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George Nagle is a former Global Executive Director of Marketing with responsibility for a portfolio of over $352 million. He’s joined by Personal Injury Attorney Gregg Goldfarb who discusses where injury and taxes intersect.
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:
Well, welcome to another edition of Practical Tax with tax attorney Steve Moskowitz. Steve, it seems that every week we have a couple guests on, and we’re always trying to find a way to help viewers and listeners understand taxes. And as you’ve said so many times, and so well, taxes are a part of our life. As Ben Franklin once said, that and death are unavoidable. But it is unique the way that we find that they do come into our lives.
Steve Moskowitz:
It really affects every aspect of our lives, because money is so important. It affects, literally, the food you eat, the place you live, how you-
Chip Franklin:
Stress? Yeah, try not having any of it.
Steve Moskowitz:
That’s when it’s a real problem.
Chip Franklin:
Yeah.
Steve Moskowitz:
And taxes wants to take a big chunk of that away from you. So the amount you pay is directly going to affect not only your life, but how your family lives as well.
Chip Franklin:
Well, let’s just jump into our first guest. Again, that’s Steve Moskowitz. I’m Chip Franklin. This is George Nagle. He’s a former global executive director of marketing. His portfolio had a responsibility of over 352 million, and he used a lot of creative innovative ways in a business to drive profit and loss. And we’re always interested in profit loss, right?
Steve Moskowitz:
Absolutely.
Chip Franklin:
Yeah. Joining us right now is Mr. Nagle. Hi, George. Where are you right now? What part of the world?
George Nagle:
Hi. So I’m out of Lansing, Michigan, so the state capital here in the wonderful state of Michigan.
Chip Franklin:
Great state, yeah. Let’s talk about this right out of the get-go, and talk a little bit about the idea of profit and loss, and how-
Steve Moskowitz:
I prefer profit.
Chip Franklin:
Right, right. Although it’s nice to have losses on paper at the end of the year as well.
Steve Moskowitz:
The sweetest thing in life is a positive cash flow with a tax loss. Now you’re talking my language, Chip.
Chip Franklin:
Let’s talk a little bit about … this goes back decades … but the idea of positive thinking, and the other one too, thinking outside of the box. When you hear that phrase, I’m kind of curious from both of you … Let me start with you, George. What does that make you think of when you think of thinking outside the box? What does that mean to you?
George Nagle:
So to me, that really means that people recognize that they may be a little stagnant and they feel a need for change. And Chip, the funny part about that is when you say that to people, they’re like, “Yeah, yeah, we need to change.” And then as soon as I say to them, “Great, who’s going to change first?” Dead silence. And a lot of that comes down to … When organizations are usually saying that, what they are lacking isn’t necessarily a need for change; it’s a need for better execution within the field that they already play in, and then they can bring in some different thinking, some breakthrough thinking, not necessarily thinking outside of their box. Because, Chip and Steve, the best present you can ever give a kid is a box, because they can make it anything that they want, and companies miss that. You can make your box whatever you want it to be. You don’t have to be outside of it. As a matter of fact, being inside of it gives you structure and allows you to execute.
Chip Franklin:
Yeah. Steve, what do you think? That’s a really interesting point. What’s your take on that phrase?
Steve Moskowitz:
That’s so important, because the whole idea of being an entrepreneur is you think things up. If you’re in a box, somebody already did that; there’s really not any money in it. Thinking outside the box, when you think of something that somebody doesn’t, that’s where you make the money. And how many times have you heard a friend … somebody thinks up something simple. When you and I were infants, the pet rock came out, and how many people came out and said, “Oh, why didn’t I think of that? My God, you take this little stone and people are paying you so much money for it.” Because nobody else thought about it. And when you go to business school, they don’t teach you, “Create a pet rock.” That’s creative; that’s outside the box.
Chip Franklin:
Well, remember Jackson Pollock, who put just that white frame up with nothing on it? And he goes, “More people talked about that than all of my works combined,” and that was the point. So, that’s truly outside. And as a writer, if you told me to write 2000 words, I have the freedom now, because I know where I can start, where I begin, and how much is there. Speaking of numbers, when you’re talking about this innovative way of thinking, Steve, how often does that happen in your practice, that somebody comes in and you see a brand new way that they can go with their income, their investments? Is that a common occurrence for people who come in [inaudible 00:05:08]?
Steve Moskowitz:
It is. And what I’d say is, it’s not that I think up something new for each new client, but a lot of the things we do, the clients and their advisors never heard of it. So I’m doing something new for this client that I’ve done for a lot of others, and that’s why I became a tax attorney after I was already a practicing CPA, because I wanted to say, “Hey, if you do X instead of Y, you can really save a lot on taxes.” Look at the Fortune 500.
Chip Franklin:
Yeah. George, you’ve launched products in difficult times. It looks like we’re in and headed for maybe possibly some more difficult times. Another bad day in the market this morning, and I don’t know how much that … It reminds me of 1978 when the stagflation … We have the beginning of a recession, but we still have inflation. When you’re going to launch something in a market like that, what are some of the challenges in the way you think and the way you approach that kind of period in this kind of time?
George Nagle:
So, there’s two setups to that. So, the first setup is what many companies currently do. They see that, they start to look at where their costs are, and then they’ll start to look at where their people are and try to reassess and spread them out and get a little bit thinner so that they’re taking a defensive stance to whatever’s coming. The other side of that, which is just some different approach or a different way to think about it, is instead of doing that, get into conversations with customers who are doing that. Find where they actually have value. And a lot of companies, Chip, will talk about how they do VOC, and they really don’t. They just don’t do it right. But when you can get to that value and bring them in as part of what you are creating … and I don’t mean just an ancillary phone call, I mean literally bring them in … and get them excited, you’ll have orders on the books before you ever launch, and then you don’t have to worry about what the market’s doing because you just created a new one.
Chip Franklin:
And that’s funny, because this next question, Steve, is right down your bailiwick, which is, are there innovative ways to use capital to grow, or protect it in times that we might be-
Steve Moskowitz:
Oh, absolutely. And I remember an old story about a real estate agent who said they took all their capital … brand new real estate agent, they were starting out in business … and she spent it all on a fancy car. People said, “You spent all your money on a fancy car. What’s wrong with you?” And she said, “I have to show the clients that I’m successful.” And in her particular case, she became very successful and that worked for her. Or look at Mary Kay in her pink Cadillacs, or other things. And again, what you’re trying to do is distinguish yourself. What ever sold you when a person came to you and said, “Hi Chip, I’m just like everybody else”?
“Okay, what do you have to offer me?” As opposed to, “Hi Chip, I have something better for you than all the other people are offering you.”
Chip Franklin:
Let me ask you guys, what do you think of this thought? Because this is kind of where I’ve come to in my life. I don’t trust easy. I had a friend that was just telling me about a stock the other day, and it looks like in a perfect position to buy, and everybody’s saying, “This is it.” And my radar automatically flips on when … If somebody tells me something incredibly difficult, but they say, “If you achieve it, you’ll gain a reward,” that I can trust. And in both your guys’ fields, it seems to me that trust is such a big part of this. You’re messaging innovative ways for people to grow. And in the word “innovative,” obviously, nothing’s new, but some things have a new coat of paint. For both of you, do you kind of subscribe to the thing that when somebody says, “It’s easy,” your radar should go up? Ask you first, George.
George Nagle:
So absolutely if I hear the word “easy,” my radar is just off the roof, because I need to make the distinction between something being simple and something being easy. Simple concepts are often the most difficult to execute, and that’s where people get hung up, is on the execution of any idea. But if somebody says, “Oh no, this is really easy,” why is it easy? And if it’s so easy, then why isn’t everybody else doing it? And if they are, well, that’s called commodity play eventually, and you’re not getting the margins and the higher revenue, you’re not getting that cash flow … right, Steve? … that is so attractive, that comes with something that’s a little bit more of a challenge, something that’s difficult, something that brings real value to people, because nobody wants the same old, same old.
Steve Moskowitz:
So what I’ve always said is, if it’s easy, there’s no money in it.
Chip Franklin:
That’s true. One of the things I’ve always loved about … and especially right now, having you two guys together … It would seem that you were in different camps, but in fact, the idea of getting people excited about the possibilities of where they are in life. I got a 401k going when I was 20 years old. My mother made me save money. Every time I got paid for something, I had to take 10% out and put it away. That was hard. It was difficult and I didn’t fully understand it, but I trusted her. Steve, I’m sure you’ve had that conversation with people before in difficult times. You’ve had people in your office, I’m sure, that maybe didn’t want to give their name at first, but that’s the benefit of a tax attorney.
Steve Moskowitz:
Oh, absolutely. And trust is something extremely valuable. It has to be earned. And like everything else, would you want to do anything with somebody you didn’t trust? ‘Cause well then, if you don’t trust him, he’s going to cheat you, cause you harm, and there’s all kinds of problems. On the other hand, what’s the ultimate trust? Having surgery, where you say, “Okay, put me to sleep and then take a knife and cut into me.” That’s the ultimate trust.
Chip Franklin:
George, the next time we have you on the show … I’m trying to get Steve to write a book, not just based on his acumen, but his stories and his thoughts on a lot of things that I think that would be valuable for people to know. I see some of your books in the background. Which one can we tell people to check out right now, that’s emblematic of how you believe and where you’re headed?
George Nagle:
Well, so fortunately for me, the four books behind me, three of them are actually composite to one of the books. So it’s the Breakthrough Thinking series, and it talks about a lot of different concepts that, again, are going to sound simple but are extremely difficult to execute, and that’s where the value really brings. [inaudible 00:12:19]
Chip Franklin:
What Steve said. There’s no money in “easy.”
George Nagle:
He is absolutely right.
Chip Franklin:
All right. George, thank you so much. Will you come back again with us, please?
George Nagle:
Absolutely. Steve, Chip, I appreciate the time. Great conversation.
Chip Franklin:
All right, and now-
Steve Moskowitz:
We appreciate it. Thanks so much.
Chip Franklin:
And we’ll get your link out as well, and I’ll have a copy of the show so you can see it. And thank you so much, we really appreciate your time.
George Nagle:
Thank you. [inaudible 00:12:40]
Chip Franklin:
Bye.
Steve Moskowitz:
Bye-bye.
Chip Franklin:
Now it’s time for Ask a Tax Attorney. Are tax agents, IRS agents … Are they really armed? Do they really carry guns?
Steve Moskowitz:
Only the criminal agents.
Chip Franklin:
Okay.
Steve Moskowitz:
So you’re talking about a very small percentage of the IRS: the CID, Criminal Investigation Division.
Chip Franklin:
What would lead them to come to your home with a gun, though?
Steve Moskowitz:
Well, all the criminal agents are armed with sidearms, and-
Chip Franklin:
Really?
Steve Moskowitz:
That’s part of being a criminal agent is you have a sidearm, because you have to remember that IRS investigates not only tax crimes, but other type of crimes, such as [inaudible 00:13:27] financial crimes. And also, again, when you’re in the criminal area, not every criminal politely sends a confirming letter with his receipts. Some criminals are violent.
Chip Franklin:
Yeah. And that’s, I think, one of the things that you always talk about … and it’s real important … is that when you decide not to pay taxes, that’s a crime. And they take that stuff really seriously, right?
Steve Moskowitz:
Yes, they do. They put you in prison for years, and that’s something that you really, really don’t want to have happen to you.
Chip Franklin:
Actually, that’s a good segue to our next guest here on Practical Tax. Joining us right now, Gregg Goldfarb. He is an attorney who can speak to some of this stuff. He’s represented injured clients, mostly, for the last 25 years, and nice enough to be with us here. Gregg, thank you for joining Practical Tax.
Gregg Goldfarb:
Thank you guys for having me. That’s a nice introduction that you gave me. [inaudible 00:14:21]
Chip Franklin:
Well, it’s a fascinating field, the field of personal injury. I had a friend that was in it once, and he says, “For us, justice is money.” Would you agree, in many cases, that’s exactly what it is?
Gregg Goldfarb:
Unfortunately, it’s as good as you’re going to get in the world of civil law. Sometimes losses. How else can you compensate? So if you got a better idea, I’m definitely willing to listen.
Chip Franklin:
Yeah. How do you put a price on an injury?
Gregg Goldfarb:
So half of my work is economic damages, and then half of my work is personal injuries: pain and suffering, emotional distress, and all that kind of stuff. The “how” is really the interesting part of that question, which is getting to know your client, listening to your client, interviewing your client. Sometimes people don’t really … They want to play a tough guy, tough gal, they don’t want to tell you how much pain they’re in or how much loss they have, because it’s almost an insult to them. So you have to sort of go behind the curtain, talk to the wife, or the husband, or their children. Oftentimes I’ll bring people in and the injured party will start telling me how they’re affected, and then their spouse will say, “Well, you forgot about X, Y, and Z.”
So the “how” really is just your typical kind of forensic analysis where you get down … You might have to follow them around for a day. Some of my clients, we do “day in a life.” I really want to see exactly how affected they are. Some people exaggerate injuries, so I might want to just put a camera on them, follow them around for their typical day to really get a handle on it. Because when you talk about justice, you want to serve your clients, but you also don’t want to be going beyond what is the claim, the actual injury.
Chip Franklin:
I would imagine the insurance adjusters would like to know about their average day too, right? In many cases, if they suspect fraud, they’re involved too, right?
Gregg Goldfarb:
So yeah, obviously that’s a major issue, and as an attorney, you’re not a witness. People come in and they say, “This is what happened to me,” and you want business and you want to believe it. And the insurance companies, they’ll do surveillance. So they don’t tell you they’re going to follow you around all day just to see what your daily, regular life is like. They actually don’t tell you. And actually, one of the first cases that I had for trial, I had an individual who was claiming he couldn’t run, he couldn’t do anything. And the insurance company … He was a boater, he had a little boat, and he’s at the dock and he’s undoing the boat. And then they gave me the surveillance tapes the day of the trial, and you see him run, run, run, run, run, jump, land on the boat.
Chip Franklin:
Ah. Is that because they were the defendants, they didn’t have to disclose that information earlier?
Gregg Goldfarb:
Exactly. So they basically … work product privilege. Everybody’s hearing about privilege: executive privilege, attorney-client privilege. Well, there’s also work product privilege. So if you do something like that that’s work product, you don’t have to necessarily show it to the other side unless you’re going to use it. So basically, the judges let them get away with, “All right, they’re showing it to you right now, day of trial.” You already spent $25,000 preparing for the case … and your blood, sweat, and tears … and then you get that or whatever. But oftentimes the insurance companies … I know a lot of the attorneys. The insurance companies, they’re going to let me know right out of the gate. They don’t want to do that either.
Chip Franklin:
Steve, you’ve had, in both your practice internally and as a lawyer, had a lot of experience with personal injury and looking at these cases. When somebody receives a large settlement and they come to you, do they need help in having to deal with that kind of money?
Steve Moskowitz:
Yes, but the help would be even better if we can help the personal injury attorney in what he’s asking for. Because when you ask for something, some things you ask for are taxable and some things are not. For example, if you ask for lost wages, that’s taxable. If you ask for pain and suffering, you ask for reimbursement for physical injuries, that’s not taxable. Now, to a client, a million bucks is a million bucks, but you say, “Wait a minute, there’s a big difference if you’re going to give a big portion of that to the IRS or not.” That’s where we come in. We say, “Well, look,” and then in the settlements, when they say, “Okay, well, we’ll settle this case for X number of dollars,” you want to spell out, “Well, okay, what’s it for?” For example, if it’s for physical injury, it’s not income; it’s not taxable.
Chip Franklin:
That’s interesting. Do you get cases, I guess, Gregg, sometimes that … Because everybody knows from watching television that you guys get a percentage, and many times the client knows that coming in, that they’re not going to pay anything unless they win the case. But that means you’re taking on a lot of costs as well, and you have to figure out at some point, I guess beforehand, whether or not this case is going to settle, go to trial, how much it’s going to cost you. Does that play out? Does the actual numbers play out, when you got somebody coming in to you, whether or not to take the case?
Gregg Goldfarb:
Absolutely. And it’s an unfortunate reality in the world of litigation. If you have … you might have a claim, you might have a case. So here’s the breakdown: some types of cases, you do not get attorney’s fees; others, you get attorney’s fees. So for example, let’s say you have a little bit of a damage to your property, the insurance company doesn’t want to pay, it’s only … Let’s just say it’s $1,300. It’s $1,300 and you’re thinking, “Well, if I hire an attorney, it’s going to cost me 5,000.” Well, most insurance claims, the statutes basically provide for attorney’s fees. So, a lot of my work isn’t first party insurance claims. It doesn’t matter the amount of money that’s at stake; it’s whether you have a case or not and whether your client wants to go forward.
I do a lot of healthcare insurance collection work, first party. My clients give me small bills all the time, and they want me to go for it. So I end up making attorney’s fees, which is a lot larger than what they get, but they need it, because otherwise, the insurance companies … They’ll just basically say “$300, we’re not going to pay it because they’ll never file a lawsuit.” Personal injury case is the case you’re really talking about, where the numbers have to be right. I’m not going to get involved in a situation where there’s only a small amount of money that I could take a percentage out of. I don’t get attorney’s fees; I get them from my client. And so if it’s a small number, it’s going to be complicated, it’s going to be costly, the opposition is going to be difficult, and I have bad judges or judges that don’t favor these kind of cases? Thumbs down. So, a lot of people don’t get justice because of the numbers.
Chip Franklin:
Hey Steve, let me ask you. You have a lot-
Steve Moskowitz:
That’s true in all areas of law, by the way.
Chip Franklin:
You have a lot of corporate clients, Steven, and how much is this on their mind, the possibility of lawsuits and huge settlements against them? Is that something that most businesses, small to medium to large, have to worry about and have to deal with?
Steve Moskowitz:
In today’s society, there’s a lot of people that are going to sue for anything. And like taking an airplane, it could crash, but you can’t run a business always saying, “Oh my God, everything I’m going to do, I’m going to [inaudible 00:22:31],” because you would freeze in your tracks, you would do nothing. Now on the other hand, that’s why a lot of people don’t go into business. They say, “You know what? I just want to go, get my paycheck, and go home. I don’t worry about being sued, and making payroll, and all the expenses.”
But if you’re in business, you have a different mindset. If you’re in business, say, “Okay.” You have to take a certain amount of risk, because if you go into business, you might lose all your money and have debts and go out of business. If you’re willing to take the risk, you’re willing to take the risk that somebody’s going to sue you. Now, there’s a lot of ways to mitigate that risk, like you have insurance, like you talk to your lawyer before you do things so you don’t do something that’s going to get a lawsuit. So you’ll never eliminate the possibility of being sued, but with the help of a good lawyer, you can greatly reduce it, because he or she could say, “Okay, do this and don’t do that.” And by the way, if you do get sued, setting up other mechanisms like we’ve [inaudible 00:23:29]
Chip Franklin:
You know what’s funny? You guys, have you ever seen the movie with Paul Newman called The Verdict?
Steve Moskowitz:
Yes.
Gregg Goldfarb:
Yes.
Chip Franklin:
Okay. David Mamet wrote the screenplay, and I flew next to him on a plane once … all across the ocean, so it was a long flight … and he said, “I went into writing this script hating lawyers,” but the more he spoke to people to try to help write the screenplay based on a book about this attorney who kind of discovered God at one point and made this decision … He also said that when they came up with this huge … He goes, when they were making the big verdict, one of the attorneys said to him exactly what you said, Steve, that the people receiving this are going to have a lot of accounting on their side to do, because some of it’s pain and suffering and some of it, like you said before, about lost wages because she couldn’t work, and if they gave her that money it would be …
So it’s funny that you said that. It’s funny that he kind of stumbled into that as a writer. There’s so much about this area that we don’t understand, and I say “we” being non-attorneys. Let me ask you one more question, both of you, and how many cases are settled and how many go to court, and why? And obviously it’s a number deal, too. Let me start with you real quickly, then, Gregg. How many of your cases go to court, and do you like it when it goes to court or would you rather settle?
Gregg Goldfarb:
Yeah, so I do different types of cases, and so some of them, they rarely go to trial. The insurance claims, usually you have a sophisticated party on the other side. The insurance company, the adjusters, dealt with a lot of these kinds of cases all the time, so they kind of can assess it. You can assess it. A lot of my work is mass torts, so there’s the roundup cases, mesothelioma. So we actually are required to try some of our cases with the objective … Let’s say there’s 10,000 cases floating out there, they all get consolidated. One judge handles them, tries to get six to 10 trials. Even in the 3M case … I don’t know if you’re aware of the 3M; it’s the largest mass tort right now with earplugs and all that with the Army, military. So 19 veterans have tried cases.
So people think, “Oh, no cases go to trial.” Well, all those cases went to trial designed to try to tell the other side … both sides … are you going to win or lose, and how much money? And you know what? The other side still wants to fight. So it depends on the type of litigation. The consensus from where I come from, and talking to lawyers, going to conferences, 95% of the cases settle. Even cases that start trial, or even finish a trial and it’s on appeal, it can still settle. So it’s kind of a difficult question to really get an apples-to-apples answer.
Chip Franklin:
I get it. But Steve, how many cases do you have when people on the IRS are coming up to them? The IRS would rather settle than go to court, or is that wrong?
Steve Moskowitz:
So just like Gregg said, almost all the cases settle. And for example, in tax court, what happens if you disagree with the auditor, when you file the tax court petition, the court automatically sends the case back to a settlement officer. That settlement officer is the sophisticated person, just like the adjuster that Gregg was talking about. They pretty much know what a case is worth, and their job is to keep tax attorneys out of tax court, and usually they give you a pretty good settlement. And the other thing, too, is … and it’s probably true with Gregg … because we do so many of these, we do try a number of cases, and because we try the cases, we get the best settlements. And again, for every one case you try, typically you have many, many, many settlements.
Chip Franklin:
Wow.
Steve Moskowitz:
You can pull the trigger if you have to, but if you’re really a good shot, you usually don’t have to take the gun out.
Chip Franklin:
And last question along this line, how often is it a jury and how often is it just the judge making the decision? Steve, you first, quick.
Steve Moskowitz:
Most of my cases are tax court and that’s a judge, tax court judge.
Chip Franklin:
Right. Do you feel more comfortable with a judge than a jury and something like that?
Steve Moskowitz:
I’m happy with either a judge or a jury. If we want a jury, we can go into federal district court.
Chip Franklin:
Interesting.
Steve Moskowitz:
But the cost of going to tax court is way less, and most people opt for that. Also, you don’t have to pay the tax first, so most people opt for that.
Chip Franklin:
Okay. And would you agree the same thing, Gregg?
Gregg Goldfarb:
Yeah. Listen, all my cases are jury trials for the most part. I’ve had a couple of non-jury trials when I was young or whatever. If I win, I want a jury. If I lose, I want the judge.
Chip Franklin:
That’s funny.
Steve Moskowitz:
Excellent point, counselor!
Gregg Goldfarb:
I’m all about results, really. And like you said, there is justice out there, and that’s why I’m still doing this.
Chip Franklin:
Yeah. Well, you know what? You did a great job today. Thank you so much for your time, and really appreciate your insights. It’s really valuable.
Steve Moskowitz:
Thanks so much, Gregg.
Gregg Goldfarb:
Hey, I listened to your cannabis episode just before I got on. Excellent episode. I love that. You guys are doing a great job. Thanks for having me on the show.
Steve Moskowitz:
Thanks so much.
Chip Franklin:
Thanks so much, Gregg. You be well, buddy. See you.
Gregg Goldfarb:
All right, man. You too.
Chip Franklin:
Thanks. That’s always nice to hear, right?
Steve Moskowitz:
Absolutely.
Chip Franklin:
Yeah. All right, well, that’s another edition of Practical Tax with tax attorney Steve Moskowitz. You can find us pretty much anywhere on the internet, but you can go to moskowitzllp.com or YouTube, and we will see you next time. All right, Steve.
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.