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

21–30 of 504 posts

Re: Buy, Borrow, Die – Explained

#21

Post by IncreasePosts »

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...

Ok, so there is a famous instance of a billionaire trying this strategy and almost destroying his wealth.

I'm not sure many financial advisors for the super rich would be recommending this method based on this.

Re: Buy, Borrow, Die – Explained

#22

Post by jandrewrogers »

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?

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.

Re: Buy, Borrow, Die – Explained

#23

Post by IncreasePosts »

sbarre wrote: post #19
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?

I mean if you RTFA, and take it at face value, it was posted by a lawyer who has been doing this for 20+ years for hundreds of clients. If it's a fake post, someone put a lot of time into making it convincing? They cite tax law and precedent cases etc.. I have not personally validated any of it myself though.

Why would anyone take anything at face value posted on reddit?

So this one random lawyer on reddit has hundreds of clients with a net worth of $300M+?

Or, they're LARPing.

I wonder which is more likely.

Re: Buy, Borrow, Die – Explained

#26

Post by diggan »

jandrewrogers wrote: post #22
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?

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.

Re: Buy, Borrow, Die – Explained

#27

Post by [deleted] »

jandrewrogers wrote: post #18
2OEH8eoCRo0 wrote: post #5

I don't understand what's in it for the lender in the borrow stage.

The lender gets to write a secured loan with an excellent risk profile and an interest rate that, on average, generates net profit that is at least as good as other lending opportunities. From the lender's perspective this is a relatively straightforward transaction. A lender will lend to just about anyone if the spreadsheet numbers work out.

[deleted]

Re: Buy, Borrow, Die – Explained

#28

Post by [deleted] »

SeanAnderson wrote: post #8
2OEH8eoCRo0 wrote: post #5

I don't understand what's in it for the lender in the borrow stage.

The article clarifies this? > Generally, in exchange for such favorable terms (i.e., interest-only, matures on death), the bank will ask for a share of the collateral’s appreciation (essentially, "stock appreciation rights"), and this obligation will be settled upon the borrower’s death along with the loan. The amount of the bank’s share of the collateral’s appreciation depends on many factors and it is fundamentally…

[deleted]

Re: Buy, Borrow, Die – Explained

#30

Post by einpoklum »

2OEH8eoCRo0 wrote: post #5

I don't understand what's in it for the lender in the borrow stage.

In addition to other responses, and if the lender is a bank, and given a fractional reserve banking system - it's possible that the lender doesn't actually pay the amount loaned out of their own assets. It just counts against the amount which, multiplied by the reserve fraction, must be backed by a reserve. So assuming a fraction of 1/10, it is somewhat as though they had loaned out a tenth of the money the lender actually gets.
Post reply on HN