Zero To A Hundred – Episode 26: Elite Tax-Savings Strategies For You With KC Chohan

Accelerators! 🚀 Get ready to unlock the secrets of tax strategies for wealth building with KC Chohan, founder of Together CFO. From leveraging tax loopholes like the Augusta Rule to creating private foundations that eliminate capital gains taxes, KC shares elite strategies used by high-net-worth individuals—and how they can work for you, too! If you’re ready to keep more of what you earn, this episode is a must-watch. 🎧

What’s on the Menu:

💰 How to employ your kids for tax savings.

🏡 The Augusta Rule: Renting your home for tax-free income.

🏛️ Private foundations and the power of tax-exempt wealth-building.

Why Tune In?

KC breaks down complex tax strategies into actionable advice for business owners and entrepreneurs. Whether you’re just starting out or scaling up, this episode will teach you how to reduce your tax burden while building long-term wealth.

💬 Gem from KC:

“Your tax plan isn’t just about saving money—it’s about creating generational wealth.”

Get in Touch with KC:

📧 Visit TogetherCFO.com to learn how KC and his team can help you reduce taxes and build wealth.

Don’t miss out—hit that subscribe button and let’s take your business from zero to a hundred! 💥

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Watch the episode here

Listen to the podcast here

Elite Tax-Savings Strategies For You With KC Chohan

In this episode, I am privileged to introduce our guests KC Chohan, who is the Founder of Together CFO, a CFO, accounting, and bookkeeping service who works with high-net-worth individuals with tax strategies and helping them protect their wealth as well as their assets. KC is also a professional speaker, a writer for Forbes Magazine and has been featured on everything from Yahoo Finance to NBC to Fox News. Our talking points are the strategies that high-net-worth individuals use to reduce or eliminate their taxes that you can employ as well, setting up a family foundation, employing your family members, i.e. your children as well as using your home as a tax-free profit center.

For those of you who do not know me. My name is Jarrod Guy Randolph. I am the Founder of BoxFi, the nation’s leading payment consultant providing business growth solutions through payment processing. I’m excited to share the network and community that I’ve built over my many years entrepreneurial journey to help you grow your business and become more profitable. Folks, let’s accelerate together.

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KC Chohan, how are you doing?

Fantastic. Thank you and yourself?

I’m doing amazing. I want to thank you for joining us on show and we’ve got a live one because we’re going to talk about tax strategies and we’re going to talk about them from the standpoint of high-net-worth individuals. The secrets that they use and how that can apply to our audience of business owners. KC, before we dive in, I have a question for you. Is there a saying or mantra that you have that you find yourself repeating every time you’re talking to one of your clients?

Flipping The Script To The Bottom Line

It’s, “Make them all, so you can give them all,” because when we look at all these elite billionaires and families, they’re all so philanthropic when they say they’re going to donate 99% of their wealth when there’s a lot more clear that but it all comes in. It’s not how much you make on the top line, but it’s how much you keep it on the bottom line is the is the key number. People often get mesmerized by the top line vanity number and they don’t talk about the bottom line take home. We want to flip that script and we want to help people take more home when all is said and done rather than looking at big vanity revenue numbers.

How do you balance that and toe the line between being somebody who is giving to the community in philanthropic and somebody who is also looking to make money at the same time. Where is the balance?

We call it strategic giving and that is, you are doing something to better your community or support the cause that you’re passionate about but you’re also getting the benefits of the tax deductions, asset protection, legacy creation, and elimination of capital gains tax along the way, which most people don’t realize that if they end to this world of tax exempt, there’s a lot of additional benefits other than just the feel good factor of contributing to your local charity.

Tax Strategies Of High Net Worth Individuals

That makes sense. You work with a lot of high-net-worths and you build these tax strategies that are very beneficial to them. Walk us through what makes what you do very unique in the industry.

We’re a hybrid. Yes, we work with family offices. All the way down to doctors and people that are making a lot of money. Comparatively speaking, we’re a hybrid because usually, to get into these structures you need to be at a high-net-worth level, $2050 million plus. What we’ve done is we’ve broken off one segment of that puzzle piece and made it more attainable for the regular millionaires. Which every single day, there’s more and more of them but they don’t have the team around them with the strategies of the elite. That’s the gap that we’ve tried to bridge.

You mentioned the team. Talk to me if you are a high-net-worth individual or a high income earner, what your team needs to look like to make sure that you have everything in place to be as efficient as you possibly can with your earned capital.

When we start out in business or in your career, you’re not going to be in a very complex situation or either going to have your own business or you’re going to have a W-2 income. It’s pretty easy for most professionals to be able to help you get your taxes filed in a way you go. As you accumulate wealth and you go from being a business owner into a high-net-worth person who has a lot of assets then it becomes a lot more complex. More loophole starts to apply to your situation, whether you become a real estate investor or you have kids and you get additional write-offs. A lot of additional things can happen but then when you get to a certain wealth level, all of that isn’t enough and you need the next level of advanced strategy and structure.

That’s where we come in, where you have amazing strategic individuals around you in all avenues from accounting, strategic giving, insurance, and real estate. This is your dream team that you’re building if you think about it. Maybe the dream team in a basketball set where they pick the best players and they all play against the rest of the world and what have you. You’re hand picking these advisors to work for you or your family. If you think of an analogy where you have a CPA that has thousands of clients, so come tax time. That person’s going to be inundated with the same requests and say, “What are the financials? What’s the taxes like?”

Imagine if that one CPA only had one client or one family as their client. How much more attention that one individual would give to that client in order to over service them and get them the most efficient tax saving strategies because they’ll have more time to devote to that client to research to get what is available if he’s good enough, assuming he is. Compared to if he’s got thousands of clients constantly ringing him at tax time, extension time and he’s not incentivized to save you money.

At that point, he’s incentivized to get a tax return filed, which is the main difference that most people don’t understand. The family office level, the individuals or the professionals that work just for you and your family and dedicate to you and your family, which has a bigger cost. If that CPA makes, let’s say, argument it’s like a million dollars a year in his practice. Why would he go work for a family office if he isn’t making that much or more? You can then see why it’s so expensive to have a family office if you’ve got 5 or 10 of these advisors that are all good in their individual specific fields. It could cost you $5 million to $10 million a year to run a family office, which if you’re not in the high-net-worth, it doesn’t make sense for a lot of people.

On Having Your Own Family Office

Let’s lean into the family office a bit. Walk me through. Our audience are business owners and entrepreneurs and many of them have had successful businesses that they have exited or that they’re looking to exit. When do you get to the level where you should be looking at, number one, having your own family office or second option, being part of a multi-family office so you’re getting that more hands-on attention.

Barriers are changing all the time as things are becoming more virtual and online and things of that nature. Traditionally, you would have a family office. There wasn’t such a multifamily office, then it became a multifamily office where now, there’s maybe a few families that are serviced by this group of people. Now, there’s virtual multifamily offices.

You can do the same thing in a virtual set just like what we’re doing. Again, the costs come down. Where you used to be in the $25 million or $50 plus million range, anyone with a net worth of probably $5 million plus could start looking at either building their own dream team and having a tool family office or going into a virtual family office and seeing if the fee structure makes sense for the amount of benefit that they would get.

Also, one of the things that I’ll say about family office because I’ve been around the family office world for about a decade. Funnily enough, I’m working on organizing a family office dinner in December based on the usage or implementation of AI with some very big family offices in New York. The family office network becomes the ultimate benefit to you because you’re around other people. You get co-investment opportunities.

You get a look behind the scenes of what those elite investors are investing in. Those relationships are what can take your portfolio and your net-worth to the next level because you can all invest in some of the same things. I didn’t know that $5 million was the barrier to entry or a thought of barrier entry in this world. I was always under the impression that it needed to be at least $25 million, if not more. If you can get into a family office, the relationships hands down that or multifamily office, they could catapult your net-worth.

Again, your net worth is your network because you’re in these rooms, you come across different deals of all sizes. If you weren’t in that room, you would never even know you had an opportunity to get into at an early stage. It’s worth being the smallest fish in the biggest pond rather than the big fish in a small pond.

You go into it with open arms and ready to learn. You’ll find that a lot of people within those networks are willing to give more information to people, help and teach you what they know and how they build and a mast their wealth because they have a lot of respect for you for getting there. Especially if you’re beside a million-dollar range. Most people are earning that themselves.

I know that at Together CFO, what you folks do is you focus on that relationship building. You focus on getting that person’s net worth to the next level to the strategies and the structures that you implement. One thing I’d love to talk about is, what is the difference between creating good structures for your net worth versus just looking for loopholes in the tax system?

Loopholes In The Tax System

Simple answer, everybody should be using loopholes along the way. If you think of, there’s so many loopholes and they are very easily accessible. We even did the top 50 loopholes that everyone should be using. We’ll send you the link so all the readers can click it and get it completely free. It’s a real simple test. You can download that. Send an email to your CPA and ask him or her, how many of these 50 are we using? If the answer comes back and you’re not using as many as you should be, you can instantly know that you’ve been overpaying on taxes.

That’s one. Do how good your CPA team is? How do you know that? Have you been ranking them? Are you comparing them? This is a simple exercise by sending one email to see how well they’re doing like a scorecard in school. The second thing is, the higher up the net worth ladder you go, the less relevant loopholes become because they simply run out. Let’s use a car as an example.

You can buy a car, appreciate it and write it off or you can buy some real estate and do the same but you need to have the cashflow to do it and sustain the asset. You might just need one car. You’re not likely going to need a fleet of ten cars. How much can you use that loophole? You can write-off a kid deduction. You can hire the kid’s child deductions or rent your home back to yourself for two weeks, but again, you get to a certain level of wealth and that’s not enough.

These tens or hundreds of thousands of deductions, still you’ve got millions of dollars of net profit left over. You can have a huge tax bill. Loopholes are maybe, let’s call it step one in the value ladder of what everybody should be doing because their mostly free to do. Unless you have to do a small survey, conservation easement or something along those lines. Generally speaking, free or low cost. When you’re still paying multiple 6 or 7 figures in taxes, you need something more robust. You need to structure and it’s like building a house.

If you build a house on sand, the likelihood is it’s not going to settle well. There’s going to be cracks. It’s going to fall down at some point. If you build a solid foundation, then on that structure, you could build a house. You could build a condo building, a shopping center or a hospital. Whatever you want if you have the right foundation that you’re building on. That is having the right structure in place. With the private foundations and the tax-exempt world, that’s one piece of a wider structure in the estate plan for a few different reasons. The four main reasons, one for creating lasting legacy, asset protection, tax savings, and totally eliminating capital gains.

I want to come back to the private foundations and eliminate capital gains. We’re going to talk about what your numbers need to look like for you to be able to get there. Back to the loopholes, there are the common loopholes that everyone here is about on YouTube and Instagram. They’ve got every tax expert out there giving you the basics. What are 2 to 3 loopholes that most people are unaware of and most of their accountants are unaware of that they’re not implementing?

The Augusta loophole. I don’t think many accountants even do that and that’s a simple one. It’s just to rent the house back to yourself for two weeks. It’s pretty simple and easy to do that then employing your kids. I don’t know how many people are employing their kids, whether that’s on social media, postings, or as a model on their profiles. If they’re older, they could do research or cleaning of the office and things of that nature.

Depending on the age of the kid, as young as one. They could be modeling and using their presence on social media. They get $13,000-ish a year tax-free. What we’d recommend is, if the kid is doing something to promote the business, they’re getting paid. That tax-free money that they have earned could go towards paying for their schooling, all the nannies or the other type of non-tax-deductible expenses that you have.

I’ve got a question for you. Let’s say you’ve got a real estate agent and they’ve got a two-year-old. How would they effectively use their two-year-old in their marketing to be able to write that $13,000 off?

It will be easy. You would just have the two-year-old in the house while you’re videoing it and saying this could be a perfect family home for you and your family. It’s easy to paint that vision of how me and my two-year-old walking in this multimillion-dollar house and you could do that same thing too with your kids.

We’re having dinner with friends and they have a two-year-old. He’s in real estate and they have a nanny. I’m 100% telling Sean that he needs to be doing this because Hudson is so cute. He should be in the ads. They already look like models as a family, so I love that idea and that’s a good takeaway. If you’re a restaurant, it could be your kid in your ads for your restaurant or if you are a construction.

It could be eating the food in the restaurant and getting it all over their face. That’s probably enough.

The Augusta Rule

We can just end it. That is some of the best information we’ve gotten and the clarity on how to do it is important and little things like employing your kids. Some people or we’ve heard of it, we’re just not sure how to do it properly. Let’s talk about the Augusta rule and you mentioned being able to rent your home back from yourself for two weeks or a year. Talk us through how that works.

You just take the fair market value of the home. You can get that by looking at comparatives on Airbnb or if there’s a similar home that’s up for rent in your community or your realtor friend can give you an estimate and then you can do a corporate retreat in that home for two weeks.

It would be the daily rate and then you’re renting the home from yourself. Are you saying that’s a write-off?

You get a tax deduction for that.

Let’s talk this through. Let’s say, we’re going to go all out. We’ve got a home on the ocean in the Hamptons. The Augusta rule is literally from Augusta, Georgia. I know that this is the stems from people who are renting their homes during the tournament that you throw events. You do fourteen days of the year and you have fourteen different events. Are you saying that your company is renting the home from you or your renting it out to someone else?

Those are like a full team daily limit and then the LLC compare the home owner rent for up to fourteen days per year.

If the daily rate for your home and looking at comparable of Airbnb as $1,000. You could technically get $14,000 in income from your home and you’re saying, just to be clear, you can write that off under the Augusta rule?

Yes, and to give you the next level of detail, the homeowner doesn’t have to report the rental income on their tax returns because it’s under the threshold. Whilst the LLC gets that as a tax-deductible rental expense. It is a legitimate business expense.

Now I understand because I’ve heard scuttlebutt about people doing this where they do have a big home in the Hamptons. If they were to compare it to a catering hall or venue that they’d have to rent. It’s literally $20,000 a day to rent something where they’ve got a $10,000 square foot home and can accommodate 300 people.

You look at weddings as a prime example of that. If you host a wedding at a beautiful house in the Hamptons that you have, it could be hundreds of thousands of dollars.

That comes in this income that you don’t have to report.

Only for fourteen days. That’s the key for fourteen days.

You could you could literally make $100,000 a day over fourteen days, which is $1.4 million not have to report.

If I have like a couple of million-dollar home, I’d would be doing that but yes.

That’s why we’re focusing on the homes in the Hamptons. My house in Upstate New York is not getting that but that’s pretty cool.

The same applies. That is something that everybody should be doing. You’re already thinking. If you’re a business owner, you don’t ever stop thinking about your business, so why not do a retreat at your own home?

That makes sense because you could own a hair salon and you could do all sights at your home and your company rents your LLC. Your hair salon rent your home from yourself.

It’s good to get out the office for that. We follow EOS principles and we always do an offsite and always get out of the office. As nice and comfortable as the office is just having that different energy and that different environment is useful.

Are there any of the tax loopholes that, let’s say, your accountant has not been applying them but for the last two years, they applied to your business. Can you refile your taxes and recapture those tax loopholes or only moving forward, they’re not looking in the past?

I believe you can go back three years and redo that but you’d have to calculate to see how much if it’s worth doing it or not, because the cost of them refilling however many different returns. You have a business return and a personal return, is it worth the saving that would be involved? You’d have to do that math, but let’s say if you downloaded the top 50 loopholes and there’s twenty of them that you haven’t used. Likely it is, there’s tens of thousands of dollars that you’ve overpaid that you didn’t have to.

Setting Up A Foundation

Talk to me about setting up a foundation and I want to go through each four of those categories that are the benefiting elements of setting up a foundation. Let’s end on that topic, talking about how you avoid your capital gains.

It’s quite a complex process to get the foundation.

Let me interrupt you quickly because I want the audience to read this going into. Where do you need to be financially for it to make sense to set up a foundation?

If you have tax liability. If you are paying in taxes over $500,000 a year. It’s a no-brainer. If you’re getting close to that, you should at least educate yourself and learn about it. Maybe $300,000 or $400,000 it starts making sense but at $500,000 it’s a home run. You need this. That’s not revenue and profit. That’s taxes paid because the others can be so variable based on which state you live in, what your deductions are and what your revenue is. If you pay over $500,000 in taxes and you want to reduce that, look into a private foundation.

Let’s call it what it is. If you have a $500,000 tax liability or tax ability at the end of the year, God bless you. You’ve got a profitable business. Now, let’s talk about ways in which you circumvent having to give all that to the government.

As many ways to do it, this is just one of them. Again, I’m not saying this is the perfect solution for everyone. You have to have certain requirements. The taxes are a big driver of this, but not the only driver. You have to have excess capital as well because if you need all of the money that your business generates personally, then Philanthropy is not there yet. You need to have excess capital to put into the foundation for this to make sense.

Again, you might be making a lot of money but if you are spending a lot personally, if you’ve got that house in the Hamptons and you got to $100,000 a month mortgage on it. You have an high overhead as well. You’ve got to take that into account. It’s not just how much you make. It’s how much excess capital you have after personal expenses because 30% of your AGI, it’s just a gross income or net profit is closest thing that most people don’t understand that can be donated into a private foundation.

Let’s talk through the steps of this. You’re doing over $500,000 and your tax bills over $500,000. You’ve got that excess capital. Now, when you go to set up this foundation, how do the numbers work? How does the money flow?

Let’s assume that it’s you. You own your business 100%. If it makes $10 million in net profit, that $10 million comes straight to you and you pay the tax on that. It’s in the worst tax bucket because it’s ordinary income. It’s actively earned. You could be paying 40% to 50% tax rate on that depending on which state you live in.

If you’re in Florida or Nevada, it might be a little lower or Texas, but I’m in California. It’s higher here. Let’s say, on that $10 million, you’re going to pay 50%. Let’s go easy on the math for ourselves. $5 million of that is going to Uncle Sam straight off the top and you’re left with $5 million profit to go live your life and have your wonderful lifestyle with. What if you had a private foundation?

The private foundation can take a 30% donation, so of that $10 million, you can donate $3 million into the private foundation. That lowers your taxable rate from $10 million down to $7 million. If we use that first part of the equation, now your tax bill has gone, 50% of $7 million would be $3.5 million. By doing that one move of $3 million into the foundation, you’ve saved $1.5 million personally on your tax bill. That sounds good so far? The kicker is the $3 million is still sat in the foundation that you fully control. Now, with that one move, the total wealth created is the $3 million plus the $1.5 million. $4.5 million has now been created for you to reinvest however you wish.

This makes sense. If it was $500,000 and you had $250,000 and you can take out 30%. That’s $150,000 that you could put into your private foundation and then you’ve got $350,000 which are going to be taxed on above and beyond that. You’ve got $175,000 that you’re saving in taxes. Combined, it would be $325,000. That is a huge saving. Let’s say you’ve got that savings of $175,000 and then of $500,000, you’ve got $150,000 dollars in the foundation or for your example, the $3 million in the foundation. What can you do with that money that’s in the foundation?

This is where all the special stuff comes in because now, you’ll play in the tax-exempt world compared to cheers in tax deductions. It’s completely different. Night and day different. In the tax-exempt world, you can invest the same way that you would personally in stocks, bonds, real estate, gold, and crypto. Pretty much whatever you want as long as it isn’t too risky. Let’s use penny stocks as an example. That would probably be too much of a risky thing to bet on rather than an ETF of the S&P 500. It’s very safe and secure or a treasury bond. As long as it’s not too risky, you can invest in pretty much anything you want.

The income that you get from that investment, what can you do with it? I’m assuming you can’t like to pay for your personal expenses or go to the movies and use your foundation credit card. What can you do with it once you’re starting to generate income on it? Can you take any of that $3 million out to pay certain expenses?

We get this every single day. They call it self-dealing. You cannot take the money out the foundation to better yourself because your clusters a disqualified person. A disqualified person is someone who’s either donated it in or is managing or affiliate with the foundation. It’d be you, your wife, or your kids. Siblings are okay because if you’ve got a brother or sister, it doesn’t mean that they are part of that foundation.

Secondly, you cannot go to the movies and have the foundation pay for it because that’s personal gain. Anything to do with your personal lifestyle, your home, grocery bills or things of that nature, should not be expensed through the foundation. That’s on you personally from the money that you make. No way around that but there is a way to get money out the foundation. That is just by taking a salary. If it comes down to it, again this is just for wealth accumulation. This is excess capital that you shouldn’t need personally but if you did for whatever reason, you can always take a salary from the foundation.

Could you go out and buy a home as a corporate retreat for the foundation?

Yes.

When you’re not using it as a corporate retreat for the foundation, can you Airbnb that home?

Yes, because that’s an investment that the foundation is made and you can do that. That’s not a problem.

The foundation can pay all the expenses for the management of that home. Now, you’re getting income if you Airbnb it but everything can be paid to the foundation. Could you buy a private jet with the foundation’s money?

As long as it’s used for foundation purposes. Jets, yachts and cars.

Foundation purposes, what does that mean? Does that mean I need to be donating to the ASPCA and we’re flying people to an ASPCA fundraising retreat? Explain to me what it means to be doing the right thing by the foundation.

It all boils down to the foundation’s mission and purpose. If you are promoting the foundation or doing an activity that’s going to benefit the foundation, that is then all foundation works. As an entrepreneur, I would argue most of your time and I know most of my time I’m always talking about business or doing something related to my business. There’s very rarely a conversation I have where no business is talked about at all. Other than maybe smalls on the subject.

It’s the same about the foundation. What’s the mission? What’s the purpose? Are you trying to help underprivileged children in Africa or education in your local community or is it Boys and Girls Scouts type thing? Whatever your mission is, and again, this can be broad. It doesn’t have to be so pinpoint specific if it’s education, science or research.

There’s no right or wrong as long as you are talking about promoting or doing something that even that you may want to donate into. Let’s say you’re a Christian and you go into Rome to the Vatican. You may want to donate to the Vatican. You want to go check it out. You want to go meet them and see if it’s the right place for you to be helping. All of that type of research can be done as well.

You can do R&D through your foundation.

They wouldn’t call it R&D in a tax-exempt world, but effectively, you are researching or checking to make sure that the places that you’re looking to fund or issue a grant to. Not that you have to do any of that, but you have the option to. If you go into Rome, it would be rude not to pop into the Vatican and say, “I’d like to make a donation. Can you run me through how you’re going to use these funds or how you use your funds? What’s the process?” You may not align with it.

Let’s say that we’ve got $3 million in our fund and we want to give money to amfAR. Can we pay for our Gala trip to the South of France every year through our foundation if we’re giving to amfAR?

We’re going to be careful on that one.

I know. I’m straightening the limits. I’m just trying to find out what we can and can’t do.

The foundation can pair or shouldn’t pair for you to attend another Gala, even if it is held by another non-profit but you can attend that. If you wanted to donate something, you could become a sponsor. There’s other ways around doing that or if you happen to have your board meeting at the same time, then you could host your board meeting there and attend the event personally.

There’s no restrictions around where you could have a board meeting. I could have a board meeting on a yacht in the middle of the Mediterranean.

It’s up to you. You’re in control of our entity.

I’m trying to set us up here and all of the audience that we can live an amazing life and figure out how to do it the right way with the tax loopholes that are out there. Can you share a story of someone that you’ve worked with where you’ve been able to create significant tax savings for them?

The whole reason or story that I ended up in this world wasn’t initially because I wanted to figure out the whole tax situation. It was when I stopped my own business and we would do in CFO Services. We had a big success with the client where we took him from $5 million a year to $220 million a year. That created a huge tax problem for him and he then pretty much forced me to figure it out even though I didn’t know anything about taxes but I can read, research and ask right questions.

The commonality that I saw was all of these elite families and billionaires have this specific type of private non-operating family foundation, which is very different to a private operating foundation, which it’s donations. These entities do not solicit donations. It’s a small word non-operating versus operating but it means a big difference.

The non-operating, are they donating from the foundation to their mission? Are they writing a check?

Your foundation has called the 5% expenditure rule. Let’s say, you have $3 million of cash sat in your foundation year one. The 5% expenditure rule says you have to expend at least 5%. In this case, it would be $150,000. That can be either on donations, grants, or overhead. You can allocate between all three or if it goes all on overhead, if you pay yourself a salary, travel or board meetings and things like that, the admin of having the foundation is not free. You can cover that.

We just learned a ton about foundations and I’m ready, willing, and able soon. Let’s talk a little bit more about asset protection and what you need to implement for long-term wealth creation.

Asset Protection For Long-Term Wealth Creation

In America, it’s probably the most litigious place in the world. I think we can all agree on that one. The high up in wealth you go, usually the more assets you accumulate. Therefore, the bigger the target on your back. We get this all the time, specifically with our medical doctor clients. We got practice, tens of the two practices, tens of the five practices. Every other week, they’re getting sued by someone for some reason or probably no reason at all just because people know that they’ve got a target on the back. They got some money.

If the assets that they owned were not in their name and they were owned in the tax-exempt entity, there’s a couple of big benefits. One is if you did get into any legal disputes and someone did an asset search on you. Nothing would come back because you don’t own anything. It would be in the foundation’s name. The second benefit is, those assets owned by the foundation grow with zero capital gains tax. Let’s say you bought a piece of real estate for a million and then a few years later, it was worth $5 million and you wanted to exit it. You would have paid the net income tax along the way, which is 1.39%-1.4%. On the exit of that $5 million, you wouldn’t have to pay any capital gains tax.

What do you mean by the exit of that $5 million?

You bought the asset for $1 million. A few years later, you selling it for $5 million. If that was you, you’d pay a capital gains tax on the $4 million different maybe 30% or 35%, depending on where you live. In the foundation, you would pay zero capital gains tax.

That $4 million profit has to go back into the foundation.

It would always be in the foundation because the asset was owned by the foundation.

You say, don’t own anything in your own name. Own it in the foundation. Can your primary residence be owned by the foundation and you rent it from the foundation?

It shouldn’t because you’d be self-dealing on your disqualified person. That’s like you’re getting right on the line there where you shouldn’t do that. There’s probably things that you could do if you want to push the needle and have a home office of the foundation in your home, but it’s not worth pushing it that far. As I said, takes a lot to create these entities and get a letter from the IRS saying, “This is a tax-exempt entity.” You’ve got to jump through a lot of hoops to make sure you stay in compliance with all of the rules because the worst thing that could happen is, you’re spending all this money and creating the set structure. You’re now compliant and then you fall out of compliance because it’s difficult to get that determination letter back.

What is the complexity to get that determination letter? What is the process? Let’s say, we’ve got one of our listeners who has a million-dollar tax bill every single year and they now want to set up a foundation from listening to your brilliance. What is the process they have to go through to set it up?

Reach out to us and we’ll do it all for you.

You make it that simple.

We offer a white glove service because there’s a lot of steps. You’ve got a goal for the state. You’ve got a file with the state, get their approval first then you go to the Feds then you file a different type of exemption with them. You go to show them all your documentation. Make sure it’s all signed and certified and then they could take anywhere from 4 weeks to 4 months to get a decision back to you at which point you then need to open a specific type of non-profit bank accounts. Again, the same with wealth accounts if you have a Schwab or a trading account. They want all the documentation, too.

There’s a lot of teas Ts and Cs involved in making sure you do all that properly because a lot of people throw in the first thing they see. They don’t get the determination of it. It gets rejected. The vast majority of them do get rejected because they don’t know what they’re doing. It’s like it’s the whole reason you imply professionals. I’ve been there and done that. You can fast track it. Let’s fast forward and say you are successful. You’ve got your determination letter. You then have to register in a few different places as well to make sure that you get the full benefit of having a foundation.

Once, that’s in place. It’s a compliance game because you got to make sure you it in your board meetings regularly. The meeting minutes have to be to a certain standard. You have to be aligned with your mission and then there’s no self-dealing to disqualify people. You’ve got to make sure that if you are buying that vacation home, you’ve got to manage a management company in place. Everything is above board and it’s working well because you can’t make any crazy investments.

Let’s say you have a wealth manager. You’d bring him in, open the wealth accounts and manage that. Make sure that you do stay in compliance because come year end, it’s not a simple 1040 tax return. This is a 990-PF and it’s 58 to 100 pages long. Not many CPAs know how to do it either. They can probably struggle along and try and figure it out, versus going to affirm that focuses on that one thing. You’re going to get a much better service. It’s generalist versus specialist is what you’re looking at.

Thankfully, we do it all. We’re a white gloves service from creation of the foundation, figuring out what your mission, your purpose, and all the rest of that good stuff is and then making sure you get the letter and the approval. More importantly, you stay compliant and you do the bookkeeping correctly. We’ll do that for you. You review it and then we do the tax filling, too. It’s a one stop shop that everything related to strategic giving in non-operating in private foundations.

For the holidays that are fast approaching, I wish everyone a foundation because it means that you are doing pretty darn well in your business and in your life. Can you give us some trends or things that you see forthcoming in terms of legislation that would have an impact on our audience of business owners?

Legislation Trends And Impact To Watch Out

The biggest one probably for your audience is the estate tax threshold for gifting is reducing. It was, back in the days, $5 million. It got pushed up to twelve and a half where it currently is. Now it is getting reduced down to $7 million. Who knows if it will change again with the new administration coming in, but we’re not talking about politics. That may or may not change but as we stand, that is going to then impact a lot more people because they cannot get the tax benefits for as big an amount as they used to.

This could be a great solution for those people. We’ve gone through a lot of Boomers coming in that owned a lot of stock personally. If they’d liquidate that stock, they’re frightened of the amount of capital gains tax that they have to pay. One of the good solutions that we’re working out with a client is to donate an amount of stock to the foundation. You’re not liquidating it. You don’t realize any capital gains.

It just goes into the foundation. You get fair market value for that donation. Many years ago when you bought the stock, you’re not getting the cost then, but you get into the value. You get a 20% write off of that amount that you can use on your personal tax deductions as well as still owning that stock of liquidating it in the foundation or whatever you want to do in the foundation. Personally, you’re going to get a 20% write off for that. If you don’t use it all in one year, you can use it over the next five years as well.

Let’s say you’ve got $2 million in stock and you decided to donate a million dollars in stock to your foundation. The million dollars that you write-off that you donate to the foundation, you get a $200,000 write off?

Correct.

That’s impressive. It’s these nuances that these are strategies of the elite that most of us are not educated on. Some of these have been aware of but a lot of this especially with the foundation structure is something that’s very new and I know very valuable to our audience. Before we go into the rapid-fire section, I want to ask you one last question, which is important for our audience to key into.

As we go into 2025, we all understand the importance of getting ahead of our taxes and having the right strategy in place. Instead of everything, it becoming ten days before. It’s April 5th and you go, “I got to put my taxes together.” How do we as business owners structure our approach to planning for our taxes ahead of time so we don’t run into that issue?

An Approach To Planning For Taxes

It’s what we try to educate our clients on. Be proactive rather than reactive. I set up the trust, the foundation, or the structure, whatever you need sooner rather than later because when it gets too lit, you miss the opportunity. A tangible with to do that is monthly taking care of your business. If you’ve got a business, use a software like FinancialFusion.io. It’s what we recommend for our clients. That gives you a snapshot. It plugs into your QuickBooks and it gives you an analysis of how your business is performing month to month, quarter to quarter and year on year.

If you can be on top of that on a monthly basis, you can then strategically start having those conversations because how you are trending, “Is business up?” “Why is business down?” “Why?” “What’s going on?” “Let me investigate.” “Let me look into it.” You’re going to be more on top of it. There’s another simple thing that people could do is just schedule four appointments a year minimum with their CPA. Every quarter, we’re going to get together and we’re going to have a conversation for an hour.

We’re going to go over some strategies because if you don’t hold them accountable, they’re never going to be knocking on your door to spend time with you because they’ve got thousands of clients or hundreds of clients. It’s important that you take the onus of that relationship because you’re only going to get out what you put in.

The relationship building with a CPA is important. A statistic that I read, which I found fascinating, is that they only graduated about 18,000 new CPAs. That’s it. Everybody has to file their taxes. Think about that. That is a very low number. Good CPAs are starting to become harder to come by. Especially as many of them are aging out of the business and selling their practices as a lot of private equity funds are doing roll-ups of these CPA companies. It is important to make sure you build a good relationship with your CPA and you deal with your tax planning ahead of time to help them because frankly, there’s just not enough people and CPAs in the industry anymore.

I agree. There’s two sides to that. There’s 18,000 coming in but it’s a hell of a lot more retiring as well. There’s a lot of Boomers that have CPA firms that have been around a long time and looking to exit and they’re not getting any enterprise value on that business at all. The kids don’t want to take over it, so you find a lot of people get disgruntled because they are very underserved in the market.

Rapid Fire Section

Yes, very true. KC, that was awesome. You gave our audience so much to take away. Now, we’re going to do the fun part, the rapid-fire section and you’re going to give me quick answers on these. Are you ready?

Yes.

Coffee or tea?

Coffee.

It is a zombie apocalypse and you have to get out of your house and protect your family. What is your weapon of choice that you’re taking with you?

Machine gun.

Mine is a flamethrower. What is a book that you recommend our audience of entrepreneurs and business owners to read that can help them in advance in their business?

Rich Dad Poor Dad is one of my favorites.

I just read another Kiyosaki book that I’m looking at called Cashflow Quadrant, which was awesome.

He’s got a game that he’s made the cashflow rat race. Unbelievable.

Have you played it?

I have it at home.

How many people do you need to play it?

Four ideally is good.

I’m going to get that and that’ll be like our dinner night game. I looked at it and it’s like $80. I looked at it on Amazon.

It’s coming up like Thanksgiving and Christmas. It’s like Bob game season night.

I’m going to order that. It’s going to my Amazon basket after this. Dead or alive, if you had the opportunity to have dinner with anybody. Who would it be?

Elon Musk.

What is one thing that you disagree with in your industry?

The price and models for CPAs.

What do you mean by that?

The CPA is not incentivized to save people money, whether they serve a dollar or a million dollars. They’re not incentivized either way. If they were incentivized to maybe other industries that take a percentage of whatever they save you, you’d get a better level of service.

I agree. That’s very true. Let’s say, you are a business owner doing $10 million in annual revenue and I walk through the door and hand you a $300,000 check. How would you advise that business owner to invest that $300,000 to grow their profits over the next twelve months?

Golden crypto.

Last but not least, tell me two key people that you’ve had in your life that have helped you to grow to the level of success that you’ve realized.

It was my mentors. I’ve got a mentor who’s like a father figure to me. He’s in the Billionaire Boys Club and he just thinks so differently than anyone else I’ve ever met. He pushes me to think that way, too. Not that just he’s so brilliant but he’s ingrained that brilliant, so his way of thinking into my own mind, which is awesome. I’d say my mother because she’s so loving and sweet. There’s not a bad bone in her body and it’s good to have that side of that person around you all the time just rubbing off on you to give you that humility. That’s awesome.

KC Chohan, please tell the audience how they can connect with you if they’d like to do so.

TogetherCFO.com. That’s the easiest way you can reach out to us. You can do a free tax calculator on our website to see how much you’re overpaying on your taxes. It takes about 35 seconds to figure it out. You can join our free school community and get that tax savings loopholes. The top 50 loopholes everyone should be using or you can just drop us a message. Join our newsletter. Hit me up on social media. It’s @TogetherCFO pretty much on every platform and happy to help however we can.

KC Chohan, thank you so much for joining us on the show.

Important Links

• Together CFO – Website
• Yahoo Finance
• NBC
• Fox News
• BoxFi
• ASPCA
• amfAR
• FinancialFusion.io
• Rich Dad Poor Dad
• Cashflow Quadrant
• @TogetherCFO – Instagram
• KC Chohan – LinkedIn

About KC Chohan

KC Chohan is the Founder of Together CFO, a fractional CFO Services, accounting, and bookkeeping firm based in Los Angeles, California. His CFO strategies have been the best-kept secret of the elite. He’s an expert on CFO strategy and helps high-net-worth families protect their wealth and protect assets. His deep passion for serving others and educating those who are unprotected.

KC pushes himself to find better alternatives and began to learn and understand the strategies of the elite. Since then, his goal has been to provide education and resources to bridge the gap for first-generational wealth, helping solve their pain point of financial literacy.

KC is a writer for Forbes Magazine and a professional speaker, who has been featured in Entrepreneur Magazine, NBC, Yahoo Finance, and Fox News. KC has spoken at many events including, the Accounting and Finance Conference, The Money Show, the California Association of Business Brokers Annual Conference, and many more. He is the resident CFO expert for Sam Oven’s Quantum Mastermind and has been interviewed on numerous cable networks, podcasts, and publications.

‍KC Chohan is on a mission to bridge the gap of asset protection, and lasting legacy for 1 million business owners.