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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#71

Post by [deleted] »

adventured wrote: post #60
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…

[deleted]

Re: Buy, Borrow, Die – Explained

#72

Post by mtremsal »

intended wrote: post #54
yuvadam wrote: post #47

[Meta] is it common to open a subreddit just for a single post like this one?

AFAIK, its quite rare.

It has become more popular as a result of Google Search algorithm changes in December 2023. Search results now tend to showcase relevant Reddit posts regardless of subreddit size or post popularity, so it’s an efficient way to beat the SEO game. There’s value in owning the subreddit itself, such as to be able to display sidemenu links of your choosing.

Re: Buy, Borrow, Die – Explained

#73

Post by t0mas88 »

sxp wrote: post #20
IncreasePosts wrote: post #16

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?

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...

There are no real problems for him mentioned in the article. He had loans of about 1 billion, increasing to 1.2 billion at the peak, but his shareholdings in Oracle were 10x of that.

His advisor did his job by warning that this could go wrong if Oracle stock dropped massively. But it never dropped that far, so he was fine.

Re: Buy, Borrow, Die – Explained

#74

Post by pmichaud »

bhauer wrote: post #51
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…

Maybe there's just no good solution here, but I think the original inspiration for this sort of law was about family homes. It's one thing to inherit stocks and have to sell some of them off, but it's much more complex to try to pass down a property that can't be arbitrarily subdivided. There are various options obviously, but I think enough people had to sell their beloved childhood home because of the tax obligation that came with the inheritance that someone thought there ought to be a law. Maybe your idea plus a carve out for a primary residence could work, but it doesn't seem politically feasible to me.

Re: Buy, Borrow, Die – Explained

#76

Post by sweeter »

IncreasePosts wrote: post #16

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?

Yea. They all do it. It's a well known exploitable tax loophole. You have to be rich to even take advantage of this method of tax evasion. This is probably one of the best digestible write ups that I've seen on the topic, I highly recommend just reading it.

Re: Buy, Borrow, Die – Explained

#77

Post by tome »

PaulDavisThe1st wrote: post #34
fordacious wrote: post #7

>Let's assume the asset appreciates at an annual rate of 8 percent Quite a lot of value creation going on. Good on them!

Value extraction is the predominant mode when financial instruments (including stocks) are involved, not value creation.

Seems unlikely. Value extraction would lead to big dividends but declining share price.

Re: Buy, Borrow, Die – Explained

#78

Post by [deleted] »

bhauer wrote: post #51
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…

[deleted]

Re: Buy, Borrow, Die – Explained

#79

Post by AnimalMuppet »

rayiner wrote: post #66
bhauer wrote: post #51

Earlier quoted context omitted.

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…

From what I can tell the idea was to make sure people would have to sell the family farm or house to pay taxes on unrealized gains on inheritance. It makes no sense to apply that to financial assets.

No, but be careful where you draw the line. In particular, don't draw it between "real estate" and "financial assets". Real estate can easily be a financial asset. Instead, the trick is to draw it between "family farm" and "billionaire who bought 100,000 acres of prime farmland".

Re: Buy, Borrow, Die – Explained

#80

Post by [deleted] »

bhauer wrote: post #51
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…

[deleted]
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