The Federal Reserve has been printing money like it’s going out of style in an attempt pay for about $29 trillion in U.S. debt. While it’s nothing new for a government to print money to cover some debt, what is new however, is that the 40% of US dollars in existence were printed in the last 12 months alone.
Which doesn’t seem like it will end well…
WATCH:
Why is the US Printing So Much Money?
As part of its effort to stimulate the economy, the U.S. government issued stimulus checks to millions of employed Americans. With money they didn’t have…
The government had to borrow by selling its debt in the form of U.S. Treasury bonds and other types of securities.
On a similar but not altogether different note, here’s Charlie Munger and Warren Buffet explaining how, if the government prints too much money, it ends up like Venezuela.
WATCH:
How Much Money Will the U.S. Print This Year?
For the 2022 fiscal year, a range of 6,876,800,000 to 9,654,400,000 pieces of money will be printed, totaling from $310,572,800,000 to $356,179,200,000.
Once the world’s 6th richest billionaire in 2008 with a net worth of $42 billion, Anil Dhirubhai Ambani, lost it all by 2019.
Here’s how…
Anil Ambani was born June 4th, 1959 in Bombay India as the youngest son of the founder of one of the most powerful companies on the planet. His father, Dhirubhai Ambani, was the founder of a company called Reliance Industries Limited which today is doing $7.366 trillion as a conglomerate, headquartered in Mumbai. It has diverse businesses including energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.
Dhirubhai raised his 2 sons to eventually take over the “family business”. Mukesh and Anil started as executives at Reliance in their twenties. The two couldn’t have been more different. Mukesh was more of a reserved family man while Anil earned a reputation as a flashy playboy who enjoyed rubbing shoulders with Bollywood’s elite.
Tragedy strikes the Ambhani family
Dhirubhai Ambani passed away on July 6th 2002 of a sudden heart attack at the age of 69. At the time of his passing he was the 138th richest man in the world with a net worth of $2.9 billion.
Mukesh, the older brother assumed role of chairman and Anil took the office of Vice President. They were at each other’s throats almost immediately. Each had different ideas for what to do with the company and the two were making decisions without consulting each other.
It was a mess…
It became a real problem. So big that even India’s finance minister tried stepping in to get the bickering duo to make nice. After all, Reliance was one of the biggest economic powerhouses in India.
The sibling rivalry for the control for Reliance was resolved when the 2 decided to split the company down the middle. Mukesh would run the gas and petroleum businesses and Anil would run the communications and power businesses and ultimately leave each other alone.
But the proverbial sky was about to come crashing down.
That same year Anil Ambani made the decision to invest around $2 billion in advancing Reliance Communications Group, heavily leveraging his company into massive debt.
Then shit hit the fan…
In 2011, Anil’s Managing Director and two Vice Presidents were arrested on suspicion of conspiring to acquire mispriced mobile network licenses for companies Reliance Communications has invested in to illegally bolster the company’s share prices in an attempt to close the debt gap.
The following year In 2012, amidst scandals, Anil Ambani acquired even more debt to pay off the existing debts. Reliance Communications took a loan of over $1.2 billion from three Chinese Banks on Anil Ambani’s personal guarantee.
That’s one hell of a personal guarantee.
By 2016, many of Anil Ambani’s companies ran into debt and operational troubles. On the one hand, Reliance Power had to sell its assets. On the other, Reliance Communications lost 98% valuation in a period of just 3 short years.
RCom was unable to compete against the top reigning telecom companies and lost consumers. This brought down Anil Ambani’s net worth to $2.5 billion.
Still not a bad nest egg by anyone’s standards however, Anil Ambani’s Reliance Communication owed the Swedish network company, Ericsson, $80 million, which he failed to repay. Which shocker, lead to a major lawsuit.
In 2019, the Supreme Court of India ordered Anil Ambani to repay the debt along with interest or go to jail. In an unlikely intervention, Anil Ambani’s older brother Mukesh paid the money owed to Ericsson and yes little brother from going to jail.
Reliance Communications then filed bankruptcy in 2019. But Anil’s problems were still far from over.
He still owed over $700 million including interest to the 3 chinese banks he borrowed money from. In February 2020, Anil declared that his net worth has fallen to zeroafter considering his liabilities. He pleaded poverty and claimed that he didn’t hold any meaningful assets that could be liquidated to pay off the debts he owed to the Chinese Banks.
Who would have thought that a man who had a net worth of $42 billion in 2008 would claim poverty by 2020?
He still managed to turn out ahead. Today he and his wife Tina Ambani reside in one of the most luxurious homes in India. A 17 story home situated at Pali Hill in Mumbai.
Once the world’s 6th richest billionaire in 2008 with a net worth of $42 billion, Anil Dhirubhai Ambani, lost it all by 2019.
Here’s how…
Anil Ambani was born June 4th, 1959 in Bombay India as the youngest son of the founder of one of the most powerful companies on the planet. His father, Dhirubhai Ambani, was the founder of a company called Reliance Industries Limited which today is doing $7.366 trillion as a conglomerate, headquartered in Mumbai. It has diverse businesses including energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.
Dhirubhai raised his 2 sons to eventually take over the “family business”. Mukesh and Anil started as executives at Reliance in their twenties. The two couldn’t have been more different. Mukesh was more of a reserved family man while Anil earned a reputation as a flashy playboy who enjoyed rubbing shoulders with Bollywood’s elite.
Tragedy strikes the Ambhani family
Dhirubhai Ambani passed away on July 6th 2002 of a sudden heart attack at the age of 69. At the time of his passing he was the 138th richest man in the world with a net worth of $2.9 billion.
Mukesh, the older brother assumed role of chairman and Anil took the office of Vice President. They were at each other’s throats almost immediately. Each had different ideas for what to do with the company and the two were making decisions without consulting each other.
It was a mess…
It became a real problem. So big that even India’s finance minister tried stepping in to get the bickering duo to make nice. After all, Reliance was one of the biggest economic powerhouses in India.
The sibling rivalry for the control for Reliance was resolved when the 2 decided to split the company down the middle. Mukesh would run the gas and petroleum businesses and Anil would run the communications and power businesses and ultimately leave each other alone.
But the proverbial sky was about to come crashing down.
That same year Anil Ambani made the decision to invest around $2 billion in advancing Reliance Communications Group, heavily leveraging his company into massive debt.
Then shit hit the fan…
In 2011, Anil’s Managing Director and two Vice Presidents were arrested on suspicion of conspiring to acquire mispriced mobile network licenses for companies Reliance Communications has invested in to illegally bolster the company’s share prices in an attempt to close the debt gap.
The following year In 2012, amidst scandals, Anil Ambani acquired even more debt to pay off the existing debts. Reliance Communications took a loan of over $1.2 billion from three Chinese Banks on Anil Ambani’s personal guarantee.
That’s one hell of a personal guarantee.
By 2016, many of Anil Ambani’s companies ran into debt and operational troubles. On the one hand, Reliance Power had to sell its assets. On the other, Reliance Communications lost 98% valuation in a period of just 3 short years.
RCom was unable to compete against the top reigning telecom companies and lost consumers. This brought down Anil Ambani’s net worth to $2.5 billion.
Still not a bad nest egg by anyone’s standards however, Anil Ambani’s Reliance Communication owed the Swedish network company, Ericsson, $80 million, which he failed to repay. Which shocker, lead to a major lawsuit.
In 2019, the Supreme Court of India ordered Anil Ambani to repay the debt along with interest or go to jail. In an unlikely intervention, Anil Ambani’s older brother Mukesh paid the money owed to Ericsson and yes little brother from going to jail.
Reliance Communications then filed bankruptcy in 2019. But Anil’s problems were still far from over.
He still owed over $700 million including interest to the 3 chinese banks he borrowed money from. In February 2020, Anil declared that his net worth has fallen to zeroafter considering his liabilities. He pleaded poverty and claimed that he didn’t hold any meaningful assets that could be liquidated to pay off the debts he owed to the Chinese Banks.
Who would have thought that a man who had a net worth of $42 billion in 2008 would claim poverty by 2020?
He still managed to turn out ahead. Today he and his wife Tina Ambani reside in one of the most luxurious homes in India. A 17 story home situated at Pali Hill in Mumbai.
Did you know that Bill Gates owns more land than the entire city of New York? It’s true and more specifically its almost all farmland.
In 2020 Gates raised eyebrows when it was announced that year he had become America’s biggest owner of farmland consisting of 269,000 acres.
For the last 10 years Bill Gate’s money manager, Michael Larson has been making massive land acquisitions across 19 states.
But why?
Why the Hell is Bill Gates Buying US Farmland?
Speculations are aplenty and there are many conspiracies. But here is an explanation from investment expert Codie Sanchez that explains why. It’s lucrative investment.
First, he’s the biggest owner of one of the most valuable limited resources in North America.
The returns on US Farmland have averaged 11.5% annually since 1990, with consistently low volatility and a near zero correlation with the stock market (according to the U.S. Farmland)
Second, the demand for food is skyrocketing. The USDA and the UN estimate the demand for food will rise by 70% to 100% in the next 30 years. What industry can beat that demand trend?
Third, Owning farmland enables you to qualify for tax grants and credits.
Watch the video to get the full explanation from Codie on the business of farming. Plus a quick overview of the crazy Bill Gates conspiracies associated with the topic…
WATCH:
About Codie Sanchez:
Codie Sanchez is a reformed journalist, turned institutional investor to cannabis investor and adviser, to now Founder at Contrarian Thinking and Cofounder of Unconventional Acquisitions.
Throughout her career, she has worked at the intersection of marketing and money, finding contrarian ways to invest.
How well, do you really know the market you serve? It sounds like one of those dumb, cryptic, things marketing people like to ask.
But according to Vusi Thembwayo, most companies don’t really know who they’re actually competing against. Or who we should be.
Who is Vusi Thembekwayo?
In short, Vusi is widely regarded as one of the most disruptive and influential forces in venture capital in Africa.
He was amongst the youngest directors of a publicly listed company in South Africa and now serves on several corporate boards.
Currently, he’s the CEO of a boutique investment & advisory firm in Africa. Leading by example, his firm forces medium, large and listed businesses into much needed, often painful, always lucrative new directions.
Having graced the covers on Entrepreneur Magazine, Forbes and Inc500, his social media engagement often mirrors that of a Rockstar dressed in a $3K suite.
Professional accomplishments aside, he’s also more informally known as Aftrica’s biggest champion for spreading entrepreneurship on the continent.
He Hosts a Popular MasterClass on YouTube
Vusi has become famous to entrepreneurs around the world because he hosts an insanely valuable Masterclass. They tackle the hardest challenges facing entrepreneurs today. For free.
He broadcasts the videos to YouTube to allow anyone interested in honest feedback on how to grow a business.
The most common comments on his channel are: “I actually can’t believe this content is free.”
During on of his Mastermind events, Vusi shared that most entrepreneurs compete at an entry level way. Because we assume that our market, is the literal niche marketplace we’re currently selling to.
There is however, another way of looking at your business to scale better, and faster.
To understand what level this is, and how to get there, one needs to understand the value chain of their industry.
WATCH:
For a full explanation you can watch this lesson from Vusi himself in his MasterClass. Just skip to minute 5:06 to get to the good stuff.
Meet the 3 Different Types of Business Owners
The biggest lesson to learn from Vusi is how to move up the value chain to “own” more of the supply chain and not just compete inside of it.
Vusi explains there are 3 types of business owners, and most of us are trained to think like 1stand 2nd time business owners.
The First-Time Business Owner
The first-time business owner focuses all of their efforts on improving and perfecting the product. But what the first time business owner doesn’t know is that the product worth nothing if you can’t actually sell it in mass.
Second-Time Owner
The second-time business owner having already experience this focuses instead on marketing and distribution, dramatically increasing their chances of success and survival.
Create Wealth By Owning the Value Chain!
But what the second-time business owner still doesn’t know, is that even if they got really good at distribution, they still work the third-time business owner.
The Third-Time Owner
The third-time business owner doesn’t focus on product or distribution. They move even farther upstream and provide a majority of all of the core goods and services the first 2 business owners needs to be operational.
Overtime by owing part of in the supply chain the third-time business owner can afford to buy business owner 1 and 2 (and all of their competitors).
This will show you why the biggest brands in the world, don’t have to do ANY marketing.
This Might Actually Blow Your Mind!
Oxfam created a pretty shocking infographic on the consolidation of the food industry industry a few years go.
In it you can get a sense for how massive the scale of production is to be a controller of the inputs to the products that are sold at mass. If you can afford it, it’s far more lucrative to sell core goods to the market than compete as a brand inside of it.
These 10 Companies Alone Make All the Food We Buy
Holy Nestle That’s a Lot of Cash
Nestle, the quant little Swiss multinational food and drink conglomerate is now the largest food company in the world pulling in an annual revenue of around $91.4 billion.
How did they afford to buy all these brands? The built the largest dairy company in the world and bought them.
Meet the Brands that Generate $64.66 billion for PEPSICO
PEPSICO was founded in 1965 when Pepsi CEO Don Kendall, and Frito-Lay CEO Herom Lay, sketched the deal on the back of a napkin to agree to combine companies in order to take get take over the growing larger snack industry.
They unlocked a new brand new market long before Blue Ocean Strategy became a thing.
Unilever’s Little $51 Billion Empire
Unilever started in on September 2, 1929 wither the merger of the Dutch margarine producer (Margarine Unie) and a British soap maker (Lever Brothers). Rub the names together and you get Unilever.
Joining forces they were able to increasingly diversified and supply a bigger market.
Conclusion
Know all the players in your business. This means you should understand the whole process, or the entire value chain.
For long-term planning, how can you partner with acquire a new business to put you into a much larger marketplace?
Visit your venders and get to know their business. This is a sign of a seasoned entrepreneur – they build great networks.
The 2019 Mid-Year Tax changes eliminated or drastically reduced tax incentives and deductions that businesses depend on. Some of the tax changes took effect in 2018 and also impact the filing of 2019 taxes. In particular, The Tax Cuts and Jobs Act (TCJA) added dozens of tax changes that directly affect businesses. These changes are incentives and deductions that firms use to offset their tax liability.
Although, according to the IRS, “The new law changed tax rates and brackets, revised business expense deductions, increased the standard deduction, removed personal exemptions, increased the Child Tax Credit and limited or discontinued certain deductions.” www.irs.gov. Those deductions are what businesses have counted on for years.
Making it to the chopping block, here are a few deductions that have been eliminated:
Moving expenses deduction, Mileage rebated deduction, Entertainment deductions, Transportation fringe benefits, Corporate AMT, and NOL carryover, to name a few. Not only do we lose them, but we have to discover what each of them proposes.
Here is an example pertaining to entertainment. “The new law generally eliminated the deduction for entertainment, amusement or recreation expenses. But, taxpayers can continue to deduct 50 percent of the cost of business meals if an employee of the taxpayer — is present and the food or beverages aren’t lavish or extravagant.” www.irs.gov. We are noticing terms like those being used more often. What is considered lavish, extravagant, or a fringe benefit? It’s our responsibility to ascertain how the IRS defines them.
Now let’s look at what has been drastically reduced:
Tax brackets, Standard deductions, Charitable contribution deductions, State and local tax deduction capped at $10k from unlimited, Office snacks and meals, Like-kind exchange, Excess business loss limitations, Depreciation for luxury vehicles and more. Again, how does the IRS define what each means? How much is a business going to have to make up for from losing these deductions? These changes will affect the filing of 2019 and future returns and don’t count on any of them coming back.
Keeping up with all the changes requires experts that specifically focus on the monumental amount of information in over 74,000 pages of the Federal Tax Code. Your CPA and Accountant are not able to and don’t want to know all the ins and outs of the tax laws for this year. They would need to hire experts who are proficient in each of the myriad of fields. That means they hire more people and charge their clients higher rates. CPAs have 73% of their clients with one foot out the door so they don’t want to raise their prices.
Let’s turn this around. What didn’t go away? The Tax Payer Certainty and Disaster Relief Act, coming in under the Ways and Means Committee, extended WOTC (Worker’s Opportunity Tax Credit) through 2020. What also remained is Cost Segregation and R&D Mitigation. These are tools that will help offset the tax pain businesses will face in 2020.
Through these 3 programs, businesses get to keep the money instead of splitting it with the IRS. Having an engineered Cost Segregation Study executed, which is what the IRS recommends, a business can receive a sizable amount of benefit. My definition of sizable can be hundreds of thousands of dollars.
Accordingly, WOTC benefits have increased. Along with Cost Seg and WOTC, the biggest change of all comes from R&D mitigation, where tens of thousands of dollars are available in manufacturing of all kinds.
It’s ridiculous to pay the IRS more than we are required. It’s absurd not taking advantage of all the benefits, the money, that’s earmarked for businesses and just let it sit. The answer is before you. Have an engineered Cost Segregation Study completed, take advantage of WOTC, and realize what an R&D Mitigation can do for you.
“A hidden thought can lead your thinking into a dead-end. Avoid dead-end thinking. Be alert when engaging your mind in its thought process.” -Greg Williams, The Master Negotiator & Body Language Expert
In negotiations with a bully, you have to watch your hidden thoughts, or those thoughts will have you thinking wrong.
“You have to beat them like they’ve done something really bad. Whip them until their insides are mashed. Can you do that? Will you do that?”
After reading the above, what are your initial thoughts? What images came to mind? Were they the images of a tough guy giving an edict to his underlings, that they dare not disobey? Or, did you consider that something other then the questions posed was occurring?
The thoughts you had about the opening statements, and the images that came to your mind, where determined by what you’ve experienced in life and the outcomes of those experiences. That means, to a degree, your thoughts began to formulate as soon as you read the first few words of the statement. Then, your mind jumped ahead of what you were reading to assume where the unread words would take you. That’s good, and it’s dangerous. The good part stems from the way you assimilate information. The bad part stems from not monitoring your expectations before jumping to judgment.
The words at the opening of this article were spoken by a chef to one of the cooks in an establishment that both were employed. The chef was referring to the correct way to make an omelet. Thus, he was talking about beating and whipping eggs to obtain a certain degree of consistency to make omelets more palatable.
When negotiating with a bully, you must be more cognizant of the way you think. Your thought process will be altered, in the prefrontal cortex area of your brain, the brain region in which complex behavior – decision making – and the moderation of social behavior occurs. This part of your brain will become more active due to the bully’s demeanor. You may experience a higher degree of emotions stemming from the perception of a threat, be it implicit or explicit. Such an emotional state may cause you to disengage from your normal thought process, which could lead you into that dead-end mentioned at the top of this article.
To combat your hidden thoughts, take into consideration what the bully is saying versus what he’s doing. If there’s a disconnect between his words and his actions, pay more attention to his actions (e.g. he says he’s going to run you into the ground in this negotiation while backing away from you and/or smiling nervously). Having this insight and using it to calculate your next action will allow you to think more clearly. That will also allow you to uncover any hidden thoughts that might create a sense of being overly fearful of a negative occurrence being projected on to you.
Negotiating with a bully is always a challenging proposition, but that proposition can be lessened by thinking about the way you think. Heighten your sense of awareness when negotiating with a bully, by being aware of where your thought processes are leading your thoughts … and everything will be right with the world.
Remember, you’re always negotiating!
After reading this article, what are you thinking? I’d really like to know. Reach me at Greg@TheMasterNegotiator.com
To receive Greg’s free 5-minute video on reading body language or to sign up for the “Negotiation Tip of the Week” and the “Sunday Negotiation Insight” click here http://www.themasternegotiator.com/greg-williams/
The 2017 Tax Cuts and Jobs Act made some major modifications to the travel, entertainment, taxable fringe benefits and moving expense deductibility for taxpayers. Above is a summary that shows the difference in the current deductibility (or inclusion in income for employees) for certain of these deductions.
At GROCO, we assist high net worth clients and their families with wealth creation, family transfers, taxes and charitable giving. Please give me a call at 510-797-8661 if you need assistance or have questions on these new rules or would like to know how to make, keep and/or transfer your wealth.
CHANGES TO INDIVIDUAL RATES AND BRACKETS– lowered top bracket from 39.6% to 37%
Married Individuals highest bracket starts at $600,000; Single Individual $500,000; Trust and estate $12,500
NEW-Dependent children aged 18-24 in school must use trust rates not Parent’s rate
Capital gains rates remain unchanged
NEW-three year holding period for carried interest distributions, sales or redemptions for Long-term capital gains
AMT thresholds increased
CHANGES TO INDIVIDUAL DEDUCTIONS
Only deductions available: medical expense, Interest expense, charitable deductions and tax expense and business casualty loss
Taxes limited to total of $10,000; Mortgage debt for existing loans limited to $1,000,000 and New home purchase $750,000. Cash contributions limit increase from 50% to 60% of adjusted gross income
No longer deductible expenses-Alimony paid for and alimony received under divorce contracts entered after 2018, tax prep fees, employee business and investment expenses and other miscellaneous itemized deductions moving expenses; personal casualty theft loss except for federally declared disasters
New 529 plans for elementary or secondary public private or religious schools.
Like kind exchanges now limited only to Real property so fast-food restaurant franchise licenses and patents; aircraft, vehicles, machinery and equipment, railcars, boats, livestock, crypto-currency, artwork and collectibles are no longer eligible.
Current year business operating losses including passive losses limited to $500,000 joint and $250,000 for other filers. Anything in excess cannot offset capital gain or investment income.
No carryback of Net operating business losses. Carryforward of future losses limited to 80% of taxable income.
Increased limits for expensing capital assets up to $1,000,000 for new & used property.
Non-owner of some private company employees may get up to 5 years to defer income on exercise of stock options or RSU’s.
CHANGES TO ESTATE TAX
Life time gift & GST exemption-2018 $11,200,000 single & $22,400,000 married couples. Will be adjusted for inflation each year.
Annual gift tax amount-2018 Increased to $15,000
CHANGES TO BUSINESS (SCHEUDLE C) AND PASS THRU ENTITIES
NEW- 20% deduction for pass thru or Schedule C qualified business income done at individual level
Limitation of business interest deduction limited to 30% of the business’s adjustable taxable income, exception for real estate companies who elect longer depreciable life for real estate.
NEW-Taxpayer’s average $25 million gross receipts- can use cash method of accounting and don’t have to use UNICAP rules for inventory capitalization.
At GROCO, we assist high net worth clients and their families with wealth creation, family transfers, taxes and charitable giving. Please give me a call at 510-797-8661 if you need assistance or have questions on these new rules or would like to know how to make, keep and/or transfer your wealth.
After the passage of the 2017 Tax Cuts and Jobs Act (ACT), many people are wondering how to maximize the value of their carried interest. There are some changes in the ACT that might affect how you proceed when selling or transferring your carried interest to achieve long-term capital gain treatment. These rules apply to taxable years ending after December 31, 2017.
NEW THREE-YEAR HOLDING RULE
Perhaps you’ve heard of the new three-year holding rule but you’re not sure if it applies to you.
Distributions and gains passed thru to you because of your carried interest
To receive long term capital gain rates (20%) on gains or distributions associated with your carried interest from the fund, the underlying investment at the fund level must be held for more than three years.
Sale or redemption of your Carried interest
If you decide to redeem or sell a portion or all your carried interest, your interest must be held for more than three years to get the long-term capital gain rate treatment.
Additional guidance from the IRS is needed to see if the underlying investments at the fund level must also be considered when you sell or redeem your interest.
Planning Point: The good news is that if stock is distributed to you and it has not yet met the three-year requirement, you can use the fund’s purchase date of the stock and hold on to it until it satisfies the three-year requirement to achieve long-term capital gain rates.
TRANSFERS OF CARRIED INTEREST-HIDDEN TAXABLE EVENT
Prior to the ACT, when you gifted your carried interest to a non-charity, typically your accountant would inform you that you may incur some gift taxes or if the proper structure was in place, no gift taxes at all.
Now, with the passages of the new ACT, you may get a call from your accountant asking you to not only pay gift taxes, but income taxes as well.
What? Income taxes? Yes.
Now, when you sell, transfer or gift your carried interest to a person related to you, you may recognize a short-term capital gain.
How much? Well, it’s complicated. That’s tax simplification.
Who is this person related to you? Well, that’s changed too. Now it includes not only your relatives but your colleagues, vendors and current or former employees.
Planning Points: Make sure that you talk to your tax advisor before making the transfer. Try to do the transfer on January 1 or December 31 when the fund can value the fund assets.
ENTITIES SUBJECT TO THESE RULES
These rules apply to individuals, trusts and estates, but not corporations.
Planning Point: It may be possible to hold the carried interest in an S Corporation and avoid these rules.
TYPES OF BUSINESS SUBJECT TO THESE RULES
The ACT only applies to partnership interest (which may include limited liability companies) that hold entities that raise or return capital from investors (VC’s, PE’s and hedge fund managers), investing in, disposing of, or developing securities, commodities, cash options or derivatives, (investment fund managers) and real estate held for rental or investment.
Entities not subject to the ACT
Farmers that hold land in which they actively farm are not subject to these new rules. Additionally, these rules generally should not apply to “profit interest,” granted to service providers who are employed by a related but separate entity (e.g. a management company).
The rules also do not apply to gains attributable to any asset not held for portfolio investment on behalf of third-party investors. We will have to wait for more guidance for this definition.
There are still many unanswered questions regarding these new rules, with hopefully more guidance coming from the IRS and Congress. Practically speaking, if you’re involved in investments, and hold the assets for more than three years, then these new rules will not have much impact. Furthermore, California has not adopted these rules.
However, there are still numerous traps for the unwary. At GROCO, we assist high net worth clients and their families with wealth creation, family transfers, taxes and charitable giving. Please give me a call at 510-797-8661 if you need assistance or have questions on these new rules or would like to know how to make, keep and/or transfer your wealth.
