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Self directed IRAs under attack in proposed tax bill

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Re: Self directed IRAs under attack in proposed tax bill

#271

Post by lmeyerov »

CPLX wrote: post #205
lmeyerov wrote: post #181

Earlier quoted context omitted.

The big thing I heard about is this ends QSBS, which stinks for founders: something like 15-20%+ of your company's value. Worse, it's a retroactive tax, meaning taxing founders who started the journey with that in mind. Talk about rich senators punching down vs encouraging company formation! PSA: If you are starting a US company and haven't heard of QSBS.. look into it at the federal + state levels, as that's a good…

As a founder I'll certainly take advantage of QSBS if it's relevant to me in the future. But let's not delude ourselves -- it's wildly unfair as a tax break. The primary use of it seems to be allowing angel investors to literally pay no taxes whatsoever on millions of dollars in windfall profits.

I'm not sure why it's unfair for first-time founders. STEM founders are largely better off not innovating and instead helping FB sell ads. Tax incentivizes like QSBS for companies, especially bootstrapped co's, help. Job creation & technology invention is why the gov already has direct programs to give tax money directly to startups (SBIR, R&D tax credit, ...), and this is an extension of that encouragement. We need more, not less -- otherwise it'll push even more to the concentration of VC-funded fintech startups and FAANG.

I would agree that QSBS support for the already-rich can be less effective -- your case of angels. I'd rather see improvements on the capping structure, vs pushing incentives even more (15-30%!) to working for FAANGs.

Re: Self directed IRAs under attack in proposed tax bill

#272

Post by toomuchtodo »

oceanplexian wrote: post #268
toomuchtodo wrote: post #189

Earlier quoted context omitted.

> My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. We probably shouldn't encourage the general public to gamble their retirement funds in a casino. I understand many believe this is an "asset class", but there is ample evidence crypto has no place in someone's retirement asset mix. Such investment in a taxable account is reasonable compro…

I like how we are all pretending that mutual and index funds are also not a casino.

They have cash flows and intrinsic value. Crypto does not.

Re: Self directed IRAs under attack in proposed tax bill

#273

Post by ImPostingOnHN »

jfrunyon wrote: post #245
caseysoftware wrote: post #203

Earlier quoted context omitted.

There are companies like Rocket Dollar that handle the paperwork for you for $15/month. Not mainstream but not a secret either.

I don't think too many "peasants" would be able to make $15/month from it, much less any actual gain.

I think many could

Re: Self directed IRAs under attack in proposed tax bill

#274

Post by UncleMeat »

bpodgursky wrote: post #61
UncleMeat wrote: post #25

Earlier quoted context omitted.

You've already won then. Why complain?

You know that some people care about how policies affect people other than themselves, right? They may even care about society as a whole.

I really don't see how enabling people to make wild fortunes in tax advantaged accounts if they get lucky in cryptocurrency is good for society as whole.

The default is taxable accounts. Things like IRAs and 401ks are exceptions carved out to encourage the population to invest so that they don't end up eating cat food at age 80. People building huge fortunes in their IRAs isn't achieving this goal.

Re: Self directed IRAs under attack in proposed tax bill

#275

Post by TheCoelacanth »

loourr wrote: post #217
2arrs2ells wrote: post #101

Earlier quoted context omitted.

Re: revenue generated, if this [1] article about Peter Thiel's $5bn Roth is correct, that's $1bn+ in lost long term capital gains tax on him alone! (That said, I'm guessing the intent of the provision is more about fairness/eliminating a loophole for the wealthy than strictly generating revenue). [1] https://www.propublica.org/article/lord-of-the-roths-how-tec...

Roth IRAs are pre tax so even if this bill passes Peter Thiel won't have to pay any taxes on his $5B.

If Peter Thiel had contributed the maximum possible with a mega backdoor Roth for every year of his life, that would total roughly $2 million, so Thiel has at least $4.998 billion in untaxed capital gains in his account.

If this passes, it wouldn't go back and make him pay taxes on those, but it would stop other people from replicating that trick and it would greatly reduce the amount of future untaxed capital gains he will get.

Re: Self directed IRAs under attack in proposed tax bill

#276

Post by TheCoelacanth »

refurb wrote: post #176
300bps wrote: post #53

Earlier quoted context omitted.

I'm actually pretty fiscally conservative but I think it's ridiculous that someone abused the intent of a Roth IRA by accumulating $5 billion into it. The whole purpose of IRAs is to encourage regular people to save for retirement. It was not meant to provide billionaires tax loopholes to avoid paying millions or even billions of dollars in taxes. It's kind of like playing a game with someone. 99% of the people are f…

Making a lucky investment is “abusing the intent”?

It wasn't luck. He sold himself assets at below market value to launder them into his IRA under the contribution limit.

Re: Self directed IRAs under attack in proposed tax bill

#277

Post by vmception »

sokoloff wrote: post #12
vmception wrote: post #7

Hey everyone: stop talking about your compliant tax strategies! It’s been nice to want to help people but now, obviously, too many people know of some and their representatives are changing the laws. It’s back to the way it’s always been: if you can afford good lawyers then you get to know of obscure tax codes. Lets leave it that way.

The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome.

> The modern 401(k) practices emerged from one of these then-obscure tax codes, which I view as an unabashedly good outcome.

That's exhibit A of what I'm talking about!

This is an article about IRAs being heavily restricted, 401k's are in the same 400-section of the tax code. IRAs are subsection 408, 401k's are subsection 401(k).

Literally just stop talking about it, stop trying to get a personal finance blog going, stop trying to get youtube views funnelled over to a personal finance discord server, just let unaware people run around like chickens with their heads cut off because when you tell them whatsup they try to get the laws changed when they fail to take advantage of it adequately

Ignorance is bliss and convenient, this is where we are. Just get the tax breaks you have because of your superior reading comprehension skills and eventually your ability to outsource and augment those skills to experienced lawyers and accountants with the same skills.

Re: Self directed IRAs under attack in proposed tax bill

#278

Post by nybble41 »

CPLX wrote: post #241
loourr wrote: post #217

Earlier quoted context omitted.

Roth IRAs are pre tax so even if this bill passes Peter Thiel won't have to pay any taxes on his $5B.

This comment is factually inaccurate. Roth IRA's are post-tax, that's the whole point of them. You put money in after paying tax and then you're done, when you withdraw for retirement it's tax free. If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now. It's a really substantive change, hence the discussion.

> If this bill passes as written he would actually be forced to divest assets out of his Roth IRA and then pay taxes on them now.

He would be forced to sell his current assets in the IRA, yes—but what prevents him from rolling over the proceeds into another asset? As long as all the funds remain in a Roth IRA until retirement age there shouldn't be any taxes due to the reinvestment, now or later.

Or are you implying that he would choose to take the tax hit of losing the Roth status rather than sell the assets?

Re: Self directed IRAs under attack in proposed tax bill

#279

Post by nybble41 »

kelseyfrog wrote: post #248
Grim-444 wrote: post #224

Earlier quoted context omitted.

Well you can't deny that options are being taken away for a portion of citizens. I stopped doing more than the minimum match into my 401K a long time ago because I could no longer trust that in 30, 40, 50 years nobody wouldn't have come after it as an easy target. It's kind of like gun control (which isn't a good analogy since it's too politically charged) - you're pointing at one restriction and saying "hey, it's no…

If any restriction is intolerable then what remains?

Liberty.

Re: Self directed IRAs under attack in proposed tax bill

#280

Post by darkerside »

loourr wrote: post #152
darkerside wrote: post #30

The whole article is predicated on the lie that low and middle income earners are buying private placements and LLCs in their IRAs. They are not. Full stop.

That's false. I know for a fact that tens of thousands of middle class people are doing this today.

Care to expand on this?
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