Industry Contributors & Editorial
McNellis on Spring Rituals: A Full Accounting
Like daffodils, if not quite as lovely, accountants are among the earliest signs of spring. When ours called the other day to ask for details about a new partnership, I noticed the days were indeed growing longer. Although pleasant, our conversation soon tumbled into that weird parallel universe that the best accountants inhabit—the one where bad news is good, losses are treasured and staggering losses a cause to celebrate, if only on April 15.
Just like everyone else, accountants live to shine, to do what they do best. And, liberal or conservative, progressive or tea partier, the best CPAs absolutely dote on saving their clients money—that is, lowering their taxes. This is why they grow curiously silent when you mention windfalls or cash cows or other wretchedly ordinary income; this is why they grit their teeth when you proudly announce you double-escrowed a deal for a quick 50 percent profit. They wince at unsheltered gains, knowing just how much harder their unthinking clients have made their job:
“Couldn’t you at least have worked an installment sale?”
“I’m really sorry; the profit was just sitting there.”
“You should have called.”
On the other hand, the CPA’s joy in discovering new losses—especially paper losses that cost their clients nothing—is wondrous. To an accountant, showing a client a brilliant new stratagem to defer gains into the next millennium is better than … well, better than a whole lot of other things. Reducing a client’s outsized capital gain with a dexterous shift of her taxable basis is sheer nirvana.
Their more adventurous first cousins—economists—may admire numerical symmetry, but accountants positively adore it. You can have your Rembrandt or Van Gogh or even Jackson Pollock, but CPAs alone know true beauty: a transcendent pair of columns, as intertwined as a double helix, yet ramrod straight and consisting of nothing but numbers, two pillars upholding the temple of commerce, perfectly balancing one another, credits offsetting debits to the penny.
Ah, the penny. Disdained by everyone else, the last penny is the CPA’s ultimate goal, calculating it to his heart’s desire. This is why the modern rule (adopted shortly after Copernicus) allowing this ancient profession to round pennies to the nearest dollar is still scorned by the conscientious practitioner.
In selecting her CPA, the real estate professional may be making a career decision. While there are doubtless as many different types of accountants as accountants themselves, the profession may—with sincere apologies to any living accountant I’ve ever met—be divided into two types. The Enron Enabler will merrily let you get away with anything and even suggest a lot of cool stuff you never dreamed of. The E.E. thinks tax shelter, not cow, when he hears the word “Guernsey;” feels naked without his Rolex and will suggest deductions that would make Al Capone blush. An E.E. is a lot more fun than other CPAs; regardless of what happens in Vegas, he’ll expense it for you. His drawbacks as your bean counter are simple—he will demand to co-invest, and, ultimately, when you’re sharing a prison cell, he will no doubt snore.
The other is “Jiminy Cricket,” a conscience that chirps in your ear every time you try to write off a personal letter’s stamp. Jiminy demands receipts for every bridge toll you claim and insists on knowing if you really spent the entire meal discussing business before he’ll approve a write-off. When you mention that a business-seeking CPA suggested you deduct your 12-year-old’s piano lessons as furthering a business education (because she will no doubt run your business one day and have to entertain clients), poor Jiminy dies a little death.
Yet, more important perhaps than your CPA’s nature is your working partnership. Is it equal? Do you explain everything, or do you sweep more dust under the rug than a Motel 6 maid? Perhaps you only disclose on a need-to-deduct basis? Or maybe you adopt the incomprehensibility strategy. The time-honored gambit was pioneered long ago by 13year-old Catholic boys. When forced to go to Confession, they sought the visiting priest from Portugal whose English was so poor that they could confess to being the Boston Strangler and still only be penalized three Hail Marys.
Regardless of your accountant’s idiosyncrasies or how you choose to behave, we suggest the full disclosure, declare-every-dime-of-income approach. Why? It’s easier being honest. As the detective said in “Thelma & Louise,” dismissing the heroines’ chances of escape, “Brains will only get you so far, and luck will always run out.”
For more about John McNellis or McNellis Partners, please visit mcnellis.com.