Issue #16 - Tax write offs are free money!

May 09, 2024

Read time: 4 minutes

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Now, onto today's issue.


1. Personal Finance

Newsflash: Just because you can "write it off", doesn't mean it's free!

Don't fall for the trap of buying something just for the sake of a tax deduction.

That fancy new car with a $798/month lease payment might be tempting, but if you can do the job just as well with a $315/month lease, go with the latter and invest the extra cash.

I hear people saying "oh that's a write off" as if justifying the overpriced, and perhaps unnecessary business expense.

Similar to when The Brick has a 50% off clearance sale (EVERYTHING MUST GO), Jimmy Two Time heads to the store, buys a $4,000 lazy boy for $2,000 and comes home to Delilah and says "HONEY I EARNED $2,000 TODAY - WE ARE WINNING".

Sure, Jimmy Two Time will be sitting pretty in his new lazy boy, but his net worth just went negative since he put it all on the Credit Card anyway. 

The the mental math crimes committed here is obviously wrong. 

So, next time you hear someone say "I wrote that off" as they look deep into your eyes in search of approval, just nod and walk away. Or better yet, get them to subscribe to the Goodwill Investing Journal

Also, it should be well understood that just because someone says "it's a write off" doesn't automatically make it legit in the eyes of the Tax Man. Make sure you can genuinely justify it, or you might find yourself in an unhappy tax audit in a few years.

But hey, if you can legitimately claim something you'd have bought anyway, go ahead and give yourself a pat on the back.

PS I just branded my car @simplyfinanceandinvesting - my Instagram account - do you like it? 


2. Stock Markets

Why is it that people always get sad when the stock market falls, yet when their favourite clothing brand has a sale, they storm the gates (of hell) and spend more than they have in their bank account and take on credit card debt?

  1. because when stocks fall, the world is going to end.
  2. because when GUCCI has a sale, you are earning money by spending money (I got it on sale!),
  3. and credit card interest is nothing to worry about.
  4. just have to pay the minimum payment!

Ok sorry for the satire, but let's get real here folks.

A lot of my generation - and I feel the pinch, too, let me tell you - are up in arms about how tough it is to get ahead in this world, blaming Wall Street and the Government for their financial troubles.

The problem is that when they say this on camera using their iPhone 15 driving around in their leased $80,000 Audi Quattro GT after returning from a wine tour in get my point. They've made spending choices that are unrealistic for their financial situation.

Meanwhile, the stock market is volatile, and when it's red and CNN is telling us the world is ending, we for some reason stop automatic dollar cost averaging into our long term investment accounts. The result is we introduce human emotional error that will totally screw up the compounding formula and ultimately lower the retirement portfolio's chance of success.

Instead do this:

When the stock market falls

  • maintain your monthly ETF/stock purchases
  • buying investments when they are down = more shares in the stock = much more money when stocks rebound (they always do)

When Gucci goes on sale

  • resist the temptation to buy
  • ask yourself, do you really need this item?
  • probably not.

Final word, any net long-term investor should never be upset with a decline in stocks. It is nothing but a good thing for the long term investor.

Caveat of course is people close to retirement, those that require principal security over possibility of growth/capital gains, or those with large near-term expenses. At this point, the portfolio should be risk adjusted to account for the shorter time horizon.


3. Real Estate 

Ever wanted to buy some Real Estate but you don't have enough money?

Don't let that stop you.

A good deal always finds the money.

You found a little shopping centre for $5,000,000.

Great location, the rents are low vs the other stores in the area, you crunch the numbers, and think it will sell for $6,300,000 in 5 years.

This is a great deal.

The property can handle a 65% mortgage, or $3,250,000. So you need $1,750,000 in cash to buy it.

But you only have $175,000, or 10% of the equity.

You need $1,575,000 more cash.

One way to structure this great deal is through a Limited Partnership. What is this?

A Partnership has both:

  • a General Partner - you - the one that finds the deal, who does all the work, and manages everything from Due Diligence to Financing to Purchase to Leasing to Sale.
  • a Limited Partner - the investor(s), they give you the extra $$$ you need. They put up 90% of the $$$ because you are providing them the wonderful opportunity to be a part of your deal.

Since you the GP are doing all the work, you agree to split the profits 75% to the Limited Partner.

You get 25% of the profits, even though you only put up 10% of the money.

You get this extra "promote" because of all the responsibility and effort you put in to make the deal successful.

After selling, paying down the mortgage, the overall return on equity is 21% annualized.

The Investor gets 2.19x his money, and you get 3.9x your money.

Everyone is extremely happy, you did a great deal!

So, instead of saying, "I can never afford that"…

…reframe that statement and say "this is how I can buy that"

Don't let a lack of money stop you from doing something great.

Money will always go to good deals.  

PS. If you want a quick real estate return calculator - click the image below to download. And if anyone wants to walk through this over Zoom - let me know, happy to set up a live demo.


1 Quote

Hero's get remembered, but Legend's never die. 

-Babe Ruth


A Question

What's your ideal last meal?

Tough call for me, split between a rib-eye steak w/ mashed potatoes and gravy, white spot double double burger, or pasta bolognese. 



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Thank you

Eddie Gudewill, CFA


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