Author: Roger Staiger

19 November 2018

Question: According to MSN: Money, what are 10 things you cannot deduct from your taxes anymore?

Central bankers face a ‘world full of uncertainties’ – Pg. 2

–          Central bankers much as “the ability and agility to manoeuvre though the current world that’s full of uncertainties”

–          The most pressing challenge for the ECB emanates from Italy.  The government’s plans to run a substantial budget deficit have led to clashes with the commission

US real estate – Pg. 7

–          …Opportunity Zones…in simpliest terms, it allows investors to reduce their capital gains by investing in deprived areas

–          …the proposed Opportunity Zones have brought together some unlikely bedfellows, with the backers including Obama progressives…Manhattan allies…and Silicon Valley pioneers

–          …Opportunity Zones may one day come to be seen as the boldest economic development plan for poor areas in a generation.  But they could also send up presenting the most generous tax deal to the rich in decades

–          The revelation that the new Amazon headquarters in Long Island City is located in one of these Opportunity Zones has only increased the interest in – and scrutiny of – the proposal

–          There is a long history of trying to bend the tax code to lift up impoverished areas.  It is a matter of wonkish debate whether Opportunity Zones will fare any better than previous efforts

–          …the aim is to shift some of the estimated $6.1tn of capital gains built up in the US – particularly in the easy-money years that followed the financial crisis – to deprived communities

–          The authors of the plan settled on a simple incentive: allow investors to defer capital gains – from the sale of property, stocks, a business, anything – as long s they reinvest the profits in one of 8,700 Opportunity Zones around the country.  These are deprived areas chosen by each of the states where the average income is less than 80% of the surrounding area or poverty levels are above 20%

–          For those who qualify, their original capital gains tax will be reduced by 10% if they hold the new investment for at least five years.  It will be cut by 15% after seven years.  After 10 years, there is an added bonus: any profits generated from the Opportunity Zone investment become tax-free

–          There is also the fact that real estate developers – renowned for their determination to avoid taxes – are expected to be big users of the funds.  At present, their favoured tax vehicle is a “1031 exchange”, which allows a developer to defer capital gains by ploughing the proceeds from one property sale into another property investment.  Opportunity Zones have been described as a 1031 exchange on steroids

–          The great appeal of Opportunity Zones, … is their flexibility – and the fact that investors can steer as much, or as little, of their capital into worthy projects as they see fit

–          Investors cannot simply park their money in a vacant lot and reap the benefits.  They must increase the value of a business or property by 100% before the investment can be sold on.  That would be far easier to accomplish in a poor neighbourhood than, for example, an up-and-coming part of Brooklyn

–          (Prof Note: For the past months I have been spending a majority of my time working on Ozone projects.  If you are not familiar…GET FAMILIAR!)

Answer: (1) Personal exemptions; (2) Alimony; (3) Non-military job-related moving expenses; (4) Home equity loan interest; (5) Theft Losses; (6) Casualty losses not from a disaster declared by the president; (7) Employee business expenses; (8) Investment expenses; (9) Tax preparation fees; (10) Legal fees paid on an award, judgment or settlement

17 November 2018

Question: According to MSN: Money, what are twenty (20) side hustles that will make your salary soar?

German and US banks drawn into Danske laundering probe – Pg. 10

–          Three big US and German banks have become embroiled in the criminal probe of Danske Bank’s 200bn (euro) money-laundering scandal as US prosecutors examine their handling of cross-border payments for lenders

–          Deutsche Bank, Bank of America and JPMorgan Chase acted as correspondent banks, providing a link to the US financial system for Danske’s Estonian branch (Prof Note: The loss of a correspondent bank is extremely problematic for smaller local banks in smaller regions.  It can signal “loss of confidence” to much worse for the institution.)

–          The worst-case scenario for Danske is if the US Treasury – which has said it is taking an active interest in the matter – designates it “a financial institution of primary money laundering concern”, which would force US banks to stop handing dollar transactions for it (Prof Note: This will also be a HUGE issue for businesses transacting in the region as they must find other means to transact.  Western Union is limited to $2,000.00/day and must be physically transacted.  Individuals are legally limited to carrying $10,000.00 (or less) on airplanes.  This can cripple a smaller nation and the businesses operating within.)

–          (Prof Note: In some countries we must actually provide contracts and invoices to financial institutions to pay our vendors.  This is problematic due to proprietary pricing of some products and pre-negotiated rates.  In some cases, when proprietary pricing was an issue, we have had to validate transactions with letters by international U.S. law firms, i.e. increasing the cost of the transaction greatly which is then passed on the payee!  International settlement is barely covered in an International Finance class but can destroy a transaction.  The worry of financial sanction is so great that we have had local banks drive by our sites to verify receipt of product.)

–          (Prof Note: We had a crew walk off one of our jobs this past month due to nonpayment, this after they had had our check for two weeks (the account was overfunded, i.e. the money was there).  The local bank would not honour the check due to the size despite assurance from our counsel (international and local) and written statements.  Best we were able to determine was there were issues with the subcontractor.  Regardless, we (which really means them) had to incur the cost of remobilization and start-up costs…..laundering is real and a global issue)

Digital estate agents battle to build on hype – Pg. 12

–          This “i-buyer” business was pioneered by dedicated start-ups such as four-year-old Opendoor.  But Redfin entered this market last year with its Redfin Now service, albeit on a small scale.  The property listing site Zillow launched its own version, Zillow Offers, in pilot form the same year

–          Shares in Redfin have shed 52% of their market value this year….

–          “Real estate is very fragmented, there are relatively low barriers to entry to get into the business of selling houses, the products are undifferentiated and there’s no customer loyalty.  That leads to this natural fragmentation.”  (Prof Note: While I agree with this quotation, I will strongly state one needs to find the highest quality people, especially in residential, and one needs to have loyalty.  The issue is that individuals, in my opinion, transact so little in real estate over a lifetime that the average layman cannot develop an expertise in the largest transaction of most people’s lives.  I am blessed to be surrounded by some of these high-quality persons and so very happy when I refer them (I do receive a bottle of hooch) to a former student and/or peer and learn of the successes!)

–          An even greater change to customer experience comes with the “i-buyer” model, in which companies such as Opendoor take homes on to their balance sheets rather than acting as agents

–          Opendoor and rivals, such as OfferPad and Redfin, generate “instant” offers based on data covering homes nearby.  They offer completions in as little as three days, buying homes for 95 to 98% of their market cost while charging fees of 6% or more….

–          (Prof Note: Real estate is such a relationship business.  You have to have relationships and years of knowledge and experience.  Be careful when selecting real estate agents/brokers.  Always seek a recommendation from a trusted source!)

Answer: (1) Bartender; (2) Brand Ambassador; (3) Data Entry; (4) Event Assistant; (5) Focus Group Participant; (6) Food and Beverage Delivery Driver; (7) Freelancer; (8) Hair salon or spa receptionist; (9) Host or barback; (10) Lawn maintenance worker; (11) Lifeguard (Prof Note: My summer job in High School); (12) Nanny or Caretaker; (13) Park Ranger (Prof Note: I would do this for free!  How awesome!); (14) Pet sitter; (15) Retail Sales Associates; (16) Security Guard or Bouncer; (17) Telemarketer; (18) Theater Usher; (19) Tutor (Prof Note: Pays, on average, $50/hour); (20) Uber or Lyft Driver (Prof Note: I have friends/peers that do some of these jobs.  Any honest job is honourable.  Just remember, if you see me as the Bouncer at your local watering hole, I am not there to socialize, I am there for business! J)