The Quest to be Car-Free in LA (or Santa Monica, at least)

Paul Goldberg recently relocated to Santa Monica with his wife Cathy and dog from suburban New Jersey for a job in Century City. He and his wife have ditched their cars and are writing about their experience living car-free in Los Angeles, a city famous for its romantic relationship with cars and the worst traffic in America. Paul and Cathy are the parents of Sirinya's best friend from college and have moved into her condo complex in Santa Monica. This is their car-free story.

Week 1

Monday

Took a taxi from the office to my new apartment as I had extra luggage, and quite a bit of it. Sirinya - our older daughter’s friend from college - and Sirinya’s toddler son Wilshire met me and we entered the new abode.  They were otherwise engaged that evening so I was on my own.

However, I had a mission – find the Spectrum store to pick up my internet modem so I would have connectivity right away.   Who needs furniture when you have wireless? The store wasn’t far definitely worth a Bird. You really don’t need the app to find Birds in Santa Monica, as you are more likely to just step on one. So I found one down the block, negotiated the purchase and…it was a dud.  Or I am a dud because I seem to have lots of trouble getting them going. No worries, lock it, walk 100 feet and try another. Success.

After restarting my Bird (left it “running” while purchasing internet), I’m off.  But wait, my phone rings and it is Spectrum saying there was a problem. And I had felt so good getting it going! No big deal, just typical cable company challenges.  We resolve it, I restart successfully, and I am back quickly dumping said Bird at CVS where I pick up some apartment essentials.

Modes of transport: Taxi, Bird

Cost: fare + $3

Workout: Hauling luggage

Tuesday

Commute to downtown LA – quick consult determines that the Big Blue Bus operates an express route from the bus stop 50 yards from my front door to downtown. It was running late but I wasn’t on a particular schedule. I had no TAP card yet, so it was cash only - $1.25 at the senior rate.  Feeling very guilty about that, but the low fare does not seem to attract ridership - at least when I’m riding. The bus stop is all of one block from the office, and was a speedy 50 minutes even in rush hour traffic.

That evening, finding the return bus stop was the most complicated part of the journey, as it was not just across from where I was dropped off. Google Maps showed it but I couldn’t quite figure it out as it was down a steep hill and hidden under an overpass. Fortunately, I had time to go the wrong way three times and still be there for it.  Again, a fast ride. Just walking across Santa Monica Blvd seemed to take the longest time.

Now was the time to explore the neighborhood and find Whole Foods. It’s about a half mile away and walking seemed ok although it is up a not-insignificant hill.  However, I decided a Bird was warranted for the ride home. With most of my purchases in the backpack, I was able to negotiate the trip home with no problems.

Modes of transport: Bus, Bird

Cost:  $5

Workout: Walking uphill

Wednesday

My first chance to work out and the CrossFit gym in downtown Santa Monica about 3 miles away at my preferred time: 5:30 am.  I walked to the bus stop where Birds and the homeless individuals congregate, and off I went. It was an easy and safe trip at with few cars joining me at 5 am. The most substantive activity were the Bird chargers restocking the fleet.  $3.50 got me there (starting to see how Bird makes money) and $3.35 back.

Commuting was on the 704 bus to Century City. Same stop, 20 minutes.

Return home was easy, although I did watch the bus I was hoping to catch speed by since crossing the Santa Monica Boulevard intersection in Century City can take longer than 5 minutes. No big deal...next one in 10 minutes.

Modes of transport: Bird, bus

Cost: $7.85, could have been $6.85 but keep forgetting TAP Card

Workout:  84 burpees, deadlifts, and wall throws

Thursday

A repeat of yesterday’s schedule. Taking a Bird to gym was uneventful but returning it squawked after stopping at a light and refused to go any further. The battery seemed ok, I just have the dud touch.  Walked the rest of the way.

I was more nimble catching the bus home after navigating Santa Monica Boulevard and Avenue of the Stars. Getting the hang of it!

I was going straight to LAX from work. My luggage was more manageable going back to the East Coast so the bus worked.  Using both seats didn’t seem to present a problem as the bus was just 3 quarters full.

I’m back in a week when my road bike from New Jersey will arrive and a newly purchased Fixie with the Copenhagen wheel will be ready for the commute and a whole new experience.

Modes of transport: Bird, walking, bus

Cost: $7.75

Workout: 800 meter run, 50 kettlebell swings, 25 calories on bike, repeat 3 times; hauling luggage

Paul G analyzes the Trump Tax Situation

Borowitz and Trump's "Tax Return Dodge" 8/2016

BY PAUL G.

Having just completed my 2015 Tax Return, I am in the mood to talk about the Trump tax situation.

It is possible that there are mysteries in his return that we will never know about, but we can be reasonably sure now what we would see in the remote case they ever come to light.

What income will be reported on Trump's return?

Trump’s return will be the summary of the results of the 500+ entities in which he has an interest.  Each of these entities (called pass-through entities) files their own tax returns that we surely will never see and reports their results, in summary form on an IRS form called a K-1 (”Partner’s share of income, deduction, credits…”).  

So, for example, the operations of one of his real estate holdings would report their net rental real estate income/loss and 20 or so other items that need to be detailed for Trump to properly reflect them in his return. More explanation is required for that thought.  

The entity itself pays no tax; all of its operations flow through to its shareholders.  But not all of the shareholders are in the same tax position so more detail is required. Take charitable contributions.  If the entity earns $100 from rentals and pays $10 in contributions its net income is $90.  But if a shareholder has made lots of other contributions on their own tax return (not talking about Trump here), they may not be able to deduct the $10.  So the K-1 shows the two items separately.  

Trump’s return will show the income from all of these entities with some additional detail for things like contributions and capital gains.  We won’t see the detail to the contributions (who they were given to), but only the amounts.  But it is really summary level and not helpful.

Did I say income?  Well, it is certainly going to show lots of losses.  That doesn’t necessarily mean that the properties lose money in the real world; but they do when using tax accounting.  This is especially true with real estate, where interest is deductible and depreciation is factored in.  Depreciation is the accounting concept that says an asset such as a building (but not land), loses value over time and the owner can reduce the income from the property by this artificial amount.  

Since real estate tends to increase in value because of economic reality, we have a benefit to the owner paid for by the government.  Fair or not, that is the reality of the tax code and it is a major consideration in real estate investing.  And Trump has lots of it (real estate).

So when all of the entities are added up, the net result is a loss which can offset much, if not all, of his other income.  And with little income (generated from his real estate holdings), there is little tax that Trump owes.

Salary?  Does Trump take a salary from his companies?  That would be an interesting question that the return would expose.  He certainly should if he is performing services and in fact there are rules to ensure that.  But he would have to pay social security and Medicare tax on it, and we know he is tax averse, so I would expect these amounts to be small.

Dividend and Interest?  These might be clues to his actual wealth, but probably not.  Other disclosures seem to indicate that he has little in stock holdings and he likes to pay interest, not receive it.

Gains on the sale of property? This might be somewhat interesting, although virtually all of the activity is likely to come from his K-1’s.  And here, another tax provision is likely heavily used: Section 1031 – Like kind exchange.

 If you have real estate and would otherwise sell it for more than you paid, you have a gain on the sale (and have to consider the depreciation you took to increase the gain – fair is fair) .  Easy.  But if you find another property you like, you can treat the sale and purchase like a trade and defer the gain until you sell the next property.  Successful real estate investors rarely (?) pay tax on sales of property as they continually trade up.  They have a great lobby or this tax loophole would have been gone long ago.

A reflection of his net worth?  An income tax return gives virtually no insight into someone’s net worth; it is a report on tax related income items.  Some things might give a hint: dividends received – where detail is provided – could be used to figure out the number of shares of stock held and therefore its value; many of the significant pass-through entities can be tied to underlying properties (which is how Forbes calculates Trump’s net worth) but overall, the return won’t show how rich or poor he is (remember, losses are not necessarily bad.

Charitable contributions?  I think it is safe to say, we won’t see many on his return that were paid by him directly.  We know how he prefers to use OPM through his foundation to satisfy his obligations in that area.  So no bombshells are likely.  And since he probably shows very little, if any, income, he wouldn’t get a tax benefit from making contributions. Since he is “smart”, he clearly wouldn’t want to waste his money without a government subsidy.

What is the story with the audit?

 If there is any disclosure that I would enjoy, it would be the nature of the tax audit.  It is virtually certain that Trump’s own return is not really being audited; his return is the collection of the 500+ other entities, and at least some of them are under audit.  These are business audits and they do take a lot of time to complete, but they seem to be quite extended.  

So what are the issues being raised?  

Obviously, Trump believes in negotiating so it is likely he takes “aggressive” positions on his tax returns and bargains with the IRS when they find the items and disagree with the treatment.  What kind of issues are being raised?  For example, are businesses paying his personal expenses and deducting them?  I can’t imagine they are not as we can clearly see he completely mixes his business with his personal activities.  Is it a little or a lot?  That would be a reasonable question but personally, I do not like subsidizing his lifestyle.

Given the slipshod accounting of his trivial foundation, I can’t see Trump overpaying for accounting services (aside from tax planning), and it is likely there are lots of mistakes in the actual accounting.  Did he take aggressive positions on trades (1031), recognition of gains or claiming credits he might not have been entitled to.  If there is any story to be found, it would be the nature of the IRS adjustments under audit.  He surely won’t be paying less tax after the audit.

So in the end, do we learn much form his returns that we don’t already know or reasonably guess?  Not really.  We need the detail from the entities and so far, vigorous reporting hasn’t yielded too much in that area and the return would show ever less.

Paul G. is a CPA, a retired partner at KPMG, and the Global Chief Technology Officer for a sports start-up. He is a long time reader of The Juan Percent and the father of Sirinya's best friend from college.