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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#51

Post by bhauer »

wmf wrote: post #42

If this is accurate, it finally explains something I've been asking about for years: The loan is paid back after the step-up in basis. That's the loophole. If the loan was paid back before step-up, the estate would still have to pay capital gains tax.

The step-up in cost basis on death is the original sin that underpins the entire debate over unrealized gains.

It's disheartening to see so much thought and deliberation going into an obviously toxic idea (taxing unrealized gains) when the obvious solution (removing the cost basis step-up when assets change hands) is being ignored.

Inherited wealth is the least earned, so it should be politically palatable to change this. But presumably because such a change would acutely affect the people who make laws in the country specifically, it is never seriously considered.

Re: Buy, Borrow, Die – Explained

#52

Post by icegreentea2 »

ajkdhcb2 wrote: post #44

I can't read reddit anymore because I always get "Your request has been blocked due to a network policy. Try logging in or creating an account here to get back to browsing." Any way to bypass this?

Did you try other browsers? For some reason for my home IP address, only Firefox (desktop) is blocked. Chrome and Edge and even mobile Firefox work fine.

Re: Buy, Borrow, Die – Explained

#53

Post by lifeisstillgood »

Richard Murphy (Accountancy professor / campaigner) is running a good series on YouTube atm, basically what could be done instead of wealth tax.

The general schtick is make tax equal (ie even without buy borrow die, capital gains is taxed lower then income tax). Equalising the two increases the tax take, and frankly seems like “encouraging getting into work”

Anyhow, if we as a society want a fairer society we know how, we just need to overcome the special interests problem

In this case (and cannot see this refuted in the article) I think treat collateralising an asset should be a realisation event. Both parties have come to a free agreement as to the value of the asset - tax the realised gains.

Re: Buy, Borrow, Die – Explained

#55

Post by deepfriedchokes »

Wow. This makes me really angry.

I read a New Yorker article recently about the Getty Family office, Vallejo Investments, that estimated they control $6 trillion in assets. Trillion! And here we are worrying about the billionaires.

With these kinds of wealth accumulation strategies, and hidden wealth through family offices, these people have more than enough power to control absolutely everything in our societies from the shadows.

Re: Buy, Borrow, Die – Explained

#56

Post by yojo »

chung8123 wrote: post #33

This seems to only be interesting if you have a lot of money tied up in a company and would like to realize some of that money without losing control of the company. Seems like a lot of risk otherwise. One bad year could have the house of cards crumbling.

I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share.

Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not.

As to the risk issue, I see no reason why the “asset” couldn’t be a combination of multiple assets, or an asset like an index ETF that tracks a diversified bundle of things. E.g. a substantial portion of my net-worth is tied up in a Vanguard target retirement fund (one asset). Most financial advisors consider this fine from a risk perspective.

Re: Buy, Borrow, Die – Explained

#57

Post by IncreasePosts »

BobbyJo wrote: post #46
IncreasePosts wrote: post #43

Earlier quoted context omitted.

What are the other options?

You want me to enumerate the potential experiences a tax lawyer may have, outside of having hundreds of clients with a net worth of 300M dollars, over a 20+ year career, that would allow them to do the math outlined in the post? I don't think that's necessary.

They literally said they do it for a living for hundreds of clients, and that it doesn't make sense to do it for a net worth of less than $300M.

So, they are either a lawyer who has done it for hundreds of clients worth $300M+, or they are lying.

Re: Buy, Borrow, Die – Explained

#58

Post by lucianbr »

SeanAnderson wrote: post #39
IncreasePosts wrote: post #15

Earlier quoted context omitted.

Ok, so now the costs are the servicing of the loan for 40 years, and paying some percent of the appreciation. Is there any indication that this would be cheaper than just paying the $17M in taxes?

Mmm, I think we're mixing up some numbers here. Let me try to break this down for clarity. Using the numbers in the report, the $17M in taxes would be paid after just 10 years, not 40 years, because the asset appreciated from $50M to $108M in 10 years and the buyer wanted liquidity at that point. After 35 years, the FMV of the asset is $740M, and tax liability would be (740 - 50) * 1/(20 + 3.8 + 5) = $198.72M So, the…

You don't seem to have accounted for "stock appreciation rights" at all, which was the whole point.

> At a 0.5% interest rate they would have paid just $20M in interest.

Plus these "stock appreciation rights", whatever and however much they are.

Re: Buy, Borrow, Die – Explained

#59

Post by twoodfin »

SeanAnderson wrote: post #39
IncreasePosts wrote: post #15

Earlier quoted context omitted.

Ok, so now the costs are the servicing of the loan for 40 years, and paying some percent of the appreciation. Is there any indication that this would be cheaper than just paying the $17M in taxes?

Mmm, I think we're mixing up some numbers here. Let me try to break this down for clarity. Using the numbers in the report, the $17M in taxes would be paid after just 10 years, not 40 years, because the asset appreciated from $50M to $108M in 10 years and the buyer wanted liquidity at that point. After 35 years, the FMV of the asset is $740M, and tax liability would be (740 - 50) * 1/(20 + 3.8 + 5) = $198.72M So, the…

The idea that anyone is getting a 0.5% interest rate for anything—let alone with collateral of a risky asset—when treasuries are at 4%+ is fanciful, and makes me lean strongly in the direction of the LARPer theory.

Re: Buy, Borrow, Die – Explained

#60

Post by adventured »

deepfriedchokes wrote: post #55

Wow. This makes me really angry. I read a New Yorker article recently about the Getty Family office, Vallejo Investments, that estimated they control $6 trillion in assets. Trillion! And here we are worrying about the billionaires. With these kinds of wealth accumulation strategies, and hidden wealth through family offices, these people have more than enough power to control absolutely everything in our societies fro…

There's no source for the claim. Here is all the New Yorker article says:

"That lucrative maneuvering is the realm of specialized attorneys, accountants, and money managers, many of whom work for family offices: in-house financial teams that typically include a dozen or so full-time attendants. Family offices, which have roots in nineteenth-century operations that served John D. Rockefeller and a handful of his peers, have proliferated in the past two decades, to at least ten thousand worldwide. They tend to have no public presence—Gordon Getty’s family office is known, inconspicuously, as Vallejo Investments—but by some estimates they control about six trillion dollars in assets, a larger sum than is managed by all the world’s hedge funds."

By some estates. Yeah ok. There's absolutely zero actual evidence to suggest the Getty family controls even a hundred billion in assets. No major wealth investigators (Forbes, Bloomberg to name two) in the past three decades has turned up such a large stash by that family.

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