How to have a billion dollar exit with zero capital gains tax • Hacker News Board

Re: How to have a billion dollar exit with zero capital gains tax

#181

Post by ajsnigrutin » Tue, May 10, 2022, 10:33 AM UTC

TrackerFF wrote: post #169

ajsnigrutin wrote: post #161

Earlier quoted context omitted.

I live in a former socialist country, and I hate the "we will tax the rich" (as in higher tax percentages) paroles I hear from our current left-leaning (even communist) parties here. Why? (and I have mentioned this before, many times, even here) Poor people already pay almost zero taxes. Rich people avoid paying taxes at all. And me, someone with an above average but below "rich" (engineers) paycheck get fucked by th…

Let's look at it this this way - say you live in Texas and make $7.25 / hr. That's $7.25 * 8 hours * 260 days = $15080 / year. According to this tax calc ( https://smartasset.com/taxes/income-taxes ), you still have to pay $1407 in total federal income taxes, or 9.33%. It may not sound a lot, but remember - when you're making that little money, every dollar counts. You could be living on the edge of poverty, where yo…

I live in slovenia.

A basic factory worker (a bit above minumum wage), earns 1200eur monthly gross, which (due to weird laws) costs the employer 1393eur (gross-gross), and the worker gets 831eur net out of that, meaning that the government takes around 40%. (the tax rate also includes pension and health insurance)

If you earn 5x times average pay (let's say you're becoming "rich"), that would make it 10k gross, costing your employer 11610eur, and you earning 5167eur net, meaning that the government takes around 55%.

Ok, similar enough,... but(!), with the same cost to your employer (11610eur), you can earn a lot more if you avoid taxes.

Lets say you start an independing contractor business in slovenia (a paper thing, you get the status) - this would make you pay a minimum of ~450eur monthly for health insurance and pension insurance (yes, this would also make you get minimal pension later, but wait for the rest of the math). Then you open a company in bosnia, where you pay ~100eur per month for bookkeeping, a mailbox, and other related costs, and then pay only 10% when you take out the profits. So your fixed monthly cost is around 600eur + 10% of the 11k of your gross gross left over, totalling to 1700eur, and earning 9900eur net, meaning that you effectively pay 15% in taxes. But that's not the worst part... if the company is registed in your girlfriends/brothers/mothers/... name, you (as a couple) still earn the same, but you're now (on paper) poor, so if you have a kid, with some paper turning, the kid will get free kindergarden and food (compared to almost 500eur monthly for two a bit above average paychecks). You might also get a government sponsored apartment to avoid high rents.

So yeah... at some point, dealing with bureaucrats in two countries goes from "not worth it" to "definitely worth it".

Re: How to have a billion dollar exit with zero capital gains tax

#182

Post by lukas099 » Tue, May 10, 2022, 10:37 AM UTC

golergka wrote: post #134

dmje wrote: post #68

Unfashionable thought: pay your damn taxes. Loopholes are one thing and IMO should be closed but morality is another. The whole idea that you can make a billion dollar business without being hugely dependent on the infrastructure, education, history, societal background etc that has largely been paid for by...taxes...is utter fallacy. Maybe if massively profitable businesses spent a bit more time doing the right thin…

> The whole idea that you can make a billion dollar business without being hugely dependent on the infrastructure, education, history, societal background etc that has largely been paid for by...taxes...is utter fallacy. Taxation is not a transaction you enter voluntarily; it's enforced by violence, and all these rationalizations don't matter as you don't have any choice anyway. So, taxation is either extortion, robb…

The fact is that we are all vastly better off under this social contract that we did not have a choice in agreeing to and that is enforced by violence.

Re: How to have a billion dollar exit with zero capital gains tax

#183

Post by urthor » Tue, May 10, 2022, 10:40 AM UTC

bagels wrote: post #55

If you want to start a software company in a QOZ with, say, $1M of recent capital gains, more cash than you expect to use in the short term, what does the QOZB do with the cash to avoid breaking the 90% rule?

From the article:

> No more than 5% of a QOZB’s assets can be “nonqualified financial property”. Nonqualified financial property includes most types of financial assets such as stocks and bonds but excludes cash, loans with a term of 18 months or less, and accounts receivable acquired in the ordinary course of business.

Cash on hand is ignored.

However, I speculate that if you put said cash in an interest gathering bank account, the IRS might have a firmer view.

So you're likely capitalizing the business with cash on hand that cannot attract meaningful interest.

Re: How to have a billion dollar exit with zero capital gains tax

#184

Post by lukas099 » Tue, May 10, 2022, 10:40 AM UTC

Aeolun wrote: post #129

whitepaint wrote: post #102

Earlier quoted context omitted.

You want to tell me when you do your taxes with your accountant you don't try to pay as little taxes as legally possible?

Mostly I just apply the straightforward rules until it seems fair. I don’t go making a seperate company to invest in a different company to hire workers in a specific area so that I can later pay zero taxes on capital gains. Honestly, the level of bother is too much to keep track of for 20%, which is already really low.

Is it fair to contribute to a Roth IRA? Is it too much bother? Where do you draw the line?

Re: How to have a billion dollar exit with zero capital gains tax

#185

Post by gumby » Tue, May 10, 2022, 10:42 AM UTC

lukas099 wrote: post #172

unglaublich wrote: post #164

... and let others pay for the upkeep of the country that enabled your success :).

If we keep putting special-interest clauses in our tax codes like these 'business opportunity zones' without expecting everyone who is capable to come in and exploit them to the maximum extent possible, that is really on us.

The intent is that people will show up and use them.

The main intent is that they be things like machine shops and the like that supply jobs and a bit of spin of economic activity (workers go get lunch etc).

Having people work in a coworking space may not be what they had in mind, but if those people go out to lunch in the zone, mission accomplished.

You can argue if that works well or not but the tax advantage does not exist in a vacuum.

Re: How to have a billion dollar exit with zero capital gains tax

#186

Post by urthor » Tue, May 10, 2022, 10:44 AM UTC

usmannk wrote: post #67

Of the reqs, having to hold the investment for 10 years seems like the biggest barrier in applying this to a startup.

Locking in a 10 year horizon with 50% of all man hours within a single suburb is also a large hurdle.

Re: How to have a billion dollar exit with zero capital gains tax

#187

Post by lukas099 » Tue, May 10, 2022, 10:44 AM UTC

imgabe wrote: post #94

Retric wrote: post #74

Earlier quoted context omitted.

The US government is the worlds largest charity, it also does a lot of other things. However it accepts donations and supports the poor, arts and sciences etc. There are even plenty of things people might want to donate too that only governments do, the Red Cross etc are hardly building space telescopes or US highways.

Taxes are not donations. You don’t go to jail if you refuse to give a donation.

> it also does a lot of other things.

Re: How to have a billion dollar exit with zero capital gains tax

#188

Post by sokoloff » Tue, May 10, 2022, 10:45 AM UTC

moistly wrote: post #63

dheera wrote: post #39

Earlier quoted context omitted.

That BS consulting fee comes from my taxes.

Strange that you pick a minuscule—nay, pissant —cost, when you could point to other waste that is literally millions of orders of magnitude greater. The BS consulting fee cost you perhaps a hundred-thousandth of a penny. The unnecessary war in Iraq cost you tens of thousands of dollars. Billions in subsidies to oil companies that are earning record-breaking profits is costing you hundreds of dollars. Don’t let clickb…

> literally millions of orders of magnitude greater

One order of magnitude is literally 10x (10¹) Two orders of magnitudes is 100x (10²) A million orders of magnitude would be 10¹⁰⁰⁰⁰⁰⁰. Millions of orders of magnitude would be larger still.

There are estimated between 10⁷⁸ to 10⁸² atoms in the universe.

Perhaps you meant to say “literally six to nine” rather than “literally millions”?

Re: How to have a billion dollar exit with zero capital gains tax

#189

Post by karmakurtisaani » Tue, May 10, 2022, 10:50 AM UTC

lukas099 wrote: post #166

mellavora wrote: post #122

Earlier quoted context omitted.

My brother's life was paid for by taxes. Went to the ER with a headache, turned out to be a brain annurism leading to 2 8rh plus surgeries and a month in the hospital. Bill was paid out of Minnesota state taxpayers fund. Otherwise he would have been bankrupt for life -- and without the surgery that life would not have been long. My wife's life was saved twice by tax-funded health care. Won't share details here. I hap…

It makes sense that people who benefit disproportionately from social spending would be pro-social spending, and vice versa for people who pay disproportionately more into the system. It troubles me to see comments here acting like the rich are all sociopaths, when really, everybody rich and poor is generally going to favor what is in their own best interests.

It troubles me to see apologist comments here for ultra wealthy tax avoidance.

Re: How to have a billion dollar exit with zero capital gains tax

#190

Post by doovd » Tue, May 10, 2022, 10:50 AM UTC

CraigJPerry wrote: post #121

doovd wrote: post #80

Earlier quoted context omitted.

businesses yes. But governments abuse public spending - at least in the UK a significant chunk gets funnelled to conservative friends and family...why should I therefore want to fund that?

Why would a desire to pay less tax on your part influence a government’s misappropriation of the public purse? That’s what voting is for surely?

Abuse of taxes is not a party-specific issue. Until laws are passed to prevent this (which is probably a multi-decade lobbying effort), it will re-occur. In the meantime, it's probably reasonable to be sour about paying taxes when it's subject to this practice by the receiver.