“A hundred thousand would be well within the realm of reasonable donation, and more could be accommodated,” added the accountant.
Jake looked at me again, and repeated, “Yeah? So?”
I stared at him briefly. “A hundred thousand dollars?! Are you serious? What the hell would I give a hundred grand for?”
Jake rolled his eyes, and then grabbed a chair and sat down. “Give me a break! Okay, let’s make it simple. What do you give out now?”
Back on the first trip around, I had religiously given the local volunteer firemen $25 or $50 every year, I always gave RPI $75 or $100, and the local Boy Scouts or Red Cross always got a handout. Some years it had hurt, especially after the Great Recession hit, but I always gave something. Marilyn had always given a $20 to her church every week, and I figured she was doing the same now. This time around I had added a zero to most of the figures. I outlined what I had donated the previous year.
He looked at me for a bit, and then said, “That’s it? You’re a real cheapskate, Carl!”
“What!?”
“Carl, you do know that charitable contributions are tax deductible, right? Anything you give to charity effectively lowers your income by that amount, thereby reducing your tax liability by whatever percentage your income would be taxed at. If you were in the top tax bracket, you would get taxed at a 50 % marginal rate. You give a hundred grand to charity, it is the equivalent of only giving fifty grand.”
“I’m not in the top tax bracket?” Just how much money did you need to be in that bracket?
“Yes and no. Most of your income is in the form of capital gains, since most of your money is in investments, which means you pay 20 %. Still, donations cut your income by a certain percentage. You should come up with a number and give it away.”
“Huh! It’s like a business!”
“Damn straight! Treat it like a business. Determine how much you want to give, who you want to give it to, and make sure you get receipts.”
“Don’t just let it out in dribs and drabs, either,” added the accountant who started this all. I turned to him with a curious expression. “Say that you want to give ten thousand to heart research. You’ll do more good in the long run by picking one charity for that and giving that one all ten than you will finding ten charities related to heart research and giving them one each.”
“Huh.” That made sense, I guess.
Jake grinned at that. “Maybe you get some perks out of it, too.”
“Like what? A free heart transplant?” I asked.
“No, but say you give money to the Baltimore Symphony Orchestra. Give enough and maybe they throw in season tickets, hmmm?”
I stopped at that. Smiling, I replied, “Actually, I like the orchestra every once in a while. I am going to have to give this some thought.” I turned back to the accountant. “One hundred thousand?”
“Why not figure that for 1984 and you can review things in six months.”
“Anything else?” asked Jake, rising from his chair. “Or can I get back to work so you have money to give away?”
“Yeah, actually, stay seated. I think I am going to need some cash this year,” I told him.
“Oh? How much?”
“Probably a few million.”
That perked Jake’s ears up. “Oh?”
I nodded. “I think so. Listen, back a few years ago, when Marilyn and I took our first trip to the Bahamas after I got out of the Army, I told her that we could buy a place like that someday. Well, anyway, we got to joking about it, and I said that if I ever got my net worth up to a hundred million, I would do it. I never thought much more about it for a while, but then we started this company up, and we have been doing well. I would think we’ll be at that point by the end of the year, don’t you?”
“Probably over that. We haven’t even included the value of the investment you are making in that Michael Dell fellow — Is he really worth it? You once said to never buy a hardware company! Why buy this guy, who is building a hardware company?”
I nodded. I had just gotten Dell’s name from Bill Gates, who didn’t want to invest, but as soon as I heard it, I knew I did. I had made a quick trip to Austin and moved Dell’s plans forward by at least a year’s time by a judicious yet reasonably small investment. “Trust me on this one. What he’s doing isn’t building a hardware company. He’s building a whole new type of production system. It’s like Henry Ford a hundred years ago. You wouldn’t be investing in the car, you’d be investing in the guy who invented the assembly line. Michael Dell is going to invent a whole new way to buy computers.”
“You say so.” Jake shrugged. The amount we had invested was well under a million, and gave us twenty percent of the company. Ten years from now that chunk would be worth billions. “So what about the Bahamas?”
“So, I told Marilyn that we would buy a vacation place when I got to a hundred mill. At the time I was half joking, but now that I’m at that point, we’re starting to get serious about the idea. I need to figure out how to do it.”
“You got a place in mind?”
It was my turn to shrug. “Maybe. I haven’t started asking price or anything, but the last place we stayed was new and looking for a buyer. I can find out.”
Jake stood up again. “Okay, you make a few phone calls and find out what the numbers are. I’ll talk to Jake and Melissa and figure out how to do it. I warn you, however, it will probably dilute your ownership slightly to drag that much cash out. Not much, but a few percent.”
“It’s going to affect your taxes, too,” added the accountant.
I nodded in understanding. If we had a company worth $100 million and I owned 90 %, then I was worth $90 million. However, if I took $10 million of my money out and spent it, then the company was worth only $90 million and my chunk was only $80 million, meaning I now only owned about 88 % of the company. “It’s probably going to change over the future anyway. Your son and Missy are still talking about creating investment pools and bringing in outside money, and using other people’s money for investments, and not just ours.”
Jake nodded. “He’s definitely feeling ambitious. How do you feel about that?”
“I know it can be done and other outfits make money doing it. I have no moral objection to any of this. I would say we try this on a small scale, keep a close eye on the whole thing, and give it a shot. If it works, we can repeat it, and the next one can be bigger. You?”
“Pretty much the same. If he screws up, I’ll hold him down while you give him a thumping.”
“How about we tell him to put together a proposal for the next board meeting. He and Missy can figure out about where I am coming up with cash by then, too.”
Jake nodded and wandered off, whistling happily. I would have a sit down with Jake Junior and go over his ideas for expansion sometime soon, too. I could see how opening up the firm to outside investors could make me even richer, and grow us that much faster. If I owned 90 % of a $1 billion company, I was worth $900 million; if I owned 70 % of a $2 billion company, I was worth $1,400 million. Either way, my cut was enough to make me the boss. I needed to sit down with Missy and find out how the big investment outfits ran this stuff.
So I sat down with Marilyn that night and told her we had to give away some money. She was very excited. She wanted to give it all to the Catholic Church! I put an immediate kibosh on that idea. It was my money, not hers, and I was nowhere near as religious as she was. If she wanted to put a C-note in the offering plate every week, rather than the twenty she had been giving, that was fine. That was five grand a year. No way in hell was I giving them one hundred grand to play with. I was going to hell anyway, and Marilyn couldn’t commit a hundred thousand dollars worth of sin if she lived ten lifetimes! We picked out several different places to donate money, including the local firehouse, the Red Cross, our colleges, and so forth. I would talk to John about some other ideas, and see if he had any thoughts. The idea of season tickets down at the Baltimore Symphony Orchestra was intriguing, too. Back on the first go, when I had been living in Lutherville, or even just visiting, it hadn’t been all that difficult to con my parents out of their tickets every once in a while. I like an occasional night of the classics. It makes me look classier than I really am!