The Science of Flipping - Did you know the Tax Code Is Designed To Make You Rich, If You Know How To Use It? | Karlton Dennis

Episode Date: May 21, 2026

Subscribe to The M.O.R.E. Show Most real estate investors are leaving massive tax savings on the table and they don't even know it. In this episode of The M.O.R.E. Show, Justin Colby sits down with tax strategist and real estate investor Karlton Dennis to break down how the tax code can legally reduce what you owe to near zero, why gas stations are one of the most overlooked investment vehicles for depreciation, and how cost segregation and bonus depreciation are the tools wealthy investors use that most people never hear about. KEY TOPICS COVERED: Why gas stations depreciate in 15 years vs 27.5 for residential, and what that means for your tax bill Cost segregation and bonus depreciation explained for real estate investors How to invest as a limited partner and earn passive income without operational risk The real estate professional status strategy and why it changes everything Entity structure, S-Corps, and how business owners can legally reduce taxes Estate planning: revocable vs irrevocable trusts and protecting wealth across generations Key Moments: 00:00 — Why Carlton invested with Grant Cardone as a limited partner 01:12 — Introduction: Karlton Dennis, tax strategist and real estate investor 02:08 — What Carlton is investing in right now in 2026 02:52 — Why gas stations are a powerful tax strategy 03:10 — Cost segregation and bonus depreciation explained 07:00 — Real estate professional status and passive income 12:00 — S-Corps, entity structure, and tax reduction for business owners 20:00 — How to use real estate to offset W-2 income 30:00 — Estate planning: trusts, capital gains, and generational wealth 40:45 — Karlton's book: The Art of Legal Tax Avoidance 42:27 — How to connect with Karlton Dennis Connect with Karlton Dennis: Instagram: @Karltondennis Book: The Art of Legal Tax Avoidance, Volume 1 — available on Amazon About The M.O.R.E. Show: The M.O.R.E. Show is hosted by Justin Colby and is dedicated to helping real estate professionals, investors, and entrepreneurs maximize opportunity in any market. New episodes every week. Learn more: www.timeformore.com Invest with Elevest Capital: www.elevestcapital.com Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Most people will invest with somebody else after they build trust with him. For me, I didn't know Grant Carter on. I had never met him before in my life. Never went to a 10x event. No, but did I download books? Yes, was I listening to his podcast? Yes, did I start getting some value out of his sales training? Yes, was he talking about real estate?

Yes. Was he bringing up other wealth teachers that I admired like Robert Kiyosaki and how he bragged about not paying taxes because he was using the tax code in mind? Yes. And I was an inspiring tax professional. And to hear somebody that was advocating for the tax code, whilst at the same time, advocating for real estate, it was in perfect alignment with where I was in my training. I was just learning about the tax code and how you can use real estate as an investment and as a tax write-off.

And for me, I wanted to make mailbox money as soon as I could. I had that fixation of I'm going to live off of passive income, so I might as well start right now. I just didn't know what went into actually earning passive income. Yeah. And so because I did not know what actually went into earning passive income, I thought I might as well partner with somebody who's already done this. I'll go put my money with Grant Cardone as a limited partner, knowing that I won't take on any operational risk and I get to benefit from the upside of him managing the property and him running the operation. What is up the Moore show? Welcome back. And again, you will not want to miss this episode because my guest sitting right here. Now, as always, every episode is brought to you by the Moore Club.

This club is for real estate investors. It teaches you all the opportunities that are in real estate. The opportunities that we're going to talk about today with Mr. Carlton Dennis tax strategist as well as real estate investor. What's up, brother? Dude, I'm doing amazing, man. I'm back in Miami, back in the MOVE studio for another podcast with you. Excited to be here, dude. Thanks for having me. So you are well known. If anyone's not following them, go follow this man right now, Carlton Dennis, well known for your tax planning, tax strategizing, for all types of industries and for business owners. All right. But you're also a real estate investor. Not a lot of people know this about you. Yeah, I am a real estate investor. I use the tax code the right way and real estate happens to have the best

benefits in the tax code. So let's jump right in. What are you focusing on right now today, 2006 as a great real estate investment? You know, my real estate portfolio has actually changed over the last couple of years. I used to have tons of single family. Now I've migrated into multifamily. And since of about about eight months ago, I've started to pivot into gas stations as a big part of my portfolio. So I'd say like at least 30 to 35 percent of my investment portfolios now in gas stations. So first of all, you'll keep your hair longer. because you got out of a single family. So that's good.

And it won't go gray as fast. So that's good because I would have suggested that. So gas stations, first of all, I think the challenge to start will be where to find them. Yeah. But what about gas stations create such a great sexy investment strategy for you? All right. So I got to let everybody know the secret. The reason why I would even go into gas stations because it doesn't sound sexy right away is because of depreciation schedules.

In the tax code, certain things depreciate over certain time periods. A residential property depreciates over. 27 and a half years. A commercial property depreciates over 39 years. Well, guess what? Gas stations depreciate over 15 years. That's much shorter than residential real estate, much shorter than commercial real estate. And so when you are looking at strategies in the tax code like cost segregation study bonus depreciation, what these strategies are essentially doing is allowing for you to break down components of the property that are non-structural components of the property. Think flooring windows, appliances. And IRS says, great. You can write these things off in a

quicker amount of time, but there's a five-year bucket, a seven-year bucket, and a 15-year and only the components that are five, seven, and 15-year can you take bonus depreciation. You can write them all off in one year. But the building structure has to be written off over 27 and a half years or over 39 years, not with gas stations. Wow. That structure has 15-year depreciable life. So what does that mean?

It means you can do a cost segregation study with bonus depreciation and write off the entire purchase price of the building in year one. There's no depreciation left in year two, year three, year four. You are taking a hundred percent of your depreciation. For a lot of my clients, especially myself last year, it was a very leveraged strategy. You put $100,000 into a gas station fund, for example, you might get a $350, $400,000 depreciation deduction for someone like myself who put a million dollars in. I got a $4 million right up. That's insane. So first of all, to rewind quickly, normal depreciation in a multifamily is what are the things that we are depreciating? Yeah. When you're depreciating multifamily, you're depreciating structure and non-structural components.

Structure is what you think of when you're driving down a road and you're seeing a house being built. The wood, the load bearing walls, the steel, the concrete, that stuff's going to last 50, almost 100 years. We have some homes that have been here for well over 50 to 100 years. But all the things that go inside of the property, all the cosmetic stuff, the paint, the flooring, all that stuff is. actually considered non-structural components. And if you hire an engineering firm that's partnered with a CPA or a tax professional, you can perform a cost segregation study. You're performing a study to segregate the structural from the non-structural. And the IRS says you can depreciate the non-structural faster. The only issue is that when you do this study, you're going to identify some stuff that

goes into a five-year depreciation schedule, which is great, like appliances and things like that. But then a lot of the rest of the stuff, like HVACs and a lot of the PIPs and a lot of the PIPES, that goes into 15 year. And even though you're writing it off faster, I mean, geez, it's still 15 years. It's still five years. So we like to use the cost segregation study plus bonus depreciation. The bonus appreciation law says any real property that has useful life of 20 years or less, you could take 100% write off on it. Well, this is great, especially with the one big beautiful bill. We can now write off 100% of non-structural components. And if you're a gas station, your structure is actually on a 15 year depreciation structure, depreciation schedule. So you could take 100% of that as well.

And so the next layer of the non-structural, which means, for example, in these apartments, you have 27 and a half years still. Yes. So you took everything that you could for the first 15, but you still have the remaining balance of those 12 years to have small deductions on the actual structure, which can be nice. I mean, but it's not as sexy as being able to take 100% in year one. because the entire building and the non-structural are all in year one. Yeah. Well, I wouldn't say it's not as sexy. I'm just finding the sexiest strategies in the tax.

For sure. Let's just be real. I'm going to go find it and I'm going to figure out a way to make it work for myself after I've tested everything. But most of my clients do start off in residential real estate or commercial if they have the means for it. And they're qualifying their spouses as real estate professionals or they're running the short-term rental strategy or maybe they're just operating real estate passively.

But the real goal is, is if I'm going to accelerate depreciation, I want to make sure I can use that to offset my active forms of income if I have the means to. And for a lot of my clients, they may jump into real estate, even though they're only breaking even on investment real estate, just for the ability to offset their active forms of income. Because some of these people are in the 37% tax bracket, $100,000 deductions, $37,000 in their pocket. $200,000 deduction, well, that doubles, right? So that's what's pretty awesome about real estate is somebody else is paying down your mortgage while you're getting. a massive tax deduction against your active forms of income. And so for you specifically, how do you get to write off your active income through this gas station model? Okay, for me specifically, I'm a GP. So when I went through this fund structure, I made sure that I established a relationship

with the operators. One of the reasons why I like the private sector space is because if you have the right type of relationships, you can get access to deal flow. And more importantly, depending on your level of being an investor, will determine on which side of the table you sit on. remember early on, we were talking about this on my podcast, that my very first investment was only a $6,000 investment into a syndication with Grant Cardon as a non-accredited investor. I had $11,000 to my name, Justin. I could only put $6,000 in while still being able to, you know, pay my rent and feed myself. But fast forward to today, I'm more of a sophisticated investor. I'm an accredited investor and I'm sitting on multiple investment properties. Plus, I have capital to deploy. So I could be treated like a

limited partner when I approach this deal and just be passive. But I made sure that when I established this relationship that they knew what my intention was. My intention is to be an active investor. I want active losses on the tax return. I don't want to sit on the LFP side. I want to be a GP. So I negotiated what it would look like for me to make a larger contribution to sit at the table with the GPs and make investment decisions like GPs do. And I got to benefit like GPs do. When that K1 comes over on my tax return, it's not a passive K1. It's an active K1. Where does it go, Carlton? It goes to flow through to offset my active S corporation income where all my profit sits. For most entrepreneurs out there right now, those are the type of deductions that you want on your tax returns.

So talk to us about LP versus GP. What is the difference when it comes to taxes, but also just the concept of what is a GP versus an LP in these syndications? Yeah, absolutely. So a general partner is somebody that is operating. They're going to go ahead and raise the capital, find the deal, negotiate the loan terms, make sure the property's up in good standing. They play an active role. And if they're playing an active role, they're going to get active deductions that the limited partner might not be able to experience against active forms of income. So when the tax return gets filed for that LLC that everybody sits underneath, the GPs, when they get their portion of their K-1, their portion of their K-1 either comes out as a positive income or a negative amount,

but that negative amount is considered an active negative amount, meaning it can go to offset active W-W-2 or active-29 income. Now, on the other side of the table, I can invest as an LP, limited partner, which means I am limited in my role in how I make this property go. I don't have management decisions over the property. I'm not determining when to refinance it. I'm not building the business plan on how we're going to improve the property. I'm saying I want to put a little capital up. I want a little bit of skin in the game. But I don't want it to make any of the investment decisions that's going to allow for this business to be extremely profitable. That is awesome because you have less overhead risk of you having to put your energy into the property. But it also comes

with less benefits as well. When you go to file a tax return for that LLC, different than the general partner, your K1 is going to report either positive income or a negative amount, but that negative amount is considered a passive loss, not what the IRS would say is non-passive. And because it's a passive loss, guess what? It can only offset other forms of passive income. Not a bad thing, not the end of the world. You just have to be aware of it. And many taxpayers who are going in a real estate for the very first time through a fund or syndication structure are most likely going in is an LP, not a GP. Now, when you're a GP, do you have to sign and be responsible for the debt? Depending on the circumstances you might have to be. Absolutely. You take on a lot more risk when

you're a GP. And that's, that's a distinguishing factor of why, to me, a lot of people don't even, they don't know what they don't know. Oh, I want GP. I want to get it off. Yeah, but now you're on the hook for the debt a lot of times. Correct. You can negotiate for sure. But at the end of the day, you also have to understand the risk you're going to start to play with, right? Because if something goes wrong, you're also on the hook. That's true. Right. And so those are like, listen, there's a lot of opportunities in real estate. There's a lot of ways to negotiate those opportunities. Correct. You just have to go in with your eyes wide open about what is the upside, what is the upside. And what are you really trying to achieve in Carlton's world? High income earner. I need to get some tax right off on my income.

Yes. I want to negotiate the GP model. Yes, you're absolutely right. Did you specifically get any leniency on the debt or are you a part of the debt as well? I'm a part of the debt as well. Totally okay with that. But here's the thing. I've been an operator of my own syndic before. So now I have experience of what it's like to talk to investors, to be a part of these investment decisions that are going on. I didn't go at this blind. And so I'm super grateful that I started early and I invested often because when I was 24 years old and I got into that first syndication, I now knew what it felt like to earn mailbox money every single month without me having to do anything. But I envied the operator, the general partner that was running this deal because

I knew he was really making the big cheese. He was managing something that was so awesome, this opportunity for all of us investors who really couldn't have access to an opportunity like this without him, right? No doubt. And so I knew one day I was going to be in that situation where if I did things right, I can turn around and create an opportunity for other people to get into real estate, build passive income and do it in a way that makes my investors proud. And I was able to do that back in 2022 when I raised capital for the first time. So you are definitely the unicorn when talking about like your ability to go in with, like you really know the rules. You really know the laws. You understand the risk. there's a lot of people that just want it because they want it.

Oh, Carlton did it. I want it to. They just don't know. Yeah. So I think the disclosure on that or disclaimer is just like, get educated. Call Carlton. Understand. Get a part of his program, right? Because the reality is you just need to know what you need to know to make those decisions. I would argue it's not for everyone to go for the GP model.

100% because they don't understand or know what Carlton knows. Yes. And one of the unfair advantages that I have that most people need to understand this is go sit down and talk with a tax professional. We get to see where the money. goes, you cannot lie on your tax returns. And if you do, trust me, there's a whole department waiting for you. That's right. So I get to know the real, real. When somebody brags about making a million or two million bucks, I go look at the tax return and realize, no, they didn't. They didn't make that two million bucks. They actually made $400,000 in profit. The top line says $2 million. You heard two

million. The bottom line says $400,000. Their take home is $400,000. Please don't get caught up in everything that you're seeing online. When you talk to a tax professional, they can tell you, what are the professions that making the money. Who are the operators that are really doing it at the right scale and the right level? Because everything flows on that tax return. Now, I want to bring you all the way back to when you invested with Grant Cardone, your 6K. I think there's a lot of people that would not have taken that risk. Why did you say, I got 11 grand in my name, I need to get in the game. I'm throwing 6K at this unaccredited fund. Why did you do that? Most people will invest with somebody else after they build trust with him. For me, I didn't know Grant Cardone. I had never met him before in my life.

never went to a 10x event. No, but did I download books? Yes, was I listening to his podcast? Yes. Did I start getting some value out of his sales training? Yes. Was he talking about real estate? Yes. Was he bringing up other wealth teachers that I admired like Robert Kiyosaki and how he bragged about not paying taxes because he was using the tax code in mind? Yes. And I was an inspiring tax professional. And to hear somebody that was advocating for the tax code whilst at the same time advocating for real estate, it was in perfect alignment with where I was in my training. I was just learning about the tax code and how you can use real estate as an investment and as a tax write-off. And for me, I wanted to make mailbox money as soon as I could. I had that fixation of I'm going to live off

of passive income. So I might as well start right now. I just didn't know what went into actually earning passive income. Yeah. And so because I did not know what actually went into earning passive income, I thought, well, I might as well partner with somebody who's already done this. I'll go put my money with Grant Cardone as a limited partner knowing that I won't take on any operational risk. and I get to benefit from the upside of him managing the property and him running the operation. Now, what was your mindset about the longevity play? You and I've talked about this on your podcast and my other podcast. Like you didn't go on that for, I'm going to go get rich on a $6,000 investment.

No, absolutely not. You went in with what? What was the mindset that most? Because what I want to get out of this is I want people to understand the young Carlton Dennis, who is not the man I'm in front of today, but was the young kid that's like, I deserve to create something amazing and it's going to take some time. Yes. What was going through your head?

Sacrifice. Sacrifice, sacrifice. It took me so long to get on the playing field when I was a full scholarship cornerback at Cal Poly San Luis Obispo. And I worked and I worked and I worked. And I felt like, you know, when you sacrifice, you get the benefits of it. Everything that I've ever really achieved in my life came on the other side of sacrifice and discipline. And for me, when I started learning about wealth, all the wealth, teachers. I mean, John C. Maxwell, Grant Cardone, Robert Kusaki, all them were talking about

patients. And it reminded me a lot of sports. It's like, dude, I can go into the gym and I can work my ass off. The muscle is not going to show up on my bicep that same day. It's going to take a month, two months, three months. It takes time to build a body just like it takes time to build an investment portfolio. The issue we have right now, Justin, today is that we're in a culture of I want money right now because of everything we see on social media. You have to realize back in 2015, 16, when young Carlton was just trying to invest, you didn't have all these people on the internet, you know, jumping out of G-Wagons, running away from cars and splashing themselves with Saratoga. You know what I mean? Like, there was no, there was no life like that for me

to admire. There was no one that was making, showing you that you log into this app. You're going to day trade this stock and make this much money. Nobody was talking like that like they're doing right now. People were talking about go get a career, go all in on it. By the time you look up, you're 45, you're 50, and you're sitting on a mound full of wealth because you were disciplined. I was raised on old principles. And those old principles is what got me here. Hard work, dedication, and having a long-term vision on how you wish to build your wealth. If people could just understand, even when you have 11 grand, you just gave away like 56% of your net worth.

Yeah. On maybe not risky, but on the point. of I want to build something for the long term. Yeah. If you just fast forward these 11 years or 10 years, whenever that was to where, now look what you're doing. You're putting a million dollars into a gas fund. People need to hear that story.

They need to understand. Carlton young man broke, 11 grand to his name, still put in 56, almost 60% of his next. Is that right? Yeah. Yeah. About 60% of his net worth. Yeah. Net worth into this because he understood the long.

game is where it's at. Yeah. Anything change about your mindset today. When you invest today, yes. What do you think? What do you go through? Why do you make the decisions you make in your investment strategies? The things that I do now is thinking about my daughter because now I'm a father. Everything that I was doing was about how do I invest money that's going to serve Carlton's lifestyle? Because I have a very, you know, lovely lifestyle. I like a lot of nice things. And no, I'm not going to change who I am. I'm very disciplined in how I approach wealth and how I approach my investments, but I also have expensive tastes. I will order the waggo on the menu. If they ask me which champagne, I'm going to ask them which one came from France. I'm just that type of

person. That being said, I got more and more focused about who am I really building this wealth for? And I'm not saying that I'm building this wealth just to give it to my daughter. I want to have options. And what most people don't do is they don't think with the end in mind, like we talked about earlier. If I know that I'm not going to live on this earth forever, my options are going to become less important to me and it's going to really shuffle to my daughter and to my wife. I want them to have options. I don't know if tomorrow I get into a car, God forbid, knock on wood, then I'm going to get hit by a bus. But I want there to be things set up so that my wife has options in the event that Carlton's not here anymore, that she knows what to do, how she's being taken care of.

Everything that I was doing was really serving Carlton early on as an investor. How is Carlton going to make this type of money? So Carlton can make this type of money. And it was partly because over time, I started receiving information from the internet and the internet started telling me what success was. And instead of looking internally for what my answer of success was, I started letting the internet tell me what success was, which was, oh, you just need to go accumulate more acid. You just need more stuff. And so I started playing this stuff game until my wife got pregnant. And everything changed, bro. I tell people this all the time, you know, you think you love somebody when you have found your person, me and my wife, we love each other to death. She's my best friend.

You think that's the most you can love somebody outside your mother or your brothers. I kid you not. The moment I laid my eyes on my daughter, bro, I swear it was like a river, like the Amazon River, flooded into my heart. And you have a special place in your heart that is literally only reserved for kids. You cannot even unlock that place in your heart until you have a child. Once that happens, it's like the genome inside your body changes. I stopped seeing the entire world the way that I was seeing it. I had newfound respect for my mother, newfound respect for my father.

I cared more about just being slow and spending time and listening to the birds chirp and smelling a goddamn flower than do I care about being on a plane flight, jumping on a podcast, going to do this, going to do that. My values changed. And then my values poured over into my investment philosophy. I stopped making decisions that immediately benefit Carlton, but benefit the household. Yeah.

And what over time is my happiness started to come from my ability to serve and the connections that I was making with people, less about what Carlton was doing for himself. So when you invest today, how are your entity structured? How are you doing it for that purpose, right? Versus just cash flow or type. But like, how do you set up the entities for your wife, for your children today? Yeah. So I run a whole co-structure.

Everything operates as C corporations for me. We have a high profit business. in tax advisory plus I have a family office company so my C corp is a hold co that owns all my operational coes everything flows up to that C corporation and it operates like a single family office that family office has its own management structure HR structure that disseminates across every single operational co I have an S corporation that does consulting to my C corp you might ask why it's because I don't like paying double taxation with the C corp so my C corp pays my S corp pays me that's right my escorp allows me to take distribution so if I want to go

go buy real estate randomly today or go buy crypto randomly today. Every time I pull money out of a C corporation, I'm taxed at dividend rates. Every time I transfer money from a C corp to an S corp, well, that's a management fee. My C corp receives a tax deduction. Now with my S corporation, I'll take a distribution. I'm not taxed on that distribution when I took the money. Then I can go park that into an investment that earns me a return while simultaneously being able to draw down my tax liability inside of my parent co. This is what we call entity layering. And for most people, when you're starting out, you don't even need to worry about having multiple entities. You just need to figure out your first entity. But over time, the things you care about will start to change. Your exit strategy

will start to become something that you care about depending on the size of your business, your employment and lowering cost. I'm well over 60 employees. So the way I run my structure benefits my entire ecosystem. I have much more favorable rates from my health benefits and all the stuff that I provide my employees by running my operational code the way that I do. And more importantly, I have leaders now that run these businesses instead of everything all roads lead to Carlton Dennis. There's operators at every level and allows for me to be able to do what I do best, which is media and being the magnetic energy that allows for all these businesses to feed off of each other. So when you have your S-Corp that gets the distribution and you're going to go invest in an apartment with me?

Is it Carlton Dennis investing in an apartment? Is it an LLC, another S-Corp? Who's investing with me in my apartment? Yeah. So my wife and I, we invest together, a apartment. of the reason why we do this is because she qualifies as a real estate professional. So we have an investment LLC that's specifically set up for us to do investments together. If I'm going to go invest with you, I'll probably come on as an LP depending on my relationship with you and how much

capital I'm coming to the table with, but I'll most likely come on as an LP. So I have that investment LLC that will invest inside of your LLC. Got it. The reason why I do that is because I prefer to have partnership entities, partnerships file their own tax return and then that tax return flows a K-1 into the individual tax return. Not to say that, you know, that's bad to invest as an individual inside of that LLC. It's not like I'm not going to get a K-1, but I really like to do things inside of partnerships and limit things on my individual return as much as possible because it does reduce audit risk. Partnerships and S corporations are audited on average around 30 to 35 percent less than Schedule C businesses. So I try to do everything through partnerships or S corporations to try to

keep as much activity off of that individual tax return is seemingly. That LLC gets funded by, you personally? Yeah. So if I'm taking a distribution from my S-Corp, then the distribution is going to flow from my business checking account to Carlton Dennis from Carlton Dennis as a contribution to Carlton Dennis's investment LLC. And then that investment LLC makes an investment into the property. So I hope you guys all, because I'm very understanding what he's saying, but might want to rewind that. This is good tax. Now, by the way, I don't know if we can even promote this, but there's going to be a live event coming up. I'm going to be speaking out. But I think if this creates questions for all of you listening, first and foremost, go follow Carlton,

but also like, is that an event something we should talk about? Like, because I think people need to get in front of this because they just make investments. I have so many investors like, oh, yeah, John Doe is going to make the investment. I'm like, oh, what entity? No, just me. And I go, okay, well, I'm not going to sit here and give you financial advice per se. Maybe you have a reason to do that, right? But I think people need to understand this. Like, what's on your desk that they can start to research some of the stuff, whether it's a product, a group, a live event, what can they go start to get educated with? Taxes is one of those things that you are going to learn it the moment you decide that you are ready to submerge yourself into just knowing more. If you can commit,

you can learn tax strategy, but if you put one foot in, it's going to be an uphill battle for you. So we put on an event called the Tax Your Millionaire Summit where taxpayers can spend three days with us going over advanced tax strategy, asking questions, and really understanding, all the frameworks that we leverage, whether it's entity structuring framers, income shifting, placing children on payroll or alternative strategies like oil and gas, gas stations, you need access to the right information broken down in a way that you can actually understand it. Most people don't act on tax strategies. It's not because they don't have access all the time.

It's because something has not been explained to them in a way in which they fully understand it. That's right. The Tax for Millionaire Summit allows for that. So if you follow me or follow Carlton, Carlton will be in the Moore Club, by the way. so we'll get him in there to start giving you some pieces of advice because ultimately the more you know, the better you can become investors, right? And so he's my guy that I go to for tax advice. He will be in the club. If you're not in the club, make sure you get in that club, the more club. So now let's go fast forward

your investing today. Yeah. Because of your kids, because of longevity. What is your thought process of how you're going to leave it to them? Hopefully you live another 78 years, which would put you at 110-ish. Yeah. You know, and you probably will. You and I will probably be somewhere on Bimini with, you know, with our, with our wives and kids. Well, you got to go check out Vimini. Bimini, man. So how are you looking to leave all this, right? As you start to make these investments, what's the purpose? You and I've just talked a lot about like I start to ask why, why, why, why for everything I'm doing now? Yeah. Because I don't believe in a lot of the nonsense of this world that older I'm getting. I'm really realizing like I need to have contentment and happiness. Yeah. So why am I doing it? Why am I investing in this? Why do I have this business? Why do? So when you are doing this, how are you leaving it to your family? You know, I had a conversation. with my team about this and my heart has changed. You know, originally my mindset was build up wealth because you want to be able to leave it to your children. But I've seen so many children that have inherited wealth that have done nothing with the wealth. And more importantly, their brain is like

literal mush because they were just handed everything in their life that they can't even think for themselves. Yeah. I believe wealth is really the transfer of information, not just the transfer of assets and my happiness is not going to come from me just transferring information is going to be it's going to come from me knowing that I worked my ass off to build up enough assets that are going to be permanent assets in our family assets that will live on legacy assets and I'm structuring my trust trust plural a revocable and irrevocable trust to mitigate estate planning taxes for my daughter and for the children that might come directly after her but putting clauses in my trust that allows for them to have access to certain well as certain points in time I know for me

I'm 32 years old. I would say I'm at the point right now based off of the work that I put in where I feel very comfortable making financial decisions, but I put in a lot of work. And I'll be honest with you, my daughter's not going to have to put in as much work as I did to get the level of information that I have access to. That is what I'm working so hard for. So if she can have access to information, great. I want her to have access to information early. I don't want all the dramas that come with having access to money too early. and my biggest thing is about pattern recognition. How can I teach my daughter to recognize patterns so she can adopt things,

activities, behaviors that can allow for her to be a fullhearted, God-fearing, successful woman. And that's what I care about the most. So for me, I believe that the money part is probably not going to come for a majority of my children who inherit it until 35 years old. That's the number that me and my wife have decided if they're going to receive anything, they'll receive it when they're 35. And we have a 60-40 rule, which is 60%.

of all the wealth that me and my wife create together is our wealth, 40% is going to be left over for whoever is there at that point in time. I like that 6040 rule. I've not, that's the first time I've heard that, which, you know, listen, I've, I've bounced back and forth between like, do I want to give them anything? And I think it's a little aggressive to say I wouldn't give them anything. But like, I want to live a good life while I'm here too. Yeah, of course. And I think I'm not going to judge anybody, but I think the people that like hoard it all and they don't do and they don't use it. Me and my wife had a conversation literally last night about like, while we're here, we're going to spend money. We're not going to cheap skate. We're not now. You can still do that in a way

that is smart. Right. And understanding taxes and understanding what you're spending money on. And I've seen stuff where you've talked about taking vacations that are business trips and things of that nature. Because there's no vacation. Yes. It's a business trip. I need to go see this apartment. We're about to go by in Phoenix, Arizona. So I got to go to Phoenix, Arizona. I got to go walk this property. Right. All these type of things. But I think it is, it is great to hear that you'd say, let's just use $10 million. You're going to spend $6 million of it for you and your wife to actually enjoy life while you're here too. Yeah.

Because we only get one life. I'll be unapologetically okay with that because at the end of this day, we've seen what it's like when people have worked so hard and then never turned around and got to allow for that hard work to be something that they benefited from. Life is short. And as much as, you know, I don't. agree with his business model, the guy that, um, created only fans, I believe. Oh, yeah. They just did a documentary about his death or something, right? 40.

44. I think my age. 44 years old. Yeah. Drops dead. Right. Drops dead. Yeah.

I don't know if he's, he might be a bad example. He probably didn't enjoy a lot of the, he probably, he was enjoyed. But what I'm trying to get at here is brother, we don't know how long we're going to be on this earth. Right. So for me, it's like, I bought the Lamborghini because I don't want to get into a Lamborghini at 55 years old having to crouch down. Who needs that? Personally, I don't want to, right? But I like the fact that I'm driving it right now.

It's not to say I'm going to be driving it forever. But I spent the money. The experience happened. The experience got absorbed. I believe God wants me to have these experiences. I don't think that God put me here to just sacrifice, sacrifice, sacrifice. I just work, work. I know God worked. But I also know God enjoyed experiences too. He was serving every single day. But you can't tell me he wasn't enjoying what he was doing. I think it's important to find that contentment because it doesn't matter whether people judge you or not. They're going to judge you whether you drive a Lamborghini or you're going to say you're broke or you're all about money. It doesn't matter. Go do the thing that makes you happy.

Yeah. I have found through spending a lot of money on things that don't actually bring much value, my happiness faded. Yes. And so I'm getting to the age where I realize, okay, if I buy this expensive thing, I know my happiness is going to fade over time. So I really, really want that thing. A hundred percent. So now, to me, I connect things like this watch was when my daughter was born. My other watch was when my son was born.

I literally connect it to a meaningful moment that you can't take that fade. It never fades. Yes. It doesn't go anywhere, right? And so that's my way of justifying it, the older I get. I want to lean into this idea of real estate creating this longevity. So, for example, apartments, I'll use that because that's my vehicle of choice. But over next 20 years, if someone invests,

40 grand in these apartments and 1031 exchanges, they're going to be making close to $100,000 a month tax free. And a 15 year time frame? Did I say 15 or 20? 15 is closer to 70 grand a year, $68,000 in 15 years. 40 grand a year, every single year, compounding, 10.31ing. Well, what you just said, it's compounding. That's right.

Because it's compounding. Right. And so it compounds. And so when someone passes, can that income be passed off. to their children tax-free. I know there's a step-up basis in valuation of the actual net worth and valuation. How does that look to the children? Because then I would say, why wouldn't everyone invest in any type of compounding dividend that goes forever? Because that is the fastest way I would argue to go leave your children something of value and they don't get it until you pass because then

you leave them the 70 grand a month of income that they're going to inherit. Yeah, two reasons. One, uneducated. They don't know what step-up in basis. is or they've heard about it and don't really fully understand it. And two, they are lazy. They hear about something and they're like, okay, well, one day when I'm rich or when I have time, I'll go set up. That sounds nice. That's for you. Those are for wealthy people. I mean, why would I focus on that structure right now? I must have to have all of it already figured out in order to, in order to do things like that. Or remember, Carlton gave six grand out of his 11 grand net worth starting because you've got to start somewhere. Yes. So talk to us about the step up basis

so people can be a little bit more informed about that. Yeah. And then my actual genuine question with not being informed that I don't know. If I'm making 70 grand a year tax free and I pass because I have all these apartments, does that, is there an ability to pass on the cash flow to my children tax free? The cash flow is still going to be taxable income to them. Every single year they'll have to report it. By the way.

So now they net 40 grand a year or 40 grand a month. That's a pretty nice little gift. That's an amazing gift. What? That's an amazing gift. Yeah. So they'll still pay taxes on whatever the cash flow is. But the asset, the ownership, if they were to sell their interest and being a part of your, you know, fund or syndication structure, that determines whether or not they're going to pay capital gains taxes.

We talked about the 1031 exchange, which is an IRS rule that allows for you to transfer your capital gains and your cost bases into a new property that's equal or greater than value. You're essentially kicking the can down the road, the tax can, if you will. And the rule exists because if you're a real estate investor, the government wants you to stay in real. real estate. They want you to continue to buy to buy properties or provide affordable housing. So, they're going to incentivize you to stay in real estate with the 1031 exchange strategy. So what happens if you end up dying and you've done five, 10, 15, 1031 exchanges going back to when you were 40 years old? Well, if you have a trust in place and your children are beneficiaries of that trust, they may receive a step up in basis, which means that the

ownership of the assets that they're receiving is going to step up to the fair market value at the date of their parents' death. So if their parents got in with a basis of a million dollars and that basis is now $15 million, well, there's a $14 million gain that the children are going to have to experience if there's no step up and basis in place. There's no trust.

There's no estate planning that was done. Most taxpayers don't want their children to be dealing about their loss and mourning over their loss and at the same time trying to figure out how to sell assets to pay the taxes associated with the estate that they inherited. No doubt. So if you can do proper planning ahead of time, you can establish a revocable living trust. Your children receive the step up and basis. And now they inherited an asset tax free. Let's make it simple.

Imagine you bought Apple stock for $100 and now Apple stock is trading at $1,000. That's a $900 gain. And your children inherits the stock. Well, guess what? They're going to pay taxes on that $900 that there's no trust structure in place. With the proper structure or will establish your children can establish or receive step up in basis, meaning now when they inherit that Apple stock at $1,000,000,000. they can sell it with absolutely zero capital gains. Now, just multiply that number by 100,000. And that's the type of wealth that we're talking about in the grand scheme of things for some taxpayers. I think this should start to, I'm hoping this episode lights a light bulb in people's head. You and I invest in these passive assets for somewhat different but similar reasons is we make money in a model that is not reliant on the passive income model.

No. Okay. That's correct. I think people need to remember, you still need to put gas in the car. That gas is your income. I don't care if you're W2. I don't care if you're an entrepreneur. Great.

Keep making the gas. Because over time, over runway, the 15 year old Carlton making, putting six grand in this deal gave himself enough runway that if he did this every single year, which now you've well surpassed that, you're going to wake up one day and start having 70 grand a month, 80 grand a month, 120 grand a month passively. But you're also going to have this huge. huge net worth that was driven by the gas you put in the tank. And now you have choices.

Yes, you do. Do you need gas anymore or not? I don't know. You're a call, right? Like, is it really worth it? Does it create your happiness? And you've built over time, I'm 44. I believe I will be living to 100.

Yeah. In the next 30 years, I can literally create a six figure a month income that's tax free. And I'm going to be able to give that. Now they can pay taxes on it, but they're still going to be making. 60 grand a month. Yeah. That 60 grand is tax fee to them. Plus, they step up the cost in whatever the hell I'm in in 30 years.

I won't even have an idea right the second. And they're going to say, oh, great. I'm going to take my $180 million portfolio. My dad just essentially gifted me because of it's trust. And we're going to sell it. Well, you could. How much taxes are they going to take if I set it up with the right trust system? Yeah.

And they are the executors of the trust. Yeah. How many? on 180 million dollars of real estate and they sell it. You're going to pay quite a bit of taxes because depending if your parents are married or if you're married when you inherit in a state like that, you may only get a $15 million or a $30 million exclusion. So if you're inheriting a huge estate like that, you would have hoped that your parents put some of that real estate into an irrevocable trust and kept some of it properly in irrevocable trust. The reason why I say this is because the irrevocable trust takes assets out of the estate for the purpose of eliminating estate taxes. you become a beneficiary of the irrevocable trust.

And because of that, you don't have to worry about capital gains taxes, but the downside is you get no step up and basis on the assets in an irrevocable trust. But what if your parents identify the right assets to leave in the revocable living trust, keeping you under that 30 million? Maybe you have the right type of assets in that revocable trust that you do want to get the step up and basis in, keeping you underneath that $30 million dollar threshold. And then everything else goes in the earbuckle. irrevocable trust that you still inherit that prevents you from owing estate taxes. So this is a

situation where having two trusts matter a lot more than having one trust, which is why estate planning ahead of time is very powerful. This is game. This is why you guys need to be in this club, the Moore Club, because men like this are going to be in there. By the way, you have a book either, it depends on when this launches. It's either out on Amazon. Yeah. And if it's not out yet, it's coming. Let's talk about this book real quick. Yeah. We have the book called the Art of Legal Tax Avoidance. And it's so funny that you talked about not quitting your earned income. job because we address that in chapter two. I'm not telling taxpayers that, you know, just because real estate provides the best tax benefits, quit your job, go start a business, go invest in real estate.

No, I'm telling you to do that right alongside your earned income. We don't want you to abandon your earned income. What we want to do is we want to leverage your earned income to get into assets that can turn around and offset your earned income so you can get to retirement faster. I'm all about compounding and your ability to invest early and often is what's going to get you to freedom sooner rather than later. But if the tax code is working against you, or sorry, if the taxes are working against you, what are we doing about your biggest expense? If you have no strategy to try to offset your biggest expense, your goal is to just work more

and try to invest more. That's a very defeating, defeating play. Because every hour that you work more, you're trading 37 cents on the dollar to Uncle Sam. Whereas if you're smart and you're savvy taxpayer, that number might be 10 cents or even less, like real estate where a lot of real estate investors are paying close to 0% in income taxes. So before you can get there to where you're paying 0%, you have to figure out your investment vehicle for most taxpayers that are working full-time jobs. They love the idea of real estate.

Once I tell them how the strategy works, then it comes down to a little bit of management. We manage the real estate. We start benefiting from the cost segregation study. And now we have big refund checks coming back to us if we're W2 or we're avoiding big tax payments if we're self-employed. Now, this book is either out on Amazon now. or will be, depending upon when this launches. Again, what was the name of the book? The Art of Legal Tax Avoidance, Volume 1.

There you go. Now, you also need to go follow this man all over social media. He is massive. He is the go to. He is my guy that I go to for this stuff. So it's good enough for me. It's definitely good enough for you as you're here listening and watching this. Go to his YouTube. Go to Instagram. Go to TikTok. Carlton Dennis. Any other names on any of these channels that they needed put in there? Tax alchemy. Go look at tax alchemy. I'll just plug you because how great you are in all things. What else? We have a live event in... Yeah, yeah. We have a live event coming up in June for our private client group members. And, you know, if you're somebody that likes to come in person to learn tax strategy,

it's definitely an event I'd have you reach out at. You can go to www.taxalcom to get more information. If you're somebody that's an avid learner, the book is going to be a great resource for you. I know it was for a lot of our taxpayers that have already read it. It's called The Art of Legal Tax Avoidance. You can go to the Art of Legal Tax Avoidance.com to download your copy today. There you go. That's it. Carlton Dennis, it's been a pleasure, my brother. Justin Colby, thank you so much.

We're going to do a lot. All right, that is Carlton Dennis. I am Justin Colby. This is The Moore Show. And again, brought to you by the Moore Club where you will see and meet and talk to Carlton Dennis himself. Make sure you're a part of that club. We'll see you in the next episode. Peace.