Brett:

I’m excited about our next guest. He has 50 years of financial leadership experience in a broad range of industries, including being a licensed certified public accountant. His background stretches across accounting, tax manufacturing, construction, information technology, marketing, transportation, logistics, human resources, wholesale distribution, insurance, credit, and more. He has held his series seven and 6366 licenses, and one of the most interesting things that I found is he's one of only 86 people in the last 16 years to pass the US Tax Court, non-attorney practitioners examination, which enables him to represent clients in the US Tax Court without being an attorney. Please welcome to the show with Charles Read, Charles, how are you today?

Charles:

Brett, I'm fine. Glad to be here. Thanks for having me.

Brett:

I want to thank you for your service as a United States Marine, a combat veteran, a veteran of the Vietnam War, and so before our listeners get to know you for the first time, would you give us a little bit more about your background and your current focus? Sure.

Charles:

I grew up in Iowa. I'm a Midwestern boy. After high school, I joined the Marine Corps, spent four years including two years overseas, went on a combat tour, came back, and was stationed. Ken said he met and married my wife, five children, when I married her. I claim insanity. But we were married for 45 years before she passed, I found that my military experience and my training were not valued in the business world. Went to college, got my bachelor's, my Masters passed my CPA exam, while still in school, went to work for Texas Instruments, spent 15 years working for various companies small and large. Then, 30 years ago, Ruth and I, my wife, started our own business. Because I was tired of working for other people and realized I was never going to run a major corporation because I didn't have the political goals. I was unwilling to stab people in the back and toss them off the ladder. We started a business, and it was payroll and accounting, and mobile service. Technology changed on the mobile, went away, and I sold off the accounting to my partner here about 10 years ago, and focused on payroll, and have been growing the payroll heavily ever since. We provide payroll and payroll-related services to small and medium-sized businesses around the country. Payroll, Payroll Tax Service compliance, timekeeping workers comp. Benefits, other things, but all payroll-related.

Brett:

There and so many ways that we could go down to different avenues, and by the way, that's getpayrol.com, that getpayroll.com to learn more about Charles Read and in the payroll services to help you out. Before we dive into, this really interesting, unique designation you have with representing the ability to represent clients the US task or tax without being an attorney, as well as touching on some capital gains tax deferral things that are happening right now with the Biden administration, proposing some changes, and just the economy in general, we'll talk about I want to take one other step back, Charles I believe we've all been given certain gifts in this life, and so some people call these strengths superpowers. I believe their God-given gifts and these gifts he gave to us to be a blessing to others. I want you to go back to maybe your high school days or your university days, and when you're a younger, younger lad, what's the maybe one or two gifts that you believe you were given? And how do they help, how do you help him bless people today?

Charles:

Well, this was brought home to me by my staff. I'd done an interview tape for the survivor, the TV show, and in that they say, one word to describe yourself. Ask my staff, and they all came back unanimously and said, tenacious, I can be like a dog with a bone. I just don't give up. I just go on and go on and go on, and I've been that way all my life. When I was 14, I rode a bicycle from Iowa to California to see my grandmother. Turn 15 on the way so I don't like to go with things. I just got in, and that's good for my clients because I don't let go. I had one tax penalty situation that took nine years to solve with the Internal Revenue Service. From my point of view, tenacity is good. From my wife’s point of view, not so much, but it worked. It worked for me.

Brett:

Tenacity. It just keeps going, and when you get something you're going to, you're going to see it through. Is that a fair summary?

Charles:

Absolutely, he's chewing on a deal. There's no bone left.

Brett:

Now let's dive right into maybe the biggest secret to being able to, show and pass an exam and be able to provide representation for clients in the US Tax Court we're here at Capital Gains Tax Solutions, and one of the biggest things is want to know is if someone uses the strategy, which we specialize in the Deferred Sales Trust, what happens is if you have to face You know, the IRS or have to face the US and a legal battle. Tell us about your experience with the US Tax Court, maybe even the IRS, and some of these things over your years.

Charles:

Well, I fight the IRS on almost a daily basis. We have employment tax situations, which is our specialty. The IRS in fiscal 19, issued over $13 billion in employment tax penalties, and we're specialists at getting those abated and solved, and in some cases, you have to take those situations to us Tax Court, or disk court, not wanting to be an attorney, I became a US Tax Court practitioner, I studied for it, I decided I was going to become one and I did. That's, that's an athlete. It took a couple of years to study for the US Tax Court exam once every two years in November, and in DC at the Tax Court. That's the only time they give it. They really don't want us, but they're forced to, in that it's part of the law that established in the US Tax Court that non-attorneys could practice in it was a holdover from the previous IRS appeals mechanism. I set for it and passed it here many years ago. But it lets me go to the court and present an argument and a petition. It's $60 to file a petition with the US Tax Court. It's cheap, you don't have to spend $5,000 for an attorney on a retainer to file a petition in District Court.

By going to Tax Court with the tax court, you don't have to pay the taxes upfront. The payment is told deferred until the Tax Court cases are settled. If you get tight to the wire with pain or losing, you file a petition with the Tax Court, it stops all the collection efforts, then the first thing that happens is it kicks back to docket appeals. You get a whole nother bite at the apple, and you're not dealing with the collections people, you're not dealing with exams, you're dealing with appeals at a higher level than you normally would. You get people who are more knowledgeable, more experienced, you're dealing with a tax counsel for the IRS, and 95% of all US tax court cases are settled pre-court. You're probably going to get a better deal than if you're fighting it out trying to find out with collections or an appeals hearing because they don't want to go to court. If they lose when they go to court, then a precedent is set. The hazards of litigation are in many cases on the IRS, not on you. Because you know your maximum liability. The liability that the IRS undertakes may be far, far more than they're willing to take on.

Brett:

Wow, that's so enlightening to make sure I encapsulate that for me and for our listeners, to file a petition of $60 in US Tax Court and versus an attorney $5,000.the first thing, two, once you are guests in this petition stage, you can defer the payments. In other words, you're moving it out of collections where they don't really have the authority to. They're just there to collect, and now you're going to fight an appeal and you're gonna defer the payment until the case is solved. Which gets kicked back appeals at a certain point, or maybe during this period of time, which you're dealing with people who can negotiate or work through this, and 95% of these are solved pre-trial because if they were the IRC is risky, not only your case but a new precedent moving forward, which obviously can be more costly. Is that a fair summary?

Charles:

Fair summary.

Brett:

Wow, that's really fascinating, and because one of the biggest misconceptions is that we don't have the leverage. I say we are the people, and I'm just curious. The rewarding part is that by using the law and hiring and working with someone like yourself to fight, that you can give some of the power back to the people. Is that a fair summary or tell us more about that, Charles?

Charles:

This is a mechanism set up where you can, and you can do this yourself, you don't need me for $60, there are guides online that you can form your own petition and send it in with the $60, and if you can't afford the $60, and can prove it the chordal, even waive the $60, you can file Pro Se. But it is a mechanism that you're going to knowing your maximum liabilities, it's what the IRS says you owe. You're not risking literally anything by going to this, and you in fact, are getting a whole nother bite at the apple and a substantial chance of getting a reduction and a major reduction or elimination of the tax collections. They don't care. Their job is to collect the money. They're like any other bill collector. They don't care. That's not their job. Their job is to collect money. They don't care if you owe it, if it's wrong, they don't care, and that's not their job, and I understand that. When you go back to Tax Court, and it gets kicked back to document appeals, these people will really look at the underlying basis of what's owed and why it's owed, or why it's assumed to be owed, and either affirm or change that, and beyond that, often, they will settle for a lesser amount, just to get the case off their desk and move forward.

Brett:

Very enlightening. Thank you so much for sharing that. Now let's shift a little bit into the Capital Gains Tax Arena. The Biden administration is proposing to take capital gains tax rates from 20 to about 39.6. He's talking about, he's proposing to take away the stepped-up basis, okay, to limit the 1031 exchange to a certain amount per person, $500,000. I believe single married couples, about a million of what you can defer some nuances there, then the final thing hasn't been proven. But I'm just curious. Let's just focus on the stepped-up basis, the cap rate being 20 to 40. It is intense. But what do you think it would mean, Charles, if the stepped-up basis is taken away?

Charles:

Well, first of all, I cannot believe that he's going to be able to take away the stepped-up basis for a spot. That’s one thing, I don't think that'll happen. On the other hand, If he takes this away, it takes away the step of basis, that's going to really change the whole estate planning mechanism. Because you're now subjecting yourself to a state that you've paid taxes on, and you've built to another level of taxation, and I don't know we've talked about this in staff meetings and so on, and I don't know what the best mechanism will be. We're gonna have to look at the final bill, and then, of course, a couple of 100,000 of us accountants will look at it and figure out the best ways to get around it like we always do.

These taxes have been since I was in college when they redid the state taxes back in 75. It was called the lawyers and accountants Full Employment Act. Because it just guaranteed us jobs, and we're smarter than Congress in that there are hundreds of 1000s of us that spend months and years trying to find ways around this, instead of writing laws haphazardly, the way the staff does in Congress and not think about the unintended consequences. We'll find ways around a lot of it. But one of the things that's going to happen, and I'm absolutely certain you're going to see this when the spouse exemption stays. You're going to have a man marry his grandson. Because his grandson then is a spouse, and he can pass the entire estate without taxes because same-sex marriage is now allowed.it's, it's, there's gonna be some very interesting things going on with the combination of the changes in the law and the changes in the taxes and the changes in spouses and several everything else. It's a fascinating time to be alive, I promise you.

Brett:

We won't be able to put the headlines down. You know, that's true. That's pretty, pretty amazing to think about. You pay the tax on it already. For those, as a reminder, a stepped-up basis is when you, when you pass right assets, would get a stepped-up basis at the current market value of which your heirs, or even your spouse, could sell that asset and walk away capital gains tax-free. Whereas now what they're proposing is to not only when you pass, not have a stepped-up basis, but also trigger the tax that's due, and you need to pay that.it could be an inopportune time to sell. It could mean a lot of things. Essentially, what I like about this, Charles, is they want all of the wealth of most of the wealth with the government. I mean, this is, I mean, it's, I don't know how else to say it, except they believe that it's their wealth. It's not It's not your family's? Well, it's theirs, and they rightfully will be taking that and taking care of it. What do you think, Charles?

Charles:

These people are there to spend money. They spend money to get campaign contributions and favors. If you look at the number of people that are millionaires in Congress, that wasn’t when they joined you, you have Where did they get the money? Where did they get those opportunities to do things? Why are they getting special treatments and special offers and special incentives, and it's because they can pass tax laws? That's what they have to sell. That's their service to business people, to investors, to whatever, to people who are willing to fund their campaign contributions. It's taxpayers, and so they're dispensed constantly, with earmarks coming back. God only knows what's going to happen. I mean, no, that was a disgrace, they got rid of it. Now it's coming back into the Democratic administration. I don't, I don't foresee anything good out of this, and with the push for socialism, well, that means that you don't need that money. We'll give you what you need, and we'll take everything else. That's not how I was raised. That's not how I believe. You know, rugged individualism and self-determination, all these things with America made America great, and if we no longer own the means, and the output of production, we don't have anything, if they can just take it from us at their whim. Obviously, I'm going to quit working. I couldn't bother.