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How to defer US taxes

taylor.town

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Re: How to defer US taxes

#41

Post by anon291 »

gautamcgoel wrote: post #31
jeffreyrogers wrote: post #9

Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes si…

The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.

A margin loan typically does not require any payments at all other than interest. Many loans are like this. Amortization for principal repayment is usually something you only find in personal or real estate loans

Re: How to defer US taxes

#42

Post by some_random »

hirako2000 wrote: post #3

I'm not sure to understand how deferring taxes is a better deal than paying it here and now. Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas. I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow s…

This is touched on briefly, the number one reason is that if you can keep deferring your taxes indefinitely then you never have to pay them. Your tax burden is wiped away on death so not only does it not matter to you but your heirs won't be affected either.

Re: How to defer US taxes

#43

Post by munk-a »

dgb23 wrote: post #16
josefritzishere wrote: post #5

This feels like a great way to get audited by the IRS. It does not feel like sound advice.

I'm getting very strong sarcastic vibes from the article.

Nah, the maximally sarcastic advice for tax avoidance is "become president" then you can just refuse to prosecute yourself for tax evasion and sue yourself for a ridiculous sum of money when someone leaks your tax avoidance.

Re: How to defer US taxes

#44

Post by claythearc »

gautamcgoel wrote: post #31
jeffreyrogers wrote: post #9

Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes si…

The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.

There are a bunch of strategies here, but one people oft repeat is the "buy, borrow, die" approach. Where, they are kicking the can down the road, but the magic happens at the die step. When the borrower dies:

Your heirs inherit your stocks, with their cost basis reset to the current price. This means that they have zero appreciation of your purchase of $RIVN at $67, despite it being at $420. They can then sell the shares, to pay the loans, and not owe capital gains, because there are no gains. Additionally, at this step cash can be extracted for no gains as well if desired.

So you avoid taxes while alive by taking loans (not income), avoiding capital gains (never selling), and then gains evaporate through a stepped up basis. There are some exceptions here - estate taxes, etc with ways around them like trusts, but this is the general mechanism.

Its worth noting though, that its not ironclad. In a significant downturn you can be forced to liquidate and it will hurt (see the news on Musk right after X purchase). Additionally, while people talk about this as being super popular, realize that in practice people who take advantage of these strategies also still have millions in cash flow, so its not a true borrow only $0 tax lifestyle, they will use already taxed money to manage them as well.

Re: How to defer US taxes

#46

Post by SoftTalker »

It seems to me that I'm running into more people who just don't file their taxes. They wait for the IRS to send them a letter saying how much they owe, and they just pay that.

I can't figure out the thought process of someone who finds this sensible. Maybe there isn't one.

Re: How to defer US taxes

#49

Post by throwaway667555 »

gautamcgoel wrote: post #31
jeffreyrogers wrote: post #9

Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes si…

The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.

When the cash flow from the assets exceeds interest expense, you've cashed out the assets without incurring tax on your appreciated position and you can afford to pay the interest. As for principal, debt is largely not paid back these days, especially large bespoke debt secured by liquid and well-defined assets. The debt holders (lenders) get paid back after death of the borrower or they continue rolling the position and collecting their return (interest income). The only question in the lender's mind is how much leverage to grant on the underlying assets, e.g. blue chip stocks, and what to do in a liquidity crunch when rolling.

Re: How to defer US taxes

#50

Post by oxqbldpxo »

It is a good thing for life, money and health, to be clear how much is enough. In money frugality always wins. These billionaires they're very miserable. Their faces show stress, worry and animosity. People say money does bring happiness. It is BS. It holds true only if there is health.
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