September 19, 2025 • 21 mins
Are you making money decisions that could be holding you back from real financial freedom? In this episode of the Main Street Business Podcast, Mark J. Kohler flies solo to answer your questions! In the process, he reveals the common mistakes people make with money, taxes, and investments — and how you can avoid them. He shares proven strategies to help you protect your wealth, build long-term security, and take control of your financial future.
From managing taxes to creating passive income, this discussion breaks down the essential steps every entrepreneur, investor, and professional should know. Learn how to maximize deductions, grow your wealth, and safeguard your assets without falling into costly traps.
If you’re serious about building wealth and creating lasting financial stability, this is an episode you can’t afford to miss!
You’ll learn:
- How transferring a property to an LLC works, the risks of triggering the due-on-sale clause, and what to watch out for with your lender
- The difference between Schedule E and Schedule C when reporting short-term rental income — and how mixed personal use can change your tax treatment
- Key rules for deducting business mileage when operating across multiple locations, and how to maximize your write-offs
- What expenses you can (and can’t) cover in a Roth IRA LLC, including laptops, mining rigs, and other gear for crypto-related activities
- Why documenting your strategies correctly is essential to avoid IRS issues and maintain tax efficiency
- Practical, real-world answers to common tax and wealth-building questions that apply to both investors and small-business owners
Get a comprehensive tax consultation with one of our Main Street tax lawyers that can build a tax strategy plan with an affordable consultation that will leave you speechless!!
Here’s the link - https://kkoslawyers.com/services/comprehensive-bus-tax-consult/?utm_source=buzzsprout&utm_medium=description&utm_campaign=msbp004-open-forum-lessons-on-wealth
- Grab my eBook 30 Unique Strategies Every Business Owner Should Know!
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I've literally sat in hot tubs in hotels across the
country, outside bankingconferences, talking to banking
lawyers trying to get the realinside scoop on this.
The reality is banks do not wantto call the due on sale clause.
It costs them money.
It's a headache Nine times outof 10, they've also sold your
paper or your mortgage into WallStreet and the bank has no
(00:20):
interest in calling thismortgage due.
If you go into the bank and gohey, I want to transfer my title
to my LLC or trust, can I dothat?
Remember this is a freakingbank.
They can't go to the bathroomwithout getting three stamps of
approval from the hierarchy.
Do not go in there and startasking permission to do this.
(00:43):
Welcome to the Main StreetBusiness Podcast.
My name is Mark Kohler and I'mflying solo.
Today.
Matt Sorensen's on stage acrosstown speaking to a real estate
group and he asked if I would doa little open forum, answer
some questions that have beenkind of gathering dust, if you
will, or in the pipe at ourwebsite,
(01:05):
mainstreetbusinesspodcastcom,and that's a reminder.
If any of you do have aquestion, please go there and
you can log in and submit aquestion that we will try to
answer as quickly as possible.
We want to actually have moreopen forum opportunities, so I'm
going to try to give you some.
Really I'd love these questionstoday and so that's why I told
Matt I was going to hold thepodcast and dive into these
(01:28):
questions, because I know theanswers and I love these
questions.
So I'd like to share someinsights with you.
And thanks for listening, andif you enjoy this podcast or
you're on YouTube watching thevideo version, please give us a
thumbs up, five star, high fives, subscribe.
Click button icon.
(01:49):
All those things, I don't know,what the hell you know all these
different platforms, all right,so the question here that's a
really good one is about the dueon sale clause with a mortgage
on a property that a clientwants to turn into investment
property.
So, specifically, chad asked mywife and I recently moved to a
new primary residence and wewant to keep our former primary
(02:11):
residence as an investmentproperty.
I want to transfer thisinvestment property from our
names into an LLC for assetprotection.
Good move, chad, but have heardwe could possibly trigger the
due on sale clause for ourmortgage.
We have a very low interestrate, so, understanding our
concern, I'm sure banks mayexercise this clause so that
(02:34):
they can change the mortgage andget a higher rate.
How can we transfer thisproperty to an LLC without
triggering the due on saleclause from our mortgage company
?
Thanks and keep up the greatwork, chad, you're awesome,
great question.
Well, first of all, chad, theshort answer is do not worry, do
(02:56):
not stress that bank is notgoing to call the due on sale
clause.
But there are a few steps youwant to follow to ensure that.
The first thing is I've metover the years, over and over
again, with bank lawyers askingthem when do you ever exercise
this due on sale clause?
Can you and why don't you domore of it?
And I mean I've literally satin hot tubs in hotels across the
(03:17):
country, outside bankingconferences, talking to banking
lawyers trying to get the realinside scoop on this.
The reality is banks do not wantto call the due on sale clause.
It costs them money, it's aheadache, and they don't even
know if the current owner,resident buyer is going to be
able to qualify for a newmortgage.
And then this ends up into awhole cascade of events that
(03:39):
could be a pain in the butt forthe bank.
So the moral of the story is aslong as you keep paying your
mortgage.
The bank is not going to carebecause nine times out of 10,
they've also sold your paper oryour mortgage into Wall Street
and they're just having itserviced as part of a larger
Fannie Mae Freddie Mac pool ofloans.
(04:00):
So the bank has no interest incalling this mortgage due.
Number two a lot of mortgageshave a provision that says if
you are transferring this toyour trust or an LLC and the
underlying ownership has notchanged, we are not going to
call it due.
Nor can we call it due in a lotof instances because you
haven't transferred theproperty's ownership.
(04:20):
You're just putting it into atrust or an entity for an estate
planning or an asset protectionpurpose.
So, again, the mortgage itselfmay protect you from this
process.
Now, with that said, if you gointo the bank and go hey, I want
to transfer my title to my LLCor trust, can I do that?
(04:41):
Okay, remember this is afreaking bank.
They can't go to the bathroomwith the guy getting three
stamps of approval from thehierarchy.
You do not want to go into thebank and start asking these
questions because they willfreak out as bankers.
Do no offense to you bankersout there.
It's not your fault, it's yourinstitution.
So, anyway, do not go in thereand start asking permission to
do this.
(05:02):
Okay, finally, the process andthis is important I want you to
use a warranty deed, or a grantdeed as it's referred to, and
other states have differentterms.
There's 3,500 counties acrossthe country and you're going to
go through that county where theproperty is located and do the
proper deed.
I do not want you to use a quitclaim deed because I want you
(05:22):
to warranty over to your otherentity or yourself all of the
warranties you can from thetitle policy and that you
already have Now.
You would never normally dothat to a third party like me if
I was buying your propertywithout me or you paying for a
title policy to guarantee allthose warranties, but you're
transferring it to yourself.
(05:43):
So just go for it with awarranty deed, just in case.
So that makes it allows yourLLC or trust to step into your
shoes with all the warrantiesyou have as an individual, which
, again, you wouldn't do to athird party, but you're doing it
to yourself.
So it's a smart thing to do anda good thing to do.
So, final point, make sure theLLC is set up or registered in
(06:05):
the state where your property is.
Make sure that the LLC is nowon title by doing that transfer.
We have paralegals at our lawoffice that does this across the
country every day.
Get down to KKOS Lawyers.
You'll see it down in thedescription and also make sure
it's on the lease agreement thename of the LLC, not your
personal name.
Make sure you let yourinsurance company know that it's
(06:26):
now a rental property so thatyou have the proper insurance.
You can't just stick aroundwith your same homeowner's
insurance and think you're goingto be okay.
If there's ever a claim, youwant to let them know that it's
a rental property, but followthe protocol of the LLC.
It should have its own bankaccount.
The rent payments should gointo the LLC bank account.
The rent payments should gointo the LLC bank account.
(06:47):
Let the LLC pay the mortgage.
Again, isn't that weird?
You've transferred it to theLLC.
Let the LLC pay.
The bank doesn't care where themoney's coming from, they just
want the mortgage paid.
So don't worry about thateither.
But finally, as I mentioned atrust early on, make sure your
trust owns the LLC that owns therental, because if anything
happens to you, we don't wantprobate and we want that
property to have assetprotection and go into your
(07:08):
trust for your estate.
Now if some of you hearing thisare like, oh my gosh, I don't
have any of that organizationdone, don't beat yourself up.
Take time to get these littlethings done.
Put it on your list of tax andlegal.
You should have an ongoing list.
I do, patty and I, my wife.
We keep a list of all thelittle things we need to do to
stay organized because, people,when you're organized you make
more money, when you'reorganized you have better
(07:30):
write-offs and when you'reorganized you have better asset
protection.
So just take baby steps gettingthere and you'll love it.
Chad, good luck with thatrental property, all right.
So now let's go over to anotherquestion here.
This is another good one thatI'm really excited about, and
we're going to stay with thereal estate genre, if you will.
(07:52):
We're going to talk about ashort-term rental type option,
uh strategy.
So this question is from SOP 78.
Don't have much more than that.
Now, this is a longer question,so I'm going to kind of
truncate it here for everybody.
So this is also a couple andagain, they are interested in
renting out their primaryresidence, but as a short-term
(08:13):
rental.
So is, uh, he goes on to talkabout how they're going to take
their primary residence andmaybe downsize it and then, but
we want to convert it to arental when we're not there
because we're going to travelaround the country and outside
of the US, but when we come homewe want to be able to stay
there.
How does this work?
And then he says I understandthat we would be giving up the
(08:34):
expense write-off as ashort-term rental because it's
partially a primary residence.
I'll explain that in a moment.
But how do we report this?
And do we have to worry aboutthe seven-day rule and
substantial services?
And do we report it on scheduleE or C?
Lots of questions on how thiswould work.
So it's a great question SOP.
Let's see what we can do here.
(08:55):
So the first point I want tomake and this is for everybody
out there that has a primaryresidence you can short-term
rental your basement, anaccessory dwelling unit, you
convert the garage into a single, you know, one bedroom, one
bath, something like that andyou create some extra income.
Lots of clients of ours overthe years have done this in
urban areas where the cost ofliving is higher, and certainly
(09:16):
in Hawaii.
A lot of clients have kind ofthis accessory dwelling unit
that they short-term rental outuntil Hawaii passed a lot of
laws on this recently due to thehotel industry.
Anyway, that's a side note.
So the point here is they wantto be able to have this as their
primary residence and partiallya short-term rental come back
(09:37):
and forth, yada, yada, Love it.
It's a great income opportunity, because why just leave that
home sitting there vacant whileyou're out of town or out of the
country?
Make some income on it and youcan do some lock-offs.
If you're used to the Airbnb orshort-term rental world, what
you can do is lock off certainrooms, keep your personal stuff
(09:57):
there and when you come backunlock them, but until then you
rent the rest of the house.
It's a beautiful structure forthat and you're making income
while you're gone.
But under the short-term rentalstrategy for tax strategy
planning, or the short-termrental loophole as it's known,
it has to be 100% short-termrental.
(10:18):
You cannot use it as yourprimary residence.
Now we got the 14-day rule andyada, yada.
But the point here is, ifyou're going to use it as a
primary residence for he saysmaybe 50 days out of the year or
more, then it's not going toqualify for that short-term
rental depreciation loopholewrite-off.
That's okay.
It's not the end of the world.
(10:38):
We don't have to have thatloophole.
What we're interested ineverybody let's keep our eye on
the ball.
They've got a property that'sgoing to be sitting vacant
making them nothing.
Let's create some cashflow andput it in a short-term rental
position where, when they wantto come back to town, they can
block it off, love it.
They may even consider FurnishFinder a midterm rental scenario
(11:00):
.
So don't worry about the taxwrite-off, just make some
cashflow with it.
Their last question is well, howdo we report this?
You're going to treat it likeany other rental property yeah,
it's in your primary residencebut you are required to report
the income.
We might do some depreciation.
We're going to write offexpenses proportionally, based
on square footage, use and howmany lock-offs and all that.
(11:21):
There's a lot of details.
I'd like you to meet with oneof our tax lawyers and build out
your plan as you implement this, and it would be very
affordable to do that.
Then you're off to the races.
But you're going to report theincome and the expenses on a
Schedule E, as in ECHO rentalproperty.
Just because it's short-termdoesn't mean it's a Schedule C
(11:43):
or ordinary income.
Short-term rentals andlong-term rentals are both
passive, on the right side ofthe trifecta and would be
reported on a Schedule E.
So don't overthink it.
Don't worry about Schedule C,as in Charlie.
This is not a business.
It is still a rental property.
Don't worry about Schedule C,as in Charlie.
This is not a business.
It is still a rental property.
So get it on a pool, make someextra money, report the income,
(12:05):
report the expenses it's goingto be.
I'm really excited about whatyou're doing, but unless you
convert it entirely to an Airbnbor short-term rental, you're
not going to get that loopholeright off, which you may not
need anyway.
So don't focus on that.
The moral of the story is don'tlet the tax tail wag the dog.
Make a good decisionfinancially and then let's
(12:26):
figure out the best tax strategyto go with the best financial
strategy.
If the tax rates were 100%, wemight let the tax tail wag the
dog, but they're not 100%.
So we want to make good 100%financial decisions and then
deal with the tax issuessecondarily.
That's the better move.
(12:46):
So, like what you're doing,don't worry about it and meet
with one of our tax lawyers atKKOS to make your plan.
Then we can even find you a taxadvisor on our network to give
you that ongoing support andadvice throughout the process.
All right, now the next questionis a unique one, but a good one
for, I think, all of youlisteners, and that is regarding
the auto deduction.
But the fact pattern is kind ofunique.
(13:06):
This is from Joe C.
He says I am a beekeeper, Ihave a home office and property
where my beehives are locatedapproximately 50 miles away.
Now, first of all, that'spretty freaking cool.
I'm really interested in this.
On our ranch Patty and I arebuilding out, I want to add some
bees.
Down the road here we have aneighbor with these little white
boxes and their bees and theybring honey over and I'm like
(13:27):
man, damn, it can't be that hard.
And they're like no, it's easy,whatever, we'll see.
Okay, I'm one of those guysthat'll try anything.
They're on the range.
So he says.
Now his question is when Itravel to where my beehives are
located, is that consideredcommuting or is that business
mileage?
Now, remember he said I have ahome office and the property
where I do the beekeeping isjust 50 miles away.
(13:50):
Does it change if I havemultiple locations where my
hives are located.
Ooh, joe, you're onto something.
All right, here's.
Here's where this gets tricky.
All of you out there shouldknow, as a business owner, if
you leave your home office to godo business, you should be able
to write off your mileage.
That's the general rule.
(14:10):
Now we're going to go to somecaveats.
We always start with thegeneral rule.
If I'm out doing business awayfrom my primary business
location or my home office,visiting customers, clients,
business locations, I picking upstuff at Staples, apple Store,
whatever I get to write offthose miles.
That's the general rule.
But if I have a businesslocation that I go to every day
(14:35):
or repeatedly as a businesslocation, then I can't write
those miles off because it'sequivalent to commuting.
If I'm going there on arepeated basis because it's
another business location ofmine, even if I have a home
office, okay.
Next caveat Well, let's say Ihave multiple business locations
.
Joe says here hey, I might getmultiple beehive locations, okay
(14:59):
.
Now it's a different story.
When I leave the office homeoffice to go to my first beehive
location, that's commutingbecause I have to go there on a
regular basis.
But from that beehive locationand I go to the other ones.
That is not commuting.
And I have to get to theseother locations and then I come
home.
That's commuting.
So a portion of it would be awrite-off going in between these
(15:22):
Now, where this has happened alot for my clients over the
years.
Think of a dentist or achiropractor or a restaurant
owner that has multiplelocations.
When they go to their primarybusiness location every morning,
every day, every day, whateverthat's commuting, even though
they're a business owner, theyare commuting to and from the
home office to their primarylocation.
But when they go to the otherdental offices, the other
(15:47):
restaurants, that is notcommuting, they're out there
doing business.
Think rental properties.
Now, rental properties are alittle different because you're
not going to the same rentalproperty every day.
You're going to check on yourrental properties.
So I'm going to write off yourminus from the minute you leave
the house because it's notordinary doing business income
like you might have in your Scorporation.
(16:08):
I'm over on the right side ofthe trifecta.
I'm out checking on my rentalproperties.
Okay, now I can write off allthat mileage going in and around
, going to Home Depot, lowe's,whatever, and working on my
rentals, because I don't gothere every day.
It's not a place of business,so hopefully those rules,
principles, concepts help you.
But the bottom line I want tosay is the auto deduction is
(16:31):
live and well.
Don't be afraid to take it.
Do your best to estimate yourmileage, write it down and have
a log if you can.
There's apps out there thatwill help you do it as well.
But don't be afraid of it.
If you can justify it I'mfreaking writing it off and, joe
, good luck with those Bs andhopefully you'll add some other
locations.
But do it economically, becauseit makes sense to add locations
(16:51):
.
Don't do it to try to get a taxwrite-off.
It's not worth it.
Financial first, tax second Allright.
Our final question of the day isgoing to be related to a Roth
IRA, llc and crypto.
Kind of fun, right.
This is from Blake and he saysI have a self-directed Roth IRA
for crypto investments.
Love it.
So do I with an LLC.
(17:11):
My question is can I use theRoth IRA LLC to purchase a
computer for operating my Rothaccount trading, or would that
be considered a taxable event?
It's not that it would beconsidered a taxable event.
What you're worried about,would that be a prohibited
transaction.
Well, blake, this is kind of atricky one and it's going to
(17:33):
depend on the facts andcircumstances.
Now, for everybody out there,there's really two types of
crypto Roth IRAs that werecommend, and we have a
directed IRA, our sister company.
One is you can just have an appdialed in with your Roth IRA
and Roth 401k where you can justtrade right on your app on your
phone.
That's what I have.
(17:53):
I don't need an LLC for that,but we use the Gemini platform
for that, so I can only buy andsell tokens on the Gemini
platform.
Now for some hardcore, truestcrypto traders out there, they
want some DeFi tokens and someother things that may not be
available on the Gemini platform.
So in order to do that type oftrading, they've got to open an
(18:14):
LLC owned by their Roth IRA andthen their LLC we use.
Kraken would go out and open upan account under the LLC and
start doing some more creativetrading inside those wallets
that maybe Gemini wouldn't allow.
Okay, so we got two ways toinvest with crypto inside an IRA
One on the Gemini platformsuper easy, but limited options
(18:38):
or an IRA LLC, more technical,got to know what you're doing, a
little more cost to set up, butlots of flexibility.
You get to choose.
Now, in this example, blake'sgone with the LLC.
He's like I want to trade allthese other things over here.
Okay, that's cool.
And then he said and in anormal business, that LLC should
be able to pay for any expensedirectly related to that LLC in
(19:02):
order to make money.
Now here's where the IRS mighthave some heartburn.
Let me get this straight.
You need a brand new laptop orcomputer for that LLC to trade
your crypto.
Okay, you cannot touch that LLC.
I'm sorry, you cannot touchthat laptop for anything else,
(19:22):
not even to look at an emailfrom your mom.
Is that okay with you?
You want to spend money in yourprecious Roth to buy a laptop
that can only be touched fortrading on that platform for
that LLC.
Because you have to keep inmind, blake, that's not your LLC
, that's not your crypto account, that's your Roth's account and
(19:44):
that's going to be Rothequipment.
Now, it's not that you.
You are allowed to do trading,so I don't want you to get
frustrated and you're going toget on your phone or your own
personal computer and do thosetrades.
The IRS is okay with thatbecause they know it's de
minimis, meaning it's minor,it's small.
You're going to get in thereand do some trades, la la la.
(20:09):
But once you say, well, I wantmy Roth to buy me a laptop, the
artist is going to go whoa, whoa, whoa.
We're cool with you using yourphone or your laptop to make
some trades here and again oncein a while.
But if you need a wholecomputer just to manage this
crypto Roth now maybe yourcrypto Roth is worth $3 million,
I don't know.
Or say it in another way yourRoth is worth so much freaking
money that it requires so muchdedicated laptop time that it
(20:32):
needs its own laptop.
Then you better be able to backthat up, because I don't see it
.
I don't see that as necessaryto just trade a crypto account.
Now I have an IRA LLC that doesown a computer, a whole CPU
with video cards doing mining.
(20:53):
So those laptops or computersor CPUs or video cards are
specifically dedicated to mininginside that LLC and they're not
used for anything else.
Okay, the Roth IRA pays forthat and that's cool.
But be careful buying acomputer that.
Do you really need it?
(21:13):
You better be able to back thatup, and then I'd be okay.
It's going to be on you.
You just got to be careful.
Well, everybody, thanks forlistening to another episode of
the Main Street Business Podcast.
Excited to be here with you.
I love these topics andquestions.
We're not going anywhere.
We'll be here again soon.
We've got a big crypto taxsummit that we're going to
(21:33):
broadcast through the podcast aswell.
You'll see that coming up inthe next few days on your feed,
so be looking out for that.
Thanks everyone.
Keep living the dream and don'tgive up.
I've literally sat in hot tubs in hotels across the
country, outside bankingconferences, talking to banking
lawyers trying to get the realinside scoop on this.
The reality is banks do not wantto call the due on sale clause.
It costs them money.
It's a headache Nine times outof 10, they've also sold your
paper or your mortgage into WallStreet and the bank has no
(00:20):
interest in calling thismortgage due.
If you go into the bank and gohey, I want to transfer my title
to my LLC or trust, can I dothat?
Remember this is a freakingbank.
They can't go to the bathroomwithout getting three stamps of
approval from the hierarchy.
Do not go in there and startasking permission to do this.
(00:43):
Welcome to the Main StreetBusiness Podcast.
My name is Mark Kohler and I'mflying solo.
Today.
Matt Sorensen's on stage acrosstown speaking to a real estate
group and he asked if I would doa little open forum, answer
some questions that have beenkind of gathering dust, if you
will, or in the pipe at ourwebsite,
(01:05):
mainstreetbusinesspodcastcom,and that's a reminder.
If any of you do have aquestion, please go there and
you can log in and submit aquestion that we will try to
answer as quickly as possible.
We want to actually have moreopen forum opportunities, so I'm
going to try to give you some.
Really I'd love these questionstoday and so that's why I told
Matt I was going to hold thepodcast and dive into these
(01:28):
questions, because I know theanswers and I love these
questions.
So I'd like to share someinsights with you.
And thanks for listening, andif you enjoy this podcast or
you're on YouTube watching thevideo version, please give us a
thumbs up, five star, high fives, subscribe.
Click button icon.
(01:49):
All those things, I don't know,what the hell you know all these
different platforms, all right,so the question here that's a
really good one is about the dueon sale clause with a mortgage
on a property that a clientwants to turn into investment
property.
So, specifically, chad asked mywife and I recently moved to a
new primary residence and wewant to keep our former primary
(02:11):
residence as an investmentproperty.
I want to transfer thisinvestment property from our
names into an LLC for assetprotection.
Good move, chad, but have heardwe could possibly trigger the
due on sale clause for ourmortgage.
We have a very low interestrate, so, understanding our
concern, I'm sure banks mayexercise this clause so that
(02:34):
they can change the mortgage andget a higher rate.
How can we transfer thisproperty to an LLC without
triggering the due on saleclause from our mortgage company
?
Thanks and keep up the greatwork, chad, you're awesome,
great question.
Well, first of all, chad, theshort answer is do not worry, do
(02:56):
not stress that bank is notgoing to call the due on sale
clause.
But there are a few steps youwant to follow to ensure that.
The first thing is I've metover the years, over and over
again, with bank lawyers askingthem when do you ever exercise
this due on sale clause?
Can you and why don't you domore of it?
And I mean I've literally satin hot tubs in hotels across the
(03:17):
country, outside bankingconferences, talking to banking
lawyers trying to get the realinside scoop on this.
The reality is banks do not wantto call the due on sale clause.
It costs them money, it's aheadache, and they don't even
know if the current owner,resident buyer is going to be
able to qualify for a newmortgage.
And then this ends up into awhole cascade of events that
(03:39):
could be a pain in the butt forthe bank.
So the moral of the story is aslong as you keep paying your
mortgage.
The bank is not going to carebecause nine times out of 10,
they've also sold your paper oryour mortgage into Wall Street
and they're just having itserviced as part of a larger
Fannie Mae Freddie Mac pool ofloans.
(04:00):
So the bank has no interest incalling this mortgage due.
Number two a lot of mortgageshave a provision that says if
you are transferring this toyour trust or an LLC and the
underlying ownership has notchanged, we are not going to
call it due.
Nor can we call it due in a lotof instances because you
haven't transferred theproperty's ownership.
(04:20):
You're just putting it into atrust or an entity for an estate
planning or an asset protectionpurpose.
So, again, the mortgage itselfmay protect you from this
process.
Now, with that said, if you gointo the bank and go hey, I want
to transfer my title to my LLCor trust, can I do that?
(04:41):
Okay, remember this is afreaking bank.
They can't go to the bathroomwith the guy getting three
stamps of approval from thehierarchy.
You do not want to go into thebank and start asking these
questions because they willfreak out as bankers.
Do no offense to you bankersout there.
It's not your fault, it's yourinstitution.
So, anyway, do not go in thereand start asking permission to
do this.
(05:02):
Okay, finally, the process andthis is important I want you to
use a warranty deed, or a grantdeed as it's referred to, and
other states have differentterms.
There's 3,500 counties acrossthe country and you're going to
go through that county where theproperty is located and do the
proper deed.
I do not want you to use a quitclaim deed because I want you
(05:22):
to warranty over to your otherentity or yourself all of the
warranties you can from thetitle policy and that you
already have Now.
You would never normally dothat to a third party like me if
I was buying your propertywithout me or you paying for a
title policy to guarantee allthose warranties, but you're
transferring it to yourself.
(05:43):
So just go for it with awarranty deed, just in case.
So that makes it allows yourLLC or trust to step into your
shoes with all the warrantiesyou have as an individual, which
, again, you wouldn't do to athird party, but you're doing it
to yourself.
So it's a smart thing to do anda good thing to do.
So, final point, make sure theLLC is set up or registered in
(06:05):
the state where your property is.
Make sure that the LLC is nowon title by doing that transfer.
We have paralegals at our lawoffice that does this across the
country every day.
Get down to KKOS Lawyers.
You'll see it down in thedescription and also make sure
it's on the lease agreement thename of the LLC, not your
personal name.
Make sure you let yourinsurance company know that it's
(06:26):
now a rental property so thatyou have the proper insurance.
You can't just stick aroundwith your same homeowner's
insurance and think you're goingto be okay.
If there's ever a claim, youwant to let them know that it's
a rental property, but followthe protocol of the LLC.
It should have its own bankaccount.
The rent payments should gointo the LLC bank account.
The rent payments should gointo the LLC bank account.
(06:47):
Let the LLC pay the mortgage.
Again, isn't that weird?
You've transferred it to theLLC.
Let the LLC pay.
The bank doesn't care where themoney's coming from, they just
want the mortgage paid.
So don't worry about thateither.
But finally, as I mentioned atrust early on, make sure your
trust owns the LLC that owns therental, because if anything
happens to you, we don't wantprobate and we want that
property to have assetprotection and go into your
(07:08):
trust for your estate.
Now if some of you hearing thisare like, oh my gosh, I don't
have any of that organizationdone, don't beat yourself up.
Take time to get these littlethings done.
Put it on your list of tax andlegal.
You should have an ongoing list.
I do, patty and I, my wife.
We keep a list of all thelittle things we need to do to
stay organized because, people,when you're organized you make
more money, when you'reorganized you have better
(07:30):
write-offs and when you'reorganized you have better asset
protection.
So just take baby steps gettingthere and you'll love it.
Chad, good luck with thatrental property, all right.
So now let's go over to anotherquestion here.
This is another good one thatI'm really excited about, and
we're going to stay with thereal estate genre, if you will.
(07:52):
We're going to talk about ashort-term rental type option,
uh strategy.
So this question is from SOP 78.
Don't have much more than that.
Now, this is a longer question,so I'm going to kind of
truncate it here for everybody.
So this is also a couple andagain, they are interested in
renting out their primaryresidence, but as a short-term
(08:13):
rental.
So is, uh, he goes on to talkabout how they're going to take
their primary residence andmaybe downsize it and then, but
we want to convert it to arental when we're not there
because we're going to travelaround the country and outside
of the US, but when we come homewe want to be able to stay
there.
How does this work?
And then he says I understandthat we would be giving up the
(08:34):
expense write-off as ashort-term rental because it's
partially a primary residence.
I'll explain that in a moment.
But how do we report this?
And do we have to worry aboutthe seven-day rule and
substantial services?
And do we report it on scheduleE or C?
Lots of questions on how thiswould work.
So it's a great question SOP.
Let's see what we can do here.
(08:55):
So the first point I want tomake and this is for everybody
out there that has a primaryresidence you can short-term
rental your basement, anaccessory dwelling unit, you
convert the garage into a single, you know, one bedroom, one
bath, something like that andyou create some extra income.
Lots of clients of ours overthe years have done this in
urban areas where the cost ofliving is higher, and certainly
(09:16):
in Hawaii.
A lot of clients have kind ofthis accessory dwelling unit
that they short-term rental outuntil Hawaii passed a lot of
laws on this recently due to thehotel industry.
Anyway, that's a side note.
So the point here is they wantto be able to have this as their
primary residence and partiallya short-term rental come back
(09:37):
and forth, yada, yada, Love it.
It's a great income opportunity, because why just leave that
home sitting there vacant whileyou're out of town or out of the
country?
Make some income on it and youcan do some lock-offs.
If you're used to the Airbnb orshort-term rental world, what
you can do is lock off certainrooms, keep your personal stuff
(09:57):
there and when you come backunlock them, but until then you
rent the rest of the house.
It's a beautiful structure forthat and you're making income
while you're gone.
But under the short-term rentalstrategy for tax strategy
planning, or the short-termrental loophole as it's known,
it has to be 100% short-termrental.
(10:18):
You cannot use it as yourprimary residence.
Now we got the 14-day rule andyada, yada.
But the point here is, ifyou're going to use it as a
primary residence for he saysmaybe 50 days out of the year or
more, then it's not going toqualify for that short-term
rental depreciation loopholewrite-off.
That's okay.
It's not the end of the world.
(10:38):
We don't have to have thatloophole.
What we're interested ineverybody let's keep our eye on
the ball.
They've got a property that'sgoing to be sitting vacant
making them nothing.
Let's create some cashflow andput it in a short-term rental
position where, when they wantto come back to town, they can
block it off, love it.
They may even consider FurnishFinder a midterm rental scenario
(11:00):
.
So don't worry about the taxwrite-off, just make some
cashflow with it.
Their last question is well, howdo we report this?
You're going to treat it likeany other rental property yeah,
it's in your primary residencebut you are required to report
the income.
We might do some depreciation.
We're going to write offexpenses proportionally, based
on square footage, use and howmany lock-offs and all that.
(11:21):
There's a lot of details.
I'd like you to meet with oneof our tax lawyers and build out
your plan as you implement this, and it would be very
affordable to do that.
Then you're off to the races.
But you're going to report theincome and the expenses on a
Schedule E, as in ECHO rentalproperty.
Just because it's short-termdoesn't mean it's a Schedule C
(11:43):
or ordinary income.
Short-term rentals andlong-term rentals are both
passive, on the right side ofthe trifecta and would be
reported on a Schedule E.
So don't overthink it.
Don't worry about Schedule C,as in Charlie.
This is not a business.
It is still a rental property.
Don't worry about Schedule C,as in Charlie.
This is not a business.
It is still a rental property.
So get it on a pool, make someextra money, report the income,
(12:05):
report the expenses it's goingto be.
I'm really excited about whatyou're doing, but unless you
convert it entirely to an Airbnbor short-term rental, you're
not going to get that loopholeright off, which you may not
need anyway.
So don't focus on that.
The moral of the story is don'tlet the tax tail wag the dog.
Make a good decisionfinancially and then let's
(12:26):
figure out the best tax strategyto go with the best financial
strategy.
If the tax rates were 100%, wemight let the tax tail wag the
dog, but they're not 100%.
So we want to make good 100%financial decisions and then
deal with the tax issuessecondarily.
That's the better move.
(12:46):
So, like what you're doing,don't worry about it and meet
with one of our tax lawyers atKKOS to make your plan.
Then we can even find you a taxadvisor on our network to give
you that ongoing support andadvice throughout the process.
All right, now the next questionis a unique one, but a good one
for, I think, all of youlisteners, and that is regarding
the auto deduction.
But the fact pattern is kind ofunique.
(13:06):
This is from Joe C.
He says I am a beekeeper, Ihave a home office and property
where my beehives are locatedapproximately 50 miles away.
Now, first of all, that'spretty freaking cool.
I'm really interested in this.
On our ranch Patty and I arebuilding out, I want to add some
bees.
Down the road here we have aneighbor with these little white
boxes and their bees and theybring honey over and I'm like
(13:27):
man, damn, it can't be that hard.
And they're like no, it's easy,whatever, we'll see.
Okay, I'm one of those guysthat'll try anything.
They're on the range.
So he says.
Now his question is when Itravel to where my beehives are
located, is that consideredcommuting or is that business
mileage?
Now, remember he said I have ahome office and the property
where I do the beekeeping isjust 50 miles away.
(13:50):
Does it change if I havemultiple locations where my
hives are located.
Ooh, joe, you're onto something.
All right, here's.
Here's where this gets tricky.
All of you out there shouldknow, as a business owner, if
you leave your home office to godo business, you should be able
to write off your mileage.
That's the general rule.
(14:10):
Now we're going to go to somecaveats.
We always start with thegeneral rule.
If I'm out doing business awayfrom my primary business
location or my home office,visiting customers, clients,
business locations, I picking upstuff at Staples, apple Store,
whatever I get to write offthose miles.
That's the general rule.
But if I have a businesslocation that I go to every day
(14:35):
or repeatedly as a businesslocation, then I can't write
those miles off because it'sequivalent to commuting.
If I'm going there on arepeated basis because it's
another business location ofmine, even if I have a home
office, okay.
Next caveat Well, let's say Ihave multiple business locations
.
Joe says here hey, I might getmultiple beehive locations, okay
(14:59):
.
Now it's a different story.
When I leave the office homeoffice to go to my first beehive
location, that's commutingbecause I have to go there on a
regular basis.
But from that beehive locationand I go to the other ones.
That is not commuting.
And I have to get to theseother locations and then I come
home.
That's commuting.
So a portion of it would be awrite-off going in between these
(15:22):
Now, where this has happened alot for my clients over the
years.
Think of a dentist or achiropractor or a restaurant
owner that has multiplelocations.
When they go to their primarybusiness location every morning,
every day, every day, whateverthat's commuting, even though
they're a business owner, theyare commuting to and from the
home office to their primarylocation.
But when they go to the otherdental offices, the other
(15:47):
restaurants, that is notcommuting, they're out there
doing business.
Think rental properties.
Now, rental properties are alittle different because you're
not going to the same rentalproperty every day.
You're going to check on yourrental properties.
So I'm going to write off yourminus from the minute you leave
the house because it's notordinary doing business income
like you might have in your Scorporation.
(16:08):
I'm over on the right side ofthe trifecta.
I'm out checking on my rentalproperties.
Okay, now I can write off allthat mileage going in and around
, going to Home Depot, lowe's,whatever, and working on my
rentals, because I don't gothere every day.
It's not a place of business,so hopefully those rules,
principles, concepts help you.
But the bottom line I want tosay is the auto deduction is
(16:31):
live and well.
Don't be afraid to take it.
Do your best to estimate yourmileage, write it down and have
a log if you can.
There's apps out there thatwill help you do it as well.
But don't be afraid of it.
If you can justify it I'mfreaking writing it off and, joe
, good luck with those Bs andhopefully you'll add some other
locations.
But do it economically, becauseit makes sense to add locations
(16:51):
.
Don't do it to try to get a taxwrite-off.
It's not worth it.
Financial first, tax second Allright.
Our final question of the day isgoing to be related to a Roth
IRA, llc and crypto.
Kind of fun, right.
This is from Blake and he saysI have a self-directed Roth IRA
for crypto investments.
Love it.
So do I with an LLC.
(17:11):
My question is can I use theRoth IRA LLC to purchase a
computer for operating my Rothaccount trading, or would that
be considered a taxable event?
It's not that it would beconsidered a taxable event.
What you're worried about,would that be a prohibited
transaction.
Well, blake, this is kind of atricky one and it's going to
(17:33):
depend on the facts andcircumstances.
Now, for everybody out there,there's really two types of
crypto Roth IRAs that werecommend, and we have a
directed IRA, our sister company.
One is you can just have an appdialed in with your Roth IRA
and Roth 401k where you can justtrade right on your app on your
phone.
That's what I have.
(17:53):
I don't need an LLC for that,but we use the Gemini platform
for that, so I can only buy andsell tokens on the Gemini
platform.
Now for some hardcore, truestcrypto traders out there, they
want some DeFi tokens and someother things that may not be
available on the Gemini platform.
So in order to do that type oftrading, they've got to open an
(18:14):
LLC owned by their Roth IRA andthen their LLC we use.
Kraken would go out and open upan account under the LLC and
start doing some more creativetrading inside those wallets
that maybe Gemini wouldn't allow.
Okay, so we got two ways toinvest with crypto inside an IRA
One on the Gemini platformsuper easy, but limited options
(18:38):
or an IRA LLC, more technical,got to know what you're doing, a
little more cost to set up, butlots of flexibility.
You get to choose.
Now, in this example, blake'sgone with the LLC.
He's like I want to trade allthese other things over here.
Okay, that's cool.
And then he said and in anormal business, that LLC should
be able to pay for any expensedirectly related to that LLC in
(19:02):
order to make money.
Now here's where the IRS mighthave some heartburn.
Let me get this straight.
You need a brand new laptop orcomputer for that LLC to trade
your crypto.
Okay, you cannot touch that LLC.
I'm sorry, you cannot touchthat laptop for anything else,
(19:22):
not even to look at an emailfrom your mom.
Is that okay with you?
You want to spend money in yourprecious Roth to buy a laptop
that can only be touched fortrading on that platform for
that LLC.
Because you have to keep inmind, blake, that's not your LLC
, that's not your crypto account, that's your Roth's account and
(19:44):
that's going to be Rothequipment.
Now, it's not that you.
You are allowed to do trading,so I don't want you to get
frustrated and you're going toget on your phone or your own
personal computer and do thosetrades.
The IRS is okay with thatbecause they know it's de
minimis, meaning it's minor,it's small.
You're going to get in thereand do some trades, la la la.
(20:09):
But once you say, well, I wantmy Roth to buy me a laptop, the
artist is going to go whoa, whoa, whoa.
We're cool with you using yourphone or your laptop to make
some trades here and again oncein a while.
But if you need a wholecomputer just to manage this
crypto Roth now maybe yourcrypto Roth is worth $3 million,
I don't know.
Or say it in another way yourRoth is worth so much freaking
money that it requires so muchdedicated laptop time that it
(20:32):
needs its own laptop.
Then you better be able to backthat up, because I don't see it
.
I don't see that as necessaryto just trade a crypto account.
Now I have an IRA LLC that doesown a computer, a whole CPU
with video cards doing mining.
(20:53):
So those laptops or computersor CPUs or video cards are
specifically dedicated to mininginside that LLC and they're not
used for anything else.
Okay, the Roth IRA pays forthat and that's cool.
But be careful buying acomputer that.
Do you really need it?
(21:13):
You better be able to back thatup, and then I'd be okay.
It's going to be on you.
You just got to be careful.
Well, everybody, thanks forlistening to another episode of
the Main Street Business Podcast.
Excited to be here with you.
I love these topics andquestions.
We're not going anywhere.
We'll be here again soon.
We've got a big crypto taxsummit that we're going to
(21:33):
broadcast through the podcast aswell.
You'll see that coming up inthe next few days on your feed,
so be looking out for that.
Thanks everyone.
Keep living the dream and don'tgive up.
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