Cyprus-Forum.com

[DT.]

When preparing a Balance sheet an Accountant has to list Assets and Liabilities. DEBTS are liabilities. Should the Liabilities exceed Assets then the company or the individual becomes insolvent.in the case of Paphitis this does not apply since he considers his debts as tax deductible and not a Balance sheet entry.

Debt interest is tax deductible..debt itself is a balance sheet entry

[miltiades]

When preparing a Balance sheet an Accountant has to list Assets and Liabilities. DEBTS are liabilities. Should the Liabilities exceed Assets then the company or the individual becomes insolvent.in the case of Paphitis this does not apply since he considers his debts as tax deductible and not a Balance sheet entry.

Debt interest is tax deductible..debt itself is a balance sheet entry

Only if the debt was exclusively used for business purposes.
For an individual a debt generated for the purchase of personal acquisitions such as a motor car or a cruise then I here at on the debt can not be tax deductible.

[Paphitis]

really wish you two would stop arguing about this "debt" issue. Leveraging up can increase your returns however depending on how ring fenced your loan is to the asset and the recourse it has to you personally will judge whether you're wise to do so and at which levels. Any downtick in a market will create turmoil in an overlveraged portfolio with margin calls on your collateral from your lenders. Thats when the assets of over ambitious guys like you become targets for us hedge funds

Sorry DT. I don't pretend to be a Financial Expert or even an accountant, other than perhaps basics or common knowledge.

I have a very high end accountant who does the books quarterly, and my tax returns - personal and company and trust returns. I pay him thousands every year to streamline my tax. He knows more about my books than I do. When I'm doing well, when I'm not and my servicing capacity. He also knows how I can reduce tax, depreciates my assets and he does everything according to law.

My previous accountant got me into some strive many years ago.

I have lunch with him regularly. He is Italian but married to a Kybrea, who owns Shopping Centres around Australia. He is a very rich man.

he tells me every single year to increase my debt levels. Not enough debt and now is the time to take as much debt as possible.

I'm not even close to triggering any margin calls, even if I lost my job.

It will be a long time before I become a target of a hedge fun DT. In fact it won't happen.

[Paphitis]

When preparing a Balance sheet an Accountant has to list Assets and Liabilities. DEBTS are liabilities. Should the Liabilities exceed Assets then the company or the individual becomes insolvent.in the case of Paphitis this does not apply since he considers his debts as tax deductible and not a Balance sheet entry.

I already told you my debt to asset is under 10%. In other words stuff all.

Even if I borrow another line of credit, it doesn't mean I have drawn down on it. It's available though.

Available for what? Well, I could borrow x to buy a property that is worth x plus stamp duties. So debt levels go up by x plus stamp but my assets also go up by x. My LVR will increase slightly but not much. let's say from 10% to 20%. Still stuff all.

If I don't borrow x to buy property valued at x, then my assets don't go up. It's critical for me to sometimes borrow x, because I'm looking to hold stock for the next display homes. That is what my Koumbaro and I do. We build display homes and flog them.

We need credit because we will need to be ready for the fire sales next year. It's completely unrealistic to have the liquidity to buy x with own funds when those funds or the liquidity doesn't exist. We would be able to do jack shit without the Banks sometimes.

And our charges and expenses are all deductible. In other words, if my lending costs are x, my actual cost is x - (x multiplied by 0.3). If it's personal debt it's even better because my costs are x - (x multiplied by 0.45).

If I allocate profits to my super funds, I get tax credits as well as I won't pay 45% but 15% tax. I've borrowed to do that as well. Just for the tax credit.

[MR-from-NG]

I had a friend who always told me "you're as wealthy as the amount you're able to borrow". He lived in best post codes, Ferraris, Bentleys the lot but somehow he'd always end up visiting me to borrow money. 10k at some visits, 20k at times. Always paid me back. He is now bankrupt and I'm waiting for the 16k I last lent him to be paid back.

I have always been scared to borrow and thank god always managed to fund whatever I fancied with my own hard earned cash.

[Kikapu]

I have always been scared to borrow and thank god always managed to fund whatever I fancied with my own hard earned cash.

You sleep much better at nights just knowing that.

[MR-from-NG]

I have always been scared to borrow and thank god always managed to fund whatever I fancied with my own hard earned cash.

You sleep much better at nights just knowing that.

Absolutely Kiks. I have no fear when my doorbell rings. I put my head on the pillow and I don't get cold sweats thinking where I'm going to find the money to pay my loans. Best way in my opinion.

[Kikapu]

I have always been scared to borrow and thank god always managed to fund whatever I fancied with my own hard earned cash.

You sleep much better at nights just knowing that.

Absolutely Kiks. I have no fear when my doorbell rings. I put my head on the pillow and I don't get cold sweats thinking where I'm going to find the money to pay my loans. Best way in my opinion.

I agree with you 100%, MR.

[miltiades]

When preparing a Balance sheet an Accountant has to list Assets and Liabilities. DEBTS are liabilities. Should the Liabilities exceed Assets then the company or the individual becomes insolvent.in the case of Paphitis this does not apply since he considers his debts as tax deductible and not a Balance sheet entry.

I already told you my debt to asset is under 10%. In other words stuff all.

Even if I borrow another line of credit, it doesn't mean I have drawn down on it. It's available though.

Available for what? Well, I could borrow x to buy a property that is worth x plus stamp duties. So debt levels go up by x plus stamp but my assets also go up by x. My LVR will increase slightly but not much. let's say from 10% to 20%. Still stuff all.

If I don't borrow x to buy property valued at x, then my assets don't go up. It's critical for me to sometimes borrow x, because I'm looking to hold stock for the next display homes. That is what my Koumbaro and I do. We build display homes and flog them.

We need credit because we will need to be ready for the fire sales next year. It's completely unrealistic to have the liquidity to buy x with own funds when those funds or the liquidity doesn't exist. We would be able to do jack shit without the Banks sometimes.

And our charges and expenses are all deductible. In other words, if my lending costs are x, my actual cost is x - (x multiplied by 0.3). If it's personal debt it's even better because my costs are x - (x multiplied by 0.45).

If I allocate profits to my super funds, I get tax credits as well as I won't pay 45% but 15% tax. I've borrowed to do that as well. Just for the tax credit.

Since you told us some time back that your debts exceed a million, now you are telling us that your debts are only 10% of your assets we can safely presume you are a ....multi millionaire, the stewards pay must be good

[Paphitis]

I had a friend who always told me "you're as wealthy as the amount you're able to borrow". He lived in best post codes, Ferraris, Bentleys the lot but somehow he'd always end up visiting me to borrow money. 10k at some visits, 20k at times. Always paid me back. He is now bankrupt and I'm waiting for the 16k I last lent him to be paid back.

I have always been scared to borrow and thank god always managed to fund whatever I fancied with my own hard earned cash.

My Koumbaro has a Ferrari. He is a bit of a play boy but he is wealthy too. His brother is well off but more grounded.

Only difference if my Koumbaro has never been in a position to need money from friends.

But we are regularly in a position to use our lines for materials and pay people. That’s what it’s there for. Our biggest problem is cashflow. It comes in spurts. We spend for months and after a year or many months at lest we get a pay day which goes back on our lines and then it’s at least many months, and sometimes over a year for the next influx. And so on and so on. He doesn’t even have a salary unless he decides to pay himself one which he is entitled to do. And again it could be from borrowings. That’s the nature of the beast.

He is still in a position to play though. He literally has a car collection. His brother is more down to earth. Same with me. He too is a partner. The 3 stooges. Plus Koumbaro’s son.