchase of the asset. With Foreclosures real estate can be purchased on fraction of their original value and with the glut of foreclosure sales that has never been more true. Tax Certificates in Florida are also the rage again. After years no availability and low returns there are more certificates than buyers in many Florida counties. Tax certificates can have returns as high as 18%.

So how do get the capital for these great real estate deals. The answer is easier than we know. Self Direction is the up untapped gem of current economy. Diversification of your portfolio is more critical than ever. Diversification does not mean just various mutual funds, it now includes real estate, private stocks, and private LLCs. Self Directed Retirement accounts give individuals the opportunity to control their retirement funds and have unlimited options. Millions of dollars are sitting on the sidelines in IRA funds looking to find suitable investments. For more information on Self Direction go to the nation's largest Self Directed Administration, Entrust's website at www.theentrustgroup.com.

If you would like more information on any of the information presented, please feel free to email me and I will get you more information.

Dave Owens, CPA is a specialist in real estate taxation. He can be reached at 239-333-1031 or email at him do2009@1031company.com.

How healthy is your retirement plan?

Dave Owens (Entrust Freedom IRA and 1031) — Sun, 18 Jan 2009 08:25:50 -0600

In our changing economic times it is more important than ever to focus on our retirement planning and financial futures. For most of us, we have never seen the wild ride that the financial markets have shown us the last few months. Just as we check our calories, blood pressure and weight on a regular basis, how are we doing with our finances? It may be time for a routine check-up.

Studies have shown us the average American spends more time annually on vacation planning than on financial planning. There was also a survey by Aetna claiming 31 percent of pre-retirees would rather clean their bathroom or pay bills than plan for retirement. Allstate used to have an ad that claimed Last year Americans spent 19 hours planning for their retirement. That’s about the same amount of time they spent planning their Thanksgiving dinner.

So how do we get started and what are our choices today? Unfortunately retirement planning is not something the faint of heart can jump right into, but it can be done and with a little practice, and does get easier. Here are some tips,

1. Set time aside, I have heard many workers and retirees say over the last few month, “I don’t even want to look at my brokerage statement”. This attitude will not help, if there was ever a time to face the facts and planning was needed, it is now. Set time aside every month when you reconcile the bank statement to look at your investments.

2. If you cannot do financial planning look to hire a reputable local financial planner. Financial Planners can sing their accolades but would any one recommend them. If you like to keep your finger of the pulse, hire a fee based financial planner. A fee based planner is paid for work he/she does and not percentage of your portfolio. If you don’t like to do any planning, consider hiring a Trust company that will be more accountable to your needs.

3. Do some of planning yourself, with the internet today information is easier than ever. Most mutual funds are rated online and can easily be compared. There is always something you can do to help your retirement accounts. Let’s talk about buying certificates of deposits(CDs), take the time to call the local banks and find out where the rates are going. I will give you a tip, look at the successful local banks, typical they are growing, they need capital and will pay the higher rates.

4. Focus on the many choices available. The saying could never be truer. Diversify, Diversify, And Diversify. If you need a fixed income, don’t put all your money in one bond fund, pick numerous funds and some bank CDs. There are more investment choices than ever. Self-Directed Retirement accounts are the greatest way to diversify.

As with any physical fitness planner, it takes a little extra work and time. Why not become a Control Freak with your retirement. One of the best opportunities in financial planning is a Self-Directed IRA. Have you heard of Self-Direction? Self-Direction is all about control and you making the best choices for your retirement. This type of account not only lets you control the investments but allows you to have unlimited choices. Stock brokers usually will only let you buy stock, bonds and mutual funds. With a Self-Directed Administrator, you can choices stocks and bonds, plus real estate, private notes and mortgages, LLC, nonpublic stock; the list is endless. If you are a control freak, and you used to own rental homes, now you can buy them in your IRA account. Did you know that you can get a higher return on your investments by loaning money from your IRA? The interest is tax free to the account and the rates are usually higher than bank rates. Many Control Freaks invest in private bank stocks. Investors like these stocks because banks are highly regulated and including the dividends can great returns. The list is endless with Self-Direction in what you can invest in. There are 5 national Self Directed Companies with Entrust being the largest. If you are looking for the ultimate diversification become a Control Freak and learn about Self Direction.

As we all head in to unchartered waters in the next few years with our financial futures, now is the time to be proactive and look for opportunities. The small steps we make to today will make big changes in the coming years. So next month when you get ready to check your weight, cholesterol and blood pressure spend an extra hour, reconciling bank account and looking at every investment you have. Now is the time to take control.

Dave Owens is a Certified Public Accountant in Southwest Florida that specializes in Individual Retirement Accounts. Dave can be reached at owens@1031company.com or 239-333-1031.

Can I Do a 1031 Tax Exchange on Property Held Less Than a Year?

Dave Owens (Entrust Freedom IRA and 1031) — Sat, 10 Jan 2009 12:15:40 -0600

Now that the sales of Real Estate have ticked up, the question becomes can I 1031 Exchange new properties held less than one year? The big question the IRS asks is intent. What was your intent with the property and do you intend to make this a long term hold? Unfortunately for us, the IRS does not tell us exactly how long to hold a property to qualify for 1031 exchange treatment. The one thing the IRS does tell us is that they do not like property to be exchange if it was held for resale. So basically they are saying if you buy a piece of property and you put a sign up in the front yard, this will not qualify and then you buy another property and flip that one.

Again it goes back to intent. If properties are held for speculation they can qualify for 1031 exchange treatment. So if I buy a property on foreclosure and fix it up (which takes 3 months), and then I list it and sell it, and I want to buy a long term rental, can I do a 1031? I have double my money on the sale of the foreclosure, and my intent is to keep my money in real estate. Again the answer is grey but I would consider discussing an exchange as long as the client holds the property long term. I would say long term is at least 2 years.

The reason I say long term is 2 years plus, is that there is a recent Revenue Procedure discussing holding property for 2 years. That make me think that is what the IRS is thinking. Typically if your property fits perfectly into the 1031 box (say a pure rental), I would say 1 years is long enough to hold a property for an exchange, again along as your intent is to stay in real estate and not cash out.

Dave Owens, CPA, CES is the Managing Member of Entrust 1031 Exchange. His website is www.Entrust1031.com. Feel Free to contact him at do2009@1031company.com or 239.333.1031.

1031 Exchange Industry is another Casualty of the Real Estate downturn.

Dave Owens (Entrust Freedom IRA and 1031) — Wed, 07 Jan 2009 11:36:57 -0600

While a 1031 Tax Exchange can be the best friend to a real estate investor, its current state is very murky right now. A 1031 tax exchange is a tax code section that allows real estate investors to sell property and purchase replacement property of equal value and defer all the taxes on the sale assuming some simple rules are followed. The triple whammy hit the 1031 Industry in summer of 2007 with the slowdown in the economy and the gauntlet fell in fall 2008 when business almost shut off. The triple whammy is depreciating prices, lack of capital for new investment property and dramatic decrease in sales. As a 13 year practitioner of 1031 exchanges, the 1031 industry should be downright embarrassed of the image it has portrayed. Over that last 2 years at least 10 exchange companies I know of have lost or spent client's funds. Basically the principals of these companies lost the cash and trust of their clients by not prudently placing the client's cash in secure cash investments with modest returns. One of these companies, lost over $150 million dollars of client escrow money. Even as the industry puts more regulations into place, there have been 3 losses in the last months, 2 involved theft of funds and one involved poor choice of placement of the cash in various investments chosen by the Qualified Intermediary. The reason why most of this money was lost was because decision makers at these QI firms got greedy and invested the client cash in non guaranteed funds looking for higher returns than basic money markets. While I might sound harsh but my point is that it was not the QIs money and they had no right to not place it in a standard money market.

While I did not write this article with the purpose of telling you how to choose a qualified intermediary, please ask one question when choosing a QI, where is the money held and who has control of the money. If a QI company will not let you chose where to place the money or make sure you authorize all transfers, I would question them. They might charge you more to place the money in your bank but it may be worth extra fee. In all honesty, I would bet ¾ o our clients do ask us where the money is held.

A recent statistic by the Small Business and Taxation Commission estimated the 1031 exchanges will decrease by 80% annually over the next 5 years. I would agree based on discussion among my peers in the industry, business is down almost 90% for many. Many can QIs may say that business is not that bad but I think they either have a great referral source or are pulling our legs. The small boutique 1031 shops either offer another service to survive or have left the industry. I know many former 1031 exchange agents.

The IRS pronouncement that I think hurt the 1031 industry was Revenue Procedure 2008-16. It was a quiet change. This Rev Proc issued guidance on when 1031 exchanges could be performed on vacation homes. Since there was no guidance before this Rev Proc, I believe the interpretation of vacation homes eligibility was much more liberal than after the ruling. I am convinced the number of vacation homes exchanges has dropped dramatically. This revenue procedure is not law but guidance from the IRS. Finally there is a tax law provision allows certain individuals with income under $50,000 to pay zero cap gains, why would you do and exchange if you don't owe any tax. Nothing is going in the industries favor.

While we will continue to perform exchanges until the real estate market improves. We are lucky because we do have another service that is growing. Unfortunately for all investors Capital Gains tax rates will go up some amount in the near future but this maybe the saving grace that brings the 1031 industry back to life.

Dave Owens is the President of Entrust 1031 Exchange a firm that specializes in Self Directed IRAs and 1031 Exchanges. He can be reached at dave.owens@1031-ira.com or 239.333.1031 x203.

Our Changing World - Happy New Year

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 06 Jan 2009 15:03:59 -0600

I am hopefully halfway through my life and at 42 it is amazing to see the changes in our small world today. I think the world I grew up with my parents and their generation is gone and the new world that has evolved is amazing but scary because of it complexity. If you add the uncertainty our financial crisis and world disorder, it makes you wonder what is our future and whatelse go wrong. There is much to be thankful for in America while I am lifelong Republican I have never hoped and prayed that someone like President Obama would deliver on his campaign promises and do the right thing for once, I think we have let the politics and special interest of a few select few have changed our lives of so many. I don't necessarily think their all their changes are for the better.

If you have not been on the Internet recently, as someone who feels semi computer literate, it is overwhelming to see what it can do today. For my business, I am trying to understand and use Linkedin.com. The features of what it can do are not for the faint of heart, while it is easy to set up a page the logic to how it will help me is not totally clear. I do believe there is a small conspiracy by 20 and 30 year olds to make the internet great but just confusing enough that I cannot figure it all out. I will say there is one idiosyncrasy by 20 year olds that I cannot figure out. Pure social networking sites like Facebook and Twitter I am sure people over 35 will never understand. I don't want to insult them but the vanity is a little over the top. Twitter lets you tell your network of connections what you are doing 24 hours a day via text messaging. Come on do we really care? There are some great things on the web that are simple and incredibly useful. Have you been on Craigslist.com? It is so simple it is ridiculous. I honestly believe that the reason my local newspaper is going out of business, is because people now list items for sale on Craigslist and the local classifieds are not needed.

I could write about the internet for hours but I do believe if you don't embrace the internet or find your niche, as a student/worker/retiree in the United States you will not be connected with our current society, like it or not.

As we start another year, the lives for most if not all of us will be tougher than ever. We will all continue to work harder. But let's not forget what is important, slow down, take care our kids, parents and in my case my spouse. The people I have met that are truly happy give more than they receive. Look around and find someone to help, you won't have to look very far. Have a great year.

Dave Owens is the President of Entrust SWFL a firm that specializes in Self Directed IRAs and 1031 Exchanges. He can be reached at dave.owens@1031-ira.com or 239.333.1031 x203.

Rebuild Your Retirement Now

Dave Owens (Entrust Freedom IRA and 1031) — Fri, 31 Oct 2008 07:54:05 -0500

Wall Street’s recent wild ride has severely changed the retirement plans of many 50 and 60 year olds. It has not been uncommon for a future retiree’s stock portfolio(s) or 401k to have been reduced by as much as 50% in the first ten months of 2008. October is on schedule to be the worst performing month Wall Street has had in 60 years.

As we all heard, CNBC is screaming to pull your money out if you plan on retiring in the next 5 years but there is still option to help rebuild your retirement account faster.

Traditionally the S&P 500 has averaged over 7% over the last 75 years but will this continue? There is a chance to improve the returns on your retirement funds. As with any reward there is work involved. What adjustment have you made to your portfolio since the market has dropped? Do you continue to ride out the Wall Street rollercoaster or take control of your assets?

There is an opportunity to grow your retirement assets. It is called Self Direction. How would you like to earn 10, 15, or 20% on your retirement account? Let’s look at some simple examples on how getting these higher returns will have a dramatic impact on your financial future.

Let assume as of January 1 this year you had $250,000 in your IRA account, you were 50 years old and as of October 11 your account balance is $125,000 because of the Wall Street Dive. If you keep your money in the Stock market and you average a 5% return for the next 15 years, you will have approximately $260,000.

Now let’s assume you have a Self Directed IRA and you take control. Your new investments average is 10%, just to be conservative. At age 65 your account balance will be $522,000. The compounding effect and tax free status of an IRA is an opportunity that you don’t want to miss.

So what is Self Direction and how do I get started? Self Directed Retirement accounts allow the Owner of the account to control and direct how to invest their assets. A true Self Directed Account allows you to place your assets in almost any type of investment. Of course you can Self Direct with stock and bonds but as we have seen, there are additional opportunities.

These additional opportunities available are called nontraditional assets. Nontraditional assets include real estate, note investing, private LLCs, tax certificates, gold and more. Wouldn’t it be great if you could loan someone you knew a private mortgage and they paid you a 12% return on the note and best of all, the interest income is tax free to the IRA account? First of all, you know the person, secondly you know where the property is located, and thirdly your note is secure because you have a first mortgage with plenty of equity in the deal.

Self Direction is not hard to get started. Typically you need to find a Self Directed IRA custodian; there are about 5 national ones, with The Entrust Group being the largest. There are other ways to Self Direct assets like a Checkbook IRA, but usually these are overpriced and additional work for the average investor and you still need to find a custodian to hold the LLC. A pure Self Directed IRA Custodian or Administrator will be able to handle the transactions for 99% of nontraditional assets at a reasonable price.

Money to fund a Self Directed Retirement usually comes from one of three sources; new contributions to the account, a transfer from an existing IRA or a rollover from a 401k. Transferring from an existing IRA is a nontaxable event. You can have as many custodians as you like and usually the most common way that investors get started in Self Direction. Self Direction is an opportunity to diverse your current portfolio.

Choosing the right type of account is based on your current employment or financial situation. Traditional IRA accounts are definitely the most popular. Roth IRAs have the benefit of investments growing tax free and being non taxable when the money is withdrawn after age 59 ½. All types of retirement accounts can be set up for Self Direction including Health Savings Accounts and Coverdell College Savings Accounts.

So now that you have set up your Self Directed Account, how do you find these great investments? Entrust calls their clients appropriately “Control Freaks”. The only way to make money with a Self Directed Account is to find investment, which is not all ways easy to do.

Invest in what you know. I would say Self Directed Investors, invest in an area that they have worked in or have a lot of experience. Let me give you a few examples, for a realtor it has never been a better time to buy. Prices are at record lows. Realtors are on the street and they see the deals. Invest in what you know best. Realtors can invest in real estate.

There are opportunities locally through private companies and developers looking for investors. I just recent spoke with a Private Equity Lender, he is looking for investors in many of his new deals. In many new hotels that are built, developers raise money from private individuals and IRA accounts. Go on the web search for private lenders and private asset managers in your region, they are not that hard to find.

Invest in Gold and Silver. Investors like the security and via the internet are able to buy and trade gold and silver based on its value. There are many companies that allow you to buy gold certificates so you don’t have to own the physical gold.

Private Bank Stocks are very popular in a Self Directed IRAs. Clients like the security of a local bank, and nice dividend flow they can produce once a bank is profitable. An easy way to find out about new banks that are raising capital is to go to the web and search for de novo banks in your state.

The possibilities are endless with Self Directed Accounts. Unfortunately, traditional investments like stocks and bonds are not going to have the steady growth they have shown over the last 50 years. We live in a different world where we are influenced by many factors and there is an increase in global demand for profitable investments.

Now is the time to take an interest in your future and find the local or national non-traditional investments that fit your goals. Will Rogers was once quoted saying, “Even if you are on the right track, you will get run over if you just sit there.” Now is the time get moving and take control of your future, no one else will.

Dave Owens, CPA, CES is the managing member of the Tax Strategies Group, a company that specializes in Self Directed IRAs and 1031 Exchanges. Dave can be reached at 239-333-1031 x203.

The Choice: Fund Retirement or College

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 21 Oct 2008 07:46:51 -0500

I don’t think anyone could have anticipated the economic crisis we are having today. Financial decisions we never thought we would have to make are now are a fact of life. I have many friends that are retirees and are force to make do with extreme hardship because of the correction in markets and high inflation. Many of the economic trends that we are seeing today have not occurred in 60 plus years. As of writing this article, domestic construction levels are at their lowest since 1945 and in Florida where I live, unemployment is at a staggering 9.2%.

No one is feeling the financial crisis as much as the families. The decision of where to spend their precious resources is harder than ever. As families do try to save, where do the dollars go, retirement or college for the kids? The costs of higher education have double and tripled the inflation rate the last few years. Saving for retirement has changed dramatically. When our parents grew up typically they were covered by pension plans that usually guaranteed them benefits during retirement. It was little easier back then because parents could focus on saving for college. Usually the retirement was taken care of by the Company. Unless you work for municipality, those days are over. In 2007, the Investment Company Institute reported that nearly two thirds of all retirement savings came from contributions from workers rather than employers. Our countries changing demographics now have many older parents that are forced to use retirement savings to pay for college costs. Please know I don' advocate using your retirement dollars to pay for your childrens education. I believe that college is an investment in their future, and they should participate.

It is not an easy decision but a little planning can go a long way now. Parents cannot count on last minute saving ideas. There are some options. Below I have listed some ideas to save for college and retirement.

· Start early, in either case goals will be so much more obtainable the sooner you start.
· I think the old rule of thumb with retirement still holds true, for retirement plan on saving 15% of your current pretax salary annually
· Use automatic deductions and salary deferrals to fund retirement and make the process as easy as possible
· For college planning, try and save 75% of projected costs with the difference coming from student loans, scholarship or students work
· Always take tax advantage saving plans like IRAs and 401k for retirement and Coverdell/529 plans for college savings. It is hard to beat the tax free growth these plans offer.

· Consider Self Directed Retirement Plans, and take control of your assets. Don’t let a unknown mutual fund manager control your future. Recent statistics show - 43% of Americans spent more time planning their most recent vacation than they have spent planning for retirement and 28% spent more time watching reality TV in the last month than they have spent planning and preparing for retirement over the last 10 year. Don’t be a statistic.

· Balance your portfolio, as you start saving typically savings will go in to growth assets, and move to more secure income producing assets as you get closer towards your goals. By staying in growth assets early, you will minimize your tax affect for assets not in preferred savings accounts.

Splitting the saving pie is now more a juggling act than ever. Remember it is never too late to get started. I always think that saving for college and retirement are just like the old Nike ad – Just Do It.

Dave Owens, CPA, CES is the managing member of Entrust IRA SWFL, a firm that specializes in 1031 exchanges and Self Directed Retirement Plans.

Was your Economic Stimulus Check Deposited in Your IRA?

Dave Owens (Entrust Freedom IRA and 1031) — Wed, 17 Sep 2008 10:35:53 -0500

Tax Free Withdrawal may apply

Many taxpayers have requested that their federal tax refund be deposited into their Individual Retirement Account now have found out that their Economic Stimulus Check (ESC) was deposited to their IRA as well. Most do not realize that they may withdraw the ESC tax free. As long as the check is withdrawn before April 15, 2009, it is a nontaxable event for the taxpayer.

For Example, if you are single taxpayer lets assume your ESC was for $600 and it was deposited to your IRA, you may withdraw all or part of the $600, penalty free and tax free. Please note this tax free access to your IRA funds does not apply to your regular tax refund that got deposited.

Leaving your ESC in your IRA account may not be a bad thing, if you have not made your 2008 IRA contribution, you can use the ESC check to help you get a head start on the current year contribution. Once the check is in your account, it may be invested in multitude of assets, including real estate, notes, LLCs and private stocks if you have a Self-Directed IRA Account.

IRAs are not the only types of accounts that you can deposit a refund or Economic Stimulus Check. The other types of accounts that qualify are Roth IRAs, Coverdell Educational Savings Accounts, Health Savings Accounts and 529 Accounts.

If you do have questions about the types of savings accounts listed above or how to use a self directed IRA to your benefit, please feel free to call me.

Dave Owens, CPA, Certified Exchange Specialist, is the Managing Member of Entrust IRA Administration with offices in Chicago, Fort Myers and Gainesville, Florida

1031 Exchanges and Foreign Property

Dave Owens (Entrust Freedom IRA and 1031) — Mon, 08 Sep 2008 09:04:21 -0500

A common question comes up with 1031 regarding whether you can sell an investment property in the United States and purchase a replacement property somewhere outside the U.S.. According to section (h)(1) of Section 1031 this transaction is disallowed. They do not consider US property and foreign property as like-kind. There are certain territories that do qualify as like-kind, those include Virgin Islands, and Guam but you must be a citizen or resident of the United States and has income derived from sources within these territories. So you could sell in Chicago and buy in the Virgin Islands, the qualifications for 1031 are met.

A little unknown fact about 1031 and foreign property is that you can do a 1031 exchange if you are a U.S. citizen or resident and the relinquished and replacement properties are both outside the U.S.. For example, you are selling a rental villa in Mexico and you want to purchase a rental property in Panama, this transaction would qualify. The IRS has ruled that foreign property to foreign property is considered like-kind.

Dave Owens, CPA, Certified Exchange Specialist, is Managing Member of 1031 Tax Free Strategies with offices in Chicago, Fort Myers and Gainesville, Florida. Please feel free to email or call with questions.

What can I buy with a Self-Directed IRA?

Dave Owens (Entrust Freedom IRA and 1031) — Sun, 10 Aug 2008 12:33:26 -0500

Probably the most popular question we get regarding Self-Directed IRAs is what can I buy with my account? The answer is what you cannot buy with your Self-Directed IRA. The sky is pretty much the limit on what you can buy. Typical investors buy Real Estate number one, followed by LLC interests, Note and Mortgage lending, and small company stock primarily bank stocks. I always tell clients that if they have a investment that they believe will appreciate it is probably eligible for your Self-Directed IRA. To see a complete list of what you can buy, click on our company website at http://www.theentrustgroup.com/investment_options/investments/.

There are certain people a self-directed IRA cannot do business with. These people or entities are called Disqualified Persons. Examples of a Disqualified Person are

The IRA holder and his or her spouse
The IRA holder's lineal descendants, ascendants and their spouses
Investment advisers and managers
Any corporation, partnership, trust, or estate in which the IRA holder has a 50 percent or greater interest

Now the real question is what cannot I not buy - Your retirement plan is intended to benefit you when you retire and not before. Transactions that can be interpreted as providing immediate financial gain to the account holder or other disqualified persons holders are not allowed.

For example, an IRA holder may not:

Borrow money from the IRA
Sell, exchange or lease property to their IRA
Receive unreasonable compensation for managing property held by the IRA
Use their IRA as security for a loan
Transfer plan income or assets to disqualified persons
Lend IRA money to disqualified persons
Extend credit on their IRA to disqualified persons
Furnish goods, services, or facilities to disqualified persons
Allow fiduciaries to obtain or use the plan's income or assets for their own interest

Please feel free to contact me if you other questions regarding Self-Directed IRAs

Dave Owens CPA is the managing member of Tax Strategies Group in Fort Myers that specializes 1031 Exchanges and Entrust Self-Directed IRAs.

Southwest Florida - How lucky we are!

Dave Owens (Entrust Freedom IRA and 1031) — Fri, 08 Aug 2008 12:56:02 -0500

I was driving around town recently noticing what a nice place Southwest Florida has become post real estate boom. When I was a kid, I was lucky to have my parents bring my family to Sanibel for 2 weeks every Christmas. I have been a full time resident for over 15 years. I know I am not a Cracker, but I have seen this area go up and down.

I travel frequently with my job, so I see different parts of the country. As I look around, I think SWFL has never been better and it is a hidden jewel. I believe bad press and the lack of constraint by local government have caused a current inventory surplus. I like reading the newspaper here, but the News-Press has to help our economy. As I see other parts of the country, no one can match some of the benefits we have. The benefits include the beaches, the parks, new roads, new shops and some of the nicest weather in the whole world.

Recently, one of the best benefits of Southwest Florida is the price of real estate. Real estate is cheap here. Our prices have decreased to the point that our real estate is no more expensive than any other part of the Midwest (where the majority of our migration comes from). Lets be honest, the entire State of Florida is on sale right now. Also, I have heard from many friends and insurance agents that the price of insurance is decreasing sharply. I am sure another year without hurricanes will help our rates. Property taxes are not perfect here. Municipalities and taxing districts have created little kingdoms, and have taken away any advantage the decrease in value has given the property owner. Taxing Districts in Florida continue to raise millage rates. It is disappointing that the entire country has to watch their pocketbooks, but local government does not and refuses to substantially cut costs.

Since the onslaught of construction equipment and trucks have disappeared, this place is not that bad to drive. I was driving from Fort Myers to Naples at 730am about 2 weeks ago, and even with the I-75 construction, I cruised down there. Two years ago, it would have taken an hour and half from my house in downtown Fort Myers to Pine Ridge Road in Naples. My trip on the way back was a breeze. Anyone that wants to complain about traffic was not here two or three years ago. The roads in Southwest Florida are pretty good; on your worst day you might be 15 cars deep at a light.

We are getting some nicer amenities. The new two new regional malls are great. I was down at Gulf Coast Town Center for Bike Night (I don't drive a motorcycle) and it was packed. I can honestly say I have never seen so many people for one event in SWFL. The regional malls are very nice, and have added some great shops to our area. FGCU has been huge help to both malls and only good things will happen in that area. Up north, if you have not visited Punta Gorda, you should. It is a great community, the planners have done a super jobr rebuilding since Hurrican Charlie. And Collier County, lets give them credit, they have some nice roads. In time Ava Maria will be a great community to live, work and visit.

One disappointment has been downtown Fort Myers and US 41. The City of Fort Myers needs to stop studying the problems and start acting. US 41 from Downtown to Colonial is embarrassing. It is the gateway to our largest city, and it looks awful. I think the planning on new streetscape downtown was not well orchestrated because a large number of successful businesses have been run out. While the rest of the country is planning massive riverfront redevelopment, the city continues to argue about a plan and go nowhere. One bright spot in the City of Fort Myers has been the new Edison's Restaurant. Several local businessmen have stepped up to make it a first class place. As our economy continues to struggle, I think the biggest disappointment in SWFL is the lack of vision to stimulate the economy with businesses that are not tourism or real estate related. I don't see or hear about the push to bring new industries or jobs in to our area. The talk is superficial and always appears to go nowhere. We need real stimulus with tax breaks and easy zoning that will bring these businesses to SWFL.

Our two top resources are our weather and beaches. The weather has never been more beautiful and for anyone that asks, Al Gore is wrong, and Sanibel is not sinking into the Gulf. I went to Fort Myers Beach recently; they are doing some nice redevelopment. In a couple of years, it will not even look like the old place. In the last year, I have visited Cayo Costa, Lovers Key, Hickey Creek and Six Mile Slough. These parks are clean, well run and a joy to visit. I am not even a nature freak.

For now, we will need to enjoy our little paradise until some columnist up North notices and start writing articles not just about the beach but how cheap real estate is and how nice the amenities are. So tell your friends to come visit for now we have plenty of room in SWFL. For what it is worth...

Dave Owens is owner of Tax Strategies Group a local business specializing in 1031 exchanges and Self-Directed IRAs and has been operating in SWFL for 15 years.

The Cost of Kids - Yikes!

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 08 Jul 2008 07:11:15 -0500

As the father of 3 kids, one teenager and two soon to be teenagers, you never really think about how much your children cost you in terms of total dollars spent annually. Basically as a parent you think you wallet is an ATM machine, that is constantly spitting twenty dollar bills out.

Every few years the US Dept of Agriculture puts out a chart of how much it does cost to raise a child. I do remember a few years ago back in my twenties seeing this chart and the number was somewhere around $100,000. Well things have changed, so if you are parent with newborns and your combined family income of over $77,100, it will cost you on average $298,680 to raise a child to age eighteen. The scary part of this equation is that it does not reflect the current round of inflation we are seeing. Gas prices are up fifty percent in the last year and food costs are up over twenty percent.

So where is all that money being spent. Basically a third of this money is spent on housing which includes mortgage interest, insurance, real estate taxes, and furnishings. I find it funny that mortgage principal is not included in the equation under housing. They must think that since I get to keep the house after the kids leave, principal does not really cost me anything. Another thirty percent of the costs are split evenly between food, transportation, and child care/education. Another ten percent is for miscellaneous, which is a category I really like. I would have guessed that miscellaneous number was higher. I just spent $250 to get all the supplies for my kids to go to camp and $50 to go to the movies; I would assume that is all considered miscellaneous.

The good news is if your family income is between $44,000 and $77,100, the cost to raise a child is only $204,000. All the numbers reported vary by family income and geographic region. These are average numbers and will also vary by lifestyle. While researching this article, I did find many articles where supporting a lower cost to raise kids, especially in larger families. I would assume larger families share clothes, bikes and eat in more often which save money.

Now the bad news, these cost figures only go up to age eighteen. Now that we have all done such a great job raising our kids, we get to send them to college. The average price for a four year public college in the United States is $13,500 per year, over four years that is approximately $54,000. The average cost for a private college is $32,000 or $128, 5000 for four years. College costs on average are increasing at the rate of five percent annually. The University of Florida just raised their tuition five percent, University of Maine is increasing tuition ten percent, and the University of California is going up by 7.4 percent. I have a motto regarding college; College is an investment in their future not mine. College Saving with a Coverdell Education Saving Account is more important than ever.

Now the best part, I call this the "Dessert", now that you have raised your children and help them through college, parents will spend an average of $2,200 per year on per child after they leave our homes. I am not sure what this is for I would guess it is for a really nice Holiday Gift.

While our children are priceless, raising them costs a lot of money, so I had better get back to work.

Dave Owens, CPA, CES, is the managing member of Tax Strategies Group in Southwest Florida, specializing in 1031 exchanges and Entrust IRAs. Dave can be reached at owens@1031company.com or 239-333-1031.

TRENDS IN THE 1031 WORLD

Dave Owens (Entrust Freedom IRA and 1031) — Tue, 17 Jun 2008 14:03:58 -0500

While the numbers of 1031 Exchanges are down, they are not out. A 1031 Exchange is a tax code section that allows taxpayer to sell investment real estate and deferral some or all of the taxes if they follow the guidelines when purchasing replacement property. 1031 is suffering what I call a triple whammy from the real estate boom: decrease in number of transactions, tightening credit, and decrease in real estate values that have eroded gains. All three have caused a big hangover for the 1031 industry. It is estimated the volume of exchanges is down approximate 70% according to recent studies by the national 1031 groups.

But there are still 1031 exchanges are still occurring every day. The investors that are performing exchanges today are the same clients that were performing exchanges before and during the boom. They are smart, savvy and long term investors. The question is where are they putting their money?

We do business all over the United States, I have not talked to one person that has not been affected by rising oil prices and real estate investors are no different. One interesting trend, we have seen in the 1031 business is going "Green". When I say Green, I mean clients are selling older energy deficient properties and moving to new more energy efficient properties. A current 1031 client commented that tenants don't want to be in old buildings that are costing them money with leaky windows, un-insulated walls and inefficient air conditioning systems. Green buildings are easier to rent, and can be for profitable.

In April 2008, we performed an exchange for a client that sold two old wood frame houses that as in his words were as far from "Green" as possible and purchased a brand new four unit strip mall with many modern energy efficient features. The houses were over 30 years old and fully depreciated. The seller had a gain of over $300,000 with a possible capital gains tax of $70,000. With a 1031 exchange the investor paid zero tax. All capital gains tax, depreciation recapture tax and state tax were deferred.

To be able to execute a 1031 exchange there are several rules that must be followed. The first rule is the most commonly asked question; how much do I need to reinvest to deferral all the tax? To deferral all the tax with a 1031 exchange, the taxpayer must purchase a replacement property equal or greater in value to the property that they sold. If they purchase a property for less value than the relinquished property they only pay tax on them money not reinvested.

Typically in a 1031 exchange the property to be exchanged must be business or investment real estate. Most of exchanges performed are rental properties, vacant land or real estate used in a business. Many times you will hear 1031 called "like-kind' exchanges, it is only like-kind from the stand point that you're selling deeded real estate and buying deeded real estate. So that means that you can sell a rental house and buy a rental condo or sell a commercial property and buy vacant land. As long as it is deed to deed, it should qualify.

Also in a 1031 exchange, you must use a Qualified Intermediary to facilitate the exchange. The QI as they are called will perform many functions, primarily prepare the exchange agreement, escrow the equity funds in a segregated account, and finally they will coordinate the exchange with all buyers, sellers and title closers. Please note you must call the QI before you sell the relinquished property to qualify for 1031 treatment.

Finally, there are two timing rules for a 1031 exchange. If you do not have your replacement property picked out when you sell your relinquished property, the tax code gives you 45 days from date of sale to identify three properties to purchase. Identification usually means notifying the QI exactly which three properties you are looking to get a contract on. The other timing rule is that from the date of sale of the relinquished property you have 180 days to close on the replacement property. The rules for 1031 can be complex, please consult tax advisor before starting an exchange.

Another example of doing a Green 1031 was performed by one of our clients recently. The investor had 3 rental homes all on septic. The city in Florida was getting ready to mandate removal of the septic and a new sewer system that would have cost over $15,000 per house. The investor did a 1031 exchange selling the 3 homes and purchasing 2 newer efficient homes on sewer. Even though he only has 2 properties, they have equal value, they are in a desirable neighborhood, and the tax saved by doing the exchanges was over $50,000.

1031 Exchanges can also be structured as a "Construction Exchanges" so that the investor can purchase property and use 1031 monies to make the property Green. Typically this will be a reverse exchange where the QI holds title to the property while improvements are made. This may sound complex it is actually very easy and common practice in the industry.

The thing I have learned about this real estate market is that clients are very resourceful. They look for opportunity and they gravitate towards it. Green investing with 1031 is just one example of investors seizing an opportunity. In Southwest Florida another trend for 1031 investors is foreclosures. Many foreclosures were caused by the flipper of boom days, now they are an opportunity for right investors. In the words of Dale Carnegie - "Opportunity does not knock, it presents itself when you beat down the door."

Dave Owens, CPA, Certified Exchange Specialist, is the managing member of the Tax Strategies Group, a company the specializes in 1031 Exchanges, Entrust Self-Directed IRAs and Cost Segregation with offices in Fort Myers, Gainesville and Chicago.

Foreclosure Tax Relief

Dave Owens (Entrust Freedom IRA and 1031) — Mon, 12 May 2008 12:25:52 -0500

Congress recently passed a new law regarding mortgage debt forgiveness resulting from a foreclosure or reduction in loan amount (i.e. short sales). The law affects mortgages that have been adjusted between January 1, 2007 and December 31, 2009. Basically the law will not require a taxpayer to take income from debt that is forgiven by a lender. The maximum amount of indebtedness that can be forgiven is $2 million.

Typically if a lender forgives debt, it will be taxable to the owner of the property. So in a short sale, if you owe $200,000 on your mortgage and you sell if for $175,000, you will have taxable income of $25,000 because of the loss the lender has. It will be reported to you as income in the year the home is sold. In a foreclosure the same will apply. If your home is foreclosed, let's say your mortgage debt was $500,000 and the bank resells the property, the income to the taxpayer would be $100,000.

Under the new law, you will not have income if you meet the following criteria, a) decrease in mortgage occurred because of financial hardship of the owner, b) decrease occurred because of a drop value of the property. To qualify the mortgage must be the borrower's principal residence and the debt was incurred to purchase, improve or construct the residence. The bad news is that this law does not help owners of investment property.

Dave Owens CPA is the managing member of 1031 Tax Strategies and Entrust SWFL. He can be contacted at 239-333-1031