(00:00:00) There's about three and a half weeks left in 1979 and among other things that folks begin thinking about as the year comes to an end is income taxes and possible means of saving some money as the year comes to an end George Covington. Our investment advisor is with us in the studio today to visit with us a little bit about tax shelters and other investment opportunities. George Covington is an investment executive with Blythe Eastman Dylan and Company and as before when George was here, he is expressing his own opinions. Not those of The Brokerage house and when we get to the point where we will take your questions in a few minutes, please a refrain from asking about specific stocks. You can ask about industry groups different kinds of Securities generally, but but stay away from specifics, please well George first of all, what is a tax shelter? (00:00:55) Bob thank you number one for having me back on your program a tax shelter, basically. Is an investment where either a small or large part of the original investment can be written off as far as the taxes are concerned at the end of the year on a quarterly basis. However, it's structured tax shelters are designed for those people who have basically risk Capital that they can invest in areas where they do get these write-offs (00:01:31) risk Capital meaning my risk (00:01:33) capital. Is that money that if you lost it at wooden materially change your lifestyle (00:01:40) who should be interested in these sure there's just something for the average person. (00:01:45) Well, I have to answer that question two ways. They're all types of shelters. Shelters are just as individual as a set of fingerprints. They should all be looked at number one as an investment and number two as a shelter. The the average individual will not usually have the opportunity to take advantage of a tremendously high right off type of shelter because most of the high right off type shelters. Let me let me talk about right off just a little bit. Let's take a person that's in the fifty percent tax bracket 50 percent tax bracket individual is a person and I'm going to talk about the state of Minnesota that will have taxable income not total income but taxable income somewhere in the area of 35 to 40 plus thousand dollars. And the way to get an idea as to whether the individual is approaching this area is when their tax bill combined federal and state comes up to somewhere around 14 15 16 thousand dollars, then they should possibly consider looking at tax shelters. The tax shelter is available to the smaller individuals are generally not as risky and the write-offs are not as substantial, but they are available all the way down to as little as 2,500 (00:03:15) dollars. When you speak of shelters, I gather that you're not talking about the kind of thing where people can set money aside tax-free for retirement. (00:03:25) No, not not at all. This is this is an area. Well, let me address basically the three types of shelters that are currently available that most people are interested in and this is in the area of Real Estate. Oil and gas and Equipment leasing. These are the three primary areas that are currently being looked at by the investment Community the investor Etc to create a tax shelter and these are situations where you have deductions pass through to the investor are intangibles, which are those expenses which are incurred that are non recoverable these become deductions. And as a result, the individual is available. You can Avail himself of taking these deductions on his tax return. But it's not basically something you talk about is putting your money away for retirement or something of that nature. (00:04:31) Well, maybe you can be a little bit more specific. How would it work in the specific case of real estate? For example. (00:04:37) Well again, there are many many types of programs. There are programs where your initial right off is very very small but the income from the program is heavily shielded from taxation on the other hand when you're going into a building project where you're starting let's say you're going to build condos or apartments or hotels Etc. Your original investment is heavily sheltered from taxation. Then your income is primarily based on a five six seven year period down the road when the property sold and you get a nice handsome capital gains (00:05:14) then more on real estate argan (00:05:16) oil. Well, let me talk a little bit more about real estate. there are many many programs available today in the area of real estate where the the write-offs are Oh, let me put it this way the right Officer available to all types of investors. As far as money goes you can have real estate programs. I know of some down as low as 3,000 dollars where the income is sheltered plus you get the capital gains appreciation as years go on and then we are also very familiar with some or 50 to 80 $90,000 spread out over three to four year period they're much more sophisticated. They're in for the more sophisticated investor. And most of the major brokerage houses it deal in these areas require extensive investigation of the client background as to his degree of sophistication Etc. But it really depends on what a person needs, you know, I wanted to make one comment before we go on after I appeared on your program the last time I got a call at my brokerage house. And was roundly criticized by lady for suggesting that everyone had a broker. This is a this is interesting. We in the investment Community do feel that everyone should have a broker if a person has 2500 dollars laying somewhere in a bank account. Then there are things that they could probably do which would help them. So I think everyone should have a broker if they're in that area of savings Etc. (00:07:00) Well as move on to oil and gas a little bit here now, that's certainly a (00:07:05) well I guess about half of your news just before we came on was devoted to the Iranian crisis. All right, the Dynamics today of the oil and gas business are one of the most exciting areas that we see the potential layer for not only tax shelter but substantial gain over the years to come. Strictly on the fact that we believe that oil and gas prices are going to go up. We do not see any possibility for a major decline in this area. So in in oil and gas you have many many types of programs, I don't know of any that are considered to be tax shelters that you can buy into for less than $5,000. There are some tax sheltered income programs that you can get down to $2,500 on but the difference in these programs is fantastic. In other words. I tell people that a hundred percent of a bad thing is still not a very good deal. Well, you can buy shelters that historically have not returned a great deal of money, but you are going to be assured of getting your 90-plus percent right off over a one to two year period and on the other hand you can go into Programs that are perhaps more conservative you won't get quite as high a write-off, but you will have somewhat better Assurance. There are no guarantees in the oil and gas is a very risky business but you'll have somewhat better Assurance of getting some all or our profit on your money back. And these are zero areas are very very interesting to us right now and currently there something somewhere between 55 and 65 companies that are registering programs of various types with the Securities Exchange Commission in Washington. This interestingly enough has not changed materially in the past few years, even though the interest in oil and gas has gone up very dramatically based primarily on the fact that every time you go to the service station you realize what's happening in that particular field. (00:09:20) I wonder about the risk in that when you read that some of even the very largest oil companies spend Millions. Millions and millions of dollars exploring only to come up dry what happens with some of these smaller outfits that attempt to go out and find (00:09:33) oil. Well, let me put it this way there. There's a tremendous risk in drilling an oil. Well, no question about it. The I would say that on average you're going to hit 20 percent. If you drill five Wells and you get one you're in the ballpark as far as credibility, the expense of drilling an oil well has skyrocketed just like everything else and perhaps more because it's a highly sophisticated area. The equipment involved is very very expensive. Very massive Etc. And for that reason people say this to me, I frequently say when I'm talking in the area of oil and gas reserves are in the area of drilling I say if this is such a good deal If this is such a grand opportunity for me, why are you selling it? Why don't you and the general partner? Just keep it all yourselves. Well number one in my case. I don't have the money and look at it as as a pie. Would you rather have a sixth of a pie or an empty plate? You can go out and drill at well yourself are the company the general partner can drill a well himself and if he if he hits he's going to be very very happy about it. If he comes up with a dry hole he's going to be very sad and have lost hand will have lost a lot of money. So the theory is and is very sound is to diversify the risk among a great number of people there by cutting down on the wrist any one individual and when you also go to a number of people more funds can be raised so that a greater number of Wells can be drilled and because of this the the risk is substantially reduced. There are many private programs in this area and many of them are excellent in the past. I have sold private programs where there were as few as three Wells drilled these these are not to be overlooked as an investment opportunity. I would like to say one thing in defense of the large public programs which are offered by most of the major brokerage houses. And that is that a lot more people have looked at them. And I think for the unsophisticated investor their best bet lies in number one knowing that they need shelter and I can get this from their own analysis or their tax advisors tax attorney Etc. And when they do realize that they need shelter then perhaps at that time. They should go to a brokerage house and start asking questions and ask all the questions that can possibly think up. (00:12:25) Let's send move on quickly to the third area that you say shelters are common in real estate is one oil and gas the second and Equipment leasing. What in the world is that about (00:12:35) well equipment leasing is basically I guess started as an investment or security. To my knowledge. Anyway, I'm sure there are other instances when the cost of computers became so high that rather than buying one and tying up a company's money on it. There were firms that would lease computers today. We've gotten into more mundane areas such as rail cars river barges things of that nature and these are perhaps more sophisticated area than oil and gas in real estate. There's somewhat more risky because they're more sensitive to recessions ups and downs in the economic cycle real estate on the one hand is changing Market constantly the real estate market in Minnesota right now may be very good or bad. I'm not going to say while the different situation might Prevail in, California. Real estate is a long-range program. All the oil and gas should be looked at as a long-range program. And of course equipment leasing should be looked at as long-range program (00:13:57) sounds like all of these things are not exactly the kind of thing one would jump into here three weeks before the end of the year in an effort to save some money. What can one do what would you recommend somebody do with just a few weeks remaining in 1979? (00:14:12) Very very difficult to answer that with any conviction on my part. the time for planning tax planning particularly should begin the day that you realize that you are going to be and the bracket the tax bracket that would entitle you to get into certain of these shelters. Now the my suggestion to anyone that is interested in shelters is yes, there are few still available year-end programs generally do not allow the percentage right off that programs put together in the first four months of the year do the best time to start your planning isn't January 2nd. Absolutely no question about it and the vast majority of tax shelters in this country. At least those sold through the major brokerage firms are actually consummated in the first half of the year. It is awfully late right now to do anything. There are a lot of programs around that people might want to take a look at but generally your best opportunities and certainly much wider variety of projects are available early in the year than they are even after July. Let's say (00:15:39) it's about 23 minutes past. The hour Our Guest is George Covington investment executive with Blythe Eastman Dillon Company. Let's see what's on the minds of our listeners this noon George. If you have a question for George Covington in the Twin Cities area call to to 11550 221 1550 in Minneapolis. St. Paul outside the metro area. There's a toll-free telephone number available within the state and that number is eight hundred six five two 97008 hundred six, five two nine seven zero zero. What is available for the person of average income if anything? Is there any reason at all for the person with average income to be looking at this kind of thing at all? (00:16:30) It's difficult for me to know what you mean exactly by average. Let's look at a person that let's say makes 25 thousand dollars a year within the family man and a wife two children. If they're fortunate enough at the end of the year to have any money left over and can establish a savings account or a money market fund of some type where they can accumulate income over a period of time then yes, they possibly can get into some of the more conservative shelters particularly in the area of real estate and oil and gas. I don't know of anything that is available to a small investor in the equipment leasing feel the the thing that I would suggest that people that have somewhere between oh 2007 thousand dollars to invest that they would like to invest and incidentally, I want to re-emphasize this they should look at this as a long-term investment. Because many of these programs and that's what we refer to them as are relatively limited as to their saleability other words. Some of them you have to stay in almost until they expire some of them are marketable at a reduced rate early in the program. But the main problem I see for the small investor is that they should really be sure that the money they invest is available for them to leave in the investment for anywhere from a 2 to a seven-year period and incidentally these programs are designed in such a way that they will generate the vast majority of their income in the later years. And as a result, they should look at it as a long-term investment not a high right off, but the write-offs they do achieve are used just primarily to reduce their base cost for the investment. (00:18:42) We can deal if listeners want with General kinds of investment questions here not just specifically tax shelters of (00:18:51) several things talking about that Bob have occurred in recent days that the stock market is selling at a very very what we consider to be low profits to earning ratio PE ratio and the market has shown signs even through the Iranian crisis of having a great deal of underlying strength and perhaps for the more stock oriented investor. It might be a good time to check with their Brokers or I broke her about some opportunities in this area interest rates since the last time we met Have gone down as much as half to three quarters of a point and gold after a very very strong run up two days ago has backed off in the world markets as well as the markets in the United States in the Commodities Market. All three of these things interest rates on yields on bonds for instance have begun to change they're going down slightly which is a positive indicator for the economy to come. So what we have is a situation that offers a lot of investment opportunities right now for those people that are actually not in need of are interested in the area of shelter. (00:20:14) Should this be the time of year when somebody who has a stock that hasn't done. Well should they begin to get rid of it at this point to (00:20:22) write again? I should look at their portfolio. They should look at their gains for the year short term. Long-term Etc and make a decision as to whether a stock. They have perhaps they don't like it anymore. They're disenchanted with it. It might be a good time to sell it and establish a loss on their records for this year. (00:20:44) Well, I think we have a caller for you George somebody with a question for George Covington. Hello. You're on the air. Hello. I have a question. It doesn't deal specifically with shelters, but I'd like to know what the prospects are for investing in the solar energy industry. (00:21:06) Well, I think long-term. They're very very excellent. 75% of this country's energy needs now are provided by fossil fuels oil and gas primarily a lesser extent much lesser extent coal solar energy is definitely something that we're going to have to utilize just as we're going to have to take another hard look in the area of nuclear and perhaps revamp some of the systems of safety Etc there but solar energy is definitely something that the very long term investor should look at as having excellent potential for the years to come solar energy. Companies are generally at this time rather small and it would require a high degree of sophistication on your part as an investor or you'd have to find a broker that had some expertise in this field to really make a good sound intelligent objective purchase in that field because most of the companies are small, they're still doing a lot of development work and there's a there's a company right here in in Minneapolis area that's involved in that and so I would suggest you check with a broker on it and find out what you could could come up with (00:22:30) seems like it'd be kind of hard to while the field may be pretty good. It might be kind of hard to pick a specific company. If you look back over the history of various technological inventions there such as well. Whatever it might be there have been a lot of firms that have not made it while the industry generally is done. Well automobiles would be an example and one could just go on and many many. (00:22:52) Exactly solar energy particularly, there's still a tremendous amount of experimentation going on in the field and a lot of the high technology companies are getting into it, but it'll be a long time before any major percentage of our energy supplied in this cell and this area (00:23:10) we have another caller standing by hello. You're on the air. Hello. Am I on? Yes, sir. Oh, yeah. I was wondering gambling stocks haven't really been given much identity by the brokerage firms and they've been as a group rather successful. What's your prognosis of prognostication? Are those that that group of stocks? (00:23:32) Well the eye this is a personal reference but I think there's enough speculation in in speculating to with your major more established types of companies than is necessary to go out and buy perhaps sell some of the gambling stocks. The field is broadening at on a very rapid basis. There are a lot of companies firms Etc. One of the major motion picture production house has announced a tremendous spending spree over the next few years in this area gambling stocks are I should say, I would consider them to be speculative. I don't see the firm basis there that you have for a manufacturing operation for instance. (00:24:30) The telephone number in the Twin Cities is 221 1550 and outside the metro area 865 to 9700 Our Guest is George Covington and we have another caller standing by hello. Hello. I'd like to ask what specific kind of real estate is a good investment or isn't there a specific kind? (00:24:53) Well, the best kind for most people is to own a home and this is the most basic of tax shelters that are available the interest that you pay on your mortgage is deductible and this creates a shelter and real estate is extremely Diversified, of course, but most of the programs involve themselves with projects all the way from very high quality mobile home parks up to the most Educated hotels and condominiums that are built in this country the real estate available to the small medium and large investor. Today is is absolutely fantastic and something happened back in the 1978 Tax Act. Made Real Estate much more interesting than it had been in the past because real estate primarily is designed to create perhaps shelter front end. Perhaps create tax free income through the years. But basically the reason people buy real estate other than to live in it is to make a profit on it in the long run and the absolute maximum tax that is required to be paid on a long-term capital gain in the area of real estate is 28% And so that makes real estate much more attractive than it was in years past. (00:26:28) Okay. I think we have another listener. Hello. You're on the air. Yes coming from the other side of the spectrum. I suppose being interested in providing a tax shelter for somebody to are there any Brokers that have a pool of potential investors who are interested in? Leasing equipment leasing or investment in various projects that could provide them a shelter. (00:26:57) Yes. Let me tell you how you might take a look at this. You should contact Brokers several Brokers ask them as to their interest in your program and I'll tell you exactly what a brokerage firm large small Etc is going to look for they're going to look for strength Financial strength background of the general partner the general partner being that party in the business deal and all tax shelters are business deals that provide the operating capital E know how etcetera and they're going to look for financial strength and background primarily. And if you have these and your program is of a size that will Investment dollars and all programs are different then. Yes, I think most brokerage houses have investors that are interested in these things. We certainly do. (00:28:01) Let's see what our next listener has on his or her mind. Hello. You're on the air. Thank you. I have a question for mr. Covington. I purchased some stocks at the beginning of the year and I gave my broker a free hand in doing things and (00:28:18) let me ask you a specific question. Did you give the broker on discretionary Authority? (00:28:24) Yes. I did. (00:28:25) You signed the discretion papers. It's hard enough. Okay, go (00:28:29) ahead and he traded the stocks about three times and each time. It made a gain and the last stock that we got into was a real loser and I sold out of it at that time. Can I sell our can I deduct his advisement fees from that came out of the out of the paper gains on the trading of those stalks off my income was this a (00:28:59) broker or an investment? Are you dealing (00:29:01) with this is stockbroker. (00:29:04) Well, his only fees are his normal commissions. And of course commissions are (00:29:08) deductible. They are yes. Okay, even though none of that that gain was eventually realized because I so I've sold out of it in the (00:29:16) same year. That's true. You you paid $10 for something and you sold it for five. Then you've lost $5 commission's decline in the stock all included. (00:29:30) Okay. Thank you very much. You're quite welcome. All right. Let's see what our next caller has. Hello. You're on the air. Thank you. Say I have two children that are in the awkward position of having to pay taxes and I was wondering on a basis of minimizing the taxes that they will pay. They have received gifts that put them in a taxable brackets and other awards that were given to them. Is there something that I can do to help them not have to pay taxes so that they will have as much left for their schooling and other activities when they are of age. (00:30:07) Yes, you may have to act in their behalf. But there are certainly Investments that you could make that would shelter their income. Just like it would shelter yours. Yes. I definitely suggest that you get in touch with a broker and discuss this. (00:30:23) Okay. Thank you very much. Our Guest is George Covington investment executive with Blythe Eastman Dylan company in Minneapolis. And we have some open telephone lines this new mm to to 11550 in Minneapolis st. Paul 865 to 9700 in other parts of Minnesota. We're specifically talking about tax shelters today, but George is perfectly happy to talk about any sort of investment question you have as long as you don't mention specific particular stock issues, and we do have a caller standing by hello. You're on the air. Yeah. Hello. I wonder if I may ask you to clarify something. You said earlier on the real estate. You said that The most you pay is 28% on long-term capital gain. I thought UK its capital gain on 40 percent (00:31:15) 70 percent of forty percent does become 28 percent (00:31:21) maximum. Oh, yeah. (00:31:24) Okay. You're quite welcome. (00:31:26) Well now you've confused me. What's that (00:31:27) about? Well the to put it on a dollar basis. If you sell something and you create a dollar of long-term capital gain, and I'm not going to get into the nitty-gritty on the thing Bob, but you will never have to pay more than 28 cents of that $1 created if it's a long-term capital gain. Hmm. (00:31:48) Okay, we have another caller standing by you're on the air in what your opinion would be on time sharing investments in real estate. I'm thinking specifically of condominiums in tropical glow like in Hawaii that are being sold on. We can tweak increments. (00:32:09) Well, let me let me tell you about right now Blythe is through its real estate entity Eastdale Realty putting together a program on a involving a hotel in a series of condominiums in a tropical setting. Let's put it that way. I'm not going to get into any great detail on it and part of the benefits to the purchasers of this program is that there are large number of Condominiums involved which become part of a rental pool, which is operated by the hotel which is in conjunction with the so it becomes an integral part of that particular shelter. And many of these things are just a way to add money or income to a real estate investment. Yes, they depending on how the program is structured. It can have some very substantial benefits because I know in our particular case what we're doing is I believe it's 60% of the income rental goes to the owner of the condo while 40 percent of it goes to the renting agency in our case is going to be a major Hotel chain and by doing this it supplements in come to the hotel and the whole project and yes, they can be very attractive. And yes, you should look at it. And but again I want to reiterate every tax sheltered investment should be looked at individually very carefully and be very sure of the strength of the general. I can't emphasize that enough. (00:33:56) Let's see. What our next caller has for a question. Hello. You're on the air. Yes. I may I would like to ask mr. Covington. If you're in a position where I would say probably perhaps a small to medium small investor most of your assets beside a home are in the stock market and very blue chip stocks. However, your what should I say liquid assets are at not what they should be. I was wondering what his opinion is as of now of the money market funds the very conservative no-load funds to put part to sell part of the stock and at least he'll get into more liquid position by investing in I believe on one that I'm interested in is 5,000 minimum. (00:34:50) Okay, you really ask two questions and I want to hit something that you didn't think about perhaps which could on a conservative basis increase your yield on your you referred your stocks as Blue Chips. That's very important and There are available to investors such as yourself privileges to write options on these Blue Chip stocks are perhaps if the portfolio is large enough to use it as a base for writing options on other Securities. Other than those you have in your portfolio. So depending on the size of your portfolio, I think you should talk to a broker about an option writing program, which is a very conservative approach and is used by currently many fiduciary type accounts fiduciary type accounts being Trust Banks Etc. And this will supplement your income and I don't really think it's an awfully good time to be selling Blue Chip stocks. I am just not in favor of that because I still have a lot of faith that the market is going to go up and so look at that first now as far as liquidity If you've got a nice portfolio Blue Chip stocks and they're not going down every day to the point where you're losing a lot of money. You have a lot of liquidity because you can get your money in five days by normal sale of that stock. So I don't see any reason to dump your portfolio unless you're dissatisfied with your yields and most people buy Blue Chip stocks for combination of yield growth Etc. So use sound like an investor that you need some you need some help in in your planning for the long range get in touch with your broker and talk about it. (00:36:45) What is an option? (00:36:49) Well, the most familiar option now that most of the listeners and you I'm sure would be familiar with is let's say that you liked a piece of land that is in your neighborhood and you thought it had some potential for development in the future. And yet you currently did not have the money to buy the land outright. So you might go to the owner of the land and say I'd like to give you let's say $1,000 for the right to buy this land from you over the next anytime within the next 12 months at us agreed upon specific price and he says okay Bob I'll take that. So you wrote him a check for $1,000 and he gives you an option written option on a piece of property at X number of dollars to be exercised anytime within the next 12 months. Alright number things can happen. You are unable to raise the money by the option expires and he keeps the thousand dollars are let's say that nine months down the road you find that you're unable to raise the money and yet John Jones your neighbor. Came into a windfall and he comes to you and says Bob don't you have an option on the property down the road? And you say yeah. Oh and you say would you like to buy it so you can in turn sell your option to him are on the other hand you do raise the money and at the end of the 12 month period you pay for the property. What you've done is locked in a price for a specific period of time do the same darn thing with with stock. You can buy a call option A call option is the right to call a stock at a specific price on or before a specific date by paying at what we call a premium or it's actually just more nothing more than option dollars for that right there put options. This is a very interesting area offers a lot of potential for a lot of people and it's relatively new. The first exchange of Chicago Board options exchange, which was established back in 1973. So we're dealing with a relatively new market which has fantastic potential for the more risk oriented investors and in the case of the young man that just called with the stock portfolio. It can offer a conservative means of increasing his income on his Securities over a period of time possibly (00:39:28) sounds like it would be fun to have some money doesn't we have another caller standing by? Hello. You're on the air. Yes. I'm calling from Randall Minnesota and what I would like to ask What you're thinking is on tax deferred annuities that are offered by insurance companies for the small (00:39:47) investor. They're very good what you're doing. There is you're taking a specific number of dollars and investing it into an annuity which will create income for you, which is non taxable as long as it is left in side the annuity to phrase it and as a result what you have is a is a means of deferring Payment of taxes on money earned and it is an ideal type of investment for some people is very conservative. There are generally extremely safe. And yes it it might be well the insurance companies around the country on all the major brokerage houses Market these 44 various very very strong groups. So yes, they're good Investments. Generally (00:40:45) how much of a person's income should they put into this kind of the opportunity and shelters? Hmm. Well in this kind of thing we're talking about here the the nerd Ingenuity owe tax deferred annuity. (00:40:58) Well, you're really looking at a an investment that Is it a liquid or is non saleable without incurring some tax consequences? So you only put that money in there, which you are fair almost definitely. Positive that you're not going to need over a period of time and this is the financial planning. Let me talk about that just a second. There's no area that is more important to the investor than having doing it himself if he sophisticated enough are on the other hand having it done by an accounting firm an accountant of someone that's familiar with tax consequences on investments inheritances things of that nature. Many people go about their business making money paying their bills not knowing one thing about how they actually stand and an individual family of a family is nothing more than just an operating little Corporation and most of them just don't know where they stand financially and many people don't know what the consequences would be. If if one of the members of that family were to be unable to earn wages for a period of time financial planning is very important. These plans are available in any number of places. All the major brokerage houses have them I'm doing a commercial for brokerage houses again at the same time. It can be done by your CPA your attorney etc for a very minimal amount of money. Some of them down as low as 250 dollars of which a large part is tax deductible. So it's something that people should be more aware of this should be more To them and it's amazing how many people walk into offices have huge net worth and actually have have no idea what would happen to it if something should happen to them or to their estate. (00:43:19) I believe we have another caller standing by do we not if we do we do not at this point we have about nine minutes before one o'clock and we'll continue with questions for George here for a couple more minutes. We have somebody on the line now. Hello, you're on the air. Go ahead, please. Hello. I'm a single woman and I'm looking at houses to buy and I've heard the the rule of thumb to follow is the four to one ratio. How wise is it to spend more than that on a house? (00:43:52) It would depend on your financial backing over and above your ordinary income. The thing that you have to look at is am I going to be able to meet my obligations and I would say that the rule of 421 is an excellent Rule and to violate it you should have some substantial some substantial backing to in the event of an emergency. I would not Advocate that you go too far out on a limb past the 421 rule under any (00:44:25) circumstances and that rule being four (00:44:28) times their of four times the income based on the mortgage retirement. (00:44:35) So if somebody earn $25,000, they should not buy a house worth more than a hundred thousand. (00:44:41) Right? No, I think the young lady was referring to monthly income. I see monthly income in relation to monthly mortgage payments. (00:44:51) Okay, which of course are a little higher now with interest rates being up. Yes. Well George, I want to thank you very much for coming in again today George Covington investment executive with Blythe Eastman Dylan and Company and talking today specifically about tax shelters and other investment questions of our listeners.