Sandy Botkin - Real Estate Tax Secrets of the Rich: Big-Time Tax Advantages of Buying, Selling, and Owning Real Estate

Copyright 2007 by Sandy Botkin. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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I dedicate this book to my wife, Lori, and my children, Jeremy, Matthew, and Allison, for their endless patience and sense of wonder and playfulness, and to my students, who helped craft this work with feedback and suggestions. I thank Jim Piccalo for letting me test my programs with his real estate school, and I thank Pat Quinlin, my personal editor, who significantly helped in the edits of the manuscript. I also thank Sally Glover and Mary Glenn, my editors at McGraw-Hill, for their input and timely suggestions.

There were numerous other folks who provided suggestions for this book. I thank Howard Kaplan, attorney at law in Omaha, Nebraska; Debbie Spoons of Tax Sentinel I; The Manhattan Tax Club; and Mike Sampson, Professor of Taxation at American University, for their reviews of this book.

I also want to specifically thank Allison Botkin for her timely edits of all cartoons and illustrations contained in this book.

Finally, I want to dedicate this book to the U.S. Congress, which makes this work not only possible, but necessary.

Historically, real estate has been one of the greatest tax shelters in the United States. A solid knowledge of real estate taxation can increase most peoples rate of return on their homes and investment property by 10 percent to 20 percent per yearno kidding! During years when real estate doesnt appreciate (which happens in all areas), tax benefits may be your only return on investment.

Sadly, many terrific tax-planning techniques that the wealthy have been using for years are not known by most people. Most real estate books currently on the market dont have this information.

Now youll learn what the rich have been doing for decades regarding real estate. All strategies are footnoted to the Internal Revenue Code (IRC), IRS Regulations (REGS), IRS rulings, and case law. Your accountant can check out everything quickly for validity. This book is based on my course, Wealth-Building Real Estate Tax Strategies, which I have been presenting nationwide for many years and is available on my Web site: www.taxreductioninstitute.com .

After reading this book, you may wonder why you werent aware of this information years ago. There are several myths that cause overpayment of taxes and lost deductions.

Myth 1: My accountant takes care of my taxes/my spouse takes care of our taxes. These seven words impoverish more people than any other myth. Its like saying My doctor takes care of my body. Wouldnt it be great if we never had to exercise, could eat all the fattening foods we wanted, and once a year go to our doctor for a Roto-Rooter job? The point is that the tax savings your accountant can find for you are small compared to what you can save if you are pursuing your own tax strategies. If you dont know what to tell your accountant and dont have the tax strategies in place, you will lose thousands of dollars in deductions and write-offs.

Myth 2: I didnt make a lot of money this year, so I dont need to know about tax planning. This is absolutely false. If you own investment property or a home, you have access to the last great tax shelters in this country: your own business and real estate. Interestingly, if your investment real estate creates a loss, you can usually use a portion or even all of that loss against any form of other income such as dividends, rents, wages, and gains if you plan correctly and meet certain tests.

Example: Richard and Mary earned $80,000 in salary but had investment real estate that generated a $10,000 loss deduction. If they are considered active investors (which I will describe later in this book), they may use this $10,000 loss against their $80,000 salary, giving them a net taxable income of $70,000.