Author Archives: Bill Gatten


™Regarding Income-Tax Benefits Re. the ©Equity Holding Corp. Trust Transfer System™

Interestingly, ‘due to Equity Holding Corp’s length time in business, we’ve been subjected to more than a few proverbial “rodeos,” and have learned a lot about what our early naysayers used to pull out of their equally proverbial lawyer-hats in order to refute our (quite valid) claims: ‘most often in order to switch a client to something they knew more about, and for which they could rack up billing hours…’and… in so doing avoid the unprofitable trip to the law library or a few hours of (‘unpaid but honest) web research.

An Early example of who was right and who was in error is the Belden Case below.

Belden is essentially an unsuccessful charge by the IRS, which at first glance may appear less than remarkable for our own purposes, in that the Equity Holding Transfer™ is not involved.  Although, due to the subject matter of the case  (i.e., a lease-purchase arrangement), the claimant was initially refused his income-tax deduction for property taxes and loan interest under the Qualified Property rules of IRC §163.  However, the final decision in this case presented an early break-through for us and the EHTransfer™ relative to whether or not a property that was vested in, and leased from, a land trust trustee would be deemed a Qualified Property under §163 if challenged.

The case dealt with a simple lease-purchase arrangement wherein the tenants, Mr. Belden and his wife, were contracted to buy the property outright at a future time, and during the interim to make all mortgage payments and cover all expenses of ownership until the agreed-upon time of purchase.  Belden presumed that his tax deduction benefits were supported by IRS Code §163 and its various subsets, including §163(h()4(D), which we refer-to frequently in the promotion of the Equity Holding Trust Transfer™.

In reviewing the case (which is digested to save you some time), ‘note that the initial refusal by the IRS to honor Mr. Belden’s claim of deductibility was based on the fact that the tax payer’s name was not on the property’s deed of title (‘ergo no proof of ownership), and neither was his name on the property’s mortgage (‘ergo no proof of any contractual mortgage obligation).

IRC §163 (h)4(D): Special Rules For Estates And Trusts 

For purposes of determining whether any interest paid or accrued by the owner of an estate or trust is qualified residence interest; and any residence held by such estate or trust shall be treated as a qualified residence of such estate or trust if such estate or trust establishes that such residence is a qualified residence of a beneficiary who has a present interest in such estate or trust, or has an interest in any residuary thereof (re. funds remaining after a payoff pertinent to a particular occurrence, such as probate, insurance or lawsuit settlement).

All of this is essentially to say that a beneficiary of the Equity Holding Transfer Trust (a land trust), who is living in, caring for  and paying for, the property, is entitled to mortgage interest and property tax deductions: ‘the criterion being 1) residing in the property as a permanent residence; 2) having a bona fide contractual obligation to pay all related interest and property taxes 3) holding either – a) ‘the equitable interest in the property, OR b) holding the equitable interest in an estate or a trust that holds the equitable interest in the property.

Note here that these qualifications do not require the tax payer to be named on the property’s deed, or to be a guarantor on the underlying financing.

Re. Wendell D. Belden, et ux (et ux = “and wife”). v. Commissioner,

TC Memo 1995-360 , Code §§163 etal.


Case Information:

Code Sec(s): 163[pg. 95-2194]
Docket: Dkt. No. 4747-93.
Date Issued: 8/02/1995.
Judge: Opinion by Gerber, J.
Tax Year(s): Years 1989, 1990.
Disposition: Decision for Taxpayer.
Cites: TC Memo 1995-360, RIA TC Memo P 95360, 70 CCH TCM 274.


Respondent determined income tax deficiencies for petitioners’ 1989 and 1990 tax years in the amounts of $12,488 and $5,040, respectively. Respondent also determined penalties under section 6662 for 1989 and 1990 in the amounts of $2,498 and $1,008, respectively. The issues for our consideration are: (1) Whether petitioners are entitled to claim interest deductions under code section 163 for 1989 and and 1990; and (2) whether petitioners are liable for the penalty under section 6662 for negligence and/or disregard of the rules or regulations for either 1989 or 1990.

Petitioners Wendell D. and Sandra J. Belden are husband and wife, and they resided in Tulsa, Oklahoma, at the time their petition was filed in this proceeding. Petitioner Wendell D. Belden was a registered investment adviser during 1988. At all relevant times, petitioners reported their income and deductions on the cash method of accounting. On December 19, 1988, petitioners entered into a contract for the purchase of a residence (Crown Pointe property) and took possession within two weeks thereafter. On January 16, 1989, petitioners and the seller, Ahrend Homes, Inc. (Ahrend), entered into an occupancy agreement as a supplement to the contract for purchase, providing petitioners with immediate rights of occupancy.

The purchase contract committed petitioners to paying $500,000 for the property, $20,000 of which was paid to Ahrend as earnest money. Petitioners were to obtain $400,000 of permanent financing. The $80,000 balance was to be supplied by petitioners in the form of a promissory note to Ahrend at closing. The purchase contract was subject to the condition-subsequent that Ahrend obtain suitable financing for the $400,000 under terms acceptable to petitioners. In that regard, petitioners were required to be reasonable in their acceptance or rejection of the final financing secured by Ahrend. There was no stated time limit within which financing could be obtained. The parties had not contemplated the amount of time it might take to secure permanent financing.


Until arranging for permanent financing, the occupancy agreement with Belden required petitioners to pay Ahrend $3,500 monthly, commencing February 1, 1989. The $3,500 was in the same amount as the interest Ahrend was paying on its outstanding construction loan on the Crown Pointe property. It was the parties’ understanding that petitioners would bear the $3,500 construction mortgage interest as long as they possessed the house and until permanent financing could be obtained. The $3,500 payment was designated “interest only” in the occupancy agreement and terminated upon completion of the sale. During 1989 and 1990, petitioners’ $3,500 monthly payments totaled $42,000 and $18,000, respectively. All utilities were to be placed in petitioners’ names, and petitioners agreed to obtain liability and contents insurance. Following a 2-month transition period, petitioners were responsible for the costs of repairs to plumbing, heating, cooling, electrical equipment, and appliances. Ahrend was given the option of obtaining insurance on its interest in the residence, and was required to pay the local real estate taxes on the Crown Point property. Petitioners and Ahrend complied with all terms of the occupancy agreement.

The Crown Pointe property had been vacant for several years and had fallen into poor repair prior to petitioners’ agreeing to purchase it. Petitioners paid in excess of $13,000 to repair, maintain, or improve the property during 1989. The occupancy agreement provided that petitioners would be reimbursed for improvements that they made to the property, in the event that petitioners were not the ultimate legal title holders of the Crown Pointe property. If the sale was ultimately unsuccessful, petitioners were liable for any damage (which exceeded normal wear and tear) that they caused to the property.

Petitioners and Ahrend did not close on the purchase contract, title was not transferred from Ahrend to petitioners, and fi nancing was not obtained. These events did not occur because of the bank’s foreclosing on Ahrend’s construction mortgage on the Crown Pointe property. Ultimately, petitioners purchased the property from the foreclosing bank, receiving title on February 1, 1991. Petitioners were named as defendants in the foreclosure action because of their equitable or possessory interest in the Crown Pointe property. After commencement of the foreclosure proceeding, and prior to petitioners’ purchase of the Crown Pointe property from the bank, petitioners paid the $3,500 monthly payments directly to the bank. On February 1, 1991, petitioners obtained a $297,000 mortgage on the Crown Pointe property with a bank that had not previously been involved with the property.


On their 1989 and 1990 Federal income tax returns, petitioners claimed the $3,500 monthly payments made in connection with the Crown Pointe property as deductible interest payments. These payments were made pending the closing of the residential real estate transaction in which the seller was to obtain permanent financing for the buyer, while the buyer had possession and the benefits of full use of the property as a personal residence. Respondent argues that the payments made by petitioners to Ahrend and the bank were rent and not interest. Petitioners bear the burden of showing that they were entitled to the deductions in question. Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435 [13 AFTR 1180] (1934).

Generally, section 163 provides for the allowance of a deduction for all interest paid on indebtedness. Personal interest, however, is generally not deductible. Sec. 163(h). “Qualified residence interest”, however, is excepted from the definition of “personal interest” within section 163. Sec. 163(h)(2)(D). “Qualified residence interest” includes interest paid during the taxable year on acquisition indebtedness with respect to a qualified residence. Sec. 163(h)(3)(A)(i). A “qualified residence” includes a taxpayer’s principal residence within the meaning of section 1034. Sec. 163(h)(4)(A).

In order to constitute “acquisition indebtedness”, the debt must be “incurred in acquiring, constructing, or substantially improving any qualified residence and [it must be] secured by such residence.” Sec. 163(h)(3)(B)(i). Generally, to be deductible interest under section 163(h)(3), a payment must be made with respect to indebtedness that is secured by the taxpayer’s qualified residence. Secs. 163(a), 163(h)(3)(B); sec. 1.163- 10T(o)(1)(i), Temp. Income Tax Regs., 52 Fed. Reg. 48410 (Dec. 22, 1987).

Petitioners were contractually bound to purchase and Ahrend was bound to sell the subject realty. The contract contained a condition subsequent by requiring that Ahrend find acceptable financing for petitioners, but petitioners were required to be reasonable in approving the financing located by Ahrend. Respondent characterizes the contract as being conditional, implying that petitioners controlled the outcome (they could avoid their obligation to take title and pay the remaining $480,000) by refusing to accept any financing obtained by Ahrend. Petitioners counter that they were bound to purchase, had possession of, and were the equitable owners of the realty. Respondent, on the other hand, argues that ownership of the realty is not the deciding factor, and thus, petitioners did not incur any indebtedness in 1989 or 1990 within the meaning of section 163(h)(3). Respondent contends that petitioners did not incur indebtedness until 1991, when title was received from the foreclosing bank and petitioners obtained a $297,000 mortgage. In that regard, respondent argues that Ahrend’s indebtedness cannot be relied on by petitioners to satisfy this requirement. Petitioners counter that they were equitable owners of the property, and that their payments to Ahrend were for interest on the construction loan as set forth in the agreements between the parties.

For petitioners to be entitled to the claimed interest deductions for 1989 and 1990, section 163(h)(3) requires that they show: (1) The interest was paid on “acquisition indebtedness” (i.e., debt “incurred in acquiring, constructing, or substantially im proving any qualified residence”); 3 and (2) the indebtedness was secured by such qualified residence.

Petitioners made the $3,500 payments either to Ahrend (which in turn made them to the bank) or directly to the bank after the time of the foreclosure. The occupancy agreement between petitioners and Ahrend designated those payments as interest on Ahrend’s construction loan, which was incurred to build the qualified residence (Crown Pointe property). The construction loan was secured by a mortgage on the Crown Pointe property, and that mortgage was foreclosed by the bank from which petitioners ultimately obtained legal title. We must now decide whether petitioners are entitled to deduct interest on debt that they are not personally obligated to repay.

Section 1.163-1(b), Income Tax Regs., provides that “Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.”

See also Baird v. Commissioner, 68 T.C. 115, 123 (1977). Respondent argues that the contractual relationship between petitioners and Ahrend was conditional such that petitioners could not become the legal or equitable owners until the property was deeded to them. In a Federal tax proceeding, the question of when a sale is completed is to be resolved by the facts and circumstances in each case, and no one factor is controlling. Id. at 124; Clodfelter v. Commissioner, 426 F.2d 1391 [25 AFTR 2d 70-1254] (9th Cir. 1970), affg. 48 T.C. 694 (1967). Concerning real property, a sale is completed at the earlier of transfer of legal title or the practical assumption of the benefits and burdens of ownership. Baird v. Commissioner, supra at 124; Dettmers v. Commissioner, 430 F.2d 1019 [26 AFTR 2d 70-5280] (6th Cir. 1970), affg. Estate of Johnston v. Commissioner, 51 T.C. 290 (1968). Our factual inquiry must focus upon the shift of the benefits and burdens of ownership. Baird v. Commissioner, supra at 124; Merrill v. Commissioner; 40 T.C. 66 (1963), affd. per curiam 336 F.2d 771 [14 AFTR 2d 5703] (9th Cir. 1964).

Petitioners did not acquire legal title until 1991. Accordingly, we must consider whether the benefits and burdens of ownership transferred to them prior to 1991. At the time petitioners entered into the contract with Ahrend, the only incomplete contractual requirements were: (1) Obtaining permanent financing, (2) execution and transfer of an $80,000 note from petitioners to Ahrend, and (3) transfer of legal title from Ahrend to petitioners. Petitioners had the complete right to possess and resided in the Crown Pointe property, beginning 2 weeks after the agreement was executed. While Ahrend had the option to obtain insurance on the residence and was required to pay the local real estate taxes, petitioners were required to maintain liability and contents insurance. All utilities were carried in petitioners’ names, and they bore the costs of any improvements, unless the property was ultimately sold to a different buyer. Following a 2-month transition period, petitioners were responsible for the costs of repairing the plumbing, heating, cooling, electrical equipment, and appliances.

Under Oklahoma law, if the parties enter into a contract for the sale of realty, factual inquiry must focus upon the shift of the benefits and burdens. A contract for sale, coupled with the buyer’s taking possession, constitutes a transfer of the benefits of ownership to the buyer and may constitute a transfer of an equitable interest. State Life Ins. Co. v. State, 135 P.2d 965, 967- 968 (Okla. 1942); Resolution Trust Corp. v. Sudderth, 854 P.2d 375, 377 (Okla. Ct. App. 1993); King v. Lunsford, 852 P.2d 821, 823 (Okla. Ct. App. 1993). In State Life Ins. Co. v. State, supra, the Oklahoma Supreme Court, in finding the transfer of equitable interest when legal title had not yet passed between parties who contracted for the sale of realty and transferred possession, stated that:

It may be that a mere contract or provision in a contract agreeing to sell real estate at some future date is insufficient of itself to create a present equitable estate in the vendee. But, as in all contracts, the intention of the parties, especially the vendor, governs. If the contract as a whole shows that the intention was to convey a present equitable estate the courts will give effect to such intention regardless of the separate meaning of particular or isolated words.




The present contract provided that the vendor bargained to sell and the vendee agreed to purchase


Among those terms was the immediate surrender of possession to the vendee. *** In such case rightful possession carries with it the beneficial interest, and nothing remains to be done except to pay the purchase money when due and to execute the deed. In such case there is a transfer of the equitable estate ***

Viewing this record in its entirety, we conclude that the benefits and burdens of ownership shifted to petitioners when they took possession of the residence. Baird v. Commissioner, 68 T.C. at 124; State Life Ins. Co. v. State, supra.

Petitioners rely heavily on a factually similar opinion of this Court. Amundson v. Commissioner, T.C. Memo. 1990-337 [90,337 PH Memo TC]. In that case a brother was allowed to deduct interest payments on his sister’s mortgage because of an informal agreement under which the brother would acquire a 50-percent interest in the subject residence if he made mortgage payments. Having concluded that the brother/taxpayer “had a 50-percent equitable interest in the property and, in effect, [that he] had assumed liability for the mortgage”, this Court held that the brother/taxpayer was entitled to deduct the interest payments. In the instant case, respondent argues that the taxpayer had no legal obligation to the lender that would permit an interest expense deduction. But the cases cited by respondent in that regard are similar to those which, in Amundson v. Commissioner, supra, were regarded as distinguishable because those cases involved taxpayers who had guaranteed corporate loans secured by collateralizing their residences. Because of the finding in Amundson that the brother/taxpayer had an ownership interest in the property, the cited cases were there distinguished.

This case also presents a unique set of facts under which we conclude that petitioners had a possessory and an equitable interest in their residence. Through their two contracts with Ahrend, petitioners effectively assumed the obligation to pay the interest on the construction mortgage until permanent financing could be obtained. The $3,500 payments were neither rent nor payments to reduce the purchase price. Moreover, the price agreed upon between petitioners and Ahrend remained at $500,000, irrespective of the lapse of time or the total number of $3,500 monthly payments made. Petitioners agreed to carry the existing mortgage interest during the interim period in which Ahrend searched for financing. They were the equitable owners of the property during that period and are entitled to deduct the payments as interest.

Under the unique circumstances of this case, petitioners are entitled to qualified residence interest deductions in the amounts of $42,000 and $18,000 for 1989 and 1990, respectively. Having decided that petitioners are entitled to the deductions in controversy, there are no deficiencies in their income tax, and there is no need to reach the issue of whether petitioners are liable for a penalty for negligence in either year.

To reflect the foregoing,

Decision will be entered for petitioners.



The next case (‘also digested for convenience) regards one of our own Equity Holding Transfer ™ transactions that was taken to task a few years ago by the IRS when they opted to refuse our clients their rightful claim of income tax deductions for mortgage interest and property tax.


As had been their contention in the Belden case, the refusal of the tax deduction came about because the tax payer (Daniel Adams and his wife) were not named on the loan and neither were they shown on the property’s title as owners: i.e., ‘due to their trustee being the legal and equitable title holder of the property entrusted to it…’which is the nature of any title-holding (“Illinois type land trust”).


However, because they apparently don’t read their own proclamations often…’or well: in Adams they neglected to look at their own IRC163(h)4(D), which states quite succinctly and clearly that a beneficiary in a “land trust” by any other name is indeed entitled to full income tax benefits as long as the beneficiary can prove being: 1) a full time resident; 2)  responsible for the full burdens of ownership; 3)  pays all property taxes; taxes and all debt relative to the property, and is doing so under a bonafide contract; and 4) is holding either an equitable interest in the property…OR…an equitable interest in an estate or trust that holds the property’s equitable title interest.


As long as these qualifications are met and the verbiage in IRS’ Revenue Ruling 92-105 is adhered to, ‘no longer is there a question about a title-holding trust’s full-pay co-beneficiary’s right to income-tax deductibility.


Here’s the Adams case:


T.C. Memo. 2010-72



A Federal Tax Court Ruling


ANTHONY J. ADAMS, Petitioner






Docket No. 2563-08.              Filed April 13, 2010.


Anthony J. Adams, pro se.


Bryan E. Sladek and Robert D. Heitmeyer, for respondent.




VASQUEZ, Judge:  For 2003 and 2004 respondent determined deficiencies in petitioner’s Federal income taxes, additions to tax, and penalties as follow


Year Deficiency Addition to TaxSec. 6651(a)(1) PenaltySec. 6662(a)
2003 $38,020 $6,304.00 $7,604
2004 $20,705 $1,983.25 $4,141
Unless otherwise indicated, all section references are to the Internal Revenue Code (I.R.C.) in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.




As an initial matter, neither party argued or was briefed whether or not:


(1) The Essex Drive trust should have claimed the mortgage interest deduction pursuant to section 163(h)(4)(D)1 and the provisions of subchapter J;


(2) Petitioner (Belden) could have claimed the mortgage interest deduction as investment interest, Re. Davies v. Commissioner, 54 T.C. 170, 176 (1970) (property that was a residence in the taxpayer’s hands was business property in the land trust’s hands); or


(3) The Essex Drive trust was a mere nominee, a sham, or should otherwise be disregarded, see Norton v. Commissioner, T.C. Memo. 2002-137 (land trusts disregarded as shams and income taxable to beneficiaries).  These issues are deemed waived.  See Rule 40; Muhich v. Commissioner, 238 F.3d 860, 864 n.10 (7th Cir. 2001) (issues not addressed or developed are deemed waived–it is not the Court’s obligation to research and construct the parties’ arguments), affg. T.C. Memo. 1999-192; 330 W. Hubbard Rest. Corp. v. United States, 203 F.3d 990, 997(7th Cir. 2000) (same); Larson v. Northrop Corp., 21 F.3d 1164, 1168 n.7 (D.C. Cir. 1994) (declining to reach issues neither argued nor briefed).  Accordingly, our decision in the case will be based upon the extent to which section 1.163-1(b), Income Tax-Regs., applies and on the arguments the parties asserted or briefed with respect thereto.


For 2003 and 2004, respectively, respondent (the IRS) concedes that petitioner is entitled to deductions for:  (1) State and local income taxes of $3,823 and $4,161; (2) real estate taxes of $3,346 and $5,020; (3) charitable contributions of $11,263 and $11,637; (4) miscellaneous expenses of $1,330 and $989 (before application of the section 67(a) 2-percent floor); and (5) “Schedule E” net losses of $81,226 and $34,645.


The issues remaining for decision for 2003 and 2004 are whether petitioner is:  (1) Entitled to his claimed mortgage

interest deductions; (2) liable for the section 6651(a)(1) additions to tax; and (3) liable for the section 6662(a) accuracy-related penalties.




Some of the facts have been stipulated and are so found.


The stipulation of facts is incorporated herein by this reference.  Petitioner resided in the state of Michigan when the petition was filed.


  1. The Essex Drive Trust: Formation and Trust Agreement


In 2003 Michael and Zina Gedz transferred legal and equitable title to 325 Essex Drive (Essex Drive property) for a 5-year period to Equity Holding Corp. acting as trustee for the Essex Drive Trust, pursuant to a trust agreement.  A warranty deed memorializing the transfer was recorded by the Register of Deeds,

Oakland County, Michigan.


The trust agreement provides that the purpose of the Essex Drive Trust is to hold the Essex Drive property and the proceeds and profits therefrom in trust for the beneficiaries’ use and benefit.  The trustee is to deal with the Essex Drive property only when the beneficiaries authorize it to do so.


According to the trust agreement, the beneficiaries’ “interests * * * consist solely” of:  (1) A power of direction to authorize the trustee to deal with the Essex Drive property; (2) the right to receive or direct the disposition of proceeds from the Essex Drive property; (3) the right to purchase, lease, manage, and control the Essex Drive property; and (4) “the obligation for expenses and disbursements relative to the trust property.”  The beneficiaries’ rights to the proceeds are “deemed to be personal property”; the beneficiaries do not possess “any right, title, or interest * * * [in the Essex Drive property] either legal or equitable”


Expenses of the Essex Drive Trust are allocated among the beneficiaries according to their respective percentages of beneficial interests held, unless otherwise agreed.  The beneficiaries also are required to obtain insurance for the Essex Drive property.  A beneficiary’s interest passes to an executor or Administrator of his or her estate on death; otherwise, a transfer of a beneficiary’s interest to a third party is subject to the other beneficiaries’ rights of first refusal, and no assignment of a beneficiary’s interests is valid.


Unless all beneficiaries consent, a copy of the assignment is delivered to the trustee, and the trustee indicates its acceptance thereon.


The trust agreement further provides that the trustee is not obligated to file Federal income tax returns or schedules on behalf of the Essex Drive Trust, notwithstanding “section 671 of the * * * [I.R.C.] of 1954 or any other applicable regulation.”


If it becomes necessary for the Essex Drive Trust to file a Form 1041, U.S. Income Tax Return for Estates and Trusts, or other informational returns under “section 6031 of the * * * [I.R.C.] of 1954,” the trustee will not be obligated to prepare them, ‘but the trustee will sign informational returns if necessary at the

beneficiaries’ request.  The beneficiaries are to report and pay all taxes on the earnings and proceeds of the Essex Drive property or which otherwise arise from their beneficial interests.


  1. Petitioner’s Beneficial Interest and Trust Documents


In 2003 the Gedzes assigned a 40-percent beneficial interest in the Essex Drive Trust to BOGAT Management, and a 50-percent beneficial interest in the Essex Drive Trust to petitioner and Sandra Adams.


  1. Beneficiary Agreement


The Gedzes, BOGAT Management, LLC (Bogert and Gatten), and petitioner and Sandra Adams entered into a beneficiary agreement that provides that the beneficiaries collectively have the:  (1) Power of direction to authorize the trustee to deal with the Essex Drive property’s title; (2) “right to receive and/or direct the disposition of proceeds from rentals, mortgages, sales, or other related income sources”; (3) right and duty to manage the Essex Drive property; and (4) obligation to pay the Essex Drive property’s expenses.


The beneficiaries’ interests in the Essex Drive Trust are personal property interests.  The beneficiaries share in the Essex Drive property’s earnings, gains, proceeds, and expenses according to their respective percentages of beneficial interest held.  No beneficiary may make material alterations or improvements to the Essex Drive property without the trustee’s and the other beneficiaries’ prior written consent.  The beneficiaries’ rights to transfer their beneficial interests are subject to the provisions of the trust agreement, and any transfer must be agreed to by a majority of the beneficiaries.


The beneficiary agreement further provides that the Essex Drive property will be sold at termination (i.e., February 28, 2008) subject to a first right to purchase (right of first refusal) held by petitioner and Sandra Adams.  The terms of the right of first refusal are that the Essex Drive property is to be made available for sale to petitioner and Sandra Adams at a price equal to what would be proposed by a third party and that they have a right to offset the sale price by the value of their share of profits derived and any contributions that are agreed to have been paid by, and refundable to, petitioner and Sandra Adams.


Petitioner and Sandra Adams’ right of first refusal “begins with the date of * * * [the inception of the related beneficiary agreement (March 1, 2003) and terminates upon the Essex Drive property’s sale or other disposition.”  According to “Exhibit ‘A’ to the Beneficiary Agreement”, petitioner and Sandra Adams’ refundable contribution is the sum of $12,000.  Their initial contribution consists of all nonrecurring costs contributed including closing costs, contributions to existing equity “($0.00 -‘Down Payment’),” Realtor®  commissions, and costs of agreed-upon expenditures for repairs and capital improvements to the Essex Drive property by petitioner and Sandra Adams.  Petitioner and Sandra Adams’ contributions are deemed fully “Refundable At Termination, If Equity Permits”.



  1. EHT Occupancy” Agreement


The related beneficiary agreement also provides that no beneficiary is entitled to occupy or possess the Essex Drive property unless an NEHT Occupancy agreement accompanies the beneficiary agreement.  The NEHT Occupancy agreement refers to the Essex Drive Trust as “Landlord” and to petitioner and Sandra Adams as “Tenant,” and provides that Landlord agrees to lease to Tenant the Essex Drive property, whereupon Tenant is to pay rent of $2,900 per-month, which includes principal and interest on all loans secured by the Essex Drive property.  Tenant is required to maintain insurance coverage for and is liable for all repairs and maintenance of the Essex Drive property.  Tenant may not make material alterations to the Essex Drive property without Landlord’s consent, and expenditures for repairs are not refundable or creditable to Tenant unless done at Landlord’s written direction.  Tenant may not assign or sublet its interest under the NEHT Occupancy agreement.


  1. Related Documents


Petitioner and Sandra Adams received other documents for the Essex Drive property.  The first document, titled “Beautiful Home”, states:  (1) No bank qualifying, no credit approval, and immediate tax benefits; (2) “Rent to Own”; (3) three payments and closing costs get you in at $320,000; and (4) participate in future appreciation and benefit in equity buildup.  The second document, titled “How We (TK Investment Properties, LLC) Can Benefit You (the Buyer))”, states that benefits provided to a buyer include:  (1) easier credit qualification and payment arrangements; (2) entitlement to all income tax deductions for “Mortgage Interest and Property Tax payments,” even though title does not pass to buyer; (3) receipt of equity buildup from reduction of the mortgage principal as payments are made; (4) receipt of appreciation of the Essex Drive property; (5) protection of the Essex Drive property from the buyer’s creditors; and (6) the pride of ownership without the rules and constraints of conventional real estate acquisition and mortgage processes.  These documents include an amortization table that was provided to petitioner and Sandra Adams, and sets forth the amounts of mortgage interest and principal paid for each successive payment.


III.  Petitioner’s Occupancy


Petitioner and Sandra Adams moved into the Essex Drive property in June 2003 and resided there for 5 years.  During that time petitioner made improvements to the Essex Drive property.  For example, he replaced the cedar deck for about $1,700 and installed an automatic garage door opener for about $500 to $600.  He re-landscaped the Essex Drive property and incurred costs of about $1,500 for “Dirt shoveling, [and] stuff like that.”  He also incurred costs of about $500 to $600 to have glass block windows installed in the basement because of Michigan’s harsh winters.  Since the Essex Drive property trust’s value declined, however, and at the end of the contract term petitioner did not exercise the right of first refusal to purchase the Essex Drive property.  Petitioner sent Equity Management Services payments of $2,900 per-month that included principal and interest on all loans secured by the property.  Petitioner credibly testified that that the fair rental value of the Essex Drive property was about $1,500 to $1,600 per month.  The escrow account statements from which the mortgage payments were made, bear the Gedzes’ names as mortgagees(? sic), and the Forms 1098, Mortgage Interest Statement, also bear the Gedzes’ names as mortgagees (?).  Equity Management Services, acting on behalf of Equity Holding Corp. sent petitioner copies of the escrow account statements and the Forms 1098.


  1. Petitioner’s Tax Returns


Petitioner filed his 2003 Form 1040, U.S. Individual Income Tax Return, in November 2005.  He filed his 2004 Form 1040 in February 2006.11  For 2003 and 2004, respectively, he claimed mortgage interest deductions of $24,135 and $23,471 that respondent disallowed.







Petitioner has neither claimed nor shown that he satisfied the requirements of section 7491(a) to shift the burden of proof to respondent.  Accordingly, petitioner bears the burden of proof.  See Rule 142(a).


  1. Mortgage Interest Deductions


Section 163(h)(1) generally disallows a deduction for personal interest.  An exception to this rule is qualified residence interest.  Sec. 163(h)(2)(D).  Qualified residence interest includes interest paid or accrued during the taxable year on acquisition indebtedness.  Sec. 163(h)(3)(A). Acquisition indebtedness means any indebtedness that is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer and is secured by the residence.  Sec. 163(h)(3)(B)(i).  A qualified residence includes the principal residence of the taxpayer.  Sec. 163(h)(4)(A).


Generally, for interest on a mortgage to be deductible the indebtedness must be an obligation of the taxpayer and not an obligation of another.  Smith v. Commissioner, 84 T.C. 889, 897 (1985), affd. without published opinion 805 F.2d 1073 (D.C. Cir. 1986).  But section 1.163-1(b), Income Tax Regs., provides: “Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.”  Where a taxpayer has not established legal, equitable, or beneficial ownership of property, we have disallowed the taxpayer’s claimed mortgage interest deduction.  Hynes v. Commissioner, 74 T.C. 1266, 1288 (1980); Song v. Commissioner, 2  Whatever rights or interests petitioner held in the Essex Drive property are determined under Michigan law because the property is in Michigan, see Altmann v. Commissioner, 20 T.C. 236, 252 (1953), and the trust agreement provides that it is governed by Michigan law. T.C. Memo. 1995-446; Bonkowski v. Commissioner, T.C. Memo. 1970-340, affd. 458 F.2d 709 (7th Cir. 1972).


The Court considers State law to determine the nature of the taxpayer’s property rights.  United States v. Natl. Bank of Commerce, 472 U.S. 713, 722 (1985); Aquilino v. United States, 363 U.S. 509, 513 (1960).12  The Court also considers certain factors to determine whether a taxpayer is an equitable or beneficial owner of the property, including whether the taxpayer:  (1) Has a right to possess the property and to enjoy the use, rents, or profits thereof; (2) has a duty to maintain the property; (3) is responsible for insuring the property; (4) bears the property’s risk of loss; (5) is obligated to pay the property’s taxes, assessments, or charges; (6) has the right to improve the property without the owner’s consent; and (7) has the right to obtain legal title at any time by paying the balance of the purchase price.  Blanche v. Commissioner, T.C. Memo. 2001-63, affd. 33 Fed. Appx. 704 (5th Cir. 2002).


Under Michigan law, the term “trust” includes any express trust wherever and however created (with certain exceptions not shown here).  Mich. Comp. Laws Serv. sec. 700.1107(m) (Lexis Nexis 2005).  Express trusts may be created to sell, mortgage, or lease lands; to receive the rents and profits of lands and apply them to the use of any person, during the life of the person, or for any shorter term subject to the rules prescribed in Mich. Comp. Laws Serv. chapter 554; or for the beneficial interest of any person where the trust is fully expressed and clearly defined upon the face of the instrument creating it subject to the limitations as to time.  Mich. Comp. Laws Serv. sec. 555.11 (Lexis Nexis 2007).


Petitioner’s property rights or interests are as follows: he is a beneficiary of the Essex Drive Trust, which meets the definition of an express trust under Michigan law; however, the trust agreement provides that he does not have any right, title, or interest in the Essex Drive property. See id.  Other related documents refer to him as a buyer and certain attributes of a sale are present such as a down payment, closing costs, and petitioner’s payment of principal and interest, while other attributes of a sale are not present such as a transfer of the Essex Drive property by deed to petitioner.  The NEHT Occupancy agreement refers to him as Tenant and to his monthly payments as rent.  The escrow account statements, the Forms 1098, and an amortization table were sent to petitioner, even though he was not personally liable for the mortgage, and the escrow account statements and the Forms 1098 bear the Gedzes’ names.  We now turn to the benefits and burdens of ownership factors. Some factors weigh in favor of finding that petitioner had assumed the benefits and burdens of ownership of the Essex Drive property while others weigh against.


Factors that indicate that petitioner assumed the benefits and burdens of ownership are:


(1) He had a duty to repair or maintain the Essex Drive property;

(2) He was responsible for insuring the Essex Drive property;

(3) He had a duty to pay the Essex Drive property’s taxes, assessments, or charges;

(4) He had a right to the Essex Drive property’s proceeds from rents, mortgages, or sales;

(5) He had the right to obtain legal title at any time by paying the balance of the purchase price:  his right of first refusal having begun on the date of the beneficiary agreement and having terminated on the Essex Drive property’s sale or other disposition;

(6) He bore some risk of loss because he was required to maintain insurance on the Essex Drive property and because he could lose his refundable contribution, which may have included the value of the improvements petitioner made, if there was no equity in the Essex Drive property; and…

(7) He agreed to pay the mortgage principal and interest under the NEHT Occupancy and beneficiary agreements.  See Amundson v. commissioner, T.C. Memo. 1990-337 (finding agreement to make mortgage payments created “enforceable interest-bearing debt” to taxpayer’s sister); see also Belden v. Commissioner, T.C. Memo. 1995-360.15  In short, petitioner treated the Essex Drive property as if he owned it.  See Amundson v. Commissioner, supra (taxpayer’s performance of obligations as owner is indicative of ownership interest); see also Trans v. Commissioner, T.C. Memo. 1999-233 (same); Uslu v. Commissioner, T.C. Memo. 1997-551 (same).

Factors contrary to petitioner having assumes the benefits and burdens of ownership are: 


(1) He could choose not to exercise his right of first refusal and to walk away from the Essex Drive property, see Randolph v. Reisig, 727 N.W.2d 388, 392 (Mich. Ct. App. 2006) (right of first refusal does not create interest in land); see also Jones v. Commissioner, T.C. Memo 2006-176 (Optionee was not entitled to mortgage interest deduction because under California law he had no ownership interest in property and because he had not acquired sufficient benefits and burdens of ownership to establish that he was equitable owner);

(2) He had to enter into an NEHT Occupancy agreement with the Essex Drive Trust in order to possess or enjoy the use of the Essex Drive property, see Ryan v. Commissioner, T.C. Memo. 1995-579; and (3) although petitioner made substantial improvements to the Essex Drive property, the beneficiary and NEHT Occupancy agreements provide that he could not make material alterations or improvements to the Essex Drive property without certain consents.

Ergo, on the unique facts of this case, we conclude that the benefits and burdens that favor ownership outweigh the factors against ownership.  Petitioner has assumed the benefits and burdens of ownership of the Essex Drive property.  See, e.g., Derr v. Commissioner, 77 T.C. 708, 725-728, 724 n.11 (1981) (beneficiary of an Illinois land trust possessed most attributes of ownership).  Petitioner, therefore, is entitled to the mortgage interest deductionsRespondent’s determinations are not sustained.


  1. Section 6651(a)(1) Additions to Tax


The section 6651(a)(1) additions to tax were based on the deficiencies.  Because of our holding that petitioner is entitled to the mortgage interest deductions and because respondent conceded the other deductions that he had disallowed in the notice of deficiency, see supra p. 3, petitioner is not liable for the deficiencies.  As there are no deficiencies, petitioner is not liable for the additions to tax.


III.  Section 6662(a) Accuracy-Related Penalties


Because of our holding that petitioner is entitled to the mortgage interest deductions and because respondent conceded the other deductions that he had disallowed in the notice of deficiency, see supra p. 3, there are no under payments of tax.   Therefore, petitioner is not liable for the section 6662(a) accuracy-related penalties.  Respondent’s determinations are not sustained.


      To reflect the foregoing, the court’s decision will be entered forthwith under Rule 155.








Regarding the Saturday Morning Training Sessions:
We meet every Saturday (9:00 AM PST) till about (10:15-30 AM PST)

How to Join the Webinar

1. Click the link to join the webinar at the specified time and date:

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If you prefer to use your phone, after joining the webinar, on screen call in and use use the numbers below.  Don’t forgt to check “Use Telephone”
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We talk about marketing strategies that we have full access to, which others simply do not, and about which they haven’t a clue as to how to implement our proprietary ideas and systems.

For instance, our excellent staff and other special guests) cover a myriad of topics regarding how a 3rd Party Land Trust Conveyance (The Equity Holding Transfer™ accomplishes all of the following, ‘just to name a few of the remarkable profit centers):

  • Working over-encumbered properties for BIG bucks
  • What to do with foreclosures beyond the short sale or modification
  • How Equity Sharing done properly provides Appreciation Insurance
  • How money can be made (lots of it) where others see no hope at all
  • How to convert short sales into safe and harmless full commission sales
  • The real way to do options…without any of their down-sides
  • How to do Contacts for Deed, All-Inclusive Mortgages, Equity Shares and Land Sale Contracts, without due-on-sale violation
  • Doing all of the forgoing without Dodd-Frank (seller-financing) compromise
  • Holding properties in a Faux Escrow (i.e., in a 3rd party trustee) for the purpose of avoiding the necessity of new mortgage qualifying, exorbitant down-payments and stringent credit requirements
  • How to pick up a property and flip it in a week without escrow or new title insurance
  • Using our on-line documentation and form creation data-base

We look forward to “seeing you” on Saturday.  Simply turn on your computer follow the above instructions, grab a cup of coffee (‘or two); sit back, relax and learn some stuff that has made millionaires out of a whole lot of folks over the years

We don’t want properties…’we want motivated sellers…’and strangely enough, every one of those folks has a property that they don’t want anymore (‘because, quite frankly,  they just don’t know how to do what we do).


Bill Gatten

Consider this:

If you could know with confidence that a particular stock (‘say, “Peachy Computers”) is selling for $550 per-share today, and that it will more than double in value over the next two months, ‘would you be willing to pay $600 per-share for it (i.e., $50.00 per-share more than it’s worth)?

Gosh, I hope so, but now consider the same scenarios where you have a “cash partner” who will put up the $50 for you for half of the $50 in a couple months (‘a 50% ROI in two months?  ‘Not a bad deal for you and your benefactor Gosh, I hope so, but now consider the same scenarios where you have a “cash partner” who will put up the $50 and who will be satisfied with just half of the $50 in a couple months (‘a 50% ROI in two months?  ‘Not a bad deal for the partner and a super-dooper deal for you: ‘i.e. a ten-billion-plus percent ROI (which would be about the same ROI if you’d invested 10 cents).

Or (‘now a little closer to home), ‘let’s say you find a house with a value of $225,000, and you learn that the property is securing a loan of $250,000.  ‘Would/could this be a good deal for you IF, say, you knew for sure than the property would be worth $300,000 in three years, ‘i.e., given reasonable appreciation projections?

In your computations here, now consider the same house not appreciating at all over the next three years, ‘during which time you have a tenant-buyer (“partner”) living in it, making all the payments, and who posted a $10,000 Contingency Fund up front in order to get in without a full down payment or needing to qualify for a mortgage, ‘and who is also paying you $150-$200  per-month in positive cash-flow, while personally 100% of all maintenance, repairs, taxes and insurance along with the underlying loan’s principal and interest.

Would the forgoing opportunity be a good deal?

Considering this deal (never use the term “deal” in any conversation with a client  or prospect), remember that you got the house for nothing down and merely assumed and passed-on the existing recurring costs your tenant-buyer.

You had no standard credit qualifying process; and you’re holding $10,000 in a Contingency Fund…’all without a violation of the underlying lender’s \Due-on-Sale admonitions, or compromise of any federal regulation concerning restriction re. Owner-financing of real estate (Dodd-Frank)?  Also consider doing a transaction like this perhaps once or twice a month with others of the millions of over-encumbered properties across the US (‘i.e., by a method that very few others have the slightest idea of how to handle).

Alternatively, let’s now say that you are given an opportunity to take-over a $250,000 clean 3-bedroom, 2-bath, 1800 sq. ft. home in a nice area – i.e., ‘one on which you need make no payments (‘your partner will do that), on which you receive a positive cash flow of, say, $100 or $200 per month…’and all of this, without the necessity of a down-payment, new financing or credit qualifying.

Would you take it? 

Wait!  What?  No payments?   Before you decide on this one, remember that this fictional property, like the fictional stock purchase above, has no equity (‘i.e., its market value is $250,000 and the loan-payoff is $275,000).  I.e. ‘not only is there NO equity, but the “equity” is NEGATIVE by $25,000).  ‘Still interested?

Before you decide, note that should you accept the property as offered, you’ll have no maintenance costs or management or repair expenses.  Moreover, ‘it’s not you who is on the loan and who will be primarily responsible for making payments or paying for property taxes, insurance (‘or any HOA dues or assessments)…’and your name will not appear on the mortgage, ‘nor will it appear in the public recording of the property’s deed (title).

OK, Now decide:  ‘Pipe Dream, or Dream-Come-True?  Or… ‘is it one of those too-good-to-be-true scams that pop-up so frequently in our business?

I’m hoping (trusting) that your response to the questions above (i.e., “Would you do it?”) will be the same as mine would be, ‘which is, “Buddy, you can bet those hagfish-skin cowboy boots, I would!”

“But why on Earth,” ‘some might say, “would anyone choose to take on the responsibility of an overpriced, over-encumbered property with negative equity?”  [Analogous side-question posed as a rhetorical didactic statement] ‘Why do people keep buying stocks and bonds when their value at inception is exactly equivalent to their purchase price…i.e…’no equity?].

The real issue here is that Equity in real estate is wonderful when you have it; but it has never been the “Be-All and End-All” when it comes to real estate acquisition; and those who think otherwise are missing the point and some significant opportunities involving millions of dollars in potential income, profit and a highly satisfying life of financial security—and here’s why:

There are, after all, myriad readily salable benefits of real property ownership, aside from Equity, ‘some of which include:

  1. Income Tax Write-Off for mortgage interest and property tax (‘and its “transferability” for profit);
  2. Equity build-up from mortgage-principal reduction;
  3. Equity build-up from economic appreciation;
  4. Use as collateral for other real estate acquisitions or unrelated business opportunities;
  5. Rental, Lease and Purchase-Option income potential;
  6. Time-sharing potential in certain types of properties;
  7. Re-salability (marketability) i.e., packaging for early re-sale to other investors;
  8. Land Use, beyond residential occupancy;
  9. Profits derived from “flipping” and/or discounting one’s ownership or acquisition rights to another party;
  10. Pride of Ownership– ‘singularly the most sought-after, salable and coveted aspect of homeownership).

It should be clear in perusing the foregoing list that one needs only a few of these benefits (‘maybe even just one or two) to make money in the business of real estate acquisition.  For example, ‘consider how you might fare in your own real estate investing endeavors were you to have, say, only items  #3, #2 and #8; or perhaps only items #2 and #3; or #4, #7, #8 and #9 (…or maybe 9 out of 10).

The point is, ‘who needs “Equity” when all these other profit centers are so clearly abundant and so simply and easily at your disposal?


A serious “Don’t-Wanter” homeowner who is straddled with a $250,000 property earing a loan balance of $350,000 (i.e., ‘upside down by $100,000), and an aggregate PITI payment (‘i.e., principal, interest, taxes and insurance) of $2,530 per-month. [i.e., P&I = $1,880 + T = $525 + I = $125].

  1. Consider that any traditional home buyer acquiring a similarly valued home would need to take out a loan for $250,000 at, say, 4.5% interest if 100% financing were indeed available to such a buyer with perfect credit.  In this case, the aggregate PITI payment (i.e., principal, interest, tax and insurance) would be $1,750 (Est) per-month for 30 years (i.e., P&I = $1,390 + T = $260 + I = $100).
  1. Therefore, quite obviously, a seller of this over-encumbered property (i.e., $250K value with a $350K loan) can’t sell by traditional means without paying his bank $100,000 in cash and covering closing costs of about another $20,000 and paying all maintenance and management costs on top of that (i.e., ‘converting the over encumbrance to $120,000.  He/she is, instead, forced to rent or lease the property out for around $1,500per-month: i.e., leaving him/her with a negative cash flow of over $2-300 per-month: plus rental property management (‘not an enviable position in which to find oneself).
  1. ..’in view of ‘a’ & ‘b’ above, what might such a property owner say to your offer to take the property over and reduce his/her negative cash-flow down from to, say, $500 or $600 per-month to a lot less, while you simultaneously relieve him/her of 100% of all management, maintenance, taxes and insurance expenses…AND…’the $120,000 over-encumbrance?

Moreover, when/if you offer to take this burden off the owner’s hands, are you not essentially handing him/her a hypothetical check for $120,000 in non-taxable  debt-relief …after having calculated about how long it will take for economic appreciation and mortgage principal reduction to sufficiently to neutralize the overage (‘a simple process with any business calculator)?  And what if no appreciation ever takes place?  How much did you lose, given your right to walk-away at the transaction termination, either relinquishing title back to the owner-of-record or negotiating an extension of the original terms?

Realistically, if any reasonable person in this predicament would object to paying you, say, $5,000, $10,000 or $15,000 upfront, ‘or, say, $500 per-month for 60 months, for doing this for them, they are not thinking clearly at all?  After all, your fee is far less than closing costs and real estate commissions would be (‘even if a Realtor® would take the listing…’which they won’t) in a traditional sale if such a sale were possible.

  1. ‘By the same token, ‘what might a potential homebuyer with marginal credit and minimal down payment say to paying you a bit more than Fair Market Rent, in exchange for 100% the income tax write-off for property tax and mortgage interest, along with all (100%) of the benefits inherent in Fee Simple real estate ownership?  ‘All without a down payment or loan-qualifying,
  1. Think about it… ‘for someone in a one-third income tax-bracket, ‘the after-tax cost of renting for $1,700 per-month is actually $2,550 per month

(I.e., ‘after earning that amount and giving 1/3rd of it to the government for taxes, 2/3rds of the $2,550 is left-over to pay the $1,700 rent.  This obviously then means that the actual after-tax cost of renting in this case (or any other) is really $850 per-month more than the $1,700 rent (‘as a matter-of-fact, the renter is paying 50% of his/her rent ‘in income tax” (‘i.e., 1/3rd of what’s he/she earns, but 1/2 of what’s paid…(’that’s the unwritten, sort’a  secret and tricky rule of the IRS).  I.e.: “OK you want to spend a dollar? Well, then, but you’d better earn a dollar-and-a-half, so that when we take out our 1/3rd for tax, you’ll still have a dollar left to spend: we want half of what you spend, which is one-third of what you earn…’Like it or not, we are your 50:50 partner, Pal.”

Question:  Which is less expensive — ‘the after-tax cost of $1,700 per-month rent ($1,700 + $850 = $2,550), or an aggregate mortgage payment of $2,200 per-month with a tax deduction?

Answer:  Because of the tax deduction benefit, the $2,200 house payment turns out to be significantly less than renting the same house.

  1. Now—‘stop for another quiet moment and seriously consider how much a tenant-buyer might pay YOU upfront (‘or per-month, ‘over and above the “mortgage” payment) in exchange for your putting him/her into their “dream home” for what is tantamount to 100% fee-simple home ownership, without a down payment or any more credit-qualifying than you, yourself, might require.
  1. With $500 from the seller and $2,200 from the buyer per-month, you have a positive cash-flow, in addition to the upfront money (‘or the no-interest monthly installments paid to you for it).

Also…’in any such arrangement, your “seller,” your “buyer” and YOU, are well-shielded by the type of trust in which the property is vested: i.e., ‘protected against threatened litigation involving the property—by virtue of the Open Door Wealth Management Equity Holding Trust Transfer® in whose third-party bonded, licensed, non-profit corporate trustee, the property’s legal and equitable title are vested for an agreed-upon term.

Find a better system that this for dealing with otherwise wholly untenable investment real estate, and we’ll buy you soup taco (‘as flimsy a thing as one surely must be).


Much has been said and written about the ©Equity Holding Corp  Trust Transfer™ concept (i.e.,, the EHTransfer™) and it appears that a select few are finally beginning “to get it.” However, probably because the so effectively replaces the need for other creative financing schemes and dreams, it often falls under attack by its detractors (especially by certain lawyers who make their livings by doing that which they more fully understand; and by those who tout and teach older, less protective, concepts such as wrap-arounds, contracts-for-deed, equity shares and lease options).

In actuality EHTransfer™ supports the objectives of each of those seller-carry vehicles, while offering a much sturdier platform for protecting the property, and therefore the principals, from the myriad risks and downsides of owner-carry financing. Few proponents of subject-to financing wouldn’t agree that there are numerous risks inherent in one’s agreeing to share a property’s title or mortgage loan obligations with another.

The EHTransfer™: A property is vested with a land trust trustee, and instead of conveying title interest; a PARTIAL beneficiary interest in the trust is assigned to a would-be buyer. That party, once named as Successor Beneficiary in the trust, and a Net Lessee in the trust property becomes entitled to all the benefits of homeowner ownership, including income tax deductions for mortgage interest and property tax.


Let’s look into a few potentially risky shortcomings pertinent to creative real estate financing, which downsides can be avoided by use of the multi-faceted title holding land trust transfer. The objective for anyone acquiring real estate ownership should always be minimum risk and maximum protection, without sacrificing income or capital gain potential.

Violation of the Lender’s Due-On-Sale Clause: 

Whether deemed a real “threat” by certain “gurus” or not (i.e., those who claim that banks just don’t care about unauthorized transfer), a DOSC call can be disastrous for someone who cannot afford to refinance when a lender calls its loan due because of an unauthorized title transfer (We hold letters from major national lenders clearly altering their stance on such transfers, stating that the EHTransfer™ model does not create a compromise of their alienation admonitions). 

The Threat of Either Party’s Legal Actions Creating an Attachment or Charging Order upon the Property: 

In any so-called Wrap, Contract for Deed, Lease Purchase or Equity Share arrangement, multiple parties are involved, and each one has either a valuable financial interest in the property, or has a primary payment obligation relative to its mortgage. As a result, there is always a real danger that either party’s liens, lawsuits, marital disputes, bankruptcy or probate proceedings could seriously cloud title to the subject property, thereby creating a grave predicament for the other party. This threat is virtually eliminated by use of the co-beneficiary, third-party trustee, title-holding land trust, in that a beneficiary’s ownership in such as trust is purely of personalty (personal property) rather than of realty (real estate) and cannot be partitioned by judgment creditors (legal opinion letters on file).

Difficulty in Dispossessing an Errant Tenant/Buyer.

When an equitable interest in real property (real estate) is conveyed to someone with a possessory interest in that same property, such party is no longer subject to eviction for damage or non-payment.  Instead, dispossession of an “owner” must take the form of foreclosure, and may also require ejectment action and quiet-title action in order to regain possession, entry and salability of the property.  In this regard, one would be well advised to employ an Equity Holding Trust Transfer™ for conveyance of the property to a prospective buyer. Such an arrangement might remain in effect until such time as the tenant/beneficiary sells the property, or refinances and purchased it outright at the trust’s termination.

In the Equity Holding Transfer™, a corporate trustee holds the property’s legal and equitable title while the tenant/beneficiary remains under the threat of simple eviction (rather than foreclosure), while concurrently enjoying all the benefits of ownership, but without title ownership of the real estate itself.


To effect the objectives of a Lease Option (i.e., a unilateral agreement to sell), the land trust property can be leased with a contractual understanding that the tenant may purchase the property or a future interest in the trust itself at some later date. Such purchase can be set at full Fair Market Value, less any monies owned to the tenant by the trust. And instead of an Option fee, the tenant can post the some predetermined amount in the trust‘s required Contingency Fund. The monthly lease obligation then becomes an aggregate payment including mortgage principal and interest, the property tax, the insurance, a monthly trustee’s holding fee and an overage that becomes the settlor’s (or investor’s) positive cash flow. [Note that any contract verbiage connoting an option to purchase constitutes a due-on-sale violation (re. 12USC1701-j-3)] 

To effect the objectives of a Lease-Purchase (‘a bilateral agreement to sell and acquire) 

In the Equity Holding Corp’s land trust transfer system, the anchoring land trust’s tenant- beneficiary can be assigned as little as a 10% beneficiary interest in the trust with a promise to convey the remainder upon that party’s  tenant/buyer’s outright acquisition of the property at the trust’s termination.  All benefits of ownership including tax write-off, appreciation, principal reduction and pride of ownership are available to the tenant throughout the transaction.

To effect the objectives of a Wrap-Around Mortgage or Contract for Deed 

The would-be buyer/”vendee” is made a successor beneficiary in the anchoring land trust and given, say, 10% or more beneficiary interest in the trust, to hold until a new loan would be obtained and the property be purchased outright.

To effect the objectives of an Equity Share 

The land trust’s tenant/beneficiary is given a 50% interest in the land trust, and a corresponding 50% share in net profits when the property sells or is refinanced at termination…’by the tenant (‘following a return of the seller’s or investor’s initial equity at inception).

The Equity Holding Tax Lease 

A tenant/beneficiary is given, say, a 10% beneficiary interest in the land trust, along with the full burdens of ownership, along with an agreement to relinquish its interest in the trust at termination. In order to be entitled to the income tax deductions for interest and property tax, the tenant need only qualify under IRC 163 (re. “Qualified Residence” parameters), being paying all taxes, insurance, monthly payments, and hold at least a 10% beneficiary interest in the underlying title holding land trust.  I.e., at termination the trust and the triple-net lease terminate and the tenant-beneficiary is free to move-on or negotiate for an extended term of years.



Having been in the land trust transfer and facilitation business for nearly thirty years now, we get frequent questions from our clients and students around the country regarding comparing the (Illinois-type) land trust with the limited liability company (the LLC) as which might be the preferred asset protection device with regard to real estate holdings.  My response is always the same: An LLC will protect YOU; the land trust will protect YOUR PROPERTY, and when used together the protections of both are enhanced and your real estate holdings can be virtually “armor-plated.”

But irrespective of what the answer might be, never forget that:  “In today’s litigious society, holding real estate in your own name is tantamount to walking down “Starving Lawyer Boulevard” with a bullseye on your back above  the words: ‘I dare you! Sue me! I’m worth it! I own real estate, ‘so I must be really, really rich.”


The LLC is a limited liability company (‘not a corporation) that combines many of the features of a corporation, but which is more akin to a sole proprietorship or partnership, depending upon the number of members. In comparison, the LLC, as a pass-through tax entity affords its members simplicity in tax accounting and reporting.

Beyond those features, however, the LLC’s primary purpose is that of shielding its member-owners from any litigation that would befall the company and its assets. In other words, were an LLC to be established for the purpose of operating a packing plant and someone were to slip and fall into a meat-grinder and loose a couple legs, the claimant’s legal recourse (.e.g., ‘were he to have “a leg to stand on”) would be limited to the assets of the company, and not to any other assets owned by its operators (“members”) outside the company. Even is the business were to be taken over, or closed down and liquidated by a victorious claimant, ‘the owner’s home, golf club memberships, automobiles, furniture and private bank accounts would remain  beyond of the reach of the lawsuit.

Relative to the article you’re reading now, bear in mind that any company in operation could, ‘should it so choose, hold as its only asset, a single house, condominium, townhouse or apartment building…of several of them. In any of these vehicles: an LLC, LP (limited partnership) or FLP (family limited partnership)…all of which protect their members (owners) from claims against themselves personally…’and are considered by many to be the most ideal forms of small business ownership.

[For additional info. re. limited liability entities, go to:]


Much has been written in the last twenty or thirty years about the feasibility, functionality and versatility (‘and safety) of the “Illinois-type” Title-Holding Land Trust as an alternative means for owning, dealing in and protecting real estate.  Be that as it may, however, there continues to exist a major lack of knowledge as to what a land trust is, its uniqueness, and any real understanding by the legal profession i.e., of all that it can do for property owners.

For example, very few attorneys are aware of, and will argue in ignorance against, the fact that when a property is placed into such an entity, its real property ownership becomes solely that of the third-party trustee nominee, and the beneficiary/ies’ ownership is equitably converted to ownership of personal property [see the Doctrine of Equitable Conversion].  By this process both the property’s legal title and equitable title are vested in the appointed trustee, leaving the grantor/beneficiary with only a personal property interest in the trust, without ownership of the property itself: however…’be tht as it may the settlor retains the equivalent of fee-simple ownership none-the-less, ‘along with complete directive-control over the actions of the trustee.

Once vested in the land trust trustee, the property’s true legal and equitable title ownership is solely that of the trustee (‘one’s careful selection of trustees being crucial).

In such “equitable conversion,” the properly structured land trust provides its beneficiaries with all the protection that the law affords both real property owners AND personal property owners (‘i.e., limited partition rights by outside judgement creditors; anonymity of ownership; inability of judgment creditors (including the IRS) to reach the co-beneficiary land trust in order to lien its corpus (‘the property); the avoidance of a lender’s due-on-sale admonitions upon fractional transfers of beneficial interest (‘assuming that the borrower/transferor is a “natural person” under the law…i.e., ‘not a commercial enterprise (i.e., a corporation) to whom the loan was made and by which entity it is guaranteed).

Also note that inasmuch as one’s ownership in a title-holding trust is personalty and not realty there is no compromise of recent Dodd-Frank prohibitions regarding owner-financing of real estate (‘i.e., re. the Wall Street Consumer Financial Protection Act).

It is also too infrequently realized by attorneys (‘even real estate specialists) that land trusts per se are legal in all states, ‘although officially recognized only as “Use in Land” versus “Uses in Trust” in Louisiana and Tennessee.  What this means is that in these two states, landtrust are not illegal,but that ownership of beneficiary interest in a land trust is seen as equivalent to ownership of the real estate, and any errant tenant co-beneficiary would have to be judicially foreclosed upon, rather than being evicted (‘as is the case in other jurisdictions), ‘i.e., in order to rectify a contract violation (‘such as, say, a payment default).

By use of the land trust model described here, one can, by a simple assignment of beneficiary interest, easily transfer all or a portion of a property’s ownership benefits (‘i.e., w/r to four or fewer units) to another party with one brief assignment document.  I.e., without (necessarily) any  need for a new loan, specific down payment or credit requirements, escrow, new title insurance, credit approval, underwriting…or other lender involvement.

When a property’s title is held by a trustee-nominee for a third-party, co-beneficiary land trust, the property is, throughout the trust’s term, essentially in a state of “escrow,” meaning that during the trust’s stipulated term no single beneficiary can act unilaterally (‘i.e., ‘without the unanimous consent and direction of all beneficiaries acting in concert).

As well, (and where we come in) a co-beneficiary in a bona fide land trust can in-fact be appointed to lease the property from the trustee, and when given at least a ten-percent beneficiary interest in the trust, receive full tax treatment by the IRS as a homeowner regarding all income tax deduction benefits of mortgage interest and property tax deductions (IRC §163(h)4(D) & IRR #92-105), along with §1031 tax exchange and §121 exemption and exclusion benefits remaining fully intact.


Now…’couldn’t a person (yourself, for instance) armed with this information advocate placing its real property into a land trust and naming his/her LLC as a co-beneficiary in order, not only to shield it from public view, but also to hold it beyond the reach of potential judgment creditors (‘including the IRS), and to avoid transfer tax?

In effect, the title-holding land trust which is the basis for the proprietary Equity Holding Corp. Title-Holding Land Trust Transfer™ shields the property,while  the LLC shields the beneficiaries…’i.e., from litigation and the leering eyes of hungry lawyers and the spittle-dripping fangs of irascible judgement-seeking creditors. (Sorry…’got carried away there.  I love creditors..’but only when I am one).

Frequent Question: Which is better?  An LLC or a Land Trust for Holding Income-Producing Real Estate?

  • Unlike an LLC or a corporation, ‘vesting a property in the trustee for a land trust does not trigger the imposition of reassessment for property tax, nor does doing so incur transfer tax or tax stamps in any state. Neither does the land trust violate the lender’s due-on-sale admonitions, or compromise the recent Dodd-Frank legislation re. seller-financing restrictions.
  • Unlike as is the case with an LLC, the beneficiary of a title holding (land) trust receives the benefits of an IRS §1031 tax-deferred exchange, and/or the section §121 home sale exclusion, without regard to a particular “Continuity of Transfer” requirement (See below)

As noted earlier, an LLC, may be (‘should be when practical) made a beneficiary of the land trust or specifically, the Equity Holding Trust Transfer™: ‘i.e., ‘with the managing member of the LLC, holding the Power of Direction over the trustee (‘e.g., holding the power alone, or sharing it with co-beneficiaries).  The reason for structuring the transaction in this manner is that when the transaction’s primary goal is protection for beneficiaries from tort liability, the “naked” land trust alone can be made more effective and protective when coupled with the LLC as a co-beneficiary,  which LLC is funded  by the personal property beneficiary interest in the trust, rather than real estate.

And here’s why: 

Due to a gap in knowledge on the part of many beginning, and some seasoned, investors (‘and their too-often naïve legal advisors), ‘they are either oblivious to this important tool, ‘or they tend to set it up incorrectly.   Unfortunately, the trouble arising from the lack of experience and knowledge probably won’t present itself until much later (‘more often than not…’too much’ later).

Consider the case of Attorney Herkimer Phlurm (‘maybe not his real name) who sought to help an investor client protect his rental property from the risk of liability claims.   The investor asked the attorney, how he might best protect a recent purchase of an income property from threats of litigation.

Short on knowledge of trusts, ‘but long on experience in structuring corporations, partnerships and Limited Liability Companies (LLC’s), ‘the attorney created a nice little LLC for his client in which to hold title to his new property.  Following creation of the entity, and after recording the property’s deed, ‘both, Attorney Phlurm and his client, Rupert Schlitzberg (probably not his real name either), were pleased with the arrangement…’for a while (‘…but any ecstasy was short-lived).

In another year, Mr. Schlitzberg (“Rupert” to his friends) was shocked when he received an excise (transfer) tax bill from the county tax assessor’s office.  Surprise!

As attorney Phlurm might have anticipated and informed his client, ‘the vesting of his property in the LLC triggered a transfer-tax ($2-3,000), ‘in that the property was security for a mortgage at te time, and…’what’s more…‘the transfer to the LLC constituted a clear breach of the lender’s Due-on-Sale Clause (12 USC 1701-j-3), ‘thereupon opening the door for foreclosure on the mortgage ‘should the lender opt to do so (…at any time at all in the future…’obviously leaving the Schlitzbergers on “tenterhooks,”* as it were).

*Tenterhooks,” the expression comes from a tent maker’s extreme stretching of newly woven canvass over a square frame with heavy hooks lining all four sides and then wetting, shrinking then drying the material before coating it with waterproofing (‘See how much you can learn by hanging out with us?)

And…‘not only that… (‘Wait! there’s more), ‘the change of ownership also constituted full justification for reassessment by the county tax collector and quite likely, an even larger tax bill next year.

In one fell swoop there was: 1) taxation on the transfer; 2) violation of the lender’s due on sale clause; 3) triggering of county reassessment, and 4) imposition of restrictions regarding IRC §1031 exchange provisions (re. Continuity of Transfer).

The major error in this scenario was simply the lawyer’s being unfamiliar with the uses, benefits, features, advantages and nuances of land trusts ‘within the jurisdiction where the property was located.  In this case, the attorney’s oversight not only cost the client thousands of dollars, as well as jeopardizing other aspect of the real estate transaction: it also, as well cost the attorney a client.  While Mr. Phlurm sits scratching his head, wondering what happened, his client is out seeking a new and better informed lawyer.


Self-Employment Taxes:

LLCs are usually subject to self-employment taxes. This means that the profits of the LLC won’t be taxed at the corporate level, but will pass through to its members who will account for those profits on their personal federal tax returns. Oftentimes, these taxes are higher than they would be at the corporate level. Individual LLC members will pay for federal items like Medicare and Social Security.

Frequent Confusion With Company Roles:

Whereas corporations have specific roles (like directors, managers, and employees), LLCs generally do not. This makes it difficult for the company and especially investors to know who’s in charge, who can sign certain contracts and who can bitch at, or fire, whom.

Although reasonably compensated-for in a properly drafted Operating Agreement, in many jurisdictions, if an LLC member leaves the company—unlike as is the case with a corporation (or a land trust whose identity is unaffected by the comings and goings of “shareholders”) the company structure and its liability protection cease to exist.

In most (if not all) jurisdictions, as we have pointed out, the transfer of a mortgaged property into such a “business based” entity (i.e., corporation, LLC, LP, Business Trust or partnership) is fully taxable.

In any jurisdiction, ‘when someone opts to take advantage of the liability protection afforded by the LLC (re. limiting one’s personal liability), an ideal alternative is to fund the LLC with something other than real estate (‘mortgaged or not).  In other words, one can vest the property first in a trustee for a land trust: ‘then vest the trust’s personal property beneficiary interest—‘in the LLC (i.e., make the LLC “a” beneficiary).  Ergo, the property is now protected by the trust, and the owner is personally protected from liability by the LLC (‘not unlike wearing suspenders and a belt together)…’and…there is no call for reassessment, transfer tax or any other negatives that can be applied to the LLC.

The “Due on Sale Clause”:

Over our thirty years in business, we’ve received numerous letters from clients who reported that their lenders had “discovered the title transfer” (‘i.e., to the land trust trustee), and were claiming their due-on-sale admonitions had been skirted; ‘and that the mortgage was about to be called immediately due and payable (‘…and that mandatory retirement of the loan was imminent if foreclosure was to be avoided).

However, regarding such lender’s demands, ‘in each such case, a registered letter was sent to the lender’s Loss Mitigation and Legal Departments, suggesting simply that they review Title 12 of the US Code of Law, §1701-j-3.  In this particular code section it is clearly stated (‘in Law) that a mortgagor (home owner) transferring his/her property to a trustee for a fully revocable, inter vivos (“living”) trust is excluded from recourse provisions under the Federal Depository Institutions Regulations Act of 1982 (i.e. the Garn-St. Germaine Act): therefore, when the borrower remains “a” beneficiary of  the trust, ‘and wherein the trust document itself does not convey occupancy right to another (i.e., ‘such occupancy rights may, however, be granted by a separate lease document, so long as the lease is not for a term of more than three-years or contains a purchase option)–there has been no due-on-sale violation!


Some of us are born with certain gifts that seem to automatically make superstars of us without a lot of effort (‘natural athletes, natural actors, natural musicians, artists, and writers…the unnaturally “gifted”).  But alas, most “superstars” have attained that status by virtue of their common birthright. In fact, most of us have to establish whatever super stardom we are ever to attain, by the sweat of our brows, and most often doing so in the face of sometimes seemingly insurmountable obstacles and handicaps with which the evolution and unfolding of our individual lives have bestowed upon us/ (i.e., in order to test our resolve).

As far as any of us know with certainty, we didn’t choose the geographical location of our birth, ‘our parents or their nurturing abilities or their mindsets; …’neither did we sort through and choose the circumstances under which we, or our parents, were raised.  We are, however (none-the-less), victims of all of those aspects of our own heredity, parentage, peer-influences and early environmental factors. Fortunately though, we’ve each been bestowed with the gift of Free-Will, and the right to override, eliminate or neutralize any part of our personal beingness and neural programming that we are mentally strong enough, and willing enough, to look at closely enough…’and take the time and actions necessary to understand it and work through it, around it…’in spite of it.

This aspect of who we are, and whom we are entitled to become, has many names: ‘Directed-Destiny; Programmed-Life-Management; Self-Discipline; Structured-Determination, Focused-Achievement, and so on.  ‘But what it all boils down to is the reality of one’s ‘self-esteem, self-motivation and personal determination.  In other words, every one of is a composite of the circumstances and obstacles encountered throughout the process of living a human life from birth to death.

The most destructive error committed by so many of us is living without access to, or a full awareness of, our absolute right to self-determination (‘i.e., not knowing with any certainty that any reasonably “normal” human can become whomever he or she chooses to be–‘despite the steady stream of conflicting experiential influences that are encountered hour by hour throughout the course of every human lifetime.

When a person mistakes desire for necessity, i.e., ‘allowing wishing, hoping and wanting to replace the concept of acknowledging honest “needing,” the prospect of achieving maximum personal fulfillment in one’s life, diminishes exponentially with every “mock supplication.”  In other words, one’s praying for something superfluous relative to being or becoming whom you choose to be is a wasted effort.

Irrespective of whom or what you accept your God to be, ‘no prayer for something unnecessary has ever been answered, nor will it ever be even though unrelated synchronous events may make it seem so from time to time.   Consider the nonbeliever who declares before a large group of onlookers, “OK God, if you truly exist, strike me dead right now.”  ‘Nothing happens because the entreaty is obviously insincere and in no manner relative to any part of the supplicant’s life or welfare, or the evolution path of humanity.

From another standpoint, consider the likely result of someone’s praying that they will be made a millionaire within a week, when they have no need for more money than they already have, and have not considered what they will do with a million dollars should it actually fall from Heaven.  Consider how many “Aunt Mary’s” have passed-away due to a severe illness, after their entire family and their church has prayed for them to continue living despite their condition?  ‘Then considered the likes of someone like, say, Dr. Jonas Salk (1914-1995 – Polio vaccine) or Dr. Christian Barnard (1922-2001 Heart Transplant), or Madame Cure (“Marie Slowdowska-Curie 1863 – 193 – radiation): each of whom, instead of praying (i.e. “wanting” and beseeching an unseen force armed only with a “desire” for success) they Needed—‘with a burning desire for success)—’to assist in saving and enhancing the the lives of millions upon millions of human beings who would, ‘without the “Dire Need” that was such a crucial part of these famous people’s lives, ‘would otherwise all have died  of their maladies much earlier.

This concept of Dire Need being the Provider of abundance is what Napoleon Hill referred to re[eatedly in his book, Think and Grow Rich, as “burning desire (i.e., ‘unquenchable necessity).” It is only a burning desire that can lead us through the life-changes and mental programming and re-programming necessary for the fullest achievement of the abundance that is every free human’s absolute birthright and which each of us deserves.

To make a wish, we need do nothing but think it, retain it in our thoughts for a while, and wait and see what happens. With Dire Necessity, however, we must move several steps ahead, and acknowledge without question that unless the Need is fulfilled, we will actually die in some way or to some significant degree should the components of that which we summon into existence not manifest.

The part that most people have trouble understanding fully enough is that we humans are simply incapable of allowing any real Need to go unrealized. When it comes to Needs versus Wishes and Wants, we all will strive to fulfill every Need at any cost: while our wishes, hopes, dreams and prayers take a backseat until they are converted to Need.

Have any of us ever gone without water or food indefinitely?  No (‘at least none of us who are reading this article at the moment).  And that’s because we would die if we did.  And think about it, do drug addicts and alcoholics go without their regular ingestion of their chosen poisons?  No!  ‘Because a terrible sickness and feeling of imminent death and indescribable loss would overtake them and a major part of who they have become would have to experience a horribly painful trauma ending in death or something very close to it.

The fact is that no true need goes unrealized…ever! One might idly wish for food and drink and not get it right away: but when it becomes a matter of having it or dying, worms and insects become as tasty morsels.  A true Need for sustenance will never fail to appear (‘even to the extent of one’s own body’s resorting to ingestion of its own fat and protein reserves in order to prolong existence as long as possible.  Ergo, it would then seem that if a particular goal were to become a necessity incorporated within the concept of “avoiding elements of the loss of mortality, its attainment would be virtually certain.

In support of this concept, consider the reason we panic when deprived of air even for a brief while. It’s because without oxygen death is certain and imminent. When struck with any illness, our fear of dying calls our sympathetic and parasympathetic neural systems to the healing process ‘to the detriment of of the life-saving biological function of sugar, protein and fat stores.

When we have too little income, ‘why do we worry and fret about bills, creditor retribution, legal action and loss of our personal possessions? ‘It clearly is because we are overtly afraid of being unable to sustain our lives should we fail at those activities that we deem necessary for human survival.

It is the universal fear of dying that forces all of us to strive, ‘to forage, to earn, achieve and build (and re-build). Though we are hardly ever consciously aware of this ever-present, all-pervasive mortal fear, is always there: ‘prodding us ever onward, ‘relentlessly requiring toil, attainment, procreation and the building of nutritional stores and reserves.

In view of all of this, ‘doesn’t it stand to reason that if we would seek to accomplish something heretofore seemingly unattainable or impossible, that it would naturally manifest only if it were to be directly connected to our natural fear of death (‘i.e., making our heart’s desires necessities rather than idle wishes).

Let’s say you’d like to build a 40-story high-rise building, ‘or, say, a 1,200 foot-long aircraft carrier: you certainly are free to begin doing just that if you choose. Many humans over the years have in fact built thousands of these things, and were greatly rewarded for having done so. But, until completion of such a task becomes an absolute necessity, you and I will quite likely never start the project; and if we do start, we’ll likely never finish because doing so may become seemingly impossible relative to our understanding of physics, mathematics, metallurgy, plumbing, carpentry, welding, structural design, computer technology and seafaring.

So…who does build these colossal structures?  These builder are people, jut like you and me, except for the unquenchable burning desire that lives in them whcih directs them to fish the job and elicit all the assistance from human being to have the expertise that the designer may lack.  None of these people hope for completion of the project…they have a profound NEED for there there to be few barriers to completion, and they have planned sufficiently well that there needs will never have to rely on hoping, dreaming,wishing or praying for divine assistance to get the job done.  The know that their “God” only helps those who help themselves and will never pick up a hammer, screw driver or an arc welder or rivet gun to help finish the job..

It’s only when a major aspect of our life depends on the completion of the project, and the knowledge that we will die in part otherwise, that we will do all of what is necessary to complete the 40-story high-rise buildings or the aircraft carriers.  The determined achiever will simply do what all achiever have always done, ‘i.e., taking the concept from pure Potential by first imagining it, then converting thought to substance by first drawing it, and then adding dimension to make it physically real beginning with eliciting the help of others with disparate talents and abilities, and then seeing to its fully three-dimensional manifestation.

So…’before writing out your objectives, choosing a mantra, and heading off to visit Mahesh Yogi in India on your trek toward bliss, stop!   ‘And take the time to figure out what your goals actually are, and which of your “wishes” can be converted to “Need”; and then assess your resources for accomplishing your aspirations. Should you come up short in the “resources” area, then you have to write-out a plan for either attaining what you are lacking; or for replacing what you are lacking with something of equal value that you have more than enough of (‘e.g., physical work can replace the need for cash; eliminating someone else’s burden can replace the need for credit; patience can replace experience; caution, diligence and research can replace formal education; hard-learned valuable skills and tenacity trumps a university degree every time.

A good test of which Wants and Wishes can be converted to Need, and then to Dire Necessity is to ask yourself which of the following you could in-fact live without in reasonable comfort…if you had to.  Strike through those items that are not completely necessary, and without which some part of you would not surely die. Whatevr remains are those item that are beyond just idle wishes: ‘they are your Wants. But, it’s crucially important to know that until each Want is elevated to the status of a Need (‘a life-sustaining necessity) it will likely continue to remain no more than an allusive and baseless hope, if not a wholly unattainable Wish.

  • Full-time self-employment
  • More social acceptance
  • More public popularity
  • Fame
  • Prestige
  • A better/safer living environment
  • A rich person’s high-class lifestyle
  • A bigger and more prestigious home
  • A new, more rewarding career
  • A chauffer driven limousine
  • A new face
  • New teeth
  • A trimmer or more attractive body
  • New friends
  • Better friends
  • A larger bank account
  • A large stock portfolio
  • A retirement fund
  • True Happiness (Bliss)
  • Personal contentment
  • Freedom from drudgery (‘more time to nap and play)
  • More self-esteem
  • An enhanced inner feeling of personal value
  • A more vacations and the ability to afford them
  • A less strenuous, demanding or tedious job
  • A much higher income
  • A different or more attentive spouse
  • A new identity
  • A more attractive physique
  • A private airplane
  • Freedom from disease worries
  • A newer car
  • A more showy car
  • An executive job title
  • A bigger office
  • A well-defined life-purpose
  • Great spiritual fulfillment
  • Greater spiritual understanding
  • Absolute certainty re. the existence or non-existence of God, demons, ghosts, space-aliens, angels, mountain monsters and mental telepathy
  • The ability to comfortably take risks that will pay off a lot of mone

Prayers, Wishes, Wants (Desires)…and true Needs:

1)         Praying – Acknowledging your inability to attain a desire on your own, and presuming it might come to you by way of divine intervention

2)         Wishing – being dissatisfied with the status quo and imagining that some extra-local non-spiritual source will provide you with something not yet extant

3)         Wanting –Imagining something that is not present, but for which you are unwilling to exert any special effort for its attainment.

4)         Needing – Requiring something, without which an early level of death will surely ensue

5)         Dire Need – An object that must, by all means, be manifested at any cost in order to avoid death

Never forget that, according to Epictetus, a 5th Century BC orator: “[A person’s] Wealth is measured only by the expense of one’s [that person’s] pleasures.

”In other words, when life itself is your gift, and when the least expensive pleasures are your greatest rewards, you are already wealthy beyond calculation: no matter how much or how little money you have. My own true net-worth quadrupled when my children were born, and quadrupled again with the arrival of my grandchildren.

Think about it…who is wealthier: the man with a big house and matching mortgage, five tapped-out credit cards and a 72-month payment plan on a new Mercedes Benz convertible–‘or a well-loved and highly respected Eskimo hunter with eight good dogs, a jolly fat wife, seven healthy children and five years’ worth of walrus blubber in the basement…’and plenty more where that came from?

The answer is, of course, ‘the Eskimo…’but only until and unless he would develop an eye for more than he has and not be able to afford it: say, an insatiable taste for filet mignon, Chateau Lafitte Rothschild and Mercedes convertibles. Should that happen, he instantly tumbles from real wealth… to abject poverty…UNLESS those things are what he truly needed and knew with certainty that he deserved and could afford them.

Converting a Want to a Need, and a Need to a Burning Desire (dire need) are the first real steps in serious goal-setting, and the process requires much thought and definitive action. For example, if you’re having difficulty in making the life-saving decision to jump off the 200 foot high cliff into the cold raging river below, in order to save yourself from the menacing band of angry marauding indians who are hot on your trail just a half mile behind you, and out to kill you…’and drawing nearer every second…’just do this: Tie the end of a long rope around your waist, then tie the other end around a large round boulder. Now roll the boulder to the edge of the cliff.

If, at this point you‘re still squeamish about jump into the river below, but know you have to, ‘simply push the rock the rest of the way over the cliff…’depending upon the length of your rope, your fate will be sealed in a couple seconds once the boulder hits the end of that rope. You needn’t worry about making decisions any longer, y ou set your life on a irreversible path to salvation.  A true Need tied to a definitive action is what brings all “Potential” into material reality and into our lives.

In 296AD, the Praetorian Prefect (a high office in the Roman Empire), Asclepiodotus, commanded an army belonging to the emperor Constantius Chlorus (Emperor of Rome 293-306), and led his troops against the usurper British emperor Allectus. Having arrived in Britain to confront Allectus, Asclepiodotus *’easy for you to say…) burned his own ships to prevent his men from retreating.  By burning the ships, a dire Need was fulfilled that might not have worked out so well for Asclepiodotus, had his soldiers been allowed to turn and sail home when they saw how outnumbered they were going to be in a couple hours, when the going got really tough.

To become honestly wealthy and attain abundance in this life you must first know what it is that you honestly want, and then you must convert that Want to a Dire Need and give yourself no choice but success (i.e., burn your bridges, decide that there can be no safety nets or turning back to the “old ways,” that  you’ve definitively decided to escape.


One’s “POA” is that long rope and that big ol’ rock at the edge of the cliff above the raging river that was referred-to above.  It’s the relinquishing of those aspects of Life that have mired you down in the mud of a lack of satisfaction with your current circumstances.

The POA is your design for success. It is the very map of your destiny. It becomes your guide to all of what you must do to become who and what you ‘need’ to be (‘not what you ‘want’ or ‘hope’ to be), and to attain all of what you need to own and control during this roller coaster ride called “Life.”

Goals that are held only in the mind of the hopeful are never goals at all. They’re just random electronic impulses left over from unfulfilled desires—nothing more.  It’s only when hopes and dreams begin the physical transformation from potential (‘that which is yet to exist, but which hangs eternally in wait for you to call upon it) through the process of writing down what Wants and wishes you’d like to convert to Needs, so that these thoughts can begin to take physical form as they metamorphose into honesty  versus day-dreaming.

As has been said many times by hundreds of “motivators,” handwriting your goals is always preferable to typing them out in your word processor. The more arduous and physical the mind-to-hand transference exercise is, the more likely and more immediately the transformation will take place (i.e., ‘the moving of a conceptualization from the ethereal realm of pure ‘potential’ into our world of material reality).

Although I don’t believe that viewing your goals daily and repeating them aloud to the bathroom mirror, or moaning a mantra is ever necessary, ‘it is none-the-less a good idea to keep these written objectives in a safe and secret place, and review and modify them every few months.  Simply write a letter toyu inner=-self listing want you want and when and why you need it, and how you care for it and what you’ll do with it when it manifests.  Then then fold your letter and place it in a safe and private place AND FORGET ABOUT IT.  The real God doesn’t have to be beseeched or reminded about what you need: ‘it knows with certainty, because it is that part of you that has always answered all of your worthy prayers and brought all of your honest needs to fruition.

Forty years ago, I was dissatisfied living on only $326 per-month (before deductions); although with that income in those days I could comfortably (sort of) cover a $60.00 per-month rent payment; a $49.00 per month payment on my brand new Ford Falcon; I could buy gasoline for 29 cents a gallon (‘full tank for $6.00); J.C. Penny’s clothing; and all the groceries we needed, for about $15.00 per week. And…after the bills were paid we often had enough leftover to take in drive-in movie with two 19 cent Mac Donald hamburgers (with fries).  Oh, ‘and water was free back then (‘in those days we didn’t know it had to come in plastic containers and cost more per-gallon than jet fuel).

Interestingly though, most of my close friends at the time who made even less than I did could somehow always afford to buy a case of beer and a carton of cigarettes along with their groceries every week. I often wondered how they managed to do that, when we seldom had that much left over, especially for fun stuff. I once asked my buddy Bob about it and he jokingly replied…”Hey man, it’s because beer’s a number one staple in my diet and I’d die without it.”

I didn’t get it at the time, but forty years later I began to appreciate Bob’s philosophy. The fact is that I only “wanted” a case of beer, but didn’t need it, ‘so I couldn’t afford it. But ol’ Bob needed it…’and it manifested for him…every week.

If it’s not a Need, ‘then it’s only a self-perceived, presumably undeserved passing fancy.

In those days we associated with friends who couldn’t afford even as much as we could (‘much less ol’ Bob): but I felt somehow looked-down-upon by those with life plans, whom I most wanted to impress and associate with, such as my high school acquaintances who were coming out of college as doctors, lawyers, engineers, dentists; local civic activists; politicians, etc.). But 40 years later, because of learning to Need versus simply dreaming, hoping, praying, beseeching and wishing…’and constantly asking “How” (Versus Why: “Why me God?”),  I found myself earning as much or more than most of them.

Q: What do you suppose it was that I did any differently then than I had            done forty years earlier?

A: Absolutely nothing, except for adopting and following a mental                    process that converted my idle wishing into Needing.  T fit into my                idealized self, I had to create a realized self that was at least equal to my     peers.

Could I live without the extras that my life now brings?  Certainly! At least a part of me could; but the other part would die a little, ‘and that scares that part enough to “Need’ to avoid the loss.

Am I wealthier because of these things? No! Not at all!  ‘Figuratively richer perhaps, but by no means wealthier. But, I do choose to defend and steward what I have?

Would I gladly and freely give away any extra that I’ve been given or earned? You bet!

It’s weird…’but I’ve discovered that the more I give of what I have, the less I need to have, and the more I am given, ‘for some inexplicable reason.

This “reason” for success and wealth, by the way, is fully covered in the religious writings of the world.  What it boils down to is simply that the Universe abhors a vacuum.  And therefore, our deigning to create a void by giving something away can only result in the instantaneous refilling of the space resulting from the absence of that which originally occupied the space.

If something is missing in your life…’stop hoping for it to magically appear and begin needing it and making it manifest.

If you have more of anything than you need: ‘give it away and the void left by its removal, will fill up faster than you can prepare for it:

  • Give [it away] and you shall receive [more of it].”
  • “Seek and you will find [abundance]” ‘when it is truly needed and not just idly hoped-for.” This is the uncompromising universal law and promise of abundance!
  • Prayers are always answered for Seekers and Doers: ‘but never for Dreamers and Wishers.
  • Knock… ‘and the door will open [i.e. ‘when you figure out whichis the proper door on which toknock, ‘which door, by the way, exists solely within you…’not somewhere in outer space or in another extra-local dimension.”

In the face of any dilemma or quandary, ‘remember always to begin any imploration or supplication (“prayer”) with the word “How” and never “Why” (‘i.e., ‘instead of “Why me, Lord,” ask yourself instead, “How, Lord, can I resolve or overcome this obstacle?”  Then wait for the answer that has been lingering patiently in your subconscious waiting for the question?)

“Re-read Napoleon Hill’s, ‘Think and Grow Rich,’ and you’ll discover “The Secret” that he talks about ‘but never explains…’fully expecting you, the reader, to figure it out for yourself.

We all dance in a ring and suppose
While the “Secret” sits in the middle…’and knows.

 Robert Frost


Speak to him thou, for he hears,
‘and spirit with spirit can meet.
Closer is he than breathing
and nearer than hands and feet.

Alfred Tennyson


Oh yeah, ‘and long-live the marvelous third-party trustee, co-beneficiary, inter vivos title-holding land trust transfer (the ©Equity Holding Corp. Trust Transfer System™) that has been making millionaires and waiting patiently for you…’for the past thirty-years…

Bill Gatten
800 409 3444



OK, you’re on an elevator headed from the parking garage to the fifth floor and there’s a person standing next to you, looking up at the lighted digits above the door, who turns and casually sizes you up and asks: “So…’what do you do for a living?”

What do you say?

  • “Oh, I’m in sales.” (Meaning: “None of your business, and you’re not going to be standing next to me long enough to get into any details anyway, so let’s let it go at that.”)
  • “I’m an investor.” (Meaning: “Envy me for 30 seconds …and think of me as someone you wish you could be…’whether I am actually that or not. And always wonder what “kind” of investor I might be…’as if you really gave a hoot”).
  • “Me?  ‘For a living? ‘Oh, not a whole lot these days…’how about you? What do YOU do?” (Meaning: “None of your business. But if you insist on talking, fire away, it’s your nickel!  Me? I’ll just pretend to listen as you babble-on…’oops, well, doggone, here’s your floor already!”)
  • “Me?  I’m a teletype operator having a bit of a struggle finding a job, what with all them photo facsimile machines out there these days. If it weren’t for my taste for beans and Spaghetti-O’s, my wife’s taking in laundry and clipping coupons, I’d be…’like…’well… SOL! How about you? What do you do?” (Meaning: “Are you a loser too? Gawd, I sure hope so, because it’s awfully lonely here on the corner of Out-of-Touch-with-Realty Street and Co-Dependency Boulevard.”) “ OK, alrighty then…(‘as the elevator door opens) ‘you go on now and have yourself a nice day…hear? (‘you say in a southern dialect).  Then to the back of the closing elevator doors, you whisper, “Damn! I wish I could afford a suit like that.”

Or..’.maybe you’d answer the elevator question this way:

“Well actually, I work here in the building during the day; but I also dabble in real estate.” (Meaning: I’m unhappy with my plight in life and am trying to better myself without risking anything by letting of of my life-raft. ‘So don’t judge me by what my answer would have been, if I hadn’t added the “but I dabble in real estate” part.”

Or…’how about this one:

“Who me? Oh, I’m a big time real estate investor.” (Meaning: “If you’re really interested in what I do, you’ll ask more questions and get me started, and, once I’m on a roll, I’ll explain how you can benefit greatly from my services.‘ Otherwise…’Oh damn, we’re already at your floor.”)

Now, think about it…’that person who was standing beside you for the short ride is now gone forever, but may well have been someone you could have helped, and received value from in the process…’had you only said the right thing…’i.e., ‘had the proper response been immediately handy and ready to be spouted without thinking about it.

That fellow passenger may in fact have had a house to sell at a bargain price; ‘he may have been an owner in distress willing to let you just take over his loan; ‘he might have been a rehabber looking for a deal.

That guy next to you might have been a prospective buyer for the house or condo you just rehabbed. The fact is that your co-passenger was an ‘all-ears, one-man captive audience’ for those 30 seconds of your life. ‘Why on Earth didn’t you sell him something?

Well, the reason you didn’t even try to sell him something, was because you presumed he didn’t really want an answer to his question and didn’t care enough about you personally to give a hoot about what you might have to say.  Or…’maybe…just maybe…he was just a lonely guy looking for a 30 second buddy to jabber meaninglessly to for half-minute.

All of these assumptions may in fact have been absolutely on the mark. But the big question is: Why didn’t you understand that the actual question was “What do you have that might benefit me?”  Why didn’t you use that precious free time to your maximum advantage?

Consider what “might” have resulted if you’d said something like the following instead: 

“Oh me?  I help folks buy and sell homes and investment real estate in all price ranges without cash or credit.”

There you go…7 seconds on the button and 23 left over.

Then if they say “Oh really?”  That’s when you continue: “Yup, if I’m buying, I pay full price, all cash or terms: if I’m selling I don’t require loan qualifying, a credit reports or big chunks of cash up front. Here’s my card, let me have one of yours.”

There’s still another 15 seconds, and we’re not even to the fourth floor yet…’if the “prospect” is interested in you or what you just said, he might by pass his floor, or ask that you step off the elevator with him for a minute or two; ‘if he’s not interested, ‘you just stare blankly at him until the door opens and he disappears, never to be seen again (‘by you, anyway).”

Now…’if that fellow passenger just happened to have been a prospect (buyer or seller) and by chance you had titillated his fancy (‘as it were) with your pre-planned, memorized, elevator speech, the question is: Did you give him every chance to know who you were and what you can do for him, were he to fit one of the criterion for your business?

Sure you did! But with those other lame answers that everyone else uses…’could any of them have made the slightest bit difference in anyone’s financial life…’much less the life of the guy headed for the fifth floor…’or your own?

“Who me?  Well, I’m an insurance agent: I make widows wealthy and I get royalties from having coined the phrase”God Forbid.”  Nope! Sorry, but you merely wasted your precious moments with that person.

So what’s the point of all this? Well, let me see. How about the point being:

1) We should all find a tall building and ride up and down in elevators all-day proffering 22 second elevator speeches to everyone who comes aboard?  No?  Well, ‘um…

2) Elevators are a great place to find motivated buyers and sellers? No? OK then,

3) It’s alright to talk to strangers on an elevator? Maybe…’at least we’re getting closer!

4) If I am ever caught between floors in an elev…No! No! No…

The actual point is simply this:

You must stop what you are doing right now, and take a half-hour to work out your “perfect,” sure-fire, concise elevator speech.

Once refined (and set to memory) resolve to always have your elevator-speech at the ready when those opportunities arise for your 22-second presentations.  You’ll be finding and qualifying prospects everywhere you go with the minimum amount of effort and maximum effect without intruding on anyone’s time.

Your audience will let you know instantly whether they are prospects or not. The ones who don’t need you and have nothing to offer you will say: “Oh that’s nice and begin talking about what THEY do for a living (‘at which point you remember having forgotten to turn off your coffee pot at home, or you can begin humming “It’s a Small, Small Word”).

The E.S. (elevator speech) is an absolute necessity for those of us in this business (especially in THIS business), and it works everywhere you go: at Church, at a cocktail party, a Chamber of Commerce Mixer; in  the checkout line at the grocery store; at your AA (“Auto Club”) meeting; when meeting your fiancée’s parents for the first time; when meeting your daughter’s fiancée for the first time (…the latter being far worse, believe me…’whomever invented nose rings and tongue piercings is an ass…idiot); standing in the Unemployment or Welfare Line (…Ok, scratch those last two…with a good elevator speech, you’ll never need either one).

THE MESSAGE AGAIN:  Develop at once a brief and concise Elevator Speech! Memorize it word-for-word, and be ready to recite it at every opportunity when someone steps-up and says: “What do you do for a living?”

Here’s mine:

“I’m in creative real estate investing, ‘always looking for good deals to buy, or good people to coach and mentor in picking up no-down, no-credit income properties.”   

Here’s an old one that, for some reason, never made me a dime:

“Shut up! What I do for a living is none of your %^&ing business!  Open your yap again Butt-Brain, and I’ll slam it shut for you!”  

I don’t know why, but I never got any significant traction with that one.



March 14:

I received a call from my partner’s bandit sign (“I Buy Houses, Full Price, All Cash or Terms Any Condition, Any Price”)

The caller was a Mr. Sam Brown who says he has a house in Mission Hills, California that is worth maybe $150,000, but which has a $164,000 loan on it and work to be done. I asked him “what he would like to see happen.” He says he is just looking for someone who would take over his payments. I then ask how much work needed to be done. He says maybe $10,000 worth. My comment is: “Woo Doggies!”

Next, I ask how far in arrears his payments are. He indicates that they are current…’for the moment anyway. I then ask what he would do if I were not able to help him. His comment is that he just wants to walk-away, and that he has no cash and will not be making any further payments, irrespective of whether or not I take the house.

I tell him that I’ll call him back the next day after checking the title and getting some comparable value information together (comps). The comparable sales in the area show the property to be worth perhaps $155,000.00 to $160,000.00 after fix-up (‘still no equity for me).

March 15:

I call Mr. Brown and arrange to meet him at the property that same day.

After seeing the mess (broken windows, a yard full of trash, weeds up to the windows, windows frames that didn’t meet the walls, peeling linoleum on the floors, dry-rot and termites), I comment to Mr. Brown that I can see that he is truly in a pickle on this one…he agrees and reiterates (in case I didn’t hear him the first time) that he has no money and has no choice but to let it go back to the bank if I don’t want it.

After inspecting the house, I determine that actual costs to bring the property to a reasonable cosmetic condition (with good, but cheap, labor and parts) might run no more than $6,000 to $7,000.

I reason, as well, that by keeping the loan in place and asking for $10,000 up front from a resident co-beneficiary on a 50:50 equity share, I can get all the work done and perhaps have a little left over. I figure I can advertise it at $165,000 and perhaps be able to start out at break-even (without cash out of pocket) and with a couple thousand in my wallet.

I then have Mr. Brown sign a 15-Day Option to give me 15 days before I have to make my final commitment (I try for 30, but he’s afraid of having to make another payment…I know, bad logic…he was never going to make a payment anyway).

Upon handing him the NEO (Non-Exclusive Option) to sign (i.e., ‘with a twenty-dollar bill stapled to the front), I also give him an unsigned copy of the Offer to Acquire (both documents available on this site), ‘explaining that the twenty-dollars is just for legal consideration (‘not really necessary, but stops a seller’s inquiring about an Option Fee).

March 16:

I beat it to the county court house and record a “Memorandum of Option,” then over to the newspaper office to run my ad:


3 Pmts and Clos. Costs
Moves you in. Nice $165K 3+2
Home. Needs TLC. xxx xxx xxxx

March 18:

I have my friend “Old Unemployed Bob” put a coat of gray paint on the front of the house and have him frame all the window and door openings with 1 X 6 boards which paints a nice bright white. We (Bob and I) pick up all the trash that is in the front yard…’and throw it all in the back yard.

Next, we Roto-Til the front yard and plant some flowering bushes along the front of the house and along the walk. ‘After two or three hundred dollars at most, the house looks quite “cute and cozy (as they say)” FROM THE STREET (‘called “Curb Appeal”). The plan THEN (and only then) is to begin working on the rest of what needs to be done, in hopes that someone might just drop by and offer to do the rest of the work for a reduction in price, before I’ve had to spend much more money.

March 20:

Bob dismantles the “things” that will eventually have to be repaired (e.g., ‘pulls the tub away from the wall where the dry rot is, removes the window sills that don’t meet the wall, takes the doors off the kitchen cabinets that are to be resurfaced, etc. (‘no hard work, ‘just partial dismantling …’thereby creating the illusion of “Work in Process”).

Note here that even though I haven’t exercised my Option, I’ve only spent about $400 at this point for everything.

March 24:

After the front of the house is cleaned up, and once the ad hits, the phone calls start hitting my voice mail, one after another. I return all of the calls and repeat the same mantra over and over again with every caller:

“Yes, I have this great little house over there on Blyth Street in Mission Hills, and if you can afford the nine or ten thousand that it’ll take to get in, and the $1,200 or so in monthly payments…after adding tax and insurance, of course: I’ll just GIVE IT TO YOU (pause). The only thing I want out of it is to have you put the loan in your own name, ‘or sell the property in a few years, and at that time, IF there’s been any appreciation we can just split it.” (NOTE: If they don’t like the ‘split appreciation’ idea, you can say: “No problem. If you’d prefer, you can come in with $19,000 instead of $10,000 and you can have it all.” They invariably want to get back the $9,000 deal.)

With each caller, I tell them that the house is being worked-on at the moment, but that if they want to see it, they have to come “with their rose colored glasses on,” because it’s a real mess at present.” I tell them that we haven’t had a chance to do much of anything yet…’or even haul off the trash.

Then when they show up, I make sure that my buddy Bob has tarpaulins and plastic sheets spread out over the floors and counter tops, and that paint cans can be seen in various places (‘needs to look like something’s going on). With all of the callers, I tell them to drive by the house first and then call me if they like what they see (from the street) and have an interest in it.

Remember…the place looks great from the curb: I want them to see it from the street, and then begin rationalizing all the shortcomings, and building-up their “want-to” while they sleep that night).

March 26:

The fifth or sixth caller calls back and asks if we can meet at the house to work something out. Maybe 7 or 8 others have said they’ll drive by, but haven’t called yet. I know we’ve got a live one at this point.  So I once again remind the prospect that the house is a mess and that he’d better have a good imagination for “potential” and for what things COULD BE, rather than what they ARE. He laughs and agrees, and we meet.

After an inspection of the mess, he asks when I might be finished with all the work…I tell him maybe as much as a month or two at most (I know he’d like to move as soon as possible). He seems discouraged, but I then tell him that if he’d like to finish the work himself, I’ll knock a couple thousand off the price and, another $2,500 off the $12,000 I need upfront to get into the property.   He now can get in for just $10,000 plus the first payment when it comes due).

I fill out an Offer to Acquire from him to me–and have him sign it and accompany it with certified (non-refundable) funds in the amount of at least one full monthly payment obligation $1,200.00 (‘could be any amount you specify).

March 27:

I return to Mr. Brown, the seller, in order to give him my signed (‘and already accepted) purchase offer. First, however, before giving him the paperwork, I tell him that the property is a lot worse than I had first thought. I see him wince a little. At that point I tell him about the termite problem and tell him that he’ll need to pay the $2,000 for the tenting and spraying, but that I’ll take care of everything else. He heaves a sigh of relief and agrees, ‘assuming that I’m paying the $10,000 that he estimated the refurb to be, and that I’m also paying all costs of marketing (‘when anyone says they don’t have money, ‘what they mean is: “Well, I have some, but I don’t want to spend it unless you pull the right levers).”

April 1:

The property is tented…at Mr. Brown’s expense. The poison is sprayed, the termites begin singing “Cum Bah Ya” as they grow weak and are no longer able to hold hands; and as their grip fails and their little arms fall to their sides, the house crumbles and falls down (‘No, just kidding…they all die and go to termite Heaven, I’m sure).

April 10th: 

I complete the paper work for the “Blyth Street Land Trust” and have Mr. Brown execute the document (‘as the only beneficiary at tht point): thereby appointing Equity Holding Corp. as the trustee.

April 11th:

I complete the “Assignment of Beneficiary Interest” agreement from Mr. Brown to my resident co-beneficiary and me, and then complete the “Beneficiary Agreement” between us.

The Beneficiary Agreement designates our respective percentages of ownership of beneficial interest in the trust as: 10% retained by Mr. Brown; 40% to me; and 50% to the Resident Beneficiary (Mr. Seabury). However, I arrange to have it stipulated in our agreement that Mr. Brown will forfeit his 10% to me and any claim to profit, at the trusts termination (‘I just need him to hold onto it for now in order to avoid the current lender’s due-on-sale admonitions; any reassessment for property tax; and payment of Transfer Tax (i.e., ‘there has been no sale of the real estate, ‘only a transfer of beneficiary interest in an inter vivos trust—personal estate).

Note here as well, that I leave Mr. Brown with 50% of the voting rights so as not to invoke property tax reassessment and conveyance tax: however, I receive a Power of Attorney from him in order that I might vote his rights, and not have to involve him in management decisions.

May 1st:

The resident co-beneficiary brings the rest of his money in, ‘executes all documents, ‘makes his first payment on the contract and is given the keys to the property.

May 2nd:

The deed to the trustee is recorded; a triple-net lease agreement between the Trustee (Equity Holding Corp) and the new Resident Beneficiary is executed; and he (the RB) and his family move into the property and the work on the property is begun (‘i.e., the RB “takes possession”).

All signed documents are sent to the trustee, who retains the collection service (Equity Management Services) who, without charge, begins payment collections and disbursements for the term of the agreement.

May 4th:

I receive a check in the mail for $10,000 including a mandatory one-month Contingency Fund (to be used for eviction if it is ever needed).  Now, when the trust and the accompanying triple-net occupancy agreement terminate, the property will be sold or refinanced by the Resident Beneficiary.  And as all costs of sale are paid; I will get back the equity that I carried (the difference between the loan amount at start and the $160,000.00 “Mutually Agreed Value” at inception (the MAV); the Resident Beneficiary will receive a refund of his original $10,000, less any recurring costs, whereupon all remaining proceeds will be divided equally between he and me.


So far (2 years into the deal), that property has increased in value to about $210,000; I receive a $100.00 p/mo. positive cash flow each month; the loan has paid down by about $3,600. I therefore have earned approximately $33,000 on what was an over-encumbered property that no one else wanted, and which involved No Down Payment from me  (‘just a refundable Contingency Fund from my Resident Beneficiary partner); No Credit Application; No New Loan; No monthly payments (for me); No Management costs; No Maintenance Costs, No Up Keep or Refurbishment costs.

Furthermore, the lender’s due-on-sale clause was not violated; the property is protected from creditor claims and tax liens, bankruptcy; marital dissolution disputes and Probate should any party die.

By the way, when this property sold three years later, it sold for 210,000 and my Resident Beneficiary and I split a bit more than $50,000 (‘along with three years of positive cash-flow and the money was paid up front).

Cool, eh?

Would you like an excellent coach and lifetime mentor to teach you how to do all of this this with virtually every type of real estate, ‘while safely, legally, efficiently and silently mirroring every (any) type of Creative Financing system, without any of the risks and down-sides (‘i.e.: Straight Lease, Lease Option, Lease Purchase, Straight Lease with Income Tax Deductions, Contract For Deed; Land-Sale Contract, Equity Share, Wrap-Around Mortgage, etc.

Bear closely in mind that we do ALL of this without a Due-On-Sale violation; without compromise of Dodd-Frank (Owner Financing) legislation; without creation of an Executory Contract; without the need for a new loan; without standard credit qualifying; without escrow; without typical loan approval and underwriting delays; without a mandatory need for new title insurance.

And closings can take a little as a week or less.

[OK, in all humility, I may not be singularly the best investment coach and mentor in the world: but, seriously, ‘how can I argue with the many thousands who insist that I’m wrong about that?].  ;o)



I don’t mean to sound maudlin or too “new-agey” here; but the one bit of magic that I have managed to glean from my three quarters of century on this wobbly little planet of ours is that WE as individuals are absolutely in-charge of everything that the universe has to give. We are not only in charge of our own destinies, but also in charge of the very clockwork that is the Universe itself. Although most of us live our lives wholly oblivious to that fact, we none-the-less are in absolute control of our health, our fates, our bank accounts, our aspirations and even the aspirations of others (…i.e., the collective needs of the world at large).

Think about it. Didn’t we (you and I together) send a man to the Moon and stand with him behind the cameras in awe as he took what presumably was humanity’s first step on another planetary body?

Didn’t we send spaceships and video cameras to all the known planets? Didn’t we invent cures for Diphtheria, Polio and Malaria? Didn’t we build the Hubble Telescope and put it into orbit around a beautiful, blue inhabited water planet in a remote part of a remote galaxy among billions of other galaxies like it…’for no reason other than because we wanted to and felt that it necessary?

Didn’t we harness the very electricity that once was the scourge of humanity, but which now is enabling demi-godly evolution of the Information Age and our personal lives on a miniscule remote planet in the vastness of virtually endless space?

Of course we did! You and I did that!  ‘And I couldn’t have done it without you!

There is no single individual anywhere on Earth who can take credit for any of our modernity…it is humanity that did it all, and it will be humanity who travels to the stars for our species’ exploration and relocation.  It us YOU and I who will one day cure all the diseases of mankind including the aging process. And that’s exactly who YOU are, and what WE are capable of doing.  Each of us is a crucial piece in an enormous magnificent jigsaw puzzle that never can be complete without every single tiny piece being in its specific place, supporting the entirety of the whole.

As individuals, we need only to be aware of, and in tune with, all of it, remaining steadfastly aware of all of it in order to use all of it and take credit for it. With each and every one of our achievements, somewhere along the line, a solitary individual with a burning desire to do a thing that alters the entire Universe forever—’with a little help from all the rest of us—’simply DID SO…’because he/she chose to do so, and because they knew for sure they could…refusing to acknowledge other people’s perception of the assumed insurmountable” obstacles and impossibility of a dream ever manifesting out of purest imperceptible Potential.

  • “You’ll never get mail from Los Angeles to New York in a single day!  There simply is no man or horse that can run that fast! 
  • You’ll never put a man on the Moon or Mars…’there’s nothing to breath when you get there!

  • Traveling to another planet is impossible.  There’s no atmosphere in space, and therefore nothing for a propellant to push against in order to create an “equal and opposing reaction”!
  • There are no other universes! We have the Milky Way, and everything that exists is right here in it! Oh wait! What are all those little specks that lie beyond the Milky Way.  Oh crap!  ‘Back to the drawing board it is!

Here’s my own little success affirmation (‘as it were…’call it a mantra if you wish?), which, by the way, I have taped to the dashboard of my car, my bathroom mirror and on the back of my TV remote (‘with which I spend entirely too much time) and I’m in the process of having tattooed on the inside of each eyelid.  If you want it, it’s yours too. I honestly have to say that it’s done alright by me. But here’s the caveat: If you read it over once or twice and think you understand its full meaning, you will be wrong…’like any expertly cut diamond, it’s far more multi-faceted than it might appear to be to the casual observer:

I  am in tune  with,  and solely in charge of, the abundance
and   the essence of, Life, which constitutes the purpose of
humanity’s existence. I will, therefore, prosper and stand
conspicuous in the most spectacular of ways…   ALWAYS!

Dr. Tom Johnson, C.O.R.S.

The core message here is that whatever it is that we choose to have, ‘if we truly want it (need it or not), it will be given to us on a silver platter when we know with certainty that having it is our absolute right; and when we honestly ‘expect’ to have it. We can pray for it. We can hope for it. We can wish it upon ourselves. We can ask Santa for it. But if we’ve already tried all of that, and are weary of all the mewling and moping and hoping—and if we are sick and tired of screwing around and being ignored while waiting for the good stuff that others seem to have more of than we do: then we must dig in, rare back and scream (i.e., holler, bellow, bawl-out, yell).

This to say that we have no choice but to tilt our heads way back and proclaim, from the diaphragm through, to, and beyond the uvula,’ as loudly and sternly as we can, that what we want is already ours and by damn, we’re going to have it…NOW!

Its funny, I know, but sometimes God just doesn’t appear to hear real well when needs are whispered as prayerful little “poor-me” supplications. But when they are boldly demanded with sternest, self-assurance, he(she?) smiles and says: ”Well, sonovagun, ‘alrighty then! You finally figured it out! It’s about time!”

When you’ve asserted yourself in this manner (figuratively or literally)…and really mean it…my solemn promise to you is all that you honestly command into reality via Need versus Hope, will indeed appear… ‘and sooner than you think. ‘So be ready!

The most closely guarded secret relative to obtaining is not the fact that if you truly want it and have a good reason, that it will be given to you.  There’s a far more valuable “tool” that we need to understand.  Personally, I can remember my “poverty days (my own)” of not too many years ago, when I thought repeating my mantras and my affirmations daily (to myself)…with stern conviction…and paying larger tithes than I could afford, would bring me financial relief. It did not. It didn’t do diddly-squat (‘so to speak) in that regard…’ until I figured out the solution to the enigma.

The enigmatic mystery all along was simply that if you don’t think you deserve it, no matter how badly you want it, and no matter what you do to get it, you will never discover that it is already yours and just waiting for you to summon it from potential.

Whatever it may be, you must NEED it (burningly) enough to demand it with every screaming fiber of your body and sou and MEAN IT.  And, until you do exactly that, your plans for achievement remain undefined and cannot allow the Law of the Universe to “know” what the hell it is that you think you’re supposed to have.

Consider walking up to an airport ticket counter and saying, “I’d like a ticket please.” The ticket agent then asks, “’And where would you like to go?”  Whereupon you reply: “Well…someplace better than where I am right now, ‘that’s for sure.”

Think about it…how far are you going to get before your realize that you need to get a lot more specific.  You “need” to refine your objective and know for sure exactly where you want to be. You also must know when you’ll be prepared to leave and when you’d like to arrive, and what your surroundings should be like once you get there. In other words , forget about where you WANT TO GO and determine instead where you NEED TO BE!

The resolution of the “enigma” then is: ‘Know with certainty what you want; brashly demand it without apology; know that it is already yours to have; expect it without embarrassment or doubt. Then, Voila! It’s on its way and you can’t stop it. Just be very careful what you pray for…because when you really mean it…you’re gonna get it!

But wait! There’s still another catch. There are a few things you must to do first in order to get aboard the Achievement Train. These items are not necessarily daily exercises, or life-changing goofy stuff that you can’t live with for long, and which embarrass your friends and family when they see you doing it. But they constitute the “catch” nonetheless, and are summed-up very succinctly in the following quote by Louise Hay:

In order to eliminate [any] ‘scarcity’ in one’s life, one must identify and relinquish some [veiled] self-serving need that relies upon that scarcity for its fulfillment

In analyzing this simple, life-altering truism, it becomes obvious that if, for example, one were to desire to, say, lose weight, he or she would have no choice but to give up something desirable but unnecessary. For the weight-challenged, take your choice: any two of the following will do (and you can keep all the rest)—’those scrumptious high calorie foods; ‘that insulin-spiking dietary starch; ‘that satisfying couple’a cold beers every evening after work (‘Oh God! Please! Not the beers!); ‘your sedentary lifestyle; or… ‘a blissful couple weeks of not exercising.

Another prime example of a deeply hidden self-serving need that relies upon a scarcity for its existence is “Failure.” In other words, many people actually choose to fail: I.e., “If I don’t attain success, my need to bitch about everything and blame others for my deficiencies won’t be impinged upon, ‘and I won’t ever have to face the prospect of…’well, ‘failing.   In other words, if I don’t try, no one can say I failed; and that way, I won’t have to come back for an encore (…and that’s very important, because even if I did accidentally succeed once, who’s to say I could ever sustain the roll I was on, and be able to do it again).”

For the same reasons, if one wants to lose the depleted bank account, and the monthly late-notices (“friendly reminders”), then he or she has no choice but to firmly resolve to give up something. ‘For starters, how about giving up, say, a couple hours of TV watching per-evening, two or three of those leisurely Saturday afternoons per-month? How about giving up the safety inherent in declaring that you don’t like cold-calling? Or perhaps letting go of that that fattening poverty- building, ‘oh so soothing propensity for procrastination;

As Dr. Wayne Dyer says in his educational course by the same name: “YOU’LL SEE IT WHEN YOU BELIEVE IT!”

For our purposes, the key is simply to understand, once and for all, that in order to become successful in Creative Real Estate, ‘especially as it pertains to the Equity Holding Transfer™, you don’t have to change your lifestyle, your religion, your spouse, your girth or the way you pluck your nose hairs. You merely need to identify and select a few of those replaceable Self-Serving Needs, ‘and resolve to abandon them in favor of diligently taking for yourself that which you REALLY want out of life.

Honestly, do you think your God will mind if you rare back, scream out boldly, emphatically and demand that “he” give you what you know with certainty that you truly deserve?  No!  ‘Any God who, in fact, would be offended by any starving soul raising his/her  voice in dire need is really not a very good God.

Imagine, if you will, a devout and truly virtuous preacher in the process of drowning in lake with others watching?  ‘Do you think his dire entreaty for salvation is going to be whispered softly in order to avoid offending God?  Hell no!  ‘You’ll hear him twenty miles away vociferously demanding the life that he knows with certainty he deserves, and of which he is about to be deprived!  In this analogy the preacher knows without question what he want at that moment, ‘and he damn-well ain’t screwin around with platitudes and sweet-talk!  In such a dire circumstance I am positive that any caring God would never resent even the busting of an F-Bomb or two somewhere along the line.  If you’ve ever felt that you were about to drown and weren’t much of a swimmer, ‘you know exactly what I’m talking about.

If you’re about to drown financially…’now you know what to do about it!


A caution to always seek out the advice of a competent attorney before “trying this at home” is always good advice; although I find it difficult to proffer truly good (non-legal) advice on the subject of seeking the right attorney with regard to the Equity Holding Trust Transfer™ or land trusts in general. In fact, I find myself “…jest a tad ‘twixt a rock and a hard place” here (as it were), mostly because… they jest ain’t hardly none o’them  a’tall around these parts (as one might say on Jerry Springer).

Although I certainly do not advocate proceeding in any real estate related transaction without the advice of a “good’ and “knowledgeable” real estate attorney (a little like finding a handsome hag fish or a smart wrestler, I’m afraid): the quandary is that—‘first off, there are very few attorneys who know a lot about the use of trusts in general. Then there is the fact that there are even fewer who know kidney beans from koala bears about what a “land trust” is…’much less how it differs from other inter vivos (living) trusts, and what it’s capable of doing. Many attorneys have never even heard of such a thing; and there are even fewer yet who are competent to offer sound advice—pro or con—relative to the use or safety of an “Illinois-type, revocable, inter vivos, title-holding beneficiary-directed, third party trustee, land trust transfer (the Equity Holding Trust Transfer™).”

Ordinarily, when an uninitiated attorney is engaged for the purposes of reviewing a land trust transfer—much less an Equity Holding Trust Transfer™ with all of its attendant appendices, directions, Escrow documentation, creditor letters, etc.— he or she is faced with a true pointy-horned dilemma. The only two options available are: 1) Get into Nexus-Lexus or out to the law library and spend some time getting educated on the advent and history of land trusts, or 2) render advice (pro or con) on something they know virtually nothing about (‘and I can assure you that it will always be ‘con: albeit I and our own attorneys are always on hand).

I’d presume that less than 4 or 5 hours would be needed to thoroughly research the pertinent local and federal codes and cites, and the myriad features and uses of the land trust (i.e., a bill of from $1,700 to $ $5,000); Think about it…if you were a busy attorney with your itinerary over-burdened with time constraints, what would you prefer to do?  Bill for a couple hours, or advise a client to do something you’re not completely sure of.

I.e., ‘would you opt to: 1) Spend your “billable” hours doing hard research for free for a transaction you’ll probably never see the likes of again; 2) Risk your client’s walking away and your receiving nothing for your consulting time, or 3) might you attempt to convert the entire transaction to something else? I.e., to something you better understand, and with which you feel more competent to advocate…’and on which you could make some money?

Similarly, if you were the client seeking and hoping to pay only for a simple review and approval of a set of documents, would you be willing to finance your attorney’s continuing legal education at the rate of $175 to $275 (or ?) per-hour? Probably not. My guess is that you’d relent, as many do, and be coerced into accepting the suggestion that the entire transaction should be transformed into something more “manageable (for the attorney).” Perhaps a nice “Contract for Deed” or maybe a seemingly innocuous “Lease Option.”  ‘After all, let’s face it, there just isn’t much billable potential in telling a client, “I’m not competent to review these documents…you should see someone else.”

Taking the advice to “convert to something else” clearly means reverting back to the very downsides, short falls and serious risks that the Equity Holding Trust Transfer™ conveyance concept was designed to avoid and protect you from, in the first place.  I.e., shortfalls such as (‘just to name a few):

  • Public recordation and notification of the transaction (‘neither party’s name needs to appear in the public record…and it ‘gets the “Sue Me” sign off the property owner’s back);
  • The lenders’ alienation admonitions (due-on-sale clause) not violated (12USC1701 j-3);
  • There is no compromise of the Wall Street Consumer Financial Protection Act (re. Dodd-Frank re. seller-assisted home financing)
  • Prevents a claim of “Equity” by a defaulting tenant-buyer so often used to thwart eviction and force a drawn-out and expensive foreclosure process…and free rent while the case drags on;
  • Avoids the threat of either the seller’s or the buyer’s creditor judgments attaching to the property (or to any Option on it);
  • Eliminates the threat of either party’s income tax liens attaching to the property
  • Removes the possibly of marital dissolution claims preventing easy disposition of the property
  • Stops the insidious susceptibility to attachment by partition actions and/or charging orders against individual participants by judgment creditors;
  • Avoids the risk of either party’s being penalized because of the other party’s bankruptcy, probate marital dissolution, incarceration or forced ancillary administration process upon a party’s death;
  • Provides an (“escrow-like”)  third-party title-holding trustee that very effectively shields the title against litigation and prevents the potential for disputes among beneficiaries

If you or I were to consult with our licensed, board-certified general medical practitioner about treatment for a brain tumor, a good one would refer us to a neurologist. However, the mindset of the legal practitioner is all too often analogous to that physician’s suggesting that we simply contract a more manageable condition. E.g., ““A brain tumor eh?  Well, I don’t know much about the brain, so how ‘bout I treat you for hemorrhoids instead? Here. Take this. Insert it carefully. Pay ast the front desk. me. Call me in the morning, and if this cure doesn’t work…’great, just let me know and we’ll switch to still another malady (“I’ve got a ton of ‘em”)

So (‘you ask): “Well, should I seek the advice of an attorney or not?”

Yup you should! Indubitably as a matter-of-fact (so say I)! However, do be sure to choose a truly competent one who has experience with land trust transfers in creative real estate transactions. And if they start talking about Lease Options, Lease Purchases, Land Contracts (Contracts for Deed), Wrap-Around Mortgages, Equity Shares, Subject To’s or Silent Seconds…run! Run like the wind!  (Unless, of course the attorney is your brother-in-law…in which event the dilemma will be yours: either act on bad advice, or…divorce).

Are there any attorneys you could recommend?

Who me?  Thanks for asking, but No. Although there are a few with whom I’ve become familiar over the years who do understand the concept (albeit a limited few, to be sure): Bill Bronchik, Denver Colorado; Mark Warda, Ft. Lauderdale. Florida; Bryan Dunklin, Dallas, Texas; Jay Swob, Cincinnati Ohio; Henry W. Keno, Chicago Illinois (‘but he’s been dead for over 25 years); Paul De Witt, Los Angeles, California.

Some attorney quotes:

In answer to “Why aren’t there more attorneys who know about land trusts?

“Because very few know how to use them, and even fewer recognize the myriad benefits.”

Mark Warda, Attorney, Florida

If you can’t find the expertise [i.e. ‘when seeking a competent attorney re. land trusts], you have no choices but to keep on looking, or take upon yourself the task of trying to educate your advisors and counselors.” Good luck with that!

Jay Douglas Swob, Attorney, Cincinnati

“Another problem with using attorneys is that most have a negative attitude about anything with which they are unfamiliar. They’ll probably advise against using a land trust because they [themselves] don’t understand it.”


 Bill Bronchik, Attorney, Denver, Colorado


“In that the ‘land trust’ is less frequently used outside of Illinois where it was first created [circa 1920], it is unlikely that many attorneys will be immediately familiar with its benefits or unique structure.”

Henry W. Kenoe, Attorney, Chicago, Illinois
Keno on Land Trusts, IICLE, 1989

“No! Don’t do it! Oh M’god! These can only be done in Illinois. They violate the Doctrine of Stepped-Transactions. Lease tenants can’t take tax write-offs. ‘You crazy?  No court in the country would see such a thing as a conversion of real estate to personal estate! Doctrine of Equitable Conversion?  What’s that?  Run Gertrude, run! Run like the wind!

But wait! Before you rush off, Gertrude, let me create a nice little all-inclusive (wrap-around) mortgage for you instead. It’ll do the all the same things and I’ll only charge you $2,000.”  The Due-on-Sale Clause? Oh, don’t worry about that…’lenders hardly ever pay any attention to those things.  I’ll build in a nice exculpatory paragraph anyway (i.e., ‘so you can’t sue me) and it’ll be in bold print.

Could the buyer get the property embroiled in a lawsuit or tax lien while you’re still on the mortgage and unable to make the payments or sell the property?  You ask.  Well, I suppose so, ‘but that hardly ever happens either (‘mumble-mumble’)…’so don’t worry about it (…‘cough-cough).

Could you evict the buyer if he doesn’t make his payments? Well, no. But, hey, there’s always judicial foreclosure, Unlawful Detainer, Ejectment and Quiet-Title action: which I will be more than happy to handle for you (…at, oh, say, $325 per-hour plus court   costs…’no guarantees of course).

Huh? “Would the property be tied up in the other party’s Probate proceedings, if they die?” Well, um, yes, but most people don’t ever die: but even if they were to that, doing so would just be a matter of another paycheck for me, ‘now wouldn’t it? I don’t see any problems here“

Anonymous Lawyer, Riverside, California.

There is no person on earth who is more apparently knowledgeable about the law than an attorney who doesn’t know what the hell he’s talking about.”

Bill Gatten Seminar Leader, Henderson, Nevada

Bill Gatten, the author of this article, is in no way engaged in the practice of law, or in rendering other dependable professional advice.  If legal or other expert assistance is required, the services of a competent professional should be obtained. Do not expect Bill Gatten to know anything (‘about anything).

ANOTHER NOTE: ‘Want to get your client’s and their attorneys to do the right thing? Give them a copy of the article. ‘Especially this part:

If a physician thought like many attorneys do:

“A brain tumor eh?  Well, I don’t know much about the brain, so how ‘bout I treat you for hemorrhoids instead? Here. Take this. Insert it carefully. Pay me. Call me in the morning, and if this cure doesn’t work…’great, just let me know and we’ll switch to still another malady (“I’ve got a ton of ‘em”).