January 19, 2019

Rooting For The Black And Gold, But Talking Green

SMR 14 | Investing In Oil And Gas


We are all trying to earn money by getting a job, making investments and all other ways. In all these, there will always be tax applied. Given that we can never get away from tax, it helps to know about an investment strategy that can help you reduce tax at the same time. Hollis shares the major tax benefits from investing money in oil and gas. He walks us through all the amazing ways to invest in oil and gas along with its tax benefits and incentives.

Listen to the podcast here:

Rooting For The Black And Gold, But Talking Green

I feel like our freedom is under attack. I feel like we have some crazy lunatic politicians that are elitist or pompous. They are selfish and they love to tell us how we should live and they don’t take their own advice. They are not living the way they tell we should live and I have a problem with that. If you’re going to give me advice on something, you better be doing it. That goes for anything. Don’t tell me how great a Toyota truck is when you drive a Ford. Don’t tell me how awesome sushi is when you don’t like sushi. Don’t tell me how great an investment is when you’re not in it. That goes from annuities to mutual funds to stocks and to bonds. Don’t tell me how awesome they are unless you’re in it and that’s what separates me from most people.

I’ve been wanting to write a book the last couple of years and I have a good friend, David who has written a series of great books. Writing a book is taking the time to do it. I’m going to start putting some things together and I’m going to call it either OTC or TCO. If it’s OTC, it’s going to be Optimization of the Tax Code or Optimizing the Tax Code or if it’s TCO, the Tax Code Optimization book or something like that. I’m on this new word of optimizing, optimization and the strategies that I deal with which are three strategies as far as investing money. I have my own money in all three, but two of the three come straight from the tax code. Straight from the US tax code that you’re probably not going to hear from your main street strip mall, financial advisor or financial planners even the certified ones.

The Tax Code

Mostly because they’re not available to the main street investor or main street brokers who deal with Wall Street. Wall Street likes all the money to flow through them. If you’re looking for something different, if you think there’s something better than the market, if you think there’s something better than an annuity, if you think there’s something that can maybe not quite as volatile as the stock market, then call me and listen. I’m going to show you exactly what I’m doing. It’s about getting educated and knowing what else is out there. I’m looking at a piece of paper and I have a couple sections of the US Tax Code referenced Section 263(c)59(e), Section 611, Section 613, Section 613(c)6 and then Section 469(c)3. That’s all the things that deal with investing your money, putting your money in oil and gas well package.

SMR 14 | Investing In Oil And Gas

Investing In Oil And Gas: You can lose money not because of what you did but because of where the money was invested in.


There are some major tax benefits to investing money in oil and gas and there’s risk involved. There’s risk involved in everything. You could lose money by investing in oil and gas. You can lose money in your mutual funds. You’ve probably lost money in the market or either your gains. People don’t realize, “Hollis, I didn’t make anything.” If you look at the $18,000 you put in, you probably lost money because if you put an $18,000 and the market is only up $15,000, do the math on that. The market is very volatile and it’s my opinion, everything I read that is not on the main street news. We’re in for another 2019 volatility. I know there are people that make money in the market. I know the market is more of a long-term thing, but I don’t like looking at a balanced. I lost money in 2001, not because of what I did but because of where the money was invested in. It made me angry and I said, “Never again am I going to have money that’s not in my control.”

Tax Deduction

I’m a control freak with money. I want to control my money. I don’t want it in the volatile market. When you put it in oil and gas wells, number one, are we going to hit oil? That’s the risk. Number two, my rate of return or my profit is going to depend on the price of oil per barrel. Number three, how many barrels per day are being pumped? Years ago, I knew nothing about oil and gas. I know a little bit but I rely on some very smart people to feed me information. The tax deduction for oil and gas is absolutely amazing. It’s amazing people that I meet and then they want to bounce this off their CPA that the CPA’s not aware of it. Just because you’ve never heard about it, because your CPA is not familiar with it, it doesn’t mean it’s not real or not true. It’s that they’re not familiar with it. Show me another investment strategy, show me another strategy where you can put your money and then get a deduction for potentially up to 100% of the amount you put in.

The minimum investment in this oil and gas strategy is $50,000 for accredited investors only and you put in $50,000 or you put it in $100,000, you’re going to get a deduction for potentially up to $100,000. It depends on that particular package in drilling and when it was drilled. Potentially the law reads, you could get $100,000 deduction in the same year that you invested the money. That comes in the form of Intangible Drilling Costs, we call it IDCs. If you are not familiar or you’re not comfortable with filing an extension on your taxes, this probably isn’t for you as well. Up until a few years ago, I had never filed an extension on my taxes and now I do it every year. We are trying to capture every penny that we can in the deduction. We file an extension and I’m paying my taxes on October 7th or 8th and it was a week before the deadline of October 15th, but that doesn’t bother me. I’m very comfortable with doing that. I encourage you to get educated about what else is out there for your money to make money than what the traditional financial tools are throwing at you.

You could lose money investing in oil and gas, just like you can lose money in your mutual funds. Click To Tweet

We hear a lot of advertisements about annuities. We hear a lot of advertisements about mutual funds and those have been around a long time. People have made money in those, they lost money in those. I like for my dollar to do more than one thing. When I can put money in something and get a tax deduction, it makes me happy. The tax benefits, the US government offers attractive tax incentives to encourage investment in domestic oil and gas projects. Intangible drilling cost, which includes items such as labor and water, typically account for 60% to 80% of the cost of completing a well and can be 100% tax deductible during the first year. Depletion allowance is a deduction from taxable income that reflects the declining production of reserves over time. Independent producers and royalty owners are permitted to take a 15% reduction to the taxable gross income of a productive well to account for the depletion of reserves. This results in 85% of the income from oil and gas investors being taxable.

401 Acres In Ethel, Louisiana

What that means is, the law said you could deduct up to 85% but with the new tax code that the administration put in, the opportunity is there to receive a 100% deduction on the amount that you put in. Since all these tax dollars were put into business in the mid-’80s, Ronald Reagan did all this. They were trying to encourage American independence from foreign oil. The first 15% of income every year from oil wells is tax-free. I know people who are landowners that have oil wells on their property. The first 15% of that income is tax-free. It doesn’t matter if you’re a landowner and you have wells on your property or you’re an investor like me, the first 15% is tax-free. I said on the show before, we have 401 acres in Ethel, Louisiana, beautiful East Feliciana Parish. My grandparents who were deceased bought some land there in the mid-’60s. My grandfather, JW Day was in the thoroughbred race horsing business. Not only did he have thoroughbreds racing but you make money by breeding as well.

As a kid, I grew up going to the race track in New Orleans. I remember going there with my dad going to Evangeline Downs in Lafayette and we would watch my grandfather’s horse race. My dad has passed away too but he had some cool stories of going all over the country watching their horses race. My grandfather bought this land in Ethel to raise his horses and he passed away when I was a freshman in college in 1995 at Louisiana Tech. He had four children. My dad, I have an uncle and two aunts. My grandfather had two sons and two daughters in that order like I do, two sons, two daughters. My dad was Hollis Day, Sr., I’m Hollis Day, Jr. and my son is Hollis Patrick Day III. My dad’s the first one to pass away of the kids, my uncle and two aunts we’re still very close. We haven’t put up fences yet and said, “This 100 acres is yours,” because me and my sister share my dad’s 100 acres. Technically, I have 50 acres that’s mine. I’m very blessed and fortunate to have that.

SMR 14 | Investing In Oil And Gas

Investing In Oil And Gas: Other than investing in oil and gas, there are no other strategies where you can put your money and then get a deduction for potentially up to 100% of the amount you put in.


I spend a lot of time when I was a kid with my dad and grandfather out there. I did a lot of hunting on that land. It’s not far behind where the new FS Williams Country Store is located. We call it the McManus Crossroads in Ethel right there at Highway 10 and 19. If you’re on Highway 10 and you go through the crossroads and you going towards Clinton on Highway 10, it’s probably about two miles to two and a half miles on the right. There’s a road called Hawsey Road. Our land is out that road. It’s 400 acres. We got some pine trees on it. We got some deer on it and we’ve been contacted by a company looking to lease the property to eventually drill for oil. Let’s say the Day family leased this property, we would be probably 20% or 22.5% royalty owners. They have a team of investors, or in our particular case our oil and gas company, there is a company leasing as investors put up money but if the lease is coming from Conoco Phillips, if Conoco Phillips did offer our family a lease and we turned it down, there’s another company that’s come to the table and we’re looking at that and studying that.

If we go with this company, where’s the money coming from to give us the money to lease the property for a three-year lease and another two-year option? It’s coming from the investors who put the money up because this is a private company. We do the same thing on a much smaller scale. Let’s say we leased it and they say, “Day family, we’re going to put a well on your property.” There’s a percentage of the way oil and gas work in wells, they call it track and our unit. There will be several landowners in that unit. We would be receiving either 20% or 22.5% of the production on that well like our investors do. On the flip side, our company also lease in the Permian Basin in East Texas. We lease land from landowners. We buy leases from other oil companies. We sell at leases to other old companies. There’s a lot of trading and swapping going on. Our CEO when he first started, he was knocking on doors of landowners to lease their land.

All that, we do the same thing on a much smaller scale. The whole point of me telling you this story is that if we had a well on our property in Ethel and there’s a lot of activity going on in East and West Feliciana Parish. These oil companies, the three big ones are Conoco Phillips, EOG and Marathon. Those are all publicly traded companies and they’re all targeting the Austin Chalk Formation, about 5,000 feet deep below the Earth’s surface and is even going up to Amite County and Wilkinson County. Even Saint Helena and even Northern East Baton Rouge Parish. The dead center of it is pretty much the center of East Feliciana Parish over into West Feliciana. If the company happened to put a well in our lease, they’re going to pay us the bonus money for the lease so we would get money even if they never drilled a well. We’ll be receiving probably 20% to 22.5% of the production coming out.

You may take advantage of the tax code just like the ultra wealthy people do. Click To Tweet

A Smaller Company On A Smaller Scale

The company who drilled in the well is going to receive the other 72.5%. This stuff goes on all the time. It’s just I’m affiliated with a smaller company who does it on a much smaller scale and we’ve been successful. We have six-well packages, twelve-well packages and there are amazing tax benefits. The goal is to get a tax deduction. There’s monthly income coming in. Revenue day which is the 25th of the month. The revenue on an oil and gas well package number one, are they going to hit oil? Number two, what’s the price of oil per barrel? Number three, how many barrels are being pumped per day? That’s pretty much it. The technology in oil and gas has improved in the last ten to fifteen years. It used to be they stick a drill bit down and they would test the soil like every twelve to fourteen feet. Now, they’re testing it every foot, every ten inches. The technology has improved.

There’s risk involved in this. There’s no guarantee you’re going to hit oil but we pretty much have a good idea of how deep the oil is. How far we need to drill down to extract in and maybe pull up a little bit, get some from there and go recover some old wells as well too. We had wells that were pumping twenty years ago. They shut down because they thought all the oil was gone but it’s not gone. It’s still there. Back then, they thought it was non-recoverable, but it’s recoverable. I say this is patient money. The income is not consistent every month. It takes a little while to start coming in. You receive monthly income several years and then this company that I’m affiliated with, that I work for, I’m a salaried employee for them, they like to sell the package. It’s like you buy a home, fix it up, sell it and walk away with profit. We’ve done that twice already where we have put money in, we drilled wells. It was one package, we hit five or six wells.

The other package we hit four of six. We got the tax deduction. We got some monthly income. We sold the wells for 20% and 18% gain on the basis. That’s the basis but when you factor in the tax deduction and the monthly income, it’s a little bit over 50% return in about a two-year period. That’s not bad for two years. There’s another way to invest where there’s a consistent income and I’ll talk about that. Let’s talk about optimizing the tax code and learning about tax deductions. How about keeping money in your own pocket? I like the phrase, “I hate taxes and you should too?” Anytime that we can pay Uncle Sam less money it’s fantastic and this is one way to do that. We’ll say we don’t drill wells for the tax deduction but it is a nice benefit. I encourage you to do a lot of your own due diligence research in this. Look up the tax code of 263, you can google 269(c) 59(e), look up IRS Section 611, 613, 613(c)6, look up IRS Section 469(c)3. It’s all there in black and white and it tells you when you invest cash in these oil and gas drilling projects, you receive a tax deduction. It’s cool too because if you don’t need the tax deduction you can carry it forward for up to three years. Plus, the first 15% of income into perpetuity of the wells is tax-free.

SMR 14 | Investing In Oil And Gas

Investing In Oil And Gas: The US government offers attractive tax incentives to encourage investment in domestic oil and gas projects.


Show me another investment strategy where you can put money in and deduct 100% of it in the same year. Show me one, it doesn’t exist. This is the only thing out there that I’m aware of that exists like this but this isn’t the perfect investment. There’s some major risk involved in this but if you can stomach that and realize that the risk, this company does a great job of mitigating the risk. The oil and gas technology has changed, improved so much the last several years. I’m reading all this stuff. I’m a numbers nerd, knowing what I like to do, I would no doubt be a tax lawyer. I would still go to Louisiana Tech University. I’d probably come back to either LSU or somewhere. I’d go to law school and then become a tax lawyer after that. One of my best friends here in town, Bryan Cone is a tax lawyer. All day long, all he does is living wills and estate planning. He’s a tax lawyer. He went to Louisiana Tech, then went to LSU Law School and then went back to SMU for another year to get his LLM in taxation.

Taking Advantage Of The Tax Code

Two of the three strategies that I deal with where I have a large piece of my money, over 90% of my money, my future retirement, my assets are in exactly what I’m talking about on the radio, exactly the same thing. I’ve been very fortunate, very blessed to have some mentors. My buddy, Mark McKay, Amarillo, Texas, who’s been on the show several times. He was the first guest. My good friend, Mike Tolleson, who is the original franchisee of CiCis Pizza. I have asked these guys, “What did you do when you were 35 that you regret doing? What did you learn about when you were 50 that maybe you wished you learned at 35?” I’ve asked those questions. They’re very wealthy and it all comes down to the tax code. These people are taking advantage of the tax code like the ultra-wealthy do. There’s no person that has gotten wealthy by putting money in a 401(k). Wealthy people may have money in the 401(k), but they didn’t get wealthy by putting money in the 401(k).

The 401(k) has changed. I have a strategy that beats the pants off the 401(k). If you are contributing to a 401(k) and you are over funding that 401(k), meaning you are putting in more than the match, call me. I’m going to show you what I’m doing with my own money and let you look at this. Let you read a book or two, let you do your own research and see if it’s for you. It’s a fit for most people. If you’re already putting money in a 401(k), why would you contribute more than the match of the 401(k)? I’ll show you another strategy, it’s what I call an unlimited Roth. It’s very similar to the Roth IRA but it doesn’t lock your money. It doesn’t handcuff you. The 401(k) handcuffs you. When you’re twenty years old, you start putting it in the 401(k). Do you realize you can’t touch that money without a penalty until you’re 59.5? This is the million-dollar question, “Do you think taxes are going to be higher or lower in the future?” If you think taxes are going to be higher in the future, then you’re contradicting your own belief by putting money into a 401(k) because there’s no guarantee of what the tax rate is going to be when you pull the money out.

Just because your CPA is not familiar with the tax deduction for gas doesn't mean it's not real or not true. Click To Tweet

We know the tax rates will expire in 2025. There are some radical socialist and I try not to bring politics into the show because I do believe both parties are severely corrupt to a core. I’m independent but I am conservative by nature when it comes to morals and values. The Republicans aren’t many more. They say they’re fiscal hawks than the Democrats. Whenever they are spending other people’s money, they spend it. They have no recourse in spending other people’s money. There’s no guarantee of what the tax rates are going to be in the future. There’s no way you have a crystal ball or you didn’t have a crystal ball. Anyone has no crystal ball to know what the tax rate is going to be in the future. We have elected politicians talking about wanting the highest income tax bracket to be 70% for people making $10 million or more. I may know one or two people making $10 million or more and I say no. I know they are maybe shaking their head but I don’t personally hang out with them. I don’t care if you make $25 million a month.

You will never convince me that taking 70% of it is okay, considering the government sucks at spending money. They are terrible at managing money. I’m getting off subject here because the government takes off Social Security. They take our money for Medicare and Social Security and both those programs are bankrupt. You can go to the Social Security website and it tells you when they’re going to run out of money. It’s like 2031 is the latest prediction. They’re done, unless things change. This is the way I view this. The government gives me my wife the middle finger every paycheck when we put in Social Security. I don’t want to put into the system. I trust myself and I am better at managing my own money than the government is, but the government doesn’t think so because it’s the law that we have to put in Social Security. That’s my opinion. I feel like Uncle Sam is giving me the middle finger every time I put mine in Social Security. He’s pretty much telling me, “Hollis and Mandy, you’re not the best at managing your own money. Give us some of it so we can manage it for you.” That’s what’s happening. I’ll debate and argue with anybody on that.

I agree, if you put money into it for 25, 30 or 40 years, I hope you get all of it back plus the interest that you could have gotten earning your own money. “Hollis, what about the people who don’t save money and who maybe go to the casino with it?” I can’t help those people. I can’t control what they do. If you want to put it into Social Security, you should be able to. Let there be a program if you want to voluntarily put money in, if you want to voluntarily give your money to corrupt elect pompous politicians who can do something with your money than what it is in there for. That’s your choice. Don’t make me do it. That’s my belief system. If you think the government does a great job of spending tax dollars, then we’re probably not going to get along. Don’t even call me. I do believe in taxes, I do believe there should be a tax. We need the military, we need roads, and we need infrastructure. I even believe in helping the low income for a short amount of time but not for a lifetime.

SMR 14 | Investing In Oil And Gas

Investing In Oil And Gas: If you think taxes are going to be higher in the future, then you’re contradicting yourself by putting money into a 401(k).


If you believe like this person in New York who wants to tax people 70%, she should put her money where her mouth is like I do with the stuff I talked about on the show. Let her start giving 70% of her paycheck every month. Then she’ll have a little bit more merit when she talks. She’s a hypocrite like most politicians. They’re all hypocrites because they want to tell us how to live and yet don’t live the same way they’re telling us how we should live. That’s called arrogance. That’s pompous. There are a couple of politicians, in my anger, I would love to get toe-to-toe with them in a boxing ring. I would love it because they’re arrogant. The lobbyists and Unions are the downfall of the country in my opinion. Everything I do goes back to the current US tax code. All I’m doing is following what’s in the books, following what some of the ultra-wealthy are doing but I scaled it back down to my income. I’m taking advantage of the same tax code they are.

Becoming A Lender

Maybe they’re putting in millions and millions of dollars, I’m putting in thousands of dollars and I’m still receiving the same tax break. We talked about the tax advantages of investing in oil and gas. I encourage you to go look up IRS Section 263(c)59(e), IRS Section 611, 613, 613(c)6 and then also IRS Section 469(c)3. Go look those up and see if it’s a good fit for you. Before we drill the wells, we lock up the land and lease. The leasing is more of a fixed rate of return. You’re called a lender. You’re lending the company your cash, your money, your IRA dollars, which is great for IRA money. You’re lending them your money and in return, they’re paying you a fixed rate of return. Accredited investors only. The one-year rate on simple interest is 8%. The two-year rate is 8.5%. The three-year rate is 9%. That is paid monthly. If you want to lock your money for three years, they’re going to pay you 9% a year but it’s going to be distributed monthly to you. If you want the compounding effect, the compounding yield, the one-year return is 8.3%. This becomes a CD, you put your money in for one year and you get nothing for one year. At the end of one year, you get your basis back, plus 8.3%. You put your money away for two years at the end of the 24th month, you get your basis, plus 9.23%. In three years, 10.28%. There are no tax advantages for doing this.

This is the way the company uses like Conoco Phillips. If you go put your money with Conoco, if you go by Exxon Mobil or whoever, they have a small portion of what they’re doing and they’re paying landowners all across the country. Wherever these guys are drilling, where these big companies are drilling, they’re paying landowners. They call it bonus money and they’re giving them a portion of the royalties to drill on their land. We do the exact same thing on a much smaller scale. We leased our land originally in 2011. We signed the lease on Valentine’s Day 2011 to Devon Energy and then Devon sold that. It was a three-year lease with a two-year option. Devon sold that lease to Goodrich Petroleum and then they also pay the two-year option as well. There was no drilling in that because oil prices went through the roof, $104 a barrel. It means it costs a lot more money to drill. I like oil at around $65 a barrel or $70 a barrel because that’s the price where everybody wins. The landowners are making money, the drillers are making money, the big companies are making money and the investors are making money.

For number’s sake, $100,000 investment in the one-year simple interest is going to pay you $8,000 over the course of a year paid monthly. You invest $100,000, you want to lock it up for two years in the simple interest you can get $17,000 paid out to you over 24 months. If you do the compounding, $18,459 at the end of the two years. $100,000 in the three-year term, the simple interest is you’re going to earn $9,000 a year, $27,000 a year paid to you over 36 months. Whereas the end of the 36 months, if you did the compounding, you would get your basis back plus $30,864. I’m talking the penny that you’re going to get back in this particular land lease deal. You can’t know what you’re going to get back in a mutual fund to the penny. Even if you’re in an indexed annuity, depending on what the market does. I don’t sell annuities but I know how they work and there’s a place maybe for an annuity here and there if it’s for the right person and the right reason. They can’t tell you the payment that you’re going to get back because it depends what the market does. If you’re in the oil and gas well project, we can’t tell you the penny either because number one, are we going to hit oil?

The Power Of Zero

Number two, the price of oil per barrel and number three, how many barrels pump per day? We’ve been saying that taxes are on sale right now. Taxes are on sale because we know the current tax code expires in 2025. I have a good book called The Power of Zero. Baby Boomers were marching out of the workforce and onto the roles of Social Security and Medicare at an alarming rate of 10,000 per day in 2014. At that time, nationally-renowned economists were sounding the warning cry about the crippling and unsustainable cost of these so-called entitlement programs. Social Security and Medicare are no entitlement program. Welfare and food stamps are entitlement programs. In Social Security, you’re getting your money back that you gave to the government so that’s not an entitlement. Our government had promised way more than it could afford to deliver the solution. It was severe. We could either double taxes, reduced spending by half or some combination of the two. Failing to act quickly would only compound the pain of the eventual fix. In 2019, five years later, even as our national debt has ballooned to $21 trillion and the evidence for higher future tax rates continue to mount, Americans still have a hard time paying taxes before the IRS absolutely requires of them.

There is still a small part of us that says maybe our taxes will be lower in retirement. If you think taxes are going to be lower in retirement, then you should be spending your 401(k). If you think taxes are going to be higher in retirement in the future, I question why you do that. I question why you put so much money in your 401(k). Maybe the math to which David Walker refer doesn’t add up after all and David Walker was the Comptroller of the US. If that’s the case, why pay taxes at full price, if a tax sale might be lurking around the corner? Could tax rates in the future be higher than they are now? This question got answered with a resounding yes when Congress passed tax cuts and Jobs Act of 2017. With a stroke of a pin, our federal government inaugurated an eight-year period starting January 1st, 2018 during which you will experience the lowest tax rates you’re likely to see in your lifetime because of the sunset clause that was built into this legislation. The tax sale ends on January 1st, 2026.

As soon as the clock strikes midnight, taxes will revert to their pre-2018 levels. All Congress has to do in order for your taxes to go up eight years from now is nothing. It’s already written in, they’re going to go back. You have math and certainty in your corner when it comes to making a critical tax payment decision that may well determine how long your money last in retirement. We went from an era where we knew that in some vague and distant future taxes were likely to go up to an era which we now know the exact year and the day when taxes will go up. If your tax rate in 2026 or beyond is even 1% higher than it is now, then continuing to grow and compound your retirement dollars in 401(k)s and IRAs will curtail the life of your retirement assets. If you think taxes will be higher in the future, let me show you what I’m doing today with my own money.

Let me show you what the ultra-wealthy are doing with their own money but you don’t have to be ultra-worthy to do this. It’s very similar to a Roth. You contribute how much you want to contribute, $25,000 a year, $50,000 a year. If you have $700,000 in a 401(k), you’ve been working 30 years. You can drip that money over if you want to and fund this strategy. My buddy, David says, “Do you want to pay taxes on the seed of the harvest?” If I’m in beautiful Mississippi and I’m up there at the feed store, I walked to the to the register with a packet of seed and the cash register or the owner of the store says, “You can pay the taxes now on this packet of okra or whenever you harvest this okra in six months, pay the taxes on that.” What are you going to do? I’m going to pay the taxes on the seed every time because it’s going to be less. It’s going to be less than the harvest. Hopefully, I’m going to have a big harvest. I’d rather pay taxes on the packet of seed.

How The Tax System Works

I know that’s a juvenile example but that’s what it comes down to. How good is this sale? To understand how good the new tax rates are for those contemplating an asset shift, we have to first understand how our country’s tax system works. To facilitate this, I want you to think back to your chemistry class in high school. Remember that long skinny cylinder with the red lines on it? No, not a test tube or beaker, I’m thinking of a graduated cylinder. The instrument that you use when measuring liquids, our country’s tax system works much like that graduated cylinder. Prior to 2018, your taxable income, including any assets shifts, would have poured into that graduated cylinder and flown all the way down to the bottom where some of it would have been taxed at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Some people don’t realize that in 2017, even Bill Gates would have had some of his earned income tax that only 10% even if only for about three seconds. That’s how our progressive tax system works. Eventually, Gates’ graduated cylinder would have filled up all the way up and the vast majority of his earned income would have become tax at 39.6%. His income from the lower tax brackets would have been unaffected by the higher rate.

There’s some grass to go over. It’s a great book. There is a sweet spot in the new tax code. It’s obvious that my favorite tax bracket is 0%. There’s a way to get in the 0% tax bracket. For some people, there’s never a way. If you have a pension, you’re probably never been a 0% tax bracket, but we could potentially lower your tax bracket. One of the strategies that I talk about here is like an unlimited Roth, the money’s tax-free in retirement. When you receive the income, there’s nowhere to even report in 1040 and no, this is not an annuity. Rebecca Walser is on the show and her episode is phenomenal. It’s the best show I’ve ever had. With Chuck Omphalius from New York, was outstanding as well. It’s about education and taking advantage, following the rules, and the current laws. Take advantage of the current sweet spot. Find out what your magic number is, learn about other strategies than traditional stocks, bonds, mutual funds, CDs and annuities. Learn the things out there, the strategies out there that aren’t running through Wall Street. Wall Street makes money on everything that runs through them.

I understand Wall Street’s a big corrupt animal, but people make money on stocks and bonds occasionally. I’m a control freak of my money. If you’re a control freak with your money and you want to see what you’re going to have, if you want to see the income you want to have, if you say, “Hollis, I need to know the income I’m going to have in twelve months and that’s not coming from an annuity.” I know there’re a lot of advertisements and shows about annuities, I’m not talking about that. This is a strategy that’s very similar to the Roth IRA. Look at the tax laws for investing in oil and gas. There’s nothing out there that I’m aware of that gives tax deductions for oil. If I can keep more money in my pocket and keep Uncle Sam his stinky, corrupt, greedy hands out of it, I don’t want his hands in my pockets. I hope you enjoyed the show. God bless you. God bless the USA.

Important Links:

Join the Sage Money Radio Community today:

You may also like...

Leave a Reply
