I had a talk about the reasons why you can't afford not to engage in the world of IRAs last February 21,2023 and asked anyone from the audience to give an example of a transaction they did and tell me how much they bought it for and how much they sold it for any non IRA deal.
One got a deal in Georgia, and it was a HUD acquisition of $55,000. The renovation cost $15,000. They borrowed right at $60,000.
It was sold for $98,000 and it took about ten months time to finish closing it out and the person who bought it used cash rather than their IRA.
Which leads to the questions:
How many tax dollars?
What was the taxable event?
How much was it for after concession and stuff like that?
The answer would be right at 20. $20,000 is the number.
So how many tax dollars are due for for a $20,000 taxable event?
How much term capital gain? Short term capital gain? So short term capital gains being less than one year means it's taxed at the same rate as ordinary income . It's still capital gains, but at the same rate as ordinary income.
So if you're in the 37% bracket, not including state taxes, then it would be 37%. 37% of that amount would be around $7,400.
That money just went off and went to the US government who might just waste it. Sorry.
Please bear with me on this because this gives a dramatic picture.
What schedule of your 1040 should that gain hit? That one should be on D unless you did enough of them to have a business. By the way, the more you know about your taxable events, the more you will appreciate IRAs. So could you have done that transaction with an IRA?
So that was a $7,400 seminar right there.
Tom Olson, who was one of the audience, have seen this many times, but I want to show him the power of that.
Let's say you got the choice between taking $1,000,000 today or a penny that doubles every day for 30 days.
What do you want?
I don't know. I like that million dollars. Why not?
It's right here in my hand today. So if you do the math on it, the penny at the end of 30 days is worth $5,368,709.12. The penny is the right choice.
The doubling makes the difference.
But, what if you're going to do all this wealth building outside an IRA?
If you had to pay 30% tax every time it doubled. You see what that number is?
And that's taxed at 30%. Would it really be taxed at more than 30%?
Not in the first 30 days. Not in the first few days but eventually it gets to the top tax rate and your blended rate would be a lot more than 30%, I would guess.
The point I'm trying to make is you've got to do this, guys!
Or see it's the same amount of effort.
You could have done that just as easily with a financial friend tax free. But you didn't do it tax free, did you? So, you see what the difference is.
Everything is the difference.
It's like hey, that's amazing, isn't it? And we don't realize that we think about we're getting good at buying and selling all the wholesalers. You know, I sold two a week for ten years, running off a big deal. That's the highest tax activity you can do and it just literally guts you. And so you got the point.