Episode 25. How RICH Avoid Capital Gain Taxes

Ever wonder how the wealthy pay so little in capital gains taxes while continuing to grow their wealth? In this podcast, we cover the top strategies they use and how you, as a business owner, can apply these SAME techniques to lower your taxes. 

Find out why banks are so eager to lend large sums of money to high-net-worth individuals, allowing them to build even more wealth while paying less in taxes. You don’t need to be a billionaire to take advantage of this video—learn how you can keep more of your money!

I've put together this FREE resource for you:

7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/

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☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/

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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...

Transcript

Speaker 1: 0:00

Let's talk about how the rich people avoid paying capital gains taxes. Now, it's no secret that rich people, on average, pay less in taxes than the average American. Now how can you, the business owner, the profitable business owner that now has all these profits in the business how can you use the exact same strategies? How can you copy the rich so that you can pay less in taxes than your neighbor? We're also going to talk about how is it and why is it that the banks are willing to give so much money to wealthy individuals so they can reproduce more income, reproduce more wealth and, at the same time, not paying as much taxes as the average person? Let's learn how to copy the rich. Ready, let's get started.

Speaker 2: 0:49

Welcome to the Tax Reduction Podcast for money-making entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy-to-understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.

Speaker 1: 1:22

All right, awesome. Now let's get started. Let's jump into today's episode strategies. And they have a tax advisor. So if you don't have a tax advisor, you've got to get yourself a tax advisor. Now what they do with their money is that they start investing in assets, whatever that may be. That could be real estate, that could be art collection, that could be coin collection, that could be other businesses, that could be stocks and commodities, whatever that may be. When rich people become wealthy because of the assets that they invest in, they become attractive to the banks.

Speaker 1: 2:11

Let me show you this example, this recent article that I read in Bloomberg. Check it out, mr B. Can we pull it up on the screen Now? In this article, it says that a wealthy individual, a client of a Bank of America, put up his art collection. Okay, think about this Put up his art collection as a collateral to be able to take out a loan to buy a sports franchise. Now what does that even mean?

Speaker 1: 2:38

You see, this wealthy individual, who is also an art collector, happens to be very smart, just like other wealthy people that know what to do with their money and use tax strategies. He thought to himself hey, right now I'm not sure if I want to sell my art collection and if I do sell my art collection now. I'm just right now speculating what he thought, what he was going through his thought process right Now. If I do sell my art collection, I am going to end up paying capital gains taxes on that art collection. So let's assume that art collection was $10 million. I'm just making this number up. If he would have sold it for $10 million, he would have paid 23.8% of capital gains tax. Now you might say Boris, wait a second. I thought that the federal maximum limit of capital gains is 20%. That is true, but we also have what's called a net investment income tax. It's a hidden tax that goes on top of your regular capital gains tax on the sale of the assets if your income exceeds a certain threshold. So in this case it would be 23.8% of federal income tax. Now if you're in a state such as New York or California, you can imagine what the state income tax rate would be. It would kill this art collector with the taxes.

Speaker 1: 3:52

What this person decided to do like hey went to the bank and said hey, I've got this art collection, but I want to buy a franchise. How about I put it up as a collateral. Okay, I put it up as a collateral. This way, you give me the money. Now, remember, loans are not taxable. Now, this collector have decided to use the loan against the collateral.

Speaker 1: 4:14

Now, this collector also kept the possession of his art collection. But, most importantly, he received a lot of money from the bank because he is attractive to the bank because of the assets that he owns. Now, he used that money to buy a sports franchise. Now, we're not even gonna talk about the deductions that he's probably got from that purchase if it was an asset purchase. This is what wealthy individuals do they accumulate assets and banks are giving them money for those assets. Now, in the next segment, we're going to talk about how you, the profitable business owner, can copy the strategy like this one. Now, you don't need to be an art collector, so to speak, to do this, but how can you copy this strategy in your everyday life, in your business and with the assets that you own? Right after this break?

Speaker 2: 5:01

If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Bora's put together a free PDF for you, the business owner Seven tax write-offs every S-corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.

Speaker 1: 5:32

Okay, welcome back Now. We talked about how is it that the rich people avoid paying capital gains taxes. Now let's talk about how you, the business owner, so to speak, can copy the exact same strategies in your business. Before we continue, I want to bring this clip to your attention from Robert Kiyosaki I am a billionaire in debt.

Speaker 3: 5:54

You know why? Because I get tax breaks for borrowing money. Then what with it? I have to invest it to make more money. Let's say I own a commercial building. I buy it for a million dollars. It goes up to $10 million. Most guys would sell it A basis of $1 million to a basis of $10. I have a $9 million capital gain Instead of selling it, flipping it like those flippers do. I don't flip, I don't sell. See the moment you sell. As you know, as an attorney, you've now executed a capital event, a taxable event. So what I do is I buy a property for a million. It goes to $10 million. I'll borrow out five tax-free. That's why there's no financial education in schools, because if you knew how to handle debt, you wouldn't save that crappy dollar you have in your hand. I'd rather borrow the money tax-free.

Speaker 1: 6:39

All right, we got the point right. So Robert Kiyosaki for those of you that don't know, he's the author of Rich Dad, Poor Dad, one of the greatest books written. If you haven't read that book, I personally recommend. But his main strategy is like hey, I basically buy real estate and my real estate appreciates an income excuse me, appreciates in value and instead of selling it, I go to the bank and say, hey, I've got this real estate, my loan on this is this much, but it's actually worth a lot more. I'd like to take out a loan against it. The banks will happily say, yes. Instead of selling the asset, what basically he's doing is taking the debt under this asset to invest more. Now let's take a step back for a second. Understand that debt management is a serious skill to have Wealthy individuals, rich people.

Speaker 1: 7:32

They know how to manage debt right. They surround themselves with professionals that help them to do that. That's why I always say hey. If you're working, for example, with a tax preparer, a regular accountant, you're overpaying in taxes because you're not using tax strategies, You're not working with a tax advisor and you're not surrounding yourself with professionals to help you pay less in taxes. So wealthy individuals surround themselves with professionals and they learn how to manage debt. They have financial education.

Speaker 1: 8:02

Now, if you can't manage debt, then obviously don't do this strategy. But as you become rich and you start generating profits good profits from your business and start investing it into real estate, then you'll learn, so to speak, or really start investing in any other assets you know. You're buying businesses, commodities, securities or, like I said, real estate, estate. What happens? That you're learning, hopefully, how to manage some of the debt, and that is the skill that you need to acquire. Because what happens is when you buy real estate, real estate is one of the investments, right, you're not going to go ahead and buy art collection, unless you're into art, but you're going to buy real estate.

Speaker 1: 8:41

Real estate is going to give you depreciation. That depreciation is a deduction against your rental income, For example, if you start investing in apartment complexes or commercial property, that depreciation will produce a loss. That loss will be deducted against your highest taxable event, which is your earned income. That will produce deductions. At the same time, the real estate it grows in value and banks will be willing to give you more money against your real estate. So you can do with it whatever it is that you want. Now you have to understand, as a business owner, what you control is your income right? As a business owner, you control income how much money you make. You know how much money you make. You know how to execute it.

Speaker 1: 9:29

The next step, right After the step of becoming rich and becoming rich, means knowing how to produce income and having cash. The next step is to invest that into the real estate. Make yourself so attractive to the banks that they're willing to give you more and more of that money so that you can invest. You don't have to sell the real estate that you own. All you have to do is borrow against it to invest more. Obviously again, you have to thread the waters carefully, so to speak, and you need to know what you're doing.

Speaker 1: 10:01

Robert Kiyosaki gave an example. Hey, if I buy commercial property for a million dollars, I sell it for 10, I'm going to have a taxable capital event of $9 million. I don't want to do that and I don't want to flip it. What I'm going to do is I'm going to go to the bank and I'm going to say, hey, it increased $9 million in value. How about you give me $5 million? They're going to give you $5 million. That $5 million can now be used or he probably uses it to invest in other real estate while not paying any income taxes on the $5 million. Now, this is not a new concept that Robert Kiyosaki, for example, invented. A lot of rich people, a lot of wealthy people with smart professionals around them, use these exact strategies to avoid paying taxes on the capital gains. They actually intentionally avoid it, Like why would I sell this asset when I still keep it, can still take out money against it and instead invest? I hope this was helpful for you. Thank you, Until the next time no-transcript.