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December 14, 2006 at 4:19 PM in reply to: Secrets of the Federal Reserve – We need to Wake Up! #41735
(former)FormerSanDiegan
ParticipantYou be the judge
[img_assist|nid=2249|title=Alien or Not ? You be the judge.|desc=|link=node|align=center|width=466|height=349]
December 14, 2006 at 4:11 PM in reply to: Secrets of the Federal Reserve – We need to Wake Up! #41734ParticipantDid you know that Alan Greenspan is actually an alien sent here to wreck our economy ?
ParticipantWhat I didn;t understand was why it required a “closer look” at their finances. If you list their largest assets and expenses these would be at the top of the list. A cursory look would find this issue. What a joke.
ParticipantIt also requires a minimum of 750 hours a year spent on that work. That’s 14 hours a week.
This is true, a minimum of 750 hours as a RE professional, but it also requires that you spend more hours in that activity than other activities. So, one would have to switch to less than full time (likely less than half-time) at their current profession. For working professionals making > $50 per hour, doing so requires more than just working tax loopholes. It requires a change in lifestyle, just for the purpose of exploiting the tax code. I have no problem deploying assets, executing 1031 exchanges, etc to benefit from the tax laws. But making a career change is much more complicated than that. Again, it is very dependent on circumstances, and just because it works for Aunt Sally doesn’t mean it will work for you.
As a holder of real estate, I agree that it can be an important part of a balanced portfolio and over the long run it pays off. I also agree not to trust people’s anonymous advice on the web. Use the the ideas given, then do your homework.
December 14, 2006 at 11:04 AM in reply to: La Costa Oaks Starboard writes out buyers agent on 3% commission #41704ParticipantThe first thing you should do is NOT post information on the internet that someone sends you marked as CONFIDENTIAL.
The second thing you should do is realize that in real estate you need to get it in writing.
Participantsurveyor –
Depreciation is nice if you are a RE professional, but if you are not and you make over 150K per year, it doesn’t help too much in the first 5-7 years of property ownership.
I have a tax loss on investment property thanks to depreciation (it cash flows otherwise). Fortunately we make too much to take the loss. But neither of us is a full-time RE professional. If one of us changed our profession we would take a large pay cut and get the depreciation, but that would be a losing proposition.
Also, you wrote that “When you sell your property, you will be required to recapture the depreciation at ordinary income tax rates.” The law is now such that depreciation recapture is a special 25% rate. This went into effect in 1997. Your reference is stale and incorrect.
As a consequence, we are sitting on about 20K of carryover losses. If we sold today, we would reduce the capital gains (15%) put have to pay 25% (Recapture of depreciation is 25% not ordinary tax rates). So, the depreciation would result in a net ADDITIONAL TAX of 10% on the amount I have depreciated. Not exactly a benefit.
The good news is that when we pay off the loan we can have multiple years of tax-free income because of the carryover depreciation loss.
The lessons:
1. Verify anything you read or hear regarding tax rules. They change and some folks out there don’t know them.
2. Don’t assume that an investment strategy that is tax advantageous to someone else is advantageous to you.Participantgold_dredger_phd –
Based on your numbers for solar power, I can cover my monthly electric usage by having a 4mx4m set of panels. I probably have room for twice that much on my roof.
Using your numbers, assuming 8 hours of sunlight
1.5 kW * 0.1 efficiency * 8 hours/day * 16 sq-m = 19.2 Kw-hours per dayOR
576 kw-hours per month
(And even more in the summer due to longer days).I know it would take a decade or so to recoup initial purchase and installation, but why is solar power such a bad idea for home use ?
Participantpoway –
I’m not giving an example, I’m asking a question.
Q: What happens to the value of hard assets (Gold, real estate) when the currency used to buy them is devalued ?A: The amount of currency required to buy these hard assets goes up.
If I believed the value of the dollar is to decay rapidly, I would pile as much debt as possible and buy as much in hard assets as I could.
ParticipantPS –
OK I agree on the progressive aspect of it, accounting for the rebate.
I actually like the concept in theory, the problem will be in the execution and the transition effects.
The underground economy (to avoid sales tax) is already considerable with local rates at 8%. What will happen when the rates are set at 20-30% combined ? The site underestimates the ingenuity of Americans to avoid paying sales tax.
The transition will be disruptive. The site claims that the final production of goods and services includes the impact of corporate income tax (This is true). It also claims that by simply taxing the end goods or services the cost burden is a zero sum game (OK, I buy that). The problem, however, is how do we instantanously go from point A to point B ?
Example: October 19,2007 Congress passes the Fair Tax to go into effect on Dec 31, 2008.
December 31, 2008 – I am on the car lot looking for a new Plug-in Hybrid from Chrysler. It costs $25,000. I decide to wait a day. Jan 1, 2008 I go back into the car dealer.
Either the dealer has to sell me the car for about 19,000 + 6,000 in sales tax and take a big loss, or I have to pay him 25,000 + 7500 and I get screwed.
Or we split the difference and BOTH get screwed.Participant“I know a guy that sleeps in the laundry room of a house that he owns. He’s renting out the available rooms just to make the mortgage payment. He makes over $100K per year at his day job.”
– This example is not representative of living standards by any stretch of the imagination. AT 100K, he could afford to rent a 3BR/2BA home in some of the nicer areas of SD @ 3000/month. Your friend is either a victim of bad circumstances (large medical bills ? divorce/alimony?) or poor financial judgment, not a low standard of living.
December 13, 2006 at 2:35 PM in reply to: Secrets of the Federal Reserve – We need to Wake Up! #41626ParticipantAt least the members of the board are US citizens and stakeholders in the decisions they make. I’d rather put my faith in them than the foreign entities that hold our debt.
I believe that the fate of our economy lies in the collective action of all the players. I think too much credit (or blame) is given to the federal reserve board.
As for unaccountable. Don’t these people (at least the chairman) have to be approved by Congress ? If so, they are just as unaccountable as the Supreme Court.
Participantps –
I agree wholeheartedly with your suggested approach in the last paragraph. As opposed to saying “Your home price went down” like the original poster, your approach is more proactive and positive (take advantage of the inflated prices).
Re: “how can real estate go up when the dollar goes down?”
I’ll answer with a couple multiple choice questions :
1. Suppose I have 1 oz of gold. Suppose it’s worth $500. Now assume that over time the dollar is devalued to 1/100th of its current value. What would you pay for the ounce of gold in the future devalued dollars ?
A. $50
B. $500
C. $50,0002. Suppose that the “true” value of a house in San Diego is $200,000 in todays dollars. Now assume that over time the dollar is devalued to 1/100th of its current value. What would you pay for the house in the future devalued dollars ?
A. $200,000
B. $2,000,000
C. $20,000,000ParticipantWhere is the personal responsibility ?
Maybe they should sue their high school economics teacher, or the “media.”ParticipantA consumption tax would presumably tax people who are currently not paying income tax from illegal activities such as drug trafficking. However, the people who buy those drugs are currently paying income tax on the money they spend one drugs. If a purely consumption tax is instituted guess what happens ? Drug purchasers pay no taxes on the legitimate income they use to purchase drugs illegally. Zero Sum Game. Tax is shifted from the consumers of illegal drugs to the purveyors.
Furthermore, a consumption tax is regressive. A family making $50-60K in San Diego likely would have to spend their entire income to survive. Someone making 300K could live on only 150K and save the other 150K. Net effect is that the high wage earner would be paying 1/2 as much (percentage wise) than the low-to-middle income folks.
Although this would be great for stocks, business and investment capital, it’s not likely to be accepted by the American public because we have an entrenched progressive tax code. If we can’t rally support for a flat tax, how could this fly ?
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