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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#141

Post by JackYoustra »

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…

It hasn't been ignored, it's been talked about since it got instated and it's never gotten the political traction to be repealed - sustainably! If you don't ensure it's dead, you end up with a corporate tax situation where entities defer taxable events until the law changes. At one point, you have to stop trying the same failed political approach (futile attempts to repeal the stepped-up basis) and try something new.

Re: Buy, Borrow, Die – Explained

#142

Post by hunter2_ »

relaxing wrote: post #112
SoftTalker wrote: post #95

Earlier quoted context omitted.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

> Most people try to minimize taxes. I don’t think this is true. Most people pay more in taxes, and receive the pleasure of a refund check come April.

I think "minimize taxes" is short for "minimize tax liability" and refunds due to overpayment have absolutely nothing to do with that once you've paid enough to avoid penalties and interest (which is only ~90% of your liability).

Re: Buy, Borrow, Die – Explained

#143

Post by throwaway22032 »

TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

I think that categorising it as hoarding is a bit of a loaded stance.

I own a home and I have assets that I use to pay my daily expenses. I am, by your definition, asset rich. I don't need to "do" anything other than maintain the investments. (I also do work, but that's besides the point).

On an intellectual level I realise that if we are to have a public sector it needs to be paid for, and that I'm never going to be the arbiter of exactly how the money is spent.

But at the end of the day, I sit here and think, how much do the police, military, and the other basic functions really cost, and is the right way to do that really to say -

Hey, you bought something, give me 20% of that!

Hey, you earned something, give me 20,40,45% of that!

Hey, you sold something, give me 20,28% of that!

Hey, you died? Give me some of that!

etc. etc. If you minimise nothing and just do the "golden path", then you end up paying well over 50% when you stack it, and it feels more like theft than a "trade for civilization" as some like to put it, because I know that it doesn't cost that much.

In my country taxation functions less like "we need this to run the Government", and more like "it's politically popular for us to redistribute". Which is logically how democracy is always going to function, but it doesn't mean that I have to agree.

I prefer to pay for things that I derive benefit from and I think my family, community, country etc benefit from, I prefer not to pay for things that don't, it's honestly no different to me than say, I'll buy a TV if I want one, I won't buy a 100 inch TV because I think that's unnecessary.

Re: Buy, Borrow, Die – Explained

#144

Post by hammock »

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…

>the obvious solution (removing the cost basis step-up when assets change hands)

Not as simple as it sounds...when you can set up original ownership of an asset into a trust and have control of that trust change hands.

Re: Buy, Borrow, Die – Explained

#145

Post by big-green-man »

tim333 wrote: post #106

>this type of planning is generally not economically feasible unless the taxpayer has a net worth exceeding around $300M You can actually achieve much the same effect by buying property and taking out a normal mortgage against it for living expenses which can be done by people of more normal means.

Well, there are 2 caveats to this as explained in the linked thread.

First, that interest rates for loans like that are higher than if you have the asset valuation to get loans from lenders that specialize in that kind of thing.

Second, that when you die you're subject to a 40% tax on your estate over your lifetime tax free gift limit, so it makes more sense to use irrevocable trusts to help shelter your estate from that in the event of your death.

Re: Buy, Borrow, Die – Explained

#146

Post by 1986 »

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…

You folks are reading the sentence wrong. The $6T estimate is for all assets controlled by family offices _generally_

Re: Buy, Borrow, Die – Explained

#147

Post by gruez »

lokar wrote: post #132
SoftTalker wrote: post #95

Earlier quoted context omitted.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

It’s more than tax minimization. It’s buying politicians and distorting society so they pay less.

> It’s buying politicians and distorting society so they pay less.

If you had the time and resources, wouldn't you try to affect change in government? It's not fundamentally any different than showing up to your city council meeting to get housing developments approved/blocked, for instance. Moreover, most people don't think of themselves as bad people, so they probably legitimately think they're doing the Right Thing™, rather than being some sort of cartoonishly evil villain trying to ruin society by starving government of funding.

Re: Buy, Borrow, Die – Explained

#148

Post by Retric »

jongjong wrote: post #137
Retric wrote: post #118

Earlier quoted context omitted.

People can live a long time which can turn relatively modest investments with average returns into significant wealth. 21 to 101 is 80 years and cost dollar averaging kicks in. Sure you could call a long life and decent job luck, but a lot of people live into their 90’s.

What do you call living to be 90 years old, if not very lucky? Again, luck.

You can do a lot to improve your odds of hitting 90 vs what actuarial tables show. Baseline may only be 15% but a very healthy lifestyle can get close to 50/50 which isn’t some major stroke of luck.

Re: Buy, Borrow, Die – Explained

#149

Post by HDThoreaun »

dirtdobber wrote: post #70

Is this partly why so many billionaires own things like mega-yachts? Presumably they aren't all avid yacht enthusiasts, no? 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 t…

No, they just want yachts. Zuckerberg has bought many things that do not really affect him financially.

Re: Buy, Borrow, Die – Explained

#150

Post by gruez »

hammock wrote: post #144
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…

>the obvious solution (removing the cost basis step-up when assets change hands) Not as simple as it sounds...when you can set up original ownership of an asset into a trust and have control of that trust change hands.

moving the funds into the trust would be a taxable event, so I'm not sure what the problem is.
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