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LI BMAN 'S AWESOME LETTER
LIBMAN TAX STRATEGIES
NOVEMBER 2018
When Gratitude Seems Impossible
My Family’s and My ExperienceWith Loss
The sentiment most commonly associated with the month of November is gratitude. With the constant stream of commercials, ads on the radio, and seasonally relevant made-for-TV movies touting the theme of thankfulness, gratitude is usually at the forefront of our minds. But what these marketing companies and writers tend to forget or ignore is that sometimes, frankly, life is just shitty. I’m in no way trying to say that being thankful for all you have isn’t important — it is. In fact, the events of this year in particular have made me more thankful than I’ve ever been in my life. These events aren’t the ones being made into feel-good holiday movies, though. They’re the kinds of experiences no one should have to talk about. experience we have ever been through. We had a baby, and then — just like that — the doctors said we didn’t. One day, we were preparing for the arrival of a wonderful addition to our amazing family, and then the next day, we were trying to figure out how to deal with Maria's health. We were scared, we were confounded, and we were genuinely angry. “There is a real beauty in finding a way to be thankful when things are tough.” This year, my wife, Maria, and I suffered a miscarriage, and it was the most harrowing In the weeks after our loss, I didn’t think things could get any worse. But even the old saying “When it rains, it pours” doesn’t begin to describe it. It was tax season, which is my busiest time of year, my previous secretary had just accepted another position, the brand new CPA I hired a week prior I had to fire because he really
didn't know what he was doing, two of my top clients were getting audited, and my great-uncle had just passed away. So, as I said, life is just shitty sometimes. But the real struggle comes when you try to find a way to be grateful despite all the sadness. Finding meaning in difficult situations is something I’ve striven to do in my job on many occasions. Because I help clients with their finances, I often hear about the more negative aspects of their lives. I know when they’ve made more money one year over another, when they are struggling
financially, when they are going through a lawsuit, or when they’ve decided to declare bankruptcy. Because so many of my clients trust me with their most personal and delicate information, Maria and I thought it was only fair to reciprocate. So how does a human deal with crippling loss? I’m by no means an expert, but to me, the first step is acknowledging that the loss occurred. All too often, people try to ignore the difficult aspects of life or simply pretend the difficulties don’t exist. But taking the time to acknowledge adversity will help you make meaning from it. Next, allow yourself to feel — really feel — sad and angry. Then remind yourself that these events don’t serve as some kind of moral retribution or judgment; no one deserves this kind of loss. The last
and perhaps hardest step is to find a way to be grateful for all that you do have. For me, this meant that I spent more time relishing the love and affection of my four boys, leaning on Maria, and being there for her when she needed me. We know that sadnesses like ours can tear families apart, but fortunately, it has somehow made our bonds stronger than ever.
There is a real beauty in finding a way to be thankful when things are tough, and with the events of this year, achieving a state of gratitude has become a daily goal. Some days are better than others, but I’m working on it, and for now, that’s enough.
-Adam Libman
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AN ATTITUDE OF GRATITUDE Should Last Beyond Thanksgiving
Taking the time to acknowledge who and what you’re grateful for is a Thanksgiving tradition far more important than turkey or football. It’s the cornerstone of the holiday and the reason we feast together in the first place. But when you really think about it, should expressing our gratitude and appreciation for others be limited to one day every year? Of course not! WHY GRATITUDE MATTERS As we get older, it’s easy to succumb to negativity and pessimism — “Kids these days,” “The world isn’t what it used to be,” etc. The crabby grandparent and angry old neighbor are archetypal depictions of later life. But these fictions don’t have to be your reality. Recognizing and acknowledging gratitude will help you take stock of the positive aspects of your life and dwell less on unhappy thoughts. Being grateful has also been linked to significant health benefits. According to gratitude expert and author Dr. Robert A. Emmons, “Preliminary findings suggest that those who regularly practice grateful thinking do reap emotional, physical, and interpersonal benefits. Adults who keep gratitude journals on a regular basis exercise more regularly, report fewer illness symptoms, feel better about their lives as a whole, and are more optimistic about the future.” Client Spotlight
HOW TO PRACTICE GRATITUDE In the above quotation from Dr. Emmons, he mentions the practice of keeping a gratitude journal. This activity is a great way to start seeing the world with a more positive, appreciative eye. As often as you can, take a few minutes to write down the acts, people, and moments that you’re grateful for. Some will be big, others small — but all will have an impact on your mood and bring a smile to your face. Before you know it, you’ll have an entire book full of good memories and warm feelings. While keeping a journal is great, there are other ways to go about cultivating and expressing gratitude. The easiest one is simply to say “Thanks” whenever you can. It may seem insignificant, but you’d be surprised what a difference it makes. When you approach the world with the perspective that every day is Thanksgiving, it’s only natural to be grateful. We all have moments when we want to curse the world, especially as we get older, and those experiences are perfectly normal. Just as frequently, though, we have moments that are worth celebrating, often with people who are worth appreciating. Which will you think about more? Randy has been a Diamond Member Client of mine since I took over Libman Tax Strategies over a decade ago, and he worked with my father long before that. Throughout the time I have known Randy, I’ve always thought he had one of the coolest jobs. He travels all over the country selling and distributing high-end leather furniture. He has worked for both individual creators and companies, and during his career, he was responsible for managing teams of over 30 people. While I am always jealous of Randy’s professional pursuits, the features of his job I try to emulate in my own life are his amazing sales strategies. He is, without a doubt, one of the best salesmen I have ever met. Because he works with such a variety of people in different demographics across the U.S., Randy knows that in order to understand a client’s needs, you have to begin by asking a lot of questions and then truly listening to the answers you are given. While I have thoroughly enjoyed getting to work with Randy over the years, my favorite aspect of our relationship is the sage advice he gives me and the ways he helps me implement that advice in my work and in my life.
Meet Randy Gleckman, One of the Best Salesmen I Know In the last decade or so, our society has become quite
invested in the so-called “college experience.” This experience requires students to be university-bound immediately following their
high school graduation. Then, after exactly four years of studying, they graduate and enter the
workforce. There is nothing fundamentally wrong with this career path, but the societal notion that this path is the only desirable one causes many young adults to assume that no other
prosperous alternatives exist. It is for this reason that students need to draw inspiration from people who chose a different route and who carved out successful lives for themselves because of that choice. This month, that inspiration is Randy Gleckman.
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... CONTINUED FROM PAGE 6
MEET CURT, OWNER OF PRIVATE CAR STORAGE My Best Business!
AUDIT-PROOF YOUR TIME SPENT ON RENTAL PROPERTIES
If you claim status as a tax-law-defined real estate professional who can deduct his or her rental property losses, your time record for the year must prove that you spent 1. more than one-half of your personal service time in real property trades or businesses in which you materially participate, and 2. more than 750 hours of your personal and investor services time in real property trades or businesses in which you materially participate. If you are married, either you or your spouse must individually qualify as a real estate professional. If one spouse qualifies, both spouses qualify. Achieving real estate professional status is the first of two steps. You face one additional hurdle: To deduct tax losses on a rental, you also must prove that you materially participated in the rental activity. If you are married, you and your spouse may count your joint efforts toward passing the material participation tests. Most of the tests for material participation are based on hours worked.
In the line of work that I do, I have the opportunity to meet clients from a variety of professional fields. While I enjoy working with every single one of them, in my experience, the clients who seem to enjoy their careers the most are the ones who have found a way to bring their personal and professional lives together — the ones who turned their passions and hobbies into a job. Curt Autenrieth, the owner of Private Car Storage, is a phenomenal example of this type of client. Prior to creating Private Car Storage, Curt was a ticket broker in the resale market. Before popular websites like Craigslist, eBay, or StubHub gained traction, individual ticket brokers’ businesses soared. I specifically recall working with Curt while I was attending USC, where I sold him my tickets to the Rose Bowl. But once the internet became a necessity in people’s everyday lives, online resale companies turned everyone into amateur ticket brokers, which caused the real brokers like Curt to seek business elsewhere. Once Curt noticed the ways in which the new technology was causing a major downshift in his industry, he knew he needed to carve out a different path. One of Curt’s passions is buying and selling Porsches. In fact, he has over a dozen cars now! But he was running out of room for them at his own house, so he leased a warehouse where he could store them and offered to store some of his friends’ cars there as well. As they say, the rest is history! Now he has five different locations and stores over $100 million worth of cars with state-of-the-art 24-hour surveillance technology and controlled access. Curt is a particularly noteworthy client not only because he is a truly successful entrepreneur, but because he was the very first client I ever had. Since we started working together several decades ago, I’ve always been impressed with Curt’s unique story, his ability to identify such an important shift in the market, and the awesome way that he turned his passion into a profit! If you need any tickets or cars stored, call Curt at 626.577.3939.
WHAT DOES THIS MEAN TO YOU?
Keep a time log! In an audit of your real estate activity, the IRS tells its examiner to do the following:
Request and closely examine the taxpayer’s documentation regarding time. The taxpayer is required under Reg. Section 1.469-5T(f)(4) to provide proof of services performed and [of] the hours attributable to those services. If you don’t have what the IRS wants, your odds of winning your rental property tax-loss deductions are slim. And don’t think you can create this log after the fact. Nearly everyone who spends the considerable time it takes to jump through the hoops to create an after-the-fact log of hours using the IRS spreadsheets loses the deductions.
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Tips for the Upcoming Tax Season
The sole question the court had to address was whether Ellen could include her drive time from her home to the rentals as rental property time. Interestingly, she failed to include her travel time in her well-kept log and had to reconstruct that travel time for the court. The court ruled that her reconstruction of the travel time to and from the properties was adequate and decided that she and Richard could deduct her $69,531 in rental losses on their joint tax return. Tax reform made many good changes in the tax law for small-business owners. Unfortunately, the changes to the net operating loss (NOL) deduction rules do not fall in the "good changes" category. They are designed to hurt you and put money in the IRS’ pocket. If your business has a bad year, the new NOL rules are designed to stop you from using your business loss to find some immediate cash. You have an NOL when your business deductions exceed your business income in a taxable year. Before tax reform, you could carry back the NOL to prior tax years and get refunds of taxes paid in those prior years. Alternatively, you could have elected to waive the NOL carryback and instead carry forward the NOL to offset some or all of your taxable income in future tax years. CHANGES TO NET OPERATING LOSSES AFTER TAX REFORM OLD NOL RULES
DRIVE TIME INCREASES ODDS OF DEDUCTING RENTAL PROPERTY LOSSES
Your rental properties provide a tax shelter when you can deduct your losses against your other income. To qualify, you must meet certain criteria, including passing the tax code’s 750- hour test. Keep an accurate log of the time you spend on your rentals (yes, we know this is a pain, but suffer a little and just do it). Including your drive times can help you log enough hours to meet this requirement. Mariam Trzeciak owned, managed, and rented 14 single-family homes in and near Columbus, Ohio. On their joint tax returns, she and her husband, Marc, claimed rental property losses of $126,376 and $151,884 in the two years that were subject to this IRS audit. The IRS revenue agent assigned to examine the Trzeciaks’ returns disallowed the losses as passive losses, claiming that Mariam did not qualify as a real estate professional because she could not count her drive time from her home near Dayton to Columbus, where the properties were. It took Mariam’s CPA and her lawyers almost three years to surface the home-office deduction as the savior. The IRS then allowed the drive time, which let Mariam deduct her rental property losses of $278,260. Clarence McDonald Leland traveled 13–16 hours from Mississippi to Texas and back several times each year to perform necessary work on his 1,276-acre farm in Turkey, Texas. The court noted that the IRS did not object to the inclusion of the travel time when determining Clarence’s participation in the farm and went on to say, “The facts of this case establish that petitioner’s [Clarence’s] travel time was integral to the operation of the farming activity rather than incidental.” The Leyh case involved Richard Leyh and Ellen O’Neill. Ellen owned 12 rental properties in Austin, Texas, about 26–30 miles from her home at a ranch in Dipping Springs, Texas. Ellen and Richard deducted a $69,531 loss from their rental operations. The IRS said no because Ellen, without inclusion of her drive time, failed the 750-hour test to establish herself as a real estate professional. TRZECIAK CASE LELAND CASE LEYH CASE
NEW NOL RULES
Tax reform made two key changes to the NOL rules:
1. You can no longer carry back the NOL (except for certain qualified farming losses).
2. Your NOL carryforward can offset only up to 80 percent of your taxable income in a tax year.
The changes put more money in the IRS’ pocket by eliminating your ability to get an immediate tax benefit from your NOL carryback and delaying your ability to get tax benefits from future NOL carryforwards.
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How Much Would Your Favorite Superheroes Pay in Taxes? Batman, Iron Man, and the IRS Man
With the new tax laws and the IRS’ complicated forms, imagine just how complex tax season would be for the CPAs who handled your favorite superheroes’ finances. Take both Batman and Iron Man, for example. Between their billionaire bank accounts, their massive businesses with hundreds of employees, and the damage from their constant vigilante activities, their fictional financial advisors would probably tear their hair out on an annual basis. To make ourselves feel a bit better about our own tax endeavors, let’s see just how much Batman and Iron Man would pay in taxes. According to Forbes, Bruce Wayne’s estimated net worth is $9.2 billion, with Wayne Enterprises grossing $31.8 billion, while Tony Stark’s net worth is $12.4 billion, and Stark Industries grosses $20.3 billion a year. There are a lot of complicated factors to consider when determining these masked men’s tax bills. Because both men are single, their personal income bracket — the highest of seven brackets — would be taxed at 37 percent. But both heroes would have a lot of deductions. Because Stark is publicly known as Iron Man, he might be able to write off a huge portion of his company’s technology as a “casualty loss.” He has also done his fair share of charitable work, giving lectures and contributing research and development resources to S.H.I.E.L.D. Wayne would likely have
a more difficult time claiming any of his suits, vehicles, gadgets, or the bat cave because he isn’t a public-facing superhero. That being said, he does have the Wayne Foundation, which helps both the art community and the orphans in the area. While there is no way to accurately pinpoint the exact dollar amount these two masked heroes would have to fork over every April, Forbes authors claim that after some general computing regarding their income and corporate tax deductions, Wayne would owe approximately $600 million federally and $1.7 billion to the state of New York, while Stark would owe approximately $400 million federally and $1.3 billion to the state of California. Of course, with their hectic lives, accounting is likely the last thing they think about, but if the rest of us pay taxes, shouldn’t they?
WORD SEARCH
Have You Heard About Our Diamond Club?
Here at Adam Libman Tax Strategies, our Diamond Club is invitation-only and reserved for our top clients. If you have questions about the privileges that come with being a Diamond Client or want more information, make sure you give Adam a call! Diamond Clients
• Randy Gleckman * • Jay & Laine Zuckerman * • Ken Ma & Juliana Tu • Max Keylor • Lynn Adkins * • Ms. X
Black Friday Colonies Feast Football
Gobble Grateful Gravy Potatoes
Thankful Thanksgiving Tradition Turkey
*Founding Members of the Diamond Club
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Thanksgiving Prep for theWhole Family
Let Kids Play a Role This Thanksgiving
Sharing your own family’s very personal sadnesses with the outside world is nothing short of terrifying. I’ve been torn about sharing our miscarriage with others. Even the word “miscarriage” itself bothers me. To be honest, I hate the term. I prefer “pregnancy loss” instead. Telling people I had a miscarriage sounds like my body has failed or that I’m to blame in some way. But I’m not to blame for this; no one is. While it’s not a particularly easy subject to discuss, Adam and I decided after lots of consideration that it was important to share so publicly. You see, my husband has the type of job that allows him to participate in both the joy of his clients’ lives and the devastations they experience. He gets to hear about additions and accomplishments, and he gets to hear about deaths and losses. In this way, it only seems fair that he and I be transparent as well. When Gratefulness Seems Impossible My Wife's Perspective GIVE EVERYONE A ROLE No, not those rolls — yet. Making the feast a family project can turn the day from a hectic list of chores into a magical bonding experience. It’s important to match each family member to a job that best fits their abilities. Young children can mash potatoes or rinse ingredients in the sink. Older kids can take on more responsibility, like measuring ingredients, keeping an eye on timers, and setting the table. Teens and young adults can supervise their younger siblings and cousins in these important tasks and may be called upon to stir what’s on the stove while an adult checks on the football game. ROLL OUT THE DECORATIONS Still not talking about bread. Not everything in Thanksgiving preparation needs to be tied to the kitchen. Creative family members of all ages can work together to bring some seasonal flare to the dining room. Thanksgiving is more than just a feast; it’s about coming together as a family and being thankful for one another. So why wait to get into the spirit until everyone is seated at the table? Here are a few ways you can make the actual preparation of Thanksgiving dinner fun and engaging for the whole family!
Maybe this means picking up some Thanksgiving coloring books, or perhaps the family can venture outdoors to collect autumn trimmings for crafts. It’s a great way to let each family member put their own personal spin on the holiday! HAVE A ‘ROLLER DERBY’ Finally. While an adult should be the one to put these delicious baked goods in the oven, the whole family can help shape the dough. In fact, Care.com recommends making this a contest. Set aside a time when everyone can vie for the title of Fastest Roll Maker, and you’ll have plenty of warm, flaky, delicious treats come dinnertime. Letting everyone play a part may take a little more planning and add slightly more chaos to your Thanksgiving preparations. But it’s sure to produce a lot of great memories and bonding moments among your loved ones. And by the time you sit down to eat, you’ll all have something to be thankful for right in front of you — Those. Delicious. Rolls.
I would like to see. As I reflected, I realized that this year, I’ve struggled to be completely grateful. I don’t know God’s plan for the future, but I know that accepting this loss was not easy. I’ve spent hours feeling angry and betrayed by my body. I’ve felt simultaneously devastated and bewildered that there could be a heartbeat one day and then nothing the next — how one day, you have a baby, and the next day, you don’t. Then, after all that, I felt guilty for focusing on those emotions because I still had four children to take care of. People say that time heals all wounds, and while I don’t know that I’ll ever reach that point, I can say that the loss of a potential child brought forth a feeling of deep gratitude and a new perspective and appreciation for the family Adam and I created. It’s easy to get caught up in the business of raising four kids, and if nothing else, this experience has been a reminder to slow down and relish the little moments — the hugs and snuggles from our boys who are growing up so quickly — and to be thankful during the hard times.
We recently celebrated the Jewish New Year, so I made mental notes of the good and bad aspects of my life and some changes
-Maria Libman
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‘The Situation’ Got Himself Into One Terrible Situation Jersey Shore Star Sentenced to Prison for Tax Evasion
The often tumultuous lives of TV stars are constantly plastered across the tops of newspapers and magazines, but given the nature of reality TV, stars’ lack of privacy isn’t all that surprising. In the last couple of years, one particular celebrity has made his fair share of headlines. Despite the
and conspiring to defraud, but the Department of Justice added new charges last year: tax evasion and structuring funds to evade currency transaction reports. Essentially, “The Situation” created one terrible legal situation for himself when he used his celebrity status to create a business but did not pay the income tax on the millions it grossed between 2010 and 2012. Using his “Jersey Shore” persona, Sorrentino created a clothing company he aptly dubbed The Situation Nation, Inc., for which he failed to file a tax return and instead filed a false corporate return in the hope of concealing his cash income. According to his 2017 indictment, Sorrentino made multiple cash deposits of less than $10,000 each into different bank accounts on the same day in order to evade bank reporting regulations. In addition to the federal prison time, Sorrentino will also serve two years of supervised release, have 500 hours of community service, and pay a $10,000 fine. When a person is famous or well-known, they immediately become a target of the IRS. Sorrentino’s eventful story serves as a reminder for everyone to not only avoid any kind of fraudulent activity but also to properly report their income this upcoming year. If you have any questions about your own tax situation , don’t hesitate to give Adam a call at 424.253.0200.
old Hollywood saying that “no press is bad press,” Mike “The Situation” Sorrentino of the MTV reality show “Jersey Shore” might feel differently. Sorrentino was recently sentenced to eight months of federal prison for tax evasion after he and his brother pleaded guilty to filing falsified tax returns on nearly $9 million in January of this year. The brothers were initially indicted in 2014 for tax offenses
Our Prize Giveaway Program Gift Cards, Tablets, andVacations!
Here at Libman Tax Strategies, our mutual relationship with you is what makes our business function at its highest level. I am honored that so many customers trust us enough to recommend our services to others. We can’t possibly express how much these referrals mean to us, but with our new referral PRIZE GIVEAWAY PROGRAM, we hope we are at least coming close! PRIZE NO. 1: If you like reading our newsletter and think that someone you know might enjoy it too, we’d love to add them to our mailing list. Send us their name and address, and we’ll send them a newsletter. To thank you for your referral, we’ll give you a $5 gift card to Starbucks! Please email help@adamlibman.com to send us an address to add. PRIZE NO. 2: If you get a friend, family member, colleague, or even a stranger in the grocery store to use our services, we will give you a FREE Amazon tablet! Easy as that! PRIZE NO. 3: After we give you the FREE Amazon tablet as a thank-you for your referral, we will enter your name in a quarterly drawing for a romantic weekend getaway to Palm Springs!
These prizes are absolutely real, and they are our FREE gifts to you. For more information about this program, please visit www.adamlibman.com/prizes.
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LIBMAN TAX STRATEGIES
INSIDE THIS ISSUE P1 When Gratitude Seems Impossible P2 How to Give Thanks Year-Round Client Spotlight P3 How MuchWouldYour Favorite Superheroes Pay in Taxes? HaveYou Heard About Our Diamond Club? P4 Let Kids Play a Role This Thanksgiving MyWife’s Perspective P5 ‘The Situation’ Got Himself Into One Terrible Situation Check Out Our Free Prizes! P6 Tips for the Upcoming Tax Season P7 Best Business Spotlight: Private Car Storage Tips for the Upcoming Tax Season (cont.) P8 3 Movie Locations to CaptivateYour Eyes
3 Famous Movie Locations You Need to Visit WhyWatch the FilmWhenYou Can See It WithYour Own Eyes?
Movies captivate audiences partially because of their ability to transport you to a different place. The heart yearns to be taken places, and cinema facilitates that journey. But what if you could immerse yourself in those fantastical worlds by visiting the destinations that you’ve seen on the big screen? Here are three places that are worth the trip. HOBBITON The only aspect of “The Lord of the Rings” that is more compelling than the fantastical journey of Frodo is the alluring, untamed countryside and quaint towns that make up Middle Earth. The Green Dragon Inn, Bilbo’s house, and the rolling hills of New Zealand make for a backdrop that will transport you straight into the life of Middle Earth’s smallest people — only these houses aren’t small at all. And you don’t need large, hairy feet to enjoy them. CHRIST CHURCH CATHEDRAL Harry Potter captured the imagination of the world. There are multiple sites across the United Kingdom where you can get lost in the adventure that shaped a generation, but there is one spot at the top of almost every fan’s list. Hogwarts is a magic castle in J.K. Rowling’s books, but in real life, its film location is a functioning cathedral in Oxford. Take one step onto the grounds of Christ Church
Cathedral, and you might begin to wonder when the next Quidditch match will begin.
TIKAL NATIONAL PARK When George Lucas witnessed a poster of this famous archeological site, he didn’t see an ancient culture — he saw Yavin IV, the perfect location for the Massassi Outpost, a rebel haven found in the first film of Star Wars. Though the movie paints a futuristic look at the region, walk through Tikal National Park, and you’ll experience it as a trip through history.
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