Lil Baby has been lauded for his diligence in making money and being crafty with cash. With the Atlanta’s-based rapper’s ascension to the five commas club, he’s now getting himself a masterclass on how to maintain his wealth.
In an interview on the radio show “The Breakfast Club,” Baby told the hosts that he’s made it a point to surround himself with businessmen who’ve helped him level up his knowledge about money management. Billionaire Michael Rubin is on the list of entrepreneurs giving him pivotal advice.
The two sometimes seem connected at the hip. They make deals together, they attend events together and, in the process, Lil Baby says he’s learned a few things from Rubin on business.
Baby’s Billionaire Michael Rubin Connection
Rubin, former 76ers owner, is the founder and CEO of online sports merchandising retailer Fanatics. In 1998, he launched Global Sports, which would later become GSI Commerce, a multibillion-dollar e-commerce company. He sold GSI to eBay for $2.4 billion.
“The main advice [Rubin} gives is be simple about business that we don’t know because we ain’t into business,” he said.
Lil Baby did go into business with Rubin.
In February, Rubin’s Fanatics and Jay-Z and others like Lil Baby, Meek Mill, Maverick Carter, the D’Amelio family (i.e. Charli, Dixie, Marc and Heidi) joined together to acquire Mitchell & Ness, the iconic vintage sports jersey maker for a reported $250 million. Fanatics controls 75 percent of Mitchell & Ness; 25 percent goes to the other investors.
Tax Lessons
Lil Baby said Rubin clued him on to how to defer capital gains tax using the 1031 exchange.
Rubin “gave me a lot of advice honestly in a short period of time…just something real simple, like something you could do,” Lil Baby told The Breakfast Club. “Like you get money … you buy and then know how not to pay taxes on it until you sell the order for 40 years.”
The 1031 exchange is a tax break, and it refers to real estate. This tax break allows people to sell a property held for business or investment purposes and then swap it for a new one that the person purchases for the same business reasons. Doing this allows for deferring capital gains tax on the sale.
Capital gains tax is the tax the IRS places on the profit that an investor makes when an investment is sold. Typically, the tax is due for the tax year during which the investment is sold, unless a person defers it, which the 1031 exchange permits.
“Proceeds from the sale must be held in escrow by a third party, then used to buy the new property; you cannot receive them, even temporarily,” Investopedia reported. “The properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred.”
And if the rules of the 1031 exchange are followed, “there is no limit on how frequently you can do 1031 exchanges,” Investopedia reported.
More to Taxes than Lil Baby Thought
For Lil Baby, the money lessons are just getting started. The rapper admitted that dropping out of high school left him oblivious to the United States tax code system.
“I didn’t know because nobody didn’t tell me,” Lil Baby said in an interview, and even getting a message out to other young rappers in a tweet in 2019 to pay their taxes.
Committing tax fraud is not uncommon for celebrities whose busy schedules oftentimes leave crucial money matters in someone else’s hands.
“At that level, tax returns can be extremely long; even for a regular person, it can be 100 pages long,’ Tenesha Hartgrove, CPA, and founder of NCrease Financial Services, told Finurah. “But you have to follow up and make sure that you see when they file it. At the end of the day, you are held accountable,” she said.
In Lil Baby’s case, the rapper’s good savings habits allowed him to pay the Internal Revenue Service without the agency taking further action.
Tax troubles have plagued many Black musicians when they’ve faced accusations of tax evasion either knowingly or unknowingly, which has resulted in asset seizures and even jail time. Toni Braxton, Method Man and Ja Rule are among some celebrities who have found themselves buried in tax debt, having to make restitution payments. Tyler Perry found himself in a tax jam that led to him being audited by the Internal Revenue Service, an experience that dragged on for three years, costing him hundreds of thousands in accounting fees. Eventually, the probe worked out in his favor after the report revealed the IRS owned the billionaire $ 9 million.
Lil Baby’s Entrepreneurial Journey
Even before the Atlanta-based trap music phenom topped the Billboard charts, he was known for always finding a way to make money. Several friends and fellow rapper Young Thug revealed his hustling drive in an Amazon original documentary, “UnTrapped,” chronicling Lil Baby’s life and his rise from hustling in Atlanta’s West End to receiving the Quincy Jones Humanitarian Award at the second-annual Music in Action Awards Gala.
A story that has been widely circulated is how the rapper borrowed $60 from family members and turned it into a $100,000 win in a dice game. But with gambling, luck is not always on one’s side as Lil Baby would find out when he lost $600,000 in one night in October 2022 gambling in the Bahamas with Drake and Meek Mill.
“They say you gon’ lose more than you gon’ win, but over time, you can’t even remember though. That’s the crazy part. I just feel like, if I’m lucky today, I’m lucky. If I’m not, I’m not,” he told Complex Magazine in an interview last month.
