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Deidre Woollard, a real estate writer at Motley Fool, talks the about building modular homes in San Francisco, while legendary meteorologist Spenser Christian from Good Morning America and ABC7 talks about the short and long term effects of climate change on business and quality of life.
Episode Transcript
Intro:
Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.
Disclaimer:
The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.
Chip Franklin:
Welcome everybody to practical tax I’m Chip Franklin and of course, Steve Moskowitz here. Steve, let’s just dive right into this and talk a little bit about real estate. I know you know a lot about this. You’ve been in San Francisco forever and you’ve seen this incredible increase in property values. But it has been a tool to help people build wealth and because of the nature of investment in asset, it’s transferability and tremendous effect on lowering income taxes. But the cost of ownership has begun to erode this opportunity, at least a lot of people think for many Americans. Is real estate still a go-to for financial wealth and for protecting your assets?
Steve Moskowitz:
Absolutely traditionally so much wealth has been built through real estate and also the Congress and their infinite wisdom so loves real estate investment. They’ve given all types of special deals to real estate. I could take our whole time just listing all these things. So the bottom line is there’s so much here. And you talk about prices, but that’s okay. You make money with OPM other people’s money. So the bottom line is even if a property goes up in value, so what? You can borrow some money and you know what always happens. Like all businesses, the costs are passed along to the tenants or the other investors and there’s so very much that you can do.
Chip Franklin:
Well, joining us right now is Deidre Woollard. She is a writer. You’ve seen her work on Motley Fool. She’s also a researcher, an editor and she’s obsessed with just about everything real estate from market investment trends, to the housing affordability issue and the latest techniques and something we’re going to get to in modular construction. And she’s so nice to join us right here on the show. Deidre hi, welcome to Practical Tax.
Deidre Woollard:
Thank you. Happy to be here.
Steve Moskowitz:
Thanks so much for joining us. We appreciate it. And our firm’s mostly in tax. We represent individuals, entrepreneurs and small businesses looking to build wealth and generational wealth. And we’ve seen one of the most effective ways to accomplish this is through investing in real estate. This June, we were part of a real estate investing conference and I’m happy to see the strategy mythology and technology that’s evolved, but there’s definitely an air of anticipation with the current economic client. I’d love to get your take on the topic as it applies to real estate investors.
Deidre Woollard:
Yeah, I think there is a little bit of concern. We just got the existing home sales numbers from the NAR, those were down by about 8.6% year over year. So there’s that concern about there being a bubble. I don’t think that’s going to happen, but we are seeing a little bit of resetting and a little bit of concern over what might be coming next. And certainly with interest rates getting to the point where we’re getting close to that 6% mark and I think that is having an impact on how people are feeling about real estate in general right now.
Steve Moskowitz:
Although some people that are old enough could remember when the numbers were at 20%-
Deidre Woollard:
Indeed.
Steve Moskowitz:
… you were just a little girl at the time, but Chip told me all about it.
Chip Franklin:
Well, we all remember that. I bought a home in Washington DC in 1983 for $97,000 and it’s now close to $1,000,000, and you don’t see that kind of growth anywhere else except in real estate. I mean, unless you’re tremendously lucky or have incredible insight.
Steve Moskowitz:
Not to mention the fact Chip, if you buy stock, you can’t live in the stock. With the real estate investment you’re living there and you may be raising a family there and taking care of people there and you have to live someplace anyway, and all these other tax benefits. It’s just such a no-brainer to say real estate is just so favored.
Chip Franklin:
Well, what trends are you seeing with individuals investing in real estate? I mean for example, I know you love to talk about bonds and tips and explain a little bit what those are. I mean, as opposed to people that pool money or rates or things like that.
Deidre Woollard:
Well yeah, there’s so many different ways to invest in real estate. One of the things that I think a lot of people think about real estate investing is traditional single family rentals and multi-family rentals and things like that, and that is still booming. Although there’s less opportunity now, just because things are so expensive. So a lot of people that were looking to get some of those deals and rent out, maybe aren’t seeing as much opportunity as they used to. Although the thing is that rents are so high that it’s evening out, so it’s still a good opportunity, I think for real estate investors all across the country, if they’re doing rentals. But rentals aren’t the only way to do it. There’s REITs of course, there’s private REITs, there’s publicly traded REITs, there’s real estate crowd funding, which is one of the areas that really has been growing. Because people are looking for alternatives from the stock market, especially right now, I think with the stock market being so volatile. People are looking for something that feels a little more stable, and that’s why you see so much private equity going into all kinds of real estate, which is fascinating to watch too.
Chip Franklin:
Steve, let me ask you this and I guess I can ask you this as well Deidre, I have a friend that owns property in Calabasas, but he doesn’t own the land underneath it. It’s a modular home. And the home has a lot of value, but he had some issues with banks and selling it and the people that were buying it. What are some of the other kind of unique challenges in owning real estate and I guess the other one would be as far as buying properties, and you mentioned rentals, especially in the Bay Area, is that still a smart investment to purchase a property and then use it as a rental? How does that affect your taxes Steve?
Steve Moskowitz:
Well you can do something special called cost segregation analysis, which greatly increases your depreciation. So suppose you had a building that brought in $10 million in rent and you had $9 million in expenses, you’ve had a cash profit of $1,000,000. But through tax planning, you can have the most beautiful words in the English language, a positive cash flow with a tax loss. We don’t write a check to depreciation, it’s just an entry we make on the tax return. So what happens with cost segregation analysis? We send an engineer to the property. Because normally depreciation is 39 years for a commercial property, 27 and a half years for residential. That’s a long time to wait. But the engineer goes to the property and he, or she says, “Oh, well this part’s 15 year property and this part’s 10 year property and this part’s five year property and this part we can write off this year.” And it greatly accelerates your depreciation.
So let’s assume that in my example, even though we have a cash profit of $1,000,000 now we have all this extra depreciation and we have a million and a half dollars. So we actually show that we have a loss of a half a million bucks on our property. So we don’t pay any taxes on the million dollars in profit, but suppose this situation is owned by a medical doctor and suppose she’s married to a house husband and let’s assume… Because with a married couple only one person has to qualify. Suppose we can qualify the house husband as a real estate professional, which is easy to do. Now we have an exception to the general rules and let’s assume the good doctor made half a million dollars from her medical practice, she can off offset that half a million in medical practice with this depreciation. So now she and her husband have made a cash profit of a million and a half dollars, but they’re not paying any income taxes on it.
We look at the Fortune 500 all the time. We see these companies make profits in the billions, yet a lot of them aren’t paying any taxes. How could such a thing be? Because the tax system is two purposes, one to collect revenue. We all know that. But the other one is in a democracy, the government can’t order us to do things, even if it’s good for the country, even it’s good for the economy. So how does the government get us to do something which they can’t order us to do? They give us a tax incentive. So there’s so much in real estate and I’ve only teased the surface just with the one thing I’ve talked about with depreciation, we’ve wiped out the cash profit on the rental, we’ve wiped out the profit from the medical practice. And again, this is an exception. If somebody said, “Hey, wait a minute. My accountant said I couldn’t do that.” Remember I was a CPA before I was a tax attorney. This is an exception to the power rules, passive activity, loss rules. This is where one of the spouses qualified as a real estate professional. That’s one of many things and I could go on and on. You know how excited I get about taxes, Chip?
Chip Franklin:
Well, you made a point-
Steve Moskowitz:
Chip and I did radio for years together, so he knows I can get really excited about it.
Chip Franklin:
But you said something that I hadn’t thought about, but in incentivizing, when the government does that, it’s often misunderstood because it’s usually a long term play that helps everybody over a long period of time. And I don’t think they sell it the right way. Do you follow me?
Steve Moskowitz:
Well, here’s the problem. Most people don’t know about these things. That’s why they don’t take advantage of them. Everybody says, “Oh the rich people, they get all the benefits.” The law doesn’t say this is for rich Americans only. The law’s for everybody. But with rich people or substantial people, they have people like our firm that come in and say do this and this and… I mean, you look at anybody. You look at the head of Apple who says he spends a lot of time dealing with the company’s to taxes. That’s true of wealthy individuals, that’s true of big business. It’s there for everybody but most people, like small business people, they’re so busy working they say, “This is terribly unfair.” And as you know Chip, one of the reasons that I switched from being a CPA to be a tax attorney, unfortunately there’s too many CPAs that go ahead and just fill in the boxes, give me your numbers and here’s your tax return. And I say, “Wait a minute, let’s do tax paying.” Like we talked about with cost segregation. And there’s other things we can do too. There’s so much, I don’t know if we have time to talk about other tax savings in real estate, but if we do, I can tell you. Or we can do it on another podcast.
Chip Franklin:
Well, I mean, there’s always going to be room for that to talk about. Let me ask both of you this about in California, there’s a lot of foreign investment and it makes it really difficult for a lot of people to buy a home because a lot of the people are coming in with cash. How do people compete with that? And is there a long term play here that’s that’s bad for our economy?
Deidre Woollard:
Yeah. That’s something I’ve been studying a lot. I mean, we’re seeing less at the foreign investment but we’ve seen a lot of cash players. Sometimes it’s investors that are buying, that aren’t necessarily foreign. So there are a couple of startups that have started to do things that have help you make an offer that’s like cash. Sometimes they do that by using the equity you have in another property or something like that or some loan. So there are a lot of different ways to get around that but one of the things that I’m watching, is that maybe there’s going to be a little bit less competition going forward just because the market is slowing. So that might be a good opportunity because you’re absolutely right, a lot of first time home buyers have really been fighting against those cash offers and losing a lot of the time.
Chip Franklin:
You know a lot about modular housing Deidre. Right?
Deidre Woollard:
Mm-hmm.
Chip Franklin:
And Steve, I want you to comment on that too. Does that offer the same sort of tax benefits as purchasing a regular home? Are there any downsides to that? Deidre, explain what it is first maybe.
Deidre Woollard:
Yeah. There are some downsides to it unfortunately. Hopefully that will change because I think we’ve got a huge housing problem in this country, and one of the ways that we can solve it is through modular housing. It’s one of the reasons it’s in The White House’s latest housing plan. But a modular house, it depends on the location and it definitely depends state by state, there are different rules. So you definitely have to do your research on this. But depending on where you are, whether it’s classified as real property or whether it’s basically characterized as a mobile home is really important because that ties into things like depreciation and what Steve was talking about. So if it’s categorized as not being attached to the property, then it may not qualify for some of the benefits of being real estate essentially.
Chip Franklin:
Steve, we’ve got an email from a listener who wants to ask a question about, do I pay my mortgage off or do I keep a mortgage for tax reasons? And does it depend on where you are-
Steve Moskowitz:
Oh, that’s easy one. We have a lawyer’s answer. It depends. So we take a look, what’s the mortgage interest rate and if you continue to pay the mortgage and invested that money in something else, what would your rate to return be? So suppose your house mortgage was 3% interest and you could have an investment and get 10% interest. Basically what you did is you borrowed three to make 10, so you benefited by seven.
Chip Franklin:
But it also depends on the people and what they’re comfortable with too. I mean, some people. Right?
Steve Moskowitz:
People get in trouble with that one because traditionally, it was a big deal to own your own home free and clear. People would have these big mortgage burning parties, it was such an event in their life. They didn’t have the mortgage, they didn’t have to worry they’re going to be thrown in the street. They owned the home, they could live there forever. And that’s great but a lot of times people will get some windfall of money. They’ll pay off the mortgage and then they’ll come to us and say, “Oh my God, I can’t pay my taxes.” And they worry about losing their house. So again, I’m not saying to never pay off the mortgage, but like any… Think of it like investments, there’s an unlimited number of investments you have to choose. So you want to choose here, what’s my benefit and what’s my return and then you make the decision. And also you have to watch out for cash and liquidity and what else could I do with my money. Not to mention risk of course, because I mentioned the 10% return. We didn’t talk about well, how risky is it? If there’s a high probability of risk, well maybe you don’t want to do that. On the other hand, maybe there’s a lower risk at 5%, you’re still making 2%.
Chip Franklin:
Interesting. You mentioned bubbles earlier Deidre. Michael Burry, Big Short fan for people that don’t remember, he was played by Christian Bale. And of course, he put together the first credit default swaps deal and made his hedge fund billions. He’s now saying the S&P is going to drop by 50% over the next few years and people should be worried. And it’s very similar to what happened in ’08, ’09. You mentioned housing bubbles, and how will that, if my house goes down in value, what are the tax ramifications of that? But before you answer that Steve, what are the signs of a bubble and what do we look for Deidre?
Deidre Woollard:
Well, I think this is such a different situation than we saw in ’08 and ’09, partly because of inventory. But there are some things that worry me. Are certain housing markets overvalued? I would say yes. I would say some of the same ones that we saw being overvalued during the great financial crisis. I’m looking at Phoenix, Las Vegas, parts of Florida, Austin, Texas is starting to worry me, even though everyone’s moving there. So there are signs that we’ve been overvalued-
Steve Moskowitz:
[inaudible 00:16:46] taxes.
Deidre Woollard:
Yeah. That’s good point. Same with Florida. So there are signs of an overvalued market, but I don’t think that’s the same as a housing bubble because we’ve got such low inventory and I don’t think we are in that situation where we have those subprime loans either. Although I am starting to see an increase in adjustable rate mortgages as interest rates go up, and that’s starting to worry me a little bit.
Chip Franklin:
Yeah. I mean, people are still having to put down… I mean, the ninja thing. No income, no job. We’re not at that point, but it’s very worrisome. I know that we have the non-QM loans now, which generally seem pretty sound. But you wonder if you turn your back to those guys… Steve, if my home lost value but it’s still worth more than I paid for it, is there a break for me there in the taxes?
Steve Moskowitz:
It’s not a break. You would make less profit and therefore you’d pay less taxes, but I don’t call that a break.
Chip Franklin:
No, that’s not a break. All right. Deidre, thank you so much. At the end of our video podcast today, we’ll put all the information down there. So if people want to contact you and find out more and I would recommend they read your stuff, we didn’t even get to talk about… I’ve read your piece on Tesla. I thought that was great. Really good stuff. And I look forward to talking to you again real soon. Okay?
Steve Moskowitz:
And a pleasure to meet you.
Deidre Woollard:
All right. Thank you so much.
Chip Franklin:
Thank you. That was great Steve. Real estate is one of those things and you have such a great handle on all that. We’re also going to talk in just a couple minutes here about criminal penalties for people. Well, you know a lot about this and people are about to hear it. What happens to you if you decide I’m just going to stop paying my taxes? Not a good idea.
Steve Moskowitz:
You get free room and board.
Chip Franklin:
Yeah. All right.
Steve Moskowitz:
A question we’re frequently asked is people are very concerned, are they going to federal or state prison? Let’s understand what a criminal case is and it comes in many ways. A very common way is that somebody goes to a routine civil audit and the auditor thinks that what the person has done has risen to the level of criminal tax fraud. There’s a difference. There’s civil tax fraud, there’s criminal tax fraud. What’s the difference? The borderline is not so well defined. The borderline is essentially somebody’s opinion that you’ve done something that is deserving of a criminal punishment. And sometimes the first notice you’ll get is an actual raid. People with guns and badges will show up at your door and spend a day in your house, searching your records, your possessions and carrying away your computers, your phones, your tablets and your records. It’s very upsetting to anyone.
And what happens in a criminal case? The agents, they’re called special agents, they have gold badges and their armed. They should warn you of your right to remain silent and then they will ask you questions. Silence is golden. You have no duty to speak to them, ever. That’s also true in a criminal trial, you never have a duty to speak and certainly you have no duty to testify against yourself. Whether or not you want to explain because people’s natural inclination is no, I want to explain. You can have that opportunity, but that should be under a controlled circumstance with your attorney. Well, that’s a big decision. Do you give up your right to remain silent? And before you do that, we need to talk to the government and see if we give up that very valuable right, what will they give us in exchange? For example, will they agree to drop the criminal case and only pursue them civilly?
Because when you have a criminal case, you’re also going to follow that with a civil case. No one wants to go to prison, but you also don’t want to go to poor house either. And the cases will be interrelated. And anything the government gets in the criminal case can and will be used against you in the civil case. And then you decide what you want to do. There’s all kinds of criminal charges from not filing a tax return, even not paying the tax, making a false statement. Example of that would be you say something to an auditor and that order says, “no, I think you’re lying to me.” Or what you’ve actually done on the return. And in a criminal case, there’s a lot of negotiation. The first negotiation is will the government kick the case? That’s our slang term for dismissing it or not filing it to begin with.
Because what happens, most criminal cases start with CID, Criminal Investigation Division. They’re basically detectives, investigators. And at the end of their work, they’ll do one of two things. They’ll either kick the case and it’s over or they will refer it to Washington DC, where the government will take a look at it and you have a right to be represented. And then if the government decides to go further, they send it back to your local area. For example, here in San Francisco would be to the AUSA Assistant United States Attorney, here in San Francisco for prosecution. Then your attorney would meet with the government attorneys. And the first thing you do is say, “Can we resolve this civilly? Can you kick the case?” If they can, that’s wonderful. If not, you begin negotiations. Is there something you can plead to? And in the federal area, there’s something called the mandatory minimum sentencing guidelines.
And what that is in English is unless the judge is willing to depart from it, is certain things that you’ve done require certain punishments. For example, the first level is between zero and six months of imprisonment. It goes up from there and it can go up for a long time. And these are things you negotiate. Are you going to make it easy on them or hard on them? That is a crucial decision. So you have to be very familiar with your case and try to determine what do you think is the most likely outcome? Do you want to go ahead and plead away these valuable rights or do you want to have a trial? And everything in between is going to be part of those negotiations and you can settle a case anytime up to and including when the jury is out considering it. However, essentially the longer you wait to settle, usually the less the government is willing to settle.
Because they’ve invested more. They’ve invested a lot of time in prosecuting you and they’re less likely to trade something away. You have the rest of your life at stake here because you have to remember, if you go ahead and plead to something, you could wind up being a felon for the rest of your life. And if that’s the course you take, if you have a professional license, like a doctor, lawyer, certain things you plead to which you’ll lose your license. There’s other things you can plead to where you won’t lose your license. And that’s a major decision you want to make when you decide, do you want to plead or do you want to put your fate in the hands of a jury? Now bear in mind if all the jurors come back and find you not guilty, that’s it. You’re done here. On the other hand, if as much as one juror says, “I’m not sure.” You’d have a mistrial and then you hope that the government wouldn’t retry you. So these are major decisions that you’d want to make. And you want to make them early on in your case and take the case along those lines.
Chip Franklin:
Yeah. Well, that’s definitely a good thing to remember. And Steve will tell you all about that, you don’t want that free room and board. You want to pay your taxes. And of course Steve just to sum it all up, you guys can help almost anybody who has neglected to pay taxes over a few years, but they got to come to you first.
Steve Moskowitz:
It’s like a medical problem. Medical problem starts out and you ignore it, and it gets worse and worse. And the doctor could do so much for you. The doctor will always help you no matter what stage you come in, but it’s how much medicine does he or she have to prescribe what has to be done. And basically what happens is the best thing is as soon as you have the tax problem, come to us. And Chip, in most cases we can go to the government and we can make a really good deal that everybody can live with. And what happens where you see the extremes, are people ignore it or maybe string the agent along or even worse, maybe lie to them, which is very bad because making a false statement is a crime. It’s a felony.
Chip Franklin:
And you should talk to them. They should never speak to the IRS, you should speak on their behalf.
Steve Moskowitz:
In my entire career I’ve always said to clients, “We’ll speak for you.” There’s nothing you can do. It’s like being awake during a medical operation. You’re really not going to help the surgeon by being awake and you might really cause some problem.
Chip Franklin:
All right. Our next guest is a face that you guys are all familiar with, you’ve been seeing him over the years. And it’s interesting because we talk a lot about the weather and we saw in the city of paradise, which disappeared because of effects that are directly related to the weather. And there was a lot of relief and a lot of issues that you dealt with at that time. Joining us right now is a former Good Morning America meteorologist and currently see him every night, ABC7 Spencer Christian. Spencer, great to see your face again my friend and thank you for with us.
Spencer Christian:
Hey. Good to be with you Chip and Steve, hello.
Steve Moskowitz:
Thanks, sir. It’s great to see again. I remember when I was a guest on your station and you were so gracious to me. Thank you so much.
Spencer Christian:
I appreciate that. Well, thank you. It’s good to join you guys. Thanks for including me on this program.
Steve Moskowitz:
Hey, if you get to talk about taxes, what greater fun in life is there?
Spencer Christian:
Well, right now the weather is quite taxing because-
Steve Moskowitz:
I like it.
Chip Franklin:
You both have something in common. You both talk about something that most people don’t fully understand why it happens and the degree that it can affect our lives. There is that parallel to that. But there is also a knowledge base that can help you through both. Whether it’s getting in a basement or a tornado or and we’ll talk about this in a little bit later, about solar panels and how that offers… So since the weather does play a big part in our financial state and our future, in both the global and local economy. Things like food production and flood insurance, energy needs, carbon footprints and of course, tax policy and regulations exist to simulate or in some cases, to I guess disincentivize investments in the economy or give relief when national disasters happen. What changes to our weather can we expect over the next few decades and how profound will these be?
Spencer Christian:
Well, first of all Chip, you really hit the nail on the head about whether having a profound influence on our economy, beyond what the average person may think about every day. But since we have entered this period of daily evidence of global warming and it’s effect on changing our climatic patterns, it’s going to have an even more noticeable effect on the economy. We can expect over the next few years to have more extreme weather events, more severe storms, more tropical systems, more extended periods of drought, more frequent thunderstorms and tornadoes, which we’ve seen the last couple of years. We’ve had record numbers of tornadoes across the US. And these extreme events are not only going to be occurring more frequently, but they’re going to be a longer duration than the typical thunderstorms we used to have, well not here in the Bay Area, but the other parts of the country years ago.
The heat waves, they’re going to last longer. The jet streams because of the ocean warming has shifted a little bit to the north. It doesn’t tend to dip as far to the south as it used to. So that’s one of the reasons here in Northern California, we’re not getting the typical winter rains we used to get. So the effects of weather are profound on every facet of the economy. Trucking and shipping and all kinds of commercialism.
Chip Franklin:
Our economies. In fact, isn’t it amazing Steve, that when we hear about how a fire is changing the weather, it creates its own weather right?
Steve Moskowitz:
Right.
Chip Franklin:
How does that work?
Spencer Christian:
So as the fire grows, the heat is rapidly rising and it really creates these big wildfires. They create a microclimate of their own. They’re constantly sucking in oxygen at the base of the fire to fuel the fire if you will. And so that creates strong wind drafts around the area of the fire. It changes the wind circulation and of course, it pollutes the air and puts all this particulate matter into the atmosphere that can travel, as we have seen in recent years, all the way across this continent and across the Atlantic Ocean and into Europe. And of course, that’s a great concern. Everything about this period that we’re in right now with the increased wildfires and the effect on air quality is reason for great concern. And I wish governments and in global institutions and corporations around the world would take it more seriously and invest more in trying to mitigate the effects.
Chip Franklin:
All right. Speaking of investments Steve, let me ask you this question. How can people prepare for these changes financially? I know that when those fires were happening up in the north, you were dealing with a lot of people, helping them get the kind of relief they needed. How did that process work?
Steve Moskowitz:
It worked out well because we’re dealing with a combination of insurance companies and also the taxes to make up for what the insurance companies missed out on. And also as far as investing goes, if you can get an accurate prediction of the weather that can actually affect your investments. For example, if you knew a certain area of the country was going to get much hotter over the years, you might want to consider if you had properties, selling it there because maybe some people don’t want to live in an area that’s that hot. And I realize that there’s air conditioning and I realize a lot of hot areas are very well populated. But even now, you take a look at some of these temperatures where they’re going and you say well, what happens if it goes a little more? And the fires? So the bottom line is that can affect investments and now we’re affecting property.
All of a sudden, that’s a major… Look at your house, that one investment alone, your house dropping in value. That’s a lot of people’s retirement. What are they going to do? Or if they’re investing in real estate, all of a sudden your investment can drop or get a lot better because you’re in an area that’s a better area. People want to go there. So when people consider moving, one of the considerations is the weather, not just for personal comfort but certain medical conditions, with the allergies and other things. You don’t want to be miserable or drugged up all the time. So you mean I could just move and get rid of all these miseries? Yeah, they’ll go.
Spencer Christian:
That’s a hugely important point Steve, about how weather affects the value of our property with the heat you mentioned of course, and the air quality, also rising sea levels. There are coastal areas now where the property values are likely decline over the next few years because of these rising sea levels and the threat of devastating flooding.
Chip Franklin:
Steve, if you’d make alterations to your home that make it more energy efficient and thus don’t contribute to more of a carbon footprint, are we moving towards tax incentives? Again, we talked about incentivization, I can never say that word, that the government offers. They did it with solar panels, but then it seemed like that fell off. I know I got in early on that, living in Southern California. Where does that all stand right now?
Steve Moskowitz:
What happens is sometimes the government jumps in and does something, then they lose interest and it fades away, in which you’re talking about they faded away because you got a less and less. The big push was go ahead and do it now before the percentage drops. But what happens is once again, the government has to incentivize people. It’s like look at the car makers or saying, “Hey, you know what? Be more generous with the tax benefits for the electric vehicles.” And all of the Congress people have to do is make some agreement, which isn’t the easiest thing for them today. And say, “All right, we incentivize this.” And all of a sudden you change everything because everything is interrelated, it’s like a Swiss watch. You mess with one little gear and it affects the whole watch. Well, you understand that with a watch, you can always get another watch but you can’t get another planet.
Chip Franklin:
No. Yeah. And in the end, it’s funny. We look at investments as being something that’s strictly on a piece of paper, but it impacts our way of life.
Steve Moskowitz:
It’s not just a piece of paper, it’s your life.
Chip Franklin:
Right.
Steve Moskowitz:
It’s down to the food you eat, the place you live, the clothes you wear, your healthcare, how your kids go to school, it affects everything. When people think about money and investments, sometimes you’ll see a portrayal in the movies. Some nasty, very wealthy person, he’s foreclosing on little now. But the bottom line is most people, the 99% that are making an investment for a normal life, this is going to affect their whole lives. It’s an incredibly big deal. And this is what I call, not the characters you see in the movies, normal people and how they live their lives and how their families live their lives.
Chip Franklin:
There’s one last question here but before we get to that, I want to talk real quick about the idea of investment again. So I bought a Tesla and I have solar panels, I’m not buying gas right now, which is great. But I did it before the latest current situation where we’re paying $7 a gallon. It seems to me Steve, that this is a tremendous opportunity right now. And there’s always opportunity in crisis. There’s always a ch an opportunity for us-
Steve Moskowitz:
There is but what you have to watch out for is getting in at the right time, because where the big bucks are made is when you get in at the beginning, and this is basic economics. Because all of a sudden, some visionary says, “I see if I do this, I can do something.” And they can make incredible money with their investments. And then basic economics, a whole bunch of people flood in and all of a sudden the opportunities for them become less and less until at the very end, there’s a glut of people. Look at the Alaskan pipeline when it first went up, people were being paid incredible amount of money to move to Alaska to be a dishwasher, literally. Because it was such horrible conditions that the companies would pay an outrageous sum just to wash dishes. And then the cruise went there and more and more people went there. Finally partly say, “Stop coming here. We have too many guys. You won’t be able to find a job.” That’s what happens with most investments.
Chip Franklin:
All right, last question. And this is one that everybody wants to know that’s ever visited San Francisco or even the people that continue to live here. Why is it so cold in the summer?
Spencer Christian:
So basically, we have these passes, these gaps along our coastal mountain range. And so in the summer when the Central Valley, the Central part of California heats up really severely, it’s very common every day to see triple digit temperatures. Essentially, as that hot air is rising so rapidly, it’s literally sucking in the cooler marine air from the coast that’s coming in through through those gaps in our coastal mountain range, and that brings in the not only cooler air but brings in more humid air because the moisture over that cooler air is condensing. That brings in the fog. Karl The Fog, as we know it here in San Francisco. So it’s a pretty common occurrence during the summer to see clear sunny skies throughout most of the day, but as it gets later in the afternoon into the early evening, as the sun gets a little lower in the sky, and you see that fog rolling in and cooling off the coastal areas and a lot of the locations right around the Bay shoreline. But the cool air doesn’t frequently reach the inland areas, which are the hottest-
Chip Franklin:
No.
Steve Moskowitz:
And I’m going to help out Spencer with the weather, and I’m sure he’ll appreciate my view on this. The other reason why Chip is because Mark Twain said so.
Chip Franklin:
No. You know what? He didn’t say that. That’s another thing I want to say. He’s often credited for that. I did a little research on it before the show and they said, “He probably didn’t say it.” But it’s like one of those things like Ben Franklin didn’t say half the things he said either. What is the biggest discrepancy you guys have ever heard from the city and then someplace in the Bay Area. And I’ll say, once it was 97°F in Lafayette and I got into the city it was 52°F. That’s insane.
Spencer Christian:
Yeah, I remember the day Chip and Steve, when the high in a place like say Antioch or Livermore was a 102°F, 104°F, and then you’d drive into the city and it’s about 68°F in San Francisco.
Steve Moskowitz:
We would see that in the office where somebody would come in from those locations that lived out there and they were just in some tiny little clothes and then they got and they saying, “Oh my God, it’s freezing here. Where am I? It was over a hundred degrees where I left and now I’m freezing. Where’s my ice skates?”
Chip Franklin:
Well Spencer, thank you so much. We’ll be looking for you tonight and of course Monday through Friday. Again, you do such a great job.
Steve Moskowitz:
Thanks Spencer. It was great working with you again.
Spencer Christian:
Great to see you Steve.
Chip Franklin:
Always good to have you here.
Spencer Christian:
Thank you too Chip. Thanks guys.
Chip Franklin:
Thank you buddy. Bye-bye. Again, that’s Spencer Christian from ABC7. Check them out tonight, to give you the weather. Steve, great show my friend. Everybody, you can follow these, you can find these on YouTube. You can go to Moskowitzllp.com and send us emails too as well. You be well, we’ll talk to you guys next time. Next edition of Practical Tax.
Outro:
Thanks for joining us on the Practical Tax podcast with tax attorney Steve Moskowitz. To hear more and view more podcasts, go to moskowitzllp.com/practicaltax.