61–70 of 504 posts
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.
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As far as I have ever been able to determine, it only makes sense as a strategy under a specific set of circumstances. It is not the general-purpose infinite money glitch many people make it out to be. There are many scenarios under which it is a suboptimal financial strategy.
If we take the post at face value, one of the requirements for this strategy to work to have your "net worth exceeding around $300M". Already there it becomes pretty specific, how many in the US has that? As far as I remember, you're already in the 1% with $10M.
Earlier quoted context omitted.
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.
I see they claimed to "do it for a living". I see where they say it only makes sense for clients with 300M+ net worth.
There are plenty of other ways to interpret those two points. For instance, it may be a thing they do at their job, but not the only thing they do.
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…
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…
Is there any indication the ultra rich structure loans like this to avoid taxes? Or is this just a meme that, for the most part, financially illiterate redditors like to throw around?
As far as I have ever been able to determine, it only makes sense as a strategy under a specific set of circumstances. It is not the general-purpose infinite money glitch many people make it out to be. There are many scenarios under which it is a suboptimal financial strategy.
Once your money timeline stretches to the second generation one can start thinking in much bigger ways that have nothing to do with individual ownership of assets. The amount of assets doesn’t have to be large to start thinking in longer term cash flow cycles.
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One famous person who did this was Larry Ellison using Oracle shares. This almost caused a problem for him in the 90s due to the stock dropping in value: https://www.sfgate.com/news/article/Inside-look-at-a-billion...
The reddit post talks about putting "the asset" in a trust, but the article says Ellison personally owned shares of Oracle. That does not fit. And most ultra-rich that own lots of shares of large publicly-traded corporations own them outright. So this seems suspicious I would say. I mean I often see news about some CEO or other selling shares, and how this is announced in advance to not be insider trading. I have eve…
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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.
30 year bond is ~4.2%. You'd pay $60M in interest on a single loan at 10yrs and $183m if you took out repeated loans at 10yr/20yr/30yr and repaid at 35.
I assume that the math works out such that if you had a LOC for 100% of the asset, at the 30 year bond rate, and continually maxed out the LOC, that the interest rate paid would equal the taxation rate.
The point is that the worst case scenario is paying equivalent fees without having to trade-off between liquidity and appreciation and the best case scenario is significantly lower fees because you didn't need 100% liquidity.
For example, Mark Zuckerberg has a lot of money. So much that he can buy a mega-yacht and it not really affect him financially. But, he could buy lots of things that don't affect him financially, and he chooses not to do so.
I always assumed that acquiring a massively valued asset like a yacht that's assumed to appreciate was part of this "buy, borrow, die" strategy.