Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Buy, Borrow, Die – Explained

old.reddit.com

Post reply on HN
Print view View original

151–160 of 504 posts

Re: Buy, Borrow, Die – Explained

#151

Post by wavemode »

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.

You also don't have to be a millionaire to get a withdrawable margin loan on stocks you own, at not-too-terrible interest rates.

I think the piece that's missing (from my scenario and yours) is the assumption that your yearly gains from appreciation of the asset exceed your living expenses. That usually only happens reliably once the asset is worth tens of millions of dollars, at least. Especially if you have a family.

Re: Buy, Borrow, Die – Explained

#152

Post by mrkeen »

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?

Billionaires like to declare no income, which is why they pay such low taxes. But they spend like kings, not like people who have no income. But you can't spend unrealised gains. So they either realise their gains and pay taxes, or get their spending money elsewhere. Since they spend a lot of money, and "elsewhere" wants its money back eventually, it sounds like "elsewhere" has to be a bank.

It seems like the most plausible explanation.

Re: Buy, Borrow, Die – Explained

#153

Post by rmbyrro »

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.

Considering how governments spend the money nowadays, especially the US and a few others on military stuff and promoting death, I think avoiding tax is a favor to society.

Re: Buy, Borrow, Die – Explained

#154

Post by mrkeen »

irdc wrote: post #83
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…

It’s also something that is valuable and can be easily moved.

You just reminded me of https://en.wikipedia.org/wiki/Yachts_impacted_by_internation...

Re: Buy, Borrow, Die – Explained

#155

Post by bongodongobob »

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…

Yachts depreciate rapidly, not sure where you got the idea that they appreciate.

Re: Buy, Borrow, Die – Explained

#156

Post by hunter2_ »

Veserv wrote: post #96
pmichaud wrote: post #74

Earlier quoted context omitted.

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 obligatio…

First of all, the estate/gift tax does not kick in until 13 M$, so that already covers that case. Second, it is irrelevant. The capital gains tax that would be due on a normal step-up in basis during life is independent of the estate tax. Assume there was no exemption and you bought stocks 20 years ago for 100 K$ that are now worth 1 M$. If you die, then your estate would need to pay estate taxes on 1 M$. However, if…

Yeah, I was thinking that despite the fact that the ultra wealthy use TFA's loophole, people who don't (i.e. net worth A - In a universe with cost basis step-up on death, they die with gains taxed at 0% and then pay 40% estate tax on everything.

B - In a world without cost basis step-up on death, they die with gains taxed at the 20% long term rate and then pay 40% estate tax on what remains.

Thus:

The step-up causes less tax revenue by percentage from the >$300M crowd who use the BBD strategy, but it causes more tax revenue by percentage from the $13MI wonder which crowd has more worth-at-death in aggregate (in the absence of BBD and the like -- if estate tax were to be paid by all, no loopholes), given that the less wealthy crowd is a much larger population.

Re: Buy, Borrow, Die – Explained

#157

Post by brigadier132 »

jongjong wrote: post #99
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…

>Inherited wealth is the least earned Let's be real. No wealth is 'earned'. It's almost entirely luck and social connections. No different from inheritance. Besides, inheritance can be hard work, psychologically. Your parents may be in a very different socioeconomic group than you for most of your adult life. Your baseline expectation for a 'normal' lifestyle is somewhat elevated (due to the lifestyle you experienced…

[flagged]

Re: Buy, Borrow, Die – Explained

#158

Post by karmajunkie »

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 real problem here (in my opinion at least) is that “borrow” isn’t a realization of gain on the assets. any time illiquid assets are used as collateral that should trigger a taxable event.

Re: Buy, Borrow, Die – Explained

#159

Post by photonthug »

gruez wrote: post #147
lokar wrote: post #132

Earlier quoted context omitted.

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 Thin…

> If you had the time and resources, wouldn't you try to affect change in government?

This is going to be hard for the politically inclined to understand, but no, it's simply not the case that everyone everywhere is preoccupied with finding/creating legal ways to push their will/preferences onto other people.

Re: Buy, Borrow, Die – Explained

#160

Post by brigadier132 »

t0mas88 wrote: post #75
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!

What value creation? This could just be a simple Vanguard S&P 500 ETF like everyone else's.

> This could just be a simple Vanguard S&P 500 ETF like everyone else's.

The demand for shares in a company incentivizes entrepreneurs to create companies so that they can then sell the shares.

So even passive investing contributes to innovation.

Post reply on HN