1. February 21, 2007 Webinar “Asset Protection and Charging Order Protection Entities” Mark J. Kohler, CPA, JD Mathew N. Sorensen, J.D. S. James Park, J.D., LL.M. www.kkolawyers.com Salt Lake City, UT* Las Vegas, NV * Beverly Hills, CA * Cedar City, UT Telephone 435.586.9366 / Facsimile 435.586.9491 © Kyler Kohler & Ostermiller, LLP 2007

2. Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler & Ostermiller, LLP is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs.

3. Inside Liability- Liability created inside the business. Goal is to protect the personal assets of the business owner from the liability created in the business with the corporate veil protection. Business entity Business owner 1)Corporate veil provides that the business owner is not held personally liable for the debts or liabilities of the company. 2)Corporate veil protection is available in an LLC, LP, or corporation. Judgmen t Corporate Veil

4. Outside Liability- Liability created outside of the business in a personal capacity. Once a creditor obtains a judgment against a business owner personally they then attempt to obtain the assets of that individual including their assets owned in a business entity. Goal is to protect the business assets from the liability created personally by the business owner. Judgment creditor attacks individuals ownership in business entity. If there is no Charging Order Protection Entity, then the creditor can obtain ownership of business entity and force the sale of assets. Business Entity Business owner who has a judgment entered against him personally.

5. XYZ Holdings, LLC, FLP or LP Partner Rental Firewall from liability for Charging Order Protection Entity Rental STEP 1: Partner Has Personal Judgment Entered Against Him STEP 2: Judgment Creditor Tries to Obtain Partner’s assets held in entity Charging Order Protection Entity

6. Charging order protection provides that the creditor only obtains a right to distributions. A creditor with a charging order does not get voting rights and cannot force the sale of assets. A Charging Order Protection Entity can stop making distributions so creditor never obtains assets. The poison pill strategy. Creditor obtains the right to distributions of income and the responsibility for the taxes for that income even if the creditor does not receive the income. Most commonly used Charging Order Protection Entity is the Limited Partnership. LLC’s may provide charging order protection but you need to be careful with single member LLC’s as they may not receive charging order protection. Problem with single member LLC is that there is no innocent partner to protect.

7. Sale of Property Tax Strategies Sale of Home Exemption (2/5 years / 250k/500k) Short term Capital Gain rates (held property less than 12 months) (1) Ordinary income tax rates (2) Watch out for Self Employment tax Long term Capital Gain rates (12 months or more holding period) (1) a 15% maximum federal rate (don’t forget state) (2) a 5% rate in a 10% or 15% bracket (3) a 0% rate replaces the 5% rate for tax years beginning after December 31, 2007 1031 Exchange (defer the gain) Charitable Remainder Trust

8. 1031 Exchanges The Transaction TaxpayerSeller Buyer Qualified Intermediary Replacement Property Replacement Property Exchange $$ Exchange Property Tax Strategy # 10 KKO ©

9. 1031 Exchanges Issues to Consider: Must hold both the property traded and the property received for business or investment purposes. The property traded must not be held primarily for sale, such as inventory. The properties must be tangible real estate. For example, they cannot be stocks, notes, securities, evidences of debt. Must use qualified intermediary if delayed exchange and get legal/tax advice. Two timing rules must be satisfied: 1. 45 day “Exchange Period” – Must identify replacement property(ies) within 45 days of sale 2. 180 day “Replacement Period” – Must close on all purchases of replacement property within 180 days

10. Within 45 days you can replace the Exchange Property with as many Replacement Properties as you choose, at any value, so long as you close within the 45 days. At the 45 th day you may identify 3 properties of any value, and close on any or all of the 3, so long as you close within the 180 days from the initial sale. At the 45 th day you can identify as many properties as you want, so long as the aggregate value of the properties does not exceed 200% of the value of the Exchange Property (200% rule). You can violate the 200% rule, so long as you close on 95% of the properties identified, within the 180 day Replacement Period. 1031 Exchanges Issues to Consider: