If you are anything like me, your brain is like scrambled eggs after tax season, and you need some humor. Recently, I had an appointment with a client that gave me something to laugh about, and I wanted to pass it on.
My appointments usually last 45 minutes to an hour at the most, but this one was mental gymnastics for four hours. Let me also note that this client is European and I really like him.
First we discussed his idea to open a new LLC for the purpose of buying a car and leasing it to his other LLC. It took me 30 minutes to explain that the new LLC he wanted to open had absolutely no business purpose, other than to give himself a write-off. Then, he said he wanted to purchase the vehicle with cash. After batting that around for 20 minutes, and him finally agreeing with me, we finished that topic.
Next, like an idiot, I asked him where he was going to get the cash to buy this car. He had explained over and over again how he wasn’t making money. If you have been doing this for as long as I have, when you hear about how bad business is or how someone owes $200,000 in taxes but has no money, you tune it out. If you don’t, you’ll end up being a fool like I used to be and reduce your fees.
Back to the story: To get cash, he was going to take a line of credit out of his house. This alone threw me for a loop. I mean, why pull money out of an appreciating asset for something that depreciates? He explains that he wants to pull $60,000 out of his house for a Tesla. He justifies his Tesla purchase to me by telling me that his son is moving to Lakeland, Florida (about 60 miles away from Orlando), and his car can only hold a charge for 35 miles. However, he says he is going to buy a used Tesla because he has other plans for the rest of his money he is pulling out.
He has decided to convert his home to solar energy. Now, I am interested. I am all for taking some equity out of your house to do something that could increase the value $75,000 to $100,000. There’s also the government tax credit (or subsidy) of 30 percent. He explains that a used Tesla will cost him $40,000, which leads me to ask: How is he going to pay $40,000 for a car and only $20,000 for a solar power conversion?
If you don’t know much about Europeans, let me explain why I like them. They are blunt and don’t beat around the bush. However, they can also think they know it all.
So, I explain to him that many of my clients have converted their home to solar power, and it costs about $40,000 or so to do it. Then, I mention the positives: There is a 30 percent tax credit, and the State of Florida gives a subsidy as well. Not to mention, Florida power companies sell power to the northern states in the winter. After all, we only have about two weeks of temperatures in the 40s. In the summer, northern states sell power to us. What power companies are learning is that it is cheaper to buy power from converted solar power houses than northern states, so there is the potential to for my client to make some extra cash.
He explains to me that he did his “research.” I mean, all clients do. Why else would we get TOLD that they learned that if they put a magnetic sign of their business on their car, it can be written off FULLY as advertising?
He said he went to 15 different companies, and they quoted him $35,000 to $45,000, but he was smart. He found a wholesale company on the internet that sold the EXACT panels for $12,000. THEN, he found “general contractor” who would install it all for $2,000, leaving him the cash to buy his beloved Tesla. As he sat back in his chair, with a smug look as if he was a cat who ate the family parakeet that got out of its cage, I begin to tear down this story.
I ask him if he looked into financing the Tesla. He stated that he didn’t want to pay 21 percent interest. I tell him that the finance company wasn’t the mafia and asked if he even inquired about it. He said he didn’t. I told him the interest rate would really be about 6 to 7 percent, depending. He retorts, why would he pay that much in interest when the line of credit from his house was 4 percent?
Deciding not to go back down that road with him, I approach it another way. I ask him if he thought about going back to the first 15 companies he talked to, explaining what he found out and asking them why they were more expensive. He thought for a second and then, in an almost insulted way, spouted that he wasn’t going to be rude. He’s been a client for 20 years, and I have a very good relationship with him, so without missing a beat, I tell him, it’s not rude, he’s just being American. We both got a good laugh at that.
I go further and tell him, if I want a hamburger, I can go get a Big Mac at McDonald’s for $1.50, or I can go to Five Guys and spend $5.00. I then ask him which one he would rather have. He smiled and, without even thinking about it, says, “Five Guys, of course.” I ask him why. Without hesitating, he says, “They are so good.”
We both smile, but for two different reasons. I’ve never been to Five Guys because I eat really healthy, but my kids and friends swear by it. I am smiling because I know I have him where I want him. The next thing I say to him is that if he went to a national tax chain to get his taxes done, he could save about $3,500. I see the wheels turning in his head as he wondered why he has been with me all these years.
I explain to him that most national tax chains hire only a few people with a license and a few years of experience. I can see the confusion on his face. I explain to him that you don’t have to have a license or a formal education to prepare tax returns for money. In fact, during the off season, he can go to a national chain, pay a couple hundred dollars and learn how to do basic tax returns. If he does well, the chain will offer him a job and get him a business card that refers to him as a tax specialist.
Being the blunt European he is, he asks me if that is what I did. At this, I laughed. I explained I had a degree, 25 years of experience and one year of law school under my belt. I explain that I am licensed and know what I am doing, and, because of all of that, I was $3,500 more expensive. He told me he understood now.
I circle back to the solar conversion. My mom was Irish, and we have a proverb: “You are being penny wise but pound foolish.” In other words, you get what you pay for.
I tell him there is a reason why these other companies cost more. He starts to reason it out now (it’s only been three hours by this time). He states, well, these companies are reputable, and they offer a 30-year guarantee. If he doesn’t save double to triple in electrical costs, they will not only reimburse him, but they will install extra equipment for free. Not to mention, they will negotiate with the power companies on price to sell the extra electricity.
I asked him would the other person do that for him. He wasn’t sure. Immediately, I stated, “They won’t be anywhere to be found if something goes wrong.” I finally ended with explaining (for the fifteenth time) not only is the federal government giving him 30 percent back in the form of a tax credit, but the state will give you another subsidy. He thanked me for spending all the time with him and said he was going to do what I said. On his way out, I told him that this year, I was charging $5,500. He smiled and stated it was worth every penny.