WS1930 How to Maximize Asset Value | Eric Most

Welcome back to the daily real estate syndication show. I'm your host, Whitney Sewell, and today we're diving deeper with our guest, Eric Most, into how you can be a better steward of your assets, including property, finances, and time. Eric brings a wealth of knowledge on charitable giving strategies that go beyond the traditional 1031 exchange plan, offering alternatives that don't require you to "die to get out" of your investment.

Eric emphasizes the generous nature of U.S. tax laws when leveraged correctly, especially for charitable giving. He explains that the more you give, the more tax benefits you receive. By illustrating a scenario where Pete considered giving up to 50% of his business to NCF before the sale, Eric shows how Pete could potentially give away $1.375 million while only taking home $175,000 less than he initially planned.

The conversation also highlights the triple tax benefits of using real estate in charitable strategies: a fair market value deduction, avoidance of depreciation recapture, and tax-free income while the property is held before the sale. Eric points out that these benefits are often overlooked because many CPAs and tax attorneys are not well-versed in charitable giving strategies. He reassures listeners that NCF is equipped to educate and work alongside financial professionals to maximize charitable impact.

Eric concludes by reminding listeners that donated funds must be used for charitable purposes and cannot be accessed for personal gain. He also touches on more sophisticated strategies, such as donating intellectual property rights, which can create even greater tax efficiencies.

If you're inspired to learn more about how you can integrate charitable giving into your real estate and business endeavors, don't miss this episode. Remember to like, subscribe, and share the Real Estate Syndication Show with friends who could benefit from these strategies.

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Transcript

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. We're continuing the conversation with our guest today, Eric Most. I hope you've been listening to this series and you've been learning how to be a better steward of this property or finances, financial capital, whatever it may be, even your time that you've been given. Our guest today is an expert in just that. We're continuing that conversation. But today, If you have been concerned about the exit plan that most people have when they talk about doing 1031s, you're gonna wanna listen to today's show. He has a different option for you as opposed to having to die to get out of this 1031 plan that a lot of investors are in. All right, Eric, I know you get this question all the time, but if someone's thinking about an exit and they want to maximize that opportunity, give us some details on how to do that as well.

Eric Most: Absolutely. Let me illustrate it. And this is a business interest gift, not a real estate interest gift, but they're the exact same. So we were helping, I got a phone call from a guy named Pete, and he called me up and said, hey, I was given your number from a friend. I'm thinking about selling my business. And he said, before you do anything, you have to call Eric. And so I said, great, what are you thinking? And he knew he was calling the National Christian Foundation. So there's a charitable component. He says, well, I was kind of planning to give a tithe on the proceeds of the sale of my business. So 10%, I said, great, what do you think your business is worth? He said, I think my business is worth about two and a half million dollars. And so at a $2.5 million business, by gifting 10% after the sale, so after he sailed, not talking, not doing anything with NCF, he was going to be able to give away, he and his wife, about $168,000. That was huge for this family. That was absolutely transformative for them, honestly. Um, but then I said, well, let me show you what it looks like. If you give 10% of your business prior to a sale to NCF. And by, by doing that, um, keeping the exact same numbers, the same two and a half million dollar business, um, gifting 10%, he now was going to have a charitable impact of $250,000. And his take-home pay was actually going to be more because of the reduction in taxes. And so he literally would walk away with more and he was able to give more away. And he's like, that's awesome. And I said, it is, but let me also let you know, like the tax law that we have here in the US, it's actually one of the most generous tax laws in the world. But few of us leverage it to the full level. And so the more you give, the more generous the tax code is effectively. And so I showed him a 25 and a 50% asset gift to NCF prior to a sale. At 50%, he was going to be able to give away $1.375 million. And his take home was going to be about $175,000 less than before he called me. So for $175,000 less, he's going to give away $1.2 million more. When he saw that, he started crying because he never knew that that was possible. And I said, hey, go home, talk with your wife, Linda, pray about it. You have to make the gift prior to any type of binding letter of intent. And so I just made emphasize, I can reemphasize it multiple times on here. And so he called me back about two, three weeks later and said, hey, we wanna do a gift. I said, great, what are we doing? He goes, we're doing the 50%. And so we did the 50% gift. And here's the neat thing, Whitney. Um, and this doesn't happen every time by any means whatsoever, but it was just a beautiful God story. In my opinion, um, uh, business ended up selling for $3 million. charitable impact, then 50%, 1.5 million went into his giving fund. And he actually walked away with as much or more than before he even called me and had he done just a gift after the fact. And so, and this was life changing type of opportunity. And so the same thing happens with real estate. Though, real estate. And so we're going to pivot this example to real estate because it's a real estate syndication show. And I love that. There is a triple tax benefit to using real estate in your charitable giving kind of strategies. Okay, triple tax benefits. So one, you get a deduction based off of the fair market value of the asset by percentage that you give to a nonprofit like NCF. Okay, there's one. Two, your folks have already been realizing one of them, and that is the depreciation, right? Depreciation is a great thing until it's not, right? Because when you have that exit, what happens? There's that depreciation recapture. And, and so that's what ate my lunch on that in my, my opening introduction, where we sold commercial real estate, I did not know, I did not calculate that depreciation recapture, shame on me. And so I, I ended up having a large tax bill. So the port part that we own of real estate, we pay no depreciation recapture. zero of that. So you get a taxable benefit of deduction. We pay no depreciation recapture. And then the income while we hold it and before sale is completely tax free to NCF as well. And so you have that tax avoidance and NCF that receive those funds. And so even if it's an exit of a real estate property, you get huge, huge tax benefits, which then allows you to give more money to the charities that you know and love.

Whitney Sewell: It's incredible. I was thinking through too, you know, you're talking about, you know, this triple tax benefit and it made me think about, uh, you know, like, would my, would my CPA be familiar with this, you know, and, and even maybe how you are, cause I'm sure you get questions. Well, could you talk to my CPA about this? Right. You know, and, and is that something that happens often? Do, are they typically well-versed at all, you know, in this type of setup, you know, what does that normally look like?

Eric Most: Yeah, as a whole, most CPAs, tax attorneys are not well versed in the charitable side of things. It's not their fault. Let's just be clear. It's kind of like medical doctors. I have several friends that are doctors and the amount of time that a medical doctor is trained on nutrition versus pharmaceutical is vastly different. And so they might get three hours of nutrition and they'll have 40 hours of study in pharmaceutical. And so what is the right solution for everybody's health? Well, it's pharmaceutical. It's the only thing they really know. The same thing applies generally to a lot of CPAs, tax attorneys, and things like that. Their practice is not one where they see generous people wanting to give money away. And so, and they haven't had the training and the equipping there. And so there's a lot of times, there are a lot of times that, that we have people that say, Oh, my CPA says you can't do that. And, and, and we do, we're happy to come alongside in a winsome way. And so, so they don't look bad. We come alongside. I'm like, no, no, no. Like you do it this way. This is this way we've, We did over 200 of these asset gifts this year alone for over a billion dollars. We've been doing this for a long time. And so they don't get many at bats when it relates to the charitable side of things. A lot of CPAs are more historical in their work too, right? It's like, well, let me see what you did this year and I'm gonna write it down in the work. Then there are some that do some great performance, but again, they're not often, understanding the real great tools of asset-based giving. And so we are happy to come alongside and educate. And we also do webinars consistently. We actually have national webinars that some of our tax attorneys do that share and try to provide CE and education. And that's something you could do. If you hear this today and you're like, hey, I want my CPA team, my advisor team to start hearing about these things. You can send them links to NCF and we're happy to provide them some good free CE. And they get to learn about these different tools that they can apply to you as an individual. And our offices across the country, our other folks that work alongside me, we're very well versed at coming alongside and saying, you know, like, Here's how you do it and we have a proven process and and that's something that really differentiates NCF and other donor advised fund platforms as well. So we have a team of over 350 people that work in NCF, many of them we have over I think the numbers over 17 complex gift attorneys that work for NCF with so much history and we do we do repetitions we're at bat at bat at bat time and time and time again. One of the heads of our, our tax side of things. was a senior level person with the IRS for over 20 years, and he kind of had a halftime mentality and that was the, you know, the first part of his career was success and the second part, say, significance and and he's he's coming he's joined NCF and so we have people that have more experience with the IRS that work for NCF than are currently working at the IRS. And, and that is a significant difference. We have, there are other DAF providers out there, but they most of them don't have anywhere close to the in-house counsel that we have to help people. They're, they're using outsourced attorneys, outsourced tax professionals that, again, they're not getting as many at-bats and they don't see the repetition of these things.

Whitney Sewell: Yeah. I appreciate how you just said, Hey, it's not their fault. They don't typically see a lot of people wanting to be overly generous. And so it's not been something, it's not been a tool they've had to have in their, on their belt. Right. And so in that you all come along beside them, cause I can see, you know, asking questions of a CPA typically, you know, they're, they're just, uh, you know, that's probably not going to work or we can do this other thing over here when, you know, if there's a connection to somebody like you all, then maybe there's a way to, kind of connect you, right? And say, well, Hey, I'd really like for you to talk to this group or, um, and get some help there. The, the examples that you gave, I think are so helpful, right. To think through, uh, you know, the business owner of two and a half million. I love the God's door, by the way, where it was actually 3 million. That's so incredible. Uh, love that. Uh, but you know, but it's helpful to think through, you know, the 10% gift would have been 168,000. I think you said, uh, and then, but. you know, it allowed him to give 250 versus 168 and lower his taxable income. I just think that's, I think about that a moment, right? That is such a great example. Anything else as far as maximizing our opportunity, Eric, that you'd leave us with?

Eric Most: Yeah, one thing that some people, I just wanna make sure people clearly understand though, when you make a charitable gift, these funds have to be used for charitable purposes. So you don't have access to this capital for personal gain in the future, right? Or personal benefit. And so I think that's just a good thing just to make sure everybody understands, because sometimes people are like, oh, well, how do I do this or that? It's like, no, no, no, like these are now dedicated, they have to be given to 501c3s or recognized charities and things like that. But no, I think that's a good overview of assets. You can think about this and apply it to multiple different things. If we want to get into really sophisticated business owners, there are, I mentioned it earlier, there's intellectual property rights and patents can actually be a really great tool of generosity. We have a giver that they're open to sharing their story. They share their story often. We own the largest crane and rigging company in the United States. It's a company called Barnhart Crane and Rigging. I know of them.

Whitney Sewell: Yeah.

Eric Most: Yeah, they're valued at almost three quarters of a billion dollars. And through our ownership, we spent off about $45 million of charitable giving every single year. And Alan comes in and Alan is just an incredible guy. And Goh and Whitney, we should link something to his story, his jog story, because it's super inspiring. But he's like, he always pushes NCF to, he goes, hey, how do we be more efficient? How do we be more efficient? And we said, well, Um, we worked with them and we came up and we worked with the IRS and we were able to get a private letter ruling that allowed for us to gift for him to gift his intellectual property. And so, he ended up gifting the intellectual property of Barnhart Crane Rigging which is the name, and so 30 cents of every dollar. is owned by NCF effectively, and we pay no tax on intellectual property. And so that creates even greater tax efficiencies for them and things like that. So there are more things to explore. We're just doing kind of like maybe a little bit more than a 101 here, but we could keep having greater conversations for sure.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.