Chris bought Tesla a few years ago and Jinko Solar eight months ago. Both of these have gone up in value by a lot. What tax strategies can he use to sell these shares?
Holly and her three sisters stand to inherit two side-by-side duplexes. How can they structure the ownership of these properties in a fair way?
Eric feels hopeless about health insurance as a self-employed business owner. Are DPCs or healthshares the way to go?
Frank and his wife have a nine-year retirement plan that involves selling their home and moving to Costa Rica. How can they maximize their savings and existing investments to set themselves up for success?
My friend and former financial planner Joe Saul-Sehy joins me to answer these four questions on today’s episode. Enjoy!
Chris asks (at 1:33 minutes):
I bought Tesla for $25,000 a few years ago. I have 675 shares, making it worth $575,100 at the time of this episode.
Eight months ago, I also bought another single stock – Jinko Solar – for $20,000, which is worth $70,000. (I have around 1,100 shares.)
These are clearly large capital gains. If I were to sell all of my shares in one sale, the taxes are almost equal to my annual salary. If I have to bite the bullet and look at the bright side, rather than at the amount of taxes I’d pay, I will – but given the amount of tax in this scenario, do you have any advice on selling and rebalancing in a tax efficient way?
For context: I’m 27, obsessed with FIRE, and earn $80,000 per year. I max out my 401k, which is in a Vanguard Target Date fund. My home is valued around $250,000 and I have 14 years left on the mortgage – the balance is $180,000. I own a few other stocks, but the value is minimal compared to Tesla and Jinko.
Frank asks (at 26:25 minutes):
My wife and I have a nine-year plan to retire to Costa Rica. We’re debt free aside from a newly refinanced 15-year mortgage. We save around $2,000 per month, and we also contribute $6,000 per year each to our Roth retirement accounts. At age 55, I’ll start collecting $500 per month from a state pension. We’re also very frugal.
We have $110,000 in index funds and $35,000 split between a six-month emergency fund and a vacation fund. We rent out a room in our home and we sell items online. These side hustles net us an additional $1,200 per month, giving us a total of $3,200 per month to invest. We also have two rental properties that generate $450 in income each month.
Our nine-year plan involves selling our home in the states and paying cash for a home in Costa Rica. We’d like to buy a separate property to use for guests when they come to visit, which we’ll rent out when it’s not in use.
Our estimated monthly living expenses (which include fun excursions) are $2,500. Since we won’t draw down from our retirement funds until we’re 59.5, we need to ensure we’re financially covered for around 10 years.
Given that we have nine years to make the most of our investments, what should we do with our $110,000 currently in index funds, plus the $3,200 per month we have to invest? Stick with index funds? Buy more rentals? Is there something else we’re missing?
Our hope is to live off of rental income, interest from investments, or a combination of two. However, buying a rental in our area seems insane as houses here are greatly overvalued right now. What should we do?
Eric asks (at 41:11 minutes):
I’m at a point where I may need to give up my business and get a full-time job for the sole purpose of health insurance.
I was reading Mr. Money Mustache’s post on DPCs and health shares. He mentioned Sedera. Is this a good solution? What if something catastrophic happens?
Holly asks (at 51:42 minutes):
My three sisters and I stand to inherit two duplexes that are right next to each other. They are four one-bedroom units, two attached. We’re inheriting them through a trust – hopefully not anytime soon.
I have a few questions on how to structure the ownership of these properties. Together, the units are worth about $1.1M and they can rent for $1,600. The net income is $47,000 per year, and we’d like these units to be professionally managed.
As for operations, I want to operate them as a multiunit property where we run the income and expenses together and divide by four. We can take advantage of economies of scale and also mitigate the risk of vacancy in one of the units. (How would we assign a unit to each one of us fairly, anyway?)
Beyond the Four Ds, is there anything else to think about? For example, if we inherit the properties through a trust, do we need to set up another company to hold them?
Also, where should we park the emergency reserves? I don’t think we should count on each of the sisters to maintain one quarter of the necessary reserves in case any of us is tempted to spend it.
Lastly, what should we do if one of our sisters wants to live in a unit, rather than rent it out? Would she rent it like any other tenant who happens to enjoy part of the profit, or should she separate the unit from the others and not share in the profit from the other three?
I’d like to avoid tension between the four of us. Any advice you can offer?
Resources Mentioned:
- How to Use Tax Lots to Pay Less Tax | Investopedia
- #122: Ask Paula – I’d Like to Airbnb a Yurt. Should I?
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