All Forum Posts by: Christopher Smith

You might elaborate on why you think him contributing the properties "slowly" to an LLC (which will presumably be taxed as a partnership) will permit him to avoid capital gains tax.

There are various provisions in the Subchapter K partnership rules that specifically tax partner property contributions to partnerships that are in substance disguised sales. 

I assume he doesn't intend to gift you his interest in the partnership over time?

Ideally you should base your goals on making economic profits, not generating tax losses. Tax benefits for the most part take care of themselves if you have at least a room temperature IQ. Building a truly profitable business on the other hand takes enduring skill, patience intelligence and effort.

Have you examined any rulings or court cases in this area for similar facts and circumstances?

One thing you might find as you get deeper into various asset groups and with time/accumulation is that you don't necessarily have to wait for broad market crashes to find attractive opportunities.

There can be groups or individual securities that are depressed while the remainder of the market is steaming upward at full speed.

Chinese equities have been hit particularly hard very recently because lots of very speculative negative rumor mongering most of which to me has little basis in reality or is so over blown as to be almost laughable. But people are driven by fear and prices have tumbled 30 to 50 percent.

I've bought on this dip adding to various Chinese holdings. Picked up one just last week at 25, that sold for 47 just a few days earlier. No change in its fundamentals at all in fact last earnings were quite good, just a fear based speculative driven short term panic selling spasm. I play a long-term game so these sheep driven stampedes are often solid openings for me.

Just a note of caution, many a $ has been lost because of a lack of patience inducing folks to buy into the latest hype du jour at massively inflated prices. At that point it's no longer a rational analysis of true expected returns and probabilities, but little more than a delusional hope game that often ends up in big disappointment in the longer term.

I'm a little like Buffett, I generally don't consider "analysts" reports, nor their meaningless price targets. For the most part they are marketing and promotional documents that to me have negligible value. I'm sure there is some legitimate research that goes into their publication, but sifting between that which might have value and the mountains and mountains of sales driven BS isn't worth the effort.

If I had to distill my approach it would be to identify the highest quality companies (those with a proven durable competitive advantage - see Buffett for all that entails) and then buy heavily into them as opportunity presents itself.

Examples of three recent obvious opportunities would include:

Post 2008 (2010 to 2013) - bought heavily into high quality California real estate at about 35% of Pre crash values. All properties have increased in price nearly 3X, all cash flow, all are profitable AFTER depreciation.

2018 mini stock market crash added large amounts of FAAAMG at values about average of 1/3 or less than today's values (all FAAAMG stocks have a proven durable competitive advantage so they will very likely increase indefinitely into the future, they are likely never sell holdings).

March 2020 bought across the board into high quality trashed names Boeing, Disney, REITs, more FAAAMGs again. All have increased massively and the best part is they all have great growth prospects at reasonable earnings multiples (except Amazon).

I do take an occasional foray into risky assets like the Chinese internet stock they I made about 5000% on, but they aren't my real foundation stones as their outcome is as much determined by luck as anything else. 

Long term success rarely comes from luck, but rather having solid insights, performing necessary due diligence and most of all having the emotional ballast and intestinal constitution of a Battleship.

An LLC (I'll assume you are referring to a single member LLC where no election has been made to be taxed as a C or S corporation) confers no tax advantages, it's primarily intended to be a risk / liability mitigation / management tool. In fact the entity is disregarded from it's owner for Federal Income tax purposes.

Might be somewhat careful, just saw a very recent Court case where a TP lost on that issue with borderline facts. Court seemed to think that "design" related efforts involved no true experimentation or risk factors and thus disallowed the credit indicating that a mere novel design was not sufficient to claim the benefit.

Who said it was?

Some court cases are, others are only relevant for the facts of that case.

IRS internal training guides are not law of course.