Steve sits down with guest Kerry Lutz to talk all things finance. From how to pay the minimum amount legal taxes, to tax incentives that motivate Kerry, and even some hot predictions about inflation. You'll want to make sure to listen to every minute!
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Episode Transcript
Intro:
You're listening to the Practical Tax podcast with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz LLP, a tax law firm.
Steve Moskowitz:
Hello and welcome to everyone out there. We'd like to thank you for joining us today. And I'm Steve Moskowitz, the host and I'd like you to go ahead and introduce yourself and tell the audience about yourself.
Kerry Lutz:
Okay, well, I'm Kerry Lutz, recovering attorney, podcaster, communications consultant, work in alternative investments and have got a podcast, the "Financial Survival Network" that has been running since 2011, over 7,500 episodes.
Steve Moskowitz:
Very nice. And tell us what your thoughts are when you think about this time Lutz, the favorite time of the year, tax season.
Kerry Lutz:
My favorite. My thoughts are how can I pay as little as possible and stay out of trouble? Legally, ethically, pay the least amount of taxes possible. As judge Learned Hand said "It's every Americans duty to minimize their tax burden through legal means."
Steve Moskowitz:
I remember many moons ago studying that case in law school. And there's so much to that. And that's what we're all about in our firm. Where you say, "Okay how do we legally save taxes?" And what everybody should realize is that the tax laws are two purposes. Everybody knows one purpose. They know extracting taxes from us but the other purpose is a system of incentives. Because in a democracy, the government can't order us to do something. But how do they get us to do something they want us to do because it's good for the economy but they can't order us? They give us tax incentives. And tell us what are some of the tax incentives that motivate you to make an investment or do something differently?
Kerry Lutz:
Well, obviously when it comes to conventional investments, real estate really has no equal. And I look at that tax deductibility of interests and non-cash outlays like depreciation, bonus depreciation section 179, all of that. When I look at it I like real estate, I like assets that have cashflow that can be leveraged. Different types of assets because not only the tax advantage but they do well in inflationary times.
Steve Moskowitz:
Excellent. And we have a lot in common. I see we've graduated from the same law school.
Kerry Lutz:
Oh, hey, the best little law school on Worth street. We used to call it.
Steve Moskowitz:
Indeed. And we're talking about real estate. Just yesterday in The Wall Street Journal, I was quoted about the value of DSTs, Delaware Statutory Trust. And most people are familiar with 1031s but DSTs, Delaware Statutory Trust provides such an additional benefit for clients. How do you feel about 'em?
Kerry Lutz:
Well, very familiar with trusts. I have several of myself. The benefits of trusts. So many people really don't have a clue but that's how the super wealthy manage to hold onto their wealth and pass it on to success of generations without devastating taxes, asset protection, so many different benefits accrue to you. The ability to buy things in the trust and basically deduct all expenses that you wouldn't otherwise be able to, had you not owned an asset in the trust. Meaning, well, you're the expert Steve, but the list goes on and on and on.
Steve Moskowitz:
Well, one of the reasons you do it is for asset protection 'cause today in our society, a lot of people feel that if you have something it's unfair and the only way to make it fair is to take it away from you. And so we talk about trust and of course when we do estate planning, we talk about trust.
Kerry Lutz:
Yeah.
Steve Moskowitz:
And also you're very interested in real estate investments and there's so much that we can do here. Most wealth is through real estate and that's basically what you're doing in your show and your podcast. And tell our audience more about the podcast.
Kerry Lutz:
Oh, well we try to get a handle on what's really happening, what's going to happen, the trends.
For instance, when the pandemic hit and the government started basically giving out helicopter money, stymies, as they become known in the vernacular, I told all of my listeners, this is a golden opportunity for you to really become wealthy. Because knowing that inflation's baked in the cake, you can buy assets that are going to appreciate substantially because of inflation. And I said, you should take your PPP money, even if you don't need it, you are legally entitled to it. The government has shut down your... Either shut down your business or injured it in such a way that your income potential has diminished. Take that money because for the simple reason, you're paying for it anyway, in the form of higher inflation. And that's just one call who've called. Well, many years ago when I first started the peak and gold, peak and bitcoin several times, can't say I have a crystal ball. I'm not always right. I didn't anticipate that precious metals and mining stocks would be in this recession for eight years but I knew eventually they'd come out of it.
Following trends of government prof legacy of the inability of the government to manage its fiscal house to keep it in order. All these things have brought us to where we are today. Energy. I knew exactly what was going to happen with energy. Just a lot of times, you know what's gonna happen, Steve, you just don't know when. So they always say, you should either predict what's gonna happen or when it's gonna happen. But don't do both because that's when you run into troubles
Steve Moskowitz:
But you did predict about the inflation. A major part of your career was dealing with inflation. Tell us how you've benefited from the inflation and the people that listen to you and how you get, especially out when we see the inflation's really taken off. And may go even higher based on the current world situation.
Kerry Lutz:
Oh, it will no doubt. So you and I were both alive during the seventies. The majority...
Steve Moskowitz:
Small boys, of course.
Kerry Lutz:
I remember it well. I remember the US going off the gold standard you know, I was only 14 years old then, but I do remember it and followed the events closely and really came to an understanding of inflation. Finally, when I saw Milton Friedman's special "Free To Choose." And then the whole thing that he said is that inflation is first and foremost always a monetary phenomena. And we've had inflation since the dollar... Basically the less the connection of the dollar to gold, the more inflation we've had. And the past to 40 years of lower rates, lower interest rates and managed or controlled inflation probably higher than what it was stated but it wasn't like it is today. But knowing that we just created $6 trillion out of thin air in the past, like in 08 and 09, the government gave all the money to the banks. The banks then deposited the money with the fed for are guaranteed 25 or 50 basis point return. And thus that money was sterilized. But when you give the money out to individuals, businesses, they're going to spend it. And when they spend it, especially in a situation with the pandemic where your production of goods and services goes down 30, 40, 50%, you have to have inflation based upon the quantity theory of money. Meaning the more money you have, fixed number of goods, the higher the price of those goods. Here we had lots more money chasing lots less goods and services.
So personally I was literally desperate to find a home. And I didn't wanna just buy a home for the sake of just buying one. I wanted the right home. And it took me a good year to do it. But in that time the nominal price of the house has jumped though its also in Florida, the nominal price is up probably about 70%. And that's just one example. So buying assets, getting rid of dollars. But buying assets that have cash flow, obviously your home doesn't, but you have to live someplace. Also, my clients I knew would be beneficiaries of the inflationary scenario that was about to erupt and really did a full court press to acquire more clients. All of these things worked out amazingly well and pick up a little, I have my core precious metals holding. So far junior mining stocks have not been the beneficiary of this inflation, but I expect that to change shortly
Steve Moskowitz:
Kerry, we have an awful lot of Californians that are joining you in Florida because they have to put up with a state with no state income taxes and how nice that is. You know, another area that comes up now, especially with the pandemic. Tell us about your work with the distressed assets.
Kerry Lutz:
Well, that was two careers ago but we used to buy and sell charged off credit card debt and other distressed assets. And look, Warren Buffet says, "Basically I like to buy assets at a discount." And to do that, you need to be in markets that are not rational. All right? Like for instance, housing is a rational market. You can pretty much figure out what, or real estate, what any given piece of real estate is worth with a little bit of research. You don't need an appraiser. You can figure it out on your own. But assets that have lost their value, assets that their value isn't easily ascertainable. That's where your knowledge can really pay off.
Steve Moskowitz:
Excellent. And tell us more about "The Financial Survival Network." You basically gave up everything else you were doing for that. Tell us more about it.
Kerry Lutz:
Well,
